20-F

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

o REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended December 31, 2006.

OR

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

OR

o SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

Date of current requiring this shell company report                     

Commission file number: 333-14106

CONVERIUM HOLDING AG

(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
Switzerland
(Jurisdiction of incorporation or organization)
General Guisan-Quai 26
CH-8002 Zürich
Switzerland
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.

	Name of each Exchange
Title of each class	on which registered
American Depositary Shares (as evidenced by American Depositary Receipts), each representing one-half (1/2) of one registered share, nominal value CHF 5 per share	New York Stock Exchange
Registered shares, nominal value CHF 5 per share*	New York Stock Exchange
8.25% Guaranteed Subordinated Notes due 2032 issued by Converium Finance S.A.	New York Stock Exchange
Subordinated Guarantee of Subordinated Notes+	New York Stock Exchange

*	Not for trading, but only in connection with the listing of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.
+	Not for trading, but only in connection with the listing of the Subordinated Notes, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

146,473,231 registered shares, nominal value CHF 5 per share, including 10,894,430 American Depositary Shares (as evidenced by American Depositary Receipts), each representing one-half (1/2) of one registered share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o No þ

Note—checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections.

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ     Accelerated filer o     Non-accelerated filer o

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o     Item 18 þ

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

TABLE OF CONTENTS

SIGNATURES

INDEX TO EXHIBITS

 EX-1.2

 EX-1.3

 EX-4.47

 EX-4.48

 EX-4.49

 EX-4.50

 EX-4.51

 EX-4.52

 EX-4.53

 EX-7.1

 EX-8.1

 EX-12.1

 EX-12.2

 EX-13.0

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PRESENTATION OF INFORMATION

In this annual report on Form 20-F, unless the context otherwise requires, “Converium,” “the Company”, “we,” “us,” and “our” refer to Converium Holding AG and its consolidated entities. Please refer to the glossary beginning on page G-1 for definitions of selected insurance and reinsurance terms.

The Company’s consolidated financial statements included in this Form 20-F are prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”).

We publish our financial statements in US dollars, and unless we note otherwise, all amounts in this annual report are expressed in US dollars. As used herein, references to “US dollars,” “dollars” “US$”, “USD” or “$” and “cents” are to US currency, references to “Swiss francs” or “CHF” are to Swiss currency, references to “yen” “JPY” or “Japanese yen” are to Japanese currency, references to “British pounds”, “GBP” or “£” are to British currency and references to “euro”, “EUR” or “€” are to the single European currency of the member states of the European Monetary Union at the relevant time.

All amounts, comments and tables relate to continuing operations unless otherwise stated. Prior year consolidated balance sheets and statements of cash flows have not been adjusted.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains certain forward-looking statements. Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements.

In particular, statements using words such as “seek to”, “expect”, “should continue”, “aim”, “intend”, “believe”, “anticipate” and ”estimate” or words of similar import generally involve forward-looking statements. This annual report includes a number of forward-looking statements, including the following:

• certain statements in “Item 4. — Information on the Company — B. Business Overview” with regard to strategy and management objectives, trends in market conditions, prices, market standing and product volumes, investment results, litigation and the effects of changes or prospective changes in regulation.

• certain statements in “Item 5. — Operating and Financial Review and Prospects” with regard to trends in results, prices, volumes, operations, investment results, margins, overall market trends, risk management and exchange rates and with regard to our internal review and related Restatement.

• certain statements in “Item 11. — Quantitative and Qualitative Disclosures About Market Risk” with regard to sensitivity analyses for invested assets.

• certain statements in “Item 15. — Controls and Procedures” with regard to our actions to remediate the material weaknesses identified in our financial accounting and reporting function.

In light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements should not be considered a representation by us that our objectives or plans will be achieved. Numerous factors could cause our actual results to differ materially from those in the forward-looking statements, including factors set forth in “Item 3. — Key Information — D. Risk Factors” and the following:

• our ability to refinance our outstanding indebtedness and increase our use of hybrid capital;

• uncertainties of assumptions used in our reserving process;

• risk associated with implementing our business strategies and our capital improvement measures;

• cyclical nature of the reinsurance industry;

3

• the occurrence of natural and man-made catastrophic events with a frequency or severity exceeding our estimates;

• acts of terrorism and acts of war;

• changes in economic conditions, including interest and currency rate conditions that could affect our investment portfolio;

• actions of competitors, including industry consolidation and development of competing financial products;

• a decrease in the level of demand for our reinsurance or increased competition in our industries or markets;

• our ability to expand into emerging markets;

• our ability to enter into strategic investment partnerships;

• a loss of our key employees or executive officers without suitable replacements being recruited within a suitable period of time;

• political risks in the countries in which we operate or in which we reinsure risks;

• the passage of additional legislation or the promulgation of new regulation in a jurisdiction in which we or our clients operate or where our subsidiaries are organized;

• the effect on us and the insurance industry as a result of the investigations being carried out by the US Securities and Exchange Commission (“SEC”) and New York’s Attorney and other governmental authorities;

• timing and outcome of class action lawsuits;

• our ability to regain past customers following the rating upgrade;

• our ability to retain employees and certain business we write prior to and following the consummation of the SCOR Tender Offer (as defined below);

• our ability to successfully integrate our business with that of SCOR’s following the consummation of the SCOR Tender Offer and retain joint ventures in which we are a party;

• the resolution of the investigations being carried out by the SEC, New York’s Attorney General and other governmental authorities;

• changes in our investment results due to the changed composition of our invested assets or changes in our investment policy;

• failure of our retrocessional reinsurers to honor their obligations or changes in the credit worthiness of our reinsurers;

• our failure to prevail in any current or future arbitration or litigation; and

• extraordinary events affecting our clients, such as bankruptcies and liquidations.

The factors listed above should not be construed as exhaustive. We cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those described in any forward-looking statements. Except as otherwise required by law, we undertake no obligation to publicly release any future revisions we may make to forward-looking statements to reflect subsequent events or circumstances or to reflect the occurrence of unanticipated events.

We have made it a policy not to provide any quarterly or annual earnings guidance and we will not update any past outlook for full year earnings. We will, however, provide investors with a perspective on our value drivers, our strategic initiatives and those factors critical to understanding our business and operating environment.

4

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3. KEY INFORMATION

A. SELECTED FINANCIAL AND OTHER DATA

We have prepared our financial statements included in this annual report in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The following financial data highlights selected information that is derived from our financial statements as of and for the years ended December 31, 2006, 2005, 2004, 2003 and 2002.

The selected financial and other data should be read in conjunction with the Consolidated Financial Statements and related notes and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Converium currently manages its business around three operating segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life & Health Reinsurance, which are based principally on global lines of business. In addition to the three segments’ financial results, the Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee and other corporate functions as well as expenses not allocated to the operating segments. In addition to reporting segment results individually, management also aggregates results for Standard Property & Casualty Reinsurance and Specialty Lines into non-life business, as management considers this aggregation meaningful in understanding the performance of Converium.

In 2004, Converium’s North American operations were placed into orderly run-off and reported as the Run-Off segment to monitor this business on a stand-alone basis. On December 13, 2006, Converium sold its North American operations to National Indemnity Company, a Berkshire Hathaway company, for total consideration of USD 295.0 million comprising of USD 95.0 million in cash and USD 200.0 million in assumption of debt. Converium has not provided any guarantee or indemnity in respect of the reserves of the North American operations. The transaction was approved by the Insurance Department of the State of Connecticut. Our North American operations were previously reported as the principal component of a separate segment, the Run-Off segment. Converium’s financial results of the North American business, including prior period amounts, have been reclassified to discontinued operations. For further details regarding the sale of the North American operations, see Note 2 to the consolidated financial statements.

Restated(1)			For the year ended December 31,
USD millions (except per share data)	2006		2005		2004		2003		2002
									Restated(1)
Income statement data:
Revenues:
Gross premiums written		1,980.9		1,955.0		3,492.2		3,044.4		2,294.7
Less ceded premiums written		-128.9		-171.9		-236.3		-371.0		-128.1
Net premiums written		1,852.0		1,783.1		3,255.9		2,673.4		2,166.6
Net change in unearned premiums		-40.3		471.7		-157.4		-89.3		-112.7
Net premiums earned		1,811.7		2,254.8		3,098.5		2,584.1		2,053.9
Net investment income		260.4		257.8		227.5		155.6		128.8
Net realized capital gains (losses)		18.9		31.3		31.2		-3.1		-34.2
Total revenues from continuing operations		2,091.0		2,543.9		3,357.2		2,736.6		2,148.5
Benefits, losses and expenses:
Losses, loss expenses and life benefits		-1,187.8		-1,720.1		-2,395.0		-1,831.8		-1,581.2
Total costs and expenses		-647.9		-740.0		-931.1		-672.2		-518.9
Amortization of intangible assets		—		-21.5		-9.9		-1.8		—
Restructuring costs		0.2		-12.1		-0.2		—		—
Total benefits, losses and expenses		-1,835.5		-2,493.7		-3,336.2		-2,505.8		-2,100.1

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Restated(1)	For the year ended December 31,
USD millions (except per share data)	2006			2005			2004			2003			2002
													Restated(1)
Income from continuing operations before taxes		255.5			50.2			21.0			230.8			48.4
Income tax (expense) benefit		-40.5			-16.1			4.6			-16.3			-18.1
Income from continuing operations		215.0			34.1			25.6			214.5			30.3
(Loss) income from discontinued operations, net of tax		-157.9			34.6			-608.1			-36.6			64.1
Net income (loss)		57.1			68.7			-582.5			177.9			94.4
Earnings (loss) per share(2):
Average number of shares (millions)		146.2			146.4			63.4			39.8			39.9
Basic earnings (loss) per share:
from continuing operations		1.47			0.23			0.40			2.71			0.38
from discontinued operations		-1.08			0.24			-9.59			-0.47			0.81
Total basic earnings (loss) per share		0.39			0.47			-9.19			2.24			1.19
Diluted earnings (loss) per share:
from continuing operations		1.45			0.23			0.40			2.69			0.38
from discontinued operations		-1.07			0.23			-9.49			-0.46			0.80
Total diluted earnings (loss) per share		0.38			0.46			-9.09			2.23			1.18
Balance sheet data:
Total invested assets		5,765.3			6,634.3			7,786.2			7,502.0			6,117.3
Total assets		10,523.0			11,825.9			14,187.3			13,126.9			10,675.0
Reinsurance liabilities		7,036.9			8,200.8			9,898.9			8,428.6			6,986.7
Debt		194.1			391.2			391.1			393.1			392.9
Total liabilities		8,677.0			10,172.5			12,452.5			11,198.9			9,079.8
Total shareholders’ equity		1,846.0			1,653.4			1,734.8			1,928.0			1,595.2
Book value per share		12.63			11.29			11.86			48.47			39.97
Other data:
Net premiums written by segment:
Standard Property & Casualty Reinsurance		816.9			739.0			1,377.4			1,299.9			974.2
Specialty Lines		729.4			737.7			1,565.3			1,119.0			962.4
Life & Health Reinsurance		305.7			306.4			313.2			254.5			230.0
Total net premiums written		1,852.0			1,783.1			3,255.9			2,673.4			2,166.6
Non-life combined ratio		96.3	%		107.0	%		105.7	%		91.7	%		100.6	%
Ratio of earnings of continuing operations to fixed charges (3)		13.6			3.4			1.9			12.4			11.3

(1)	The figures for the years ended December 31, 2002, 2003 and 2004 have been restated as set out in the Company’s 2004 Form 20-F/A filed with the SEC on February 28, 2006 and as discussed in Note 1 to the financial statements (see page F-11), which decreased 2002 “Losses, Loss expenses and Life benefits” by USD 58.6 million resulting in an increase in net income.
(2)	For the periods 2002 and 2003, the earnings per share have been restated to reflect the Rights Offering that occurred in October 2004.
(3)	The ratio of earnings to fixed charges is calculated by dividing income (loss) before taxes plus fixed charges by fixed charges. Fixed charges consist of interest expense and the interest portion of rental expense.

6

The table below shows the components that comprise the non-life ratios, which are non-GAAP measures. As discussed above, management aggregates the results for the Standard Property & Casualty Reinsurance and Specialty Lines segments into non-life business, as they consider this aggregation a key indicator in understanding the performance of Converium.

									Other
	Net		Net		Losses				operating and		Loss		Acquisition		Administration
	premiums		premiums		and loss		Acquisition		administration		ratio		costs ratio		expense ratio		Combined
Combined Ratio	written		earned		expenses		costs		expenses		(1)		(2)		(3)		ratio (4)
Analysis	(USD millions)										(%)
2006
Standard Property & Casualty Reinsurance		816.9		775.6		-441.1		-195.6		-43.9		56.9		25.2		5.4		87.5
Specialty lines		729.4		723.7		-534.3		-192.4		-38.6		73.8		26.6		5.3		105.7
Total Non-life consolidated		1,546.3		1,499.3		-975.4		-388.0		-82.5		65.1		25.9		5.3		96.3
2005
Standard Property & Casualty Reinsurance		739.0		880.8		-729.6		-181.3		-43.9		82.8		20.6		5.9		109.3
Specialty lines		737.7		1,059.2		-772.5		-263.8		-54.5		72.9		24.9		7.4		105.2
Total Non-life consolidated		1,476.7		1,940.0		-1,502.1		-445.1		-98.4		77.4		22.9		6.7		107.0
2004
Standard Property & Casualty Reinsurance		1,377.4		1,392.2		-1,003.0		-353.3		-52.0		72.0		25.4		3.8		101.2
Specialty lines		1,565.3		1,387.6		-1,154.7		-328.1		-53.3		83.2		23.6		3.4		110.2
Total Non-life consolidated		2,942.7		2,779.8		-2,157.7		-681.4		-105.3		77.6		24.5		3.6		105.7
2003
Standard Property & Casualty Reinsurance		1,299.9		1,285.2		-838.8		-266.4		-48.0		65.3		20.7		3.7		89.7
Specialty lines		1,119.0		1,038.1		-713.0		-228.0		-39.6		68.7		22.0		3.5		94.2
Total Non-life consolidated		2,418.9		2,323.3		-1,551.8		-494.4		-87.6		66.8		21.3		3.6		91.7
2002
Standard Property & Casualty Reinsurance		974.2		942.1		-668.4		-234.2		-38.5		70.9		24.9		4.0		99.8
Specialty lines		962.4		885.5		-709.6		-157.4		-34.3		80.1		17.8		3.6		101.5
Total Non-life consolidated		1,936.6		1,827.6		-1,378.0		-391.6		-72.8		75.4		21.4		3.8		100.6

(1)	Losses divided by net premiums earned
(2)	Acquisition costs divided by net premiums earned
(3)	Other operating and administration expenses divided by net premiums written
(4)	Sum of the loss, acquisition costs and administration expense ratios

Dividends

For a discussion of our dividend policy, see “Item 8. — Financial Information — A. Consolidated Statements and Other Financial Information — Dividends and Dividend Policy”.

B. CAPITALIZATION AND INDEBTEDNESS

     Not applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

     Not applicable.

7

D. RISK FACTORS

Risks relating to Converium and the reinsurance industry

If we do not successfully implement our strategy or if such strategy is not effective, it could have a material adverse effect on our business, financial condition, results of operations and cash flows

As a multi-line reinsurer Converium pursues a strategy of profitable organic growth with a geographic emphasis on Europe, Asia-Pacific, Central and South America, and the Middle East. Reflecting its significant capabilities in this particular area, the Company places a distinct focus on global specialty lines. Converium implements its strategy by:

– Making investments in specialty lines: Based on the Company’s track record and human capital Converium is committed to further expanding its specialty portfolio, including Aviation & Space, Engineering, Marine & Energy, Credit & Surety and Agribusiness.

– Maintaining and developing multiple distribution channels, including joint ventures: To leverage Converium’s proven skills at identifying and managing joint ventures and distribution channels which provide direct access to business, the Company will continue to seek opportunities in this field. This offers growth opportunities beyond organic business development and outright acquisitions.

– Broadening the client base: In addition to expanding relationships with existing clients Converium seeks to establish new relationships in the Company’s preferred geographical markets and lines of business.

– Expanding the knowledge base: Converium believes in the value of a knowledge-based business model, offering clients insight and services beyond pure underwriting capacity. To this end, the Company will continue to boost its intellectual capital.

– Further enhancing the risk management and control culture: These efforts will focus on further implementing a state-of-the-art Enterprise Risk Management (“ERM”) framework.

– Advancing cost and capital efficiency: Converium is committed to further rationalize its internal processes and setup in order to achieve a competitive administrative expense ratio. In addition, Converium constantly seeks to maximize capital efficiency by exploring opportunities for leveraging its balance sheet and transferring risks directly to the capital markets.

There can be no assurance, however, that we will be able to successfully implement our strategy or that the strategy will be effective. The implementation and the effectiveness of this strategy are based on a certain number of assumptions (including continued client acceptance outside the United States) and factors that are not under our control. If economic conditions, our competitive position, our rating level or our financial condition are not consistent with these assumptions or our objectives, or if the measures envisaged by the strategy are insufficient, it is possible that our strategy would fail and that we would not achieve our objectives. In this case, our business and financial condition could deteriorate and new measures would need to be devised and implemented.

A ratings downgrade could have a material adverse effect on our business, financial condition, result of operations or cash flows

If our ratings were significantly downgraded, our competitive position in the reinsurance industry may suffer, and it could be more difficult for us to market and sell our products. Certain business that we write contains terms that give the ceding company the right to terminate cover and/or require collateral if our ratings are downgraded. A significant downgrade could result in a significant reduction in the number of reinsurance contracts we write and in a substantial loss of premium volume as client companies and brokers that place their business, move to other competitors with higher ratings.

The claims paying ability ratings assigned by rating agencies to reinsurance or insurance companies are based upon factors and criteria established independently by each rating agency. Rating agencies may downgrade or withdraw their ratings in the future if we do not continue to meet the then current criteria for the ratings previously assigned to us. Such criteria may change, perhaps significantly, at the sole discretion of the rating agencies.

Based on the developments in 2004, Standard & Poor’s Ratings Services lowered its rating of Converium, including its subsidiaries, to BBB and following the rights offering changed this rating to BBB+. On March 1, 2007 Standard & Poor’s raised the rating to A- (Stable Outlook). Although A.M. Best placed its rating of Converium on watch with a positive outlook on September 7, 2006, it continues to rate the Company at B++, the level to which it was downgraded in 2004.

Claims-paying ability and financial strength ratings are a key factor in establishing the competitive position of reinsurers. The Company believes that the A- rating from Standard & Poor’s is sufficient but that the B++ rating from A.M. Best may not satisfy the criteria required by some of its target clients and brokers, and that this rating may negatively impact new business and adversely affect its ability to compete.

8

In the light of changing business circumstances associated with Converium’s ratings downgrade in 2004, Converium entered into fronting agreements with Munich Re and National Indemnity Company in order to support and sustain the aviation business from GAUM. Converium expects that continuation of its membership in GAUM will be supported by its rating upgrade from Standard & Poor’s but to some extent may still be conditional upon entering into fronting arrangements acceptable to other pool members in a timely fashion and thereafter maintaining such arrangements. Converium has currently two fronting arrangements in place, both with National Indemnity Company and Munich Re. The current fronting agreement covers the GAUM business written in the US and Canada and is effective from January 1, 2007 until December 31, 2007. The other fronting agreement is for GAUM business written outside the US and Canada and was originally effective from January 1, 2007 until June 30, 2007 and has now been renewed for the period until December 31, 2007.

We cannot guarantee that we will be able to maintain the A-rating from Standard & Poor’s and, in the case of a rating downgrade by Standard & Poor’s by two notches to below BBB+, Converium’s membership in GAUM pool would be reduced to less than a 5% share. In such a case, Converium would not be permitted to participate in future pool business and would have to collateralize, through letters of credit, its obligations under the business written by the pool in its name prior to its termination. If Converium’s pool membership were terminated, it would also be required to sell its 30.1% stake in GAUM. In 2006, this business generated USD 230.8 million of gross premiums written. See Notes 7 and 17 to our 2006 consolidated financial statements for additional information on GAUM.

Our loss reserves may not adequately cover future losses and benefits

Our loss reserves may prove to be inadequate to cover our actual losses and benefits experience. To the extent loss reserves are insufficient to cover actual losses, loss expenses or future life benefits, we would have to add to these loss reserves and incur a charge to our earnings which could have a material adverse effect on our financial condition, results of operations or cash flows.

Loss reserves do not represent an exact calculation of liability, but rather are estimates of the expected cost of the ultimate settlement of losses. All of our loss reserve estimates are based on actuarial and statistical projections at a given time, facts and circumstances known at that time and estimates of trends in loss severity and other variable factors, including new concepts of liability and general economic conditions. If the underlying assumptions used do not hold true over time, actual losses could vary, possibly materially, from the estimates.

As of December 31, 2006, we had USD 6,348.6 million of gross reserves and USD 5,743.7 million of net reserves for losses and loss expenses. If we underestimated these net reserves by 5%, this would have resulted in an additional USD 287.2 million of incurred losses and loss expenses, before income taxes, for the year ended December 31, 2006.

Unforeseen losses, the type or magnitude of which we cannot predict, may emerge in the future. These additional losses could arise from newly acquired lines of business, changes in the legal environment, or extraordinary events affecting our clients such as reorganizations and liquidations or changes in general economic conditions. We continue to conduct pricing, loss reserving, claims and underwriting studies for many casualty lines of business, including those in which preliminary loss trends are noted. Converium has experienced moderate favorable developments of its loss reserves. Since 2002, Converium has recorded USD (425.6) million of favorable development from continuing operations on prior year’s non-life business (2002: USD (113.9) million; 2003: USD (195.7) million; 2004: USD 72.8 million; 2005 USD (86.0) million; and 2006 USD (102.8) million). The positive reserve development within 2006 was largely within the Property line of business, primarily within the underwriting years 2003 and 2004 as well as the aviation line of business, primarily within the underwriting years 2002, 2003 and 2004.

In addition, because we, like other reinsurers, do not separately evaluate each of the individual risks assumed under reinsurance treaties, we are largely dependent on the original underwriting decisions made by ceding companies. We are subject to the risk that our ceding companies may not have adequately evaluated the risks to be reinsured and that the premiums ceded to us may not adequately compensate us for the risks we assume.

We may be unable to meet the collateral requirements necessary for our business

In November 2004, Converium AG obtained a USD 1.6 billion, three-year syndicated letter of credit facility (the “Syndicated Letter of Credit Facility”) from various banks. The facility provides Converium’s operating companies with a USD 1.5 billion capacity for issuing letters of credit and a USD 100.0 million liquidity reserve. As of December 31, 2006, Converium had outstanding letters of credit of USD 1,974.5 million under the Syndicated Letter of Credit Facility and other bilateral letter of credit arrangements. Investments of USD 1,973.5 million were

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pledged as collateral related to the Syndicated Letter of Credit Facility and other irrevocable letters of credit of USD 769.1 million (to secure certain assumed reinsurance contracts). Converium must comply with various financial covenants in order to avoid default under the agreement. In an event of default, the majority lenders may cancel the total commitment and/or may declare that all amounts outstanding may be immediately due and payable and that full cash cover in respect of each letter of credit is immediately due and payable.

See “Item 3. — Key information — D. Risk factors – Ratings changes” for information on collateral requirements related to GAUM and Notes 7 and 17 to our 2006 consolidated financial statements.

We are subject to the cyclical nature of the reinsurance industry

The insurance and reinsurance industries, particularly the non-life market, are cyclical. Historically, operating results of reinsurers have fluctuated significantly because of volatile and sometimes unpredictable developments, many of which are beyond their direct control. These developments include:

• price competition and price setting mechanisms of clients;

• frequency of occurrence or severity of both natural and man-made catastrophic events;

• levels of capacity and demand;

• general economic conditions; and

• changes in legislation, case law and prevailing concepts of liability.

As a result, the reinsurance business historically has been characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of underwriting capacity permitted attractive premium levels. We expect to continue to experience the effects of cyclicality, which could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Securitization trend could disadvantage medium-sized players

The reinsurance market is undergoing changes in the nature of its core business practices. One of the trends in the insurance industry has been the development of instruments designed to allow for the trading of insurance risks in the capital markets. Examples of insurance securitization tools that have been developed include catastrophe bonds and catastrophe equity puts. Trading insurance risks in the capital markets will spread the risks across alternative risk carriers which could lead to a reduced demand for reinsurance products.

We may face competitive disadvantages in the reinsurance industry

The reinsurance industry is highly competitive. Some of our competitors may have greater financial or operating resources or offer a broader range of products or more competitive pricing than we do. Our ability to compete is based on many factors, including our overall financial strength and rating, geographic scope of business, client relationships, premiums charged, contract terms and conditions, products and services offered, speed of claims payment, reputation, experience and qualifications of employees and local presence. We compete for reinsurance business in international reinsurance markets with numerous reinsurance and insurance companies, some of which have greater financial or other resources and some of which have higher financial strength ratings. We believe that our largest competitors include:

• Munich Reinsurance Company;

• Swiss Reinsurance Company;

• Hannover Re Group;

• SCOR;

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• PartnerRe Group; and

• Lloyd’s syndicates active in the London market.

In addition, new companies have entered the reinsurance market and existing companies have raised additional capital to increase their underwriting capacity. Other financial institutions, such as banks, are also able to offer services similar to our own. We have also recently seen the creation of alternative products from capital market participants that are intended to compete with reinsurance products. We are unable to predict the extent to which these new, proposed or potential initiatives may affect the demand for our products or the supply and terms of risks that may be available for us to consider underwriting.

As a result of ongoing investigations of the insurance and reinsurance industry and non-traditional insurance products, we conducted an internal review and analysis of certain of our reinsurance transactions and have previously restated our financial statements, however the governmental inquiries are ongoing

Ongoing investigations of the insurance and reinsurance industry and non-traditional insurance and reinsurance products are being conducted by U.S. and international regulators and governmental authorities, including the U.S. Securities and Exchange Commission and the New York Attorney General.

On March 8, 2005, MBIA Inc. (“MBIA”) issued a press release stating that MBIA’s audit committee undertook an investigation to determine whether there was an oral agreement with MBIA under which MBIA would replace Axa Re Finance as a reinsurer to Converium Reinsurance (North America) Inc. (“CRNA”) by no later than October 2005. The press release stated that it appeared likely that MBIA made such an agreement or understanding with Axa Re Finance in 1998. Thereafter, on April 19, 2005, CRNA received subpoenas from the U.S. Securities and Exchange Commission and the Office of the New York Attorney General seeking documents related to certain transactions between CRNA and MBIA. Converium has also received additional inquiries from the Securities and Exchange Commission and other governmental authorities in Europe regarding non-traditional insurance and reinsurance products and/or the restatement of its financial statements. The inquiries are ongoing and Converium is fully cooperating with the governmental authorities.

In view of the industry investigations and the events relating to MBIA described above, Converium engaged independent outside counsel to assist it in a review and analysis of certain of its reinsurance transactions, including the MBIA transactions. The internal review, which was overseen by the Audit Committee, addressed issues arising from the ongoing governmental inquiries and Converium’s own decision to review certain additional items. The internal review involved the assessment of numerous assumed and ceded transactions including structured/finite risk and other reinsurance transactions and encompassed all business units of Converium, a review of hundreds of thousands of e-mails, attachments to e-mails and other documents and interviews of certain members of the Global Executive Committee and the Board of Directors, as well as certain former members of senior management and other employees of Converium. The Audit Committee believes that the scope and process of the internal review has been sufficient to determine whether Converium’s assumed and ceded transactions which improperly accounted for as reinsurance, rather than as deposits. After discussing the findings of Converium’s extensive internal review with independent outside counsel, the Audit Committee determined that certain accounting corrections were appropriate and authorized the restatement of Converium’s financial statements as of and for the years ended December 31, 2004 through 1998, which occurred during late 2005. As part of this process, the Audit Committee involved its independent group auditors, PricewaterhouseCoopers Ltd.

As noted above, we are fully cooperating with the governmental authorities, and are in the process of sharing the results of our internal review with the relevant authorities. Although the internal review was extensive, the ongoing governmental inquiries, or other developments, could result in further restatements of our financial results in the future and could have a materially adverse effect on Converium.

We are a defendant in a class action lawsuit related to the Company’s announcement on July 20, 2004 that second quarter 2004 results would fall short of expectations due to higher than modeled U.S. casualty loss emergence primarily related to the underwriting years 1996 to 2001

As discussed in greater detail below, the Company is a defendant in a securities law class action case arising out of the Company’s announcement on July 20, 2004 that second quarter 2004 results would fall short of expectations due to higher than modeled U.S. casualty loss emergence primarily related to the underwriting years 1996 to 2001. The consolidated actions are in the discovery phase; thus, the timing and outcome of these matters are not currently predictable. The costs of defending the class actions may have a material impact on our operating results in future reporting periods and an unfavorable outcome could have a materially adverse effect on the Company’s financial condition, results of operations and cash flows.

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Regulatory or legal changes could adversely affect our business

Insurance laws, regulations and policies currently governing our clients and us may change at any time in ways which may adversely affect our business. Furthermore, we cannot predict the timing or form of any future regulatory initiatives. We are subject to applicable government regulation in each of the jurisdictions in which we conduct business, particularly in Switzerland, the United States, the United Kingdom and Germany. Regulatory agencies have broad administrative power over many aspects of the insurance and reinsurance industries. Government regulators are concerned primarily with the protection of policyholders rather than shareholders or creditors.

Recently, the insurance and reinsurance regulatory framework has been subject to increased scrutiny in many jurisdictions. Changes in current insurance regulation may include increased governmental involvement in the insurance industry, initiatives aimed at premium controls, requirements for participation in guaranty associations or other industry pools and other changes which could adversely affect the reinsurance business and economic environment. Such changes could impose new financial obligations on us, require us to make unplanned modifications of our products and services, or result in delays or cancellations of sales of our products and services.

The reinsurance industry is also affected by political, judicial, regulatory and other legal developments, which have at times in the past resulted in new or expanded theories of liability. We cannot predict the future impact of changing law or regulation on our business.

See “Item 4. — B. Business Overview — Regulation”.

European Reinsurance Directive may disadvantage companies like us which are not established within the European Union

The new EU Reinsurance Directive that was adopted on November 16, 2005 does not provide for any discrimination of non-EU based reinsurance companies. However, if the individual EU member states, in implementing the EU Reinsurance Directive, should include any discriminatory regulations with respect to reinsurers of a non-EU member state, this could be a disadvantage for Converium AG in its doing business in the EU, as Converium AG derives a substantial proportion of its revenues within the EU and any competitive disadvantage we face there could have an adverse effect on our financial condition, results of operations or cash flows. However, a large portion of those revenues are being written through our subsidiary in the EU member state Germany, where no negative impact can arise from the implementation of the directive. In addition Converium has a second subsidiary in the UK, which also is an EU member. See “Item 4. — Information on the Company — B. Business Overview — Regulation — European Union Directives”.

Our exposure to catastrophic events, both natural and man-made, may cause unexpected large losses

A catastrophic event or multiple catastrophic events may cause unexpected large losses and could have a material adverse effect on our business, financial condition, and results of operations or cash flows. Natural catastrophic events to which we are exposed include windstorms, hurricanes, earthquakes, tornadoes, severe hail, severe winter weather, floods and fires and man-made catastrophic events, for example, acts of terrorism, are inherently unpredictable in terms of both their occurrence and severity. For example, in 2005, the reinsurance industry suffered extensive losses from the hurricanes that occurred in the United States and the floods in Continental Europe. These events adversely affected our results.

We are also exposed to man-made catastrophic events, which may have a significant adverse impact on our industry and on us. It is possible that both the frequency and severity of man-made catastrophic events will increase.

As a result, claims from natural or man-made catastrophic events could cause substantial volatility in our financial results for any period and adversely affect our financial condition, results of operations or cash flows. Our ability to write new business could also be impacted. We believe that increases in the value and geographic concentration of insured property and the effects of inflation will increase the severity of claims from catastrophic events in the future.

The extent of our losses from catastrophic occurrences is a function of the frequency and severity of events, the number of our clients affected, and the total catastrophe losses incurred by our clients and our participation in the reinsurance policies affected. In addition, depending on the nature of the loss, the speed with which claims are made and settled, and the terms and conditions of the policies affected, we may be required to make large claims payments upon short notice. We may be forced to fund these obligations by liquidating investments unexpectedly and in unfavorable market conditions, or by raising funds at unfavorable costs, both of which could adversely affect the results of our operations.

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Our efforts to protect ourselves against catastrophic losses, such as the use of selective underwriting practices, purchasing reinsurance (known as retrocessional reinsurance, when bought by a reinsurer such as Converium) and monitoring risk accumulation may not prevent such occurrences from adversely affecting our profitability or financial condition.

The majority of the natural catastrophe reinsurance we write relates to exposures within Europe, Japan and the United States. Accordingly, we are exposed to natural catastrophic events, which affect these regions, such as European windstorm, Japanese earthquake and US hurricane or earthquake events.

Terrorist attacks, national security threats, military initiatives and political unrest could result in the payment of material insurance claims and may have a negative effect on our business

Threats of terrorist attacks, national security threats, military initiatives and political unrest have had and may continue to have a significant adverse effect on general economic, market and political conditions, increasing many of the risks in our businesses. We cannot predict the long-term effects of terrorist attacks, threats to national security, military initiatives and political unrest on our businesses at this time.

Although Zurich Financial Services, through its subsidiaries, has agreed to arrangements that cap our exposure for losses and loss expenses arising out of the September 11th terrorist attacks at USD 289.2 (subsequently reduced to USD 231.0 million following the sale of our North American operations), net of retrocessional reinsurance recoveries, terrorist attacks and other man-made catastrophic events may have a material adverse effect on our business, financial condition or results of operations. For a discussion of the impact of the September 11th terrorist attacks on our business, see Note 8 to our 2006 consolidated financial statements.

If we are unable to achieve our investment objectives, our investment results may be adversely affected

Investment returns are an important part of our overall profitability, and fluctuations in the fixed income or equity markets could have a material adverse effect on our financial condition, results of operations or cash flows. For the years ended December 31, 2006 and 2005, net investment income and net realized capital gains accounted for 13.4% and 11.4% of our revenues, respectively. Our capital levels, ability to pay claims and our operating results substantially depend on our ability to achieve our investment objectives, which may be affected by general political and economic conditions that are beyond our control.

Fluctuations in interest rates affect our returns on fixed income investments in our available-for-sale portfolio, as well as the market values of, and corresponding levels of unrealized and realized capital gains or losses on the available-for-sale fixed income securities in our investment portfolio. Generally, investment income will be reduced during sustained periods of lower interest rates as higher yielding fixed income securities are called, mature or are sold and the proceeds reinvested at lower rates. During periods of rising interest rates, prices of fixed income securities tend to fall and realized gains upon their sale are reduced.

In addition, as described under “Formation transactions and relationship with Zurich Financial Services,” under the Quota Share Retrocession Agreement, the Funds Withheld Asset may be prepaid to us, in whole or in part, as of the end of any calendar quarter. In the event that the Funds Withheld Asset is prepaid, we would have to reinvest these assets in investments and we may not be able to invest them at yields comparable to those payable under the Quota Share Retrocession Agreement. To the extent we are not able to invest these funds at comparable yields, our investment income could be adversely affected.

Capital market fluctuations may adversely impact the value of our investments and shareholders’ equity

We had a cash and investments portfolio of USD 6,398.4 million as of December 31, 2006. As with any institutional investor with a similarly sized portfolio, Converium is exposed to the financial markets; in particular, an increase in interest rates, and a resulting decline in the market value of our fixed income securities, would adversely impact our shareholders’ equity for the securities we account for as available-for-sale.

General economic conditions can adversely affect the markets for interest-rate-sensitive securities, including the extent and timing of investor participation in such markets, the level and volatility of interest rates and, consequently, the value of fixed income securities. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic political conditions and other factors beyond our control.

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We have historically invested and may continue to invest a portion of our assets globally in equity securities, which are generally subject to greater risks and more volatility than fixed income securities. General economic conditions, stock market conditions and many other factors beyond our control can adversely affect the equity markets and, consequently, the value of the equity securities we own.

Foreign exchange rate fluctuations may impact our financial condition, results of operation and cash flows

We publish our financial statements in US dollars. Therefore, fluctuations in exchange rates used to translate other currencies, particularly European currencies including the Euro, British pound and Swiss franc, into US dollars will impact our reported financial condition, results of operations and cash flows from year to year. These fluctuations in exchange rates will also impact the US dollar value of our investments and the return on our investments. For 2006, approximately:

• 80% of our net premiums written

• 60% of our net investment income

• 85% of our losses, loss expenses and life benefits, and

• 72% of our operating expenses

were denominated in currencies other than the US dollar. As we will only be writing limited business from the United States, a smaller proportion of our business will be denominated in US dollars in the future. For a discussion of the impact of material changes in foreign exchange rates on our shareholders’ equity, see “Item 11. — Quantitative and Qualitative Disclosures About Market Risks”.

The loss of key employees and executive officers without suitable replacements being recruited within a suitable period of time could adversely affect us

Our ability to execute our business strategy is dependent on our ability to attract, develop and retain a staff of qualified underwriters and other key employees. Our senior management team includes a number of key personnel whose skills, experience and knowledge of the reinsurance industry constitute important elements of Converium’s competitive strengths. If some of these executive officers or key employees leave their positions at Converium, even if we were able to find persons with suitable skills to replace them, our operations could be adversely affected. In addition, a strong financial position is important to us in order to retain and attract skilled personnel in the industry, especially underwriters with specific expertise in high-margin, non-commoditized specialty lines of business. If our current or future financial position does not allow us to do so, our operations could be adversely affected. See “Item 6. — Directors, Senior Management and Employees — A. Directors and Senior Management”.

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Consolidation in the insurance industry could lead to lower margins for us and less demand for our reinsurance products and services

The insurance industry overall is undergoing a process of consolidation as industry participants seek to enhance their product and geographic reach, client base, operating efficiency and general market power through merger and acquisition activities. These larger entities may seek to use the benefits of consolidation to, among other things, implement price reductions for the products and services they purchase. If competitive pressures compel us to reduce our prices, our operating margins would decrease.

As the insurance industry consolidates, competition for customers may become more intense and the importance of acquiring and properly servicing each customer will become greater. We could incur greater expenses relating to customer acquisition and retention, which could reduce our operating margins. In addition, insurance companies that merge may be able to enhance their negotiating position when buying reinsurance and may be able to spread their risks across a larger capital base so that they require less reinsurance.

We purchase retrocessional reinsurance, which may become unavailable on acceptable terms and subjects us to credit risk

In order to limit the effect on our financial condition of large and multiple losses, we buy retrocessional reinsurance. From time to time, market conditions have limited, and in some cases have prevented, insurers and reinsurers from obtaining the types and amounts of reinsurance which they consider adequate for their business needs. There can be no assurance that we will be able to obtain our desired amounts of retrocessional reinsurance. There is also no assurance that, if we are able to obtain such retrocessional reinsurance, we will be able to negotiate terms as favorable to us as in prior years.

A retrocessionaire’s insolvency or its inability or unwillingness to make payments under the terms of its reinsurance treaty with us could have a material adverse effect on our business, financial condition, results of operations or cash flows. Therefore, our retrocessions subject us to credit risk because the ceding of risk to retrocessionaires does not relieve us of our liability to our ceding companies.

We are dependent on a small number of reinsurance brokers for a large portion of our revenue and exposed to their credit risk

We market our reinsurance products in our target markets in part through reinsurance brokers. In some markets we principally write through reinsurance brokers. Loss of all or a substantial portion of the business written through brokers could have a material adverse effect on our financial condition, results of operations or cash flows.

Although the percentage of our gross premiums written produced through brokers decreased to 28% in 2006 (from 32% in 2005), we are still subject to risks associated with business produced through brokers. In accordance with industry practice, we frequently pay amounts owed on claims under our policies to reinsurance brokers, and these brokers, in turn, pay these amounts over to the insurers that have reinsured a portion of their liabilities with us. We refer to these insurers as ceding insurers. In some jurisdictions, or pursuant to some contractual arrangements, if a broker fails to make such a payment, we may remain liable to the ceding insurer for the deficiency. Conversely, in certain jurisdictions, when the ceding insurer pays premiums for these policies to reinsurance brokers for payment over to us, these premiums are considered to have been paid and the ceding insurer will no longer be liable to us for those amounts, whether or not we have actually received the premiums. Consequently, in connection with the settlement of reinsurance balances, we assume a degree of credit risk associated with reinsurance brokers around the world.

We may be adversely affected if Zurich Financial Services or its subsidiaries fail to honor their obligations to us or our clients

As part of the Formation Transactions described under “Formation transactions and relationship with Zurich Financial Services” in “Item 4. — Information on the Company — A. History and Development of the Company” and in “Item 10. — Additional Information — C. Material Contracts”, we entered into a number of contractual agreements with Zurich Financial Services and its affiliates including the Master Agreement, the Quota Share Retrocession Agreement, the Master Novation and Indemnity Reinsurance Agreement, service agreements, lease agreements and certain indemnity agreements. Among other things, under the Quota Share Retrocession Agreement, Zurich Financial Services, through its subsidiaries, provides us with a substantial amount of our investment returns. Additionally, Zurich Financial Services, through its subsidiaries, has agreed to arrangements that cap our exposure, net of retrocessional reinsurance recoveries, for losses and loss expenses arising out of the September 11th terrorist attacks at USD 289.2 million, (subsequently reduced to USD 231.0 million following the sale of our North American operations) the amount of loss and loss expenses we recorded as of September 30, 2001. In addition, subsidiaries of Zurich Financial Services have provided us with retrocessional reinsurance protection, provided coverage for certain workers’ compensation exposure, indemnified us for specified taxes and other matters and agreed to lease or sublease office space to us. Therefore, we are exposed to credit risk from Zurich Financial Services with respect to these obligations.

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In addition, Zurich Financial Services subsidiaries remain the legal counterparty for many of our assumed reinsurance contracts, particularly those reinsurance contracts entered into prior to the date of the initial public offering. Although we do not have credit risk exposure with respect to these contracts, if these Zurich Financial Services subsidiaries do not honor their commitments efficiently and effectively to these clients, we might bear reputational risk. See “Item 4. – Information on the Company – A. History and Development of the Company”.

We are dependent on a small number of relationships for a substantial proportion of our business; the loss of a key business relationship could significantly reduce our premium volume and reduce net income

Substantial parts of our current business come from a small number of relationships such as Lloyd’s syndicates, MDU and GAUM which represent approximately 38% of our total gross premiums written. We are therefore exposed to certain concentration risk. The loss of all or a substantial portion of a key business relationship could significantly reduce the gross premium written and net income of a business segment or the company overall.

We may be restricted from consummating a change of control transaction, disposing of assets or entering new lines of business

Certain tax considerations and contractual arrangements with Zurich Financial Services may make an acquisition of Converium less likely and limit our ability to dispose of assets or enter into new lines of business. See “Formation transactions and relationship with Zurich Financial Services”.

Our inability to dispose of assets or enter new lines of business may render us less able to respond to changing market and competitive conditions, which could have a material adverse effect on our financial condition, results of operations or cash flows.

We are potentially exposed to a significant loss of business in the event of a change of control

Certain business that we write contains termination provisions which give the ceding company or counterparty the right of termination in the event of a change in control. Whether a change in control has taken place will ordinarily be determined by the legal jurisdiction which governs the individual contract concerned.

The Company has a number of material contracts which contain such a clause including the aviation pool membership and shareholders agreement in GAUM, the MDU business and our shareholding in MDUSL and the ZIC and ZIB Quota Share Retrocession Agreements. Accordingly the exercise of termination provisions following a change in control could have a material adverse impact on our business, operating results and financial condition.

We may require additional equity or debt financing in the future, which may only be available at unfavourable terms

Our future capital requirements depend on many factors, including our ability to write new business successfully, the frequency and severity of catastrophic events, and our ability to establish premium rates and reserves at levels sufficient to cover losses.

We may need to raise additional funds through financings or curtail our growth and reduce our assets. Any equity or debt financing, if available at all, may be on terms that are not favourable to us.

Equity financings could be dilutive to our existing shareholders and could result in the issuance of securities that have rights, preferences and privileges that are senior to those of our other securities. If we cannot obtain adequate capital on favourable terms or at all, our business, operating results and financial condition could be adversely affected.

Risks Related to SCOR’s Tender Offer for Converium’s registered shares

On May 9, 2007, Converium and SCOR entered into a transaction agreement (the “SCOR Transaction Agreement”) pursuant to which SCOR agreed to offer holders of Converium’s registered shares 0.5 new SCOR shares and CHF 5.50 in cash in exchange for each Converium registered share tendered and Converium agreed that its Board of Directors would recommend SCOR’s Tender Offer (the "SCOR Tender Offer") to Converium shareholders. We are subject to the following risks as a result of the SCOR Tender Offer:

Regardless of whether or not the SCOR Tender Offer is completed, the announcement and pendency of the SCOR Tender Offer could cause disruptions in our business

Uncertainty about the effect of the SCOR Tender Offer on our business operations and employees could result in a material adverse effect on our financial condition and operating results. These uncertainties may impair our ability to retain and motivate key personnel until the SCOR Tender Offer is completed and could cause our customers and other parties who deal with us to defer decisions regarding business relationships with us or other decisions concerning us, or to seek to change existing business relationships with us. If key employees depart because of uncertainty about their future roles with us, our ability to continue to execute our business and strategic plans could be adversely affected. In addition, the attention of our management may shift away from our ongoing business toward the completion of the SCOR Tender Offer and the integration of our businesses following the consummation of the SCOR Tender Offer. If the SCOR Tender Offer is not completed, our management will have spent considerable time, and incurred significant expenses, which could adversely affect our business and results of operations. Converium expects significant transaction and defense services costs during 2007. In addition, the loss of employees, customers or other relationships during the pendency of the SCOR Tender Offer could adversely affect our business if the SCOR Tender Offer is not completed. Furthermore, the SCOR Transaction Agreement generally restricts us, until the SCOR Tender Offer occurs, from taking actions outside of the ordinary course of business, without the consent of SCOR. These restrictions could adversely affect our ability to pursue key aspects of our strategic plans prior to the completion of the SCOR Tender Offer.

If SCOR is unsuccessful and the SCOR Tender Offer is not consummated, SCOR will control a substantial portion of our registered shares

If the SCOR Tender Offer is not consummated, SCOR will control approximately 32.9% of our voting securities. As a result, SCOR may over time be able to remove our current directors and elect a slate of its own directors and otherwise exert significant influence over the day-to-day affairs of the Company.

After completion of the SCOR Tender Offer, there may be substantial difficulty and costs associated with the integration of our operations with those of SCOR’s

Prior to the completion of the SCOR Tender Offer, the Company and SCOR operated, and will continue to operate, as independent companies, each with its own business, products, customers, employees, culture and systems. As such, the integration process will be complex, time-consuming and expensive and we may face substantial difficulties, costs and delays associated with the integration, including:

•    perceived adverse changes in product offerings available to clients or client service standards, whether or not these changes do, in fact, occur;

•    the retention of our and SCOR’s existing clients, joint venture partners and underwriters; and

•    retaining and integrating management, underwriters and other key employees of the resulting company.

After the consummation of the SCOR Tender Offer, the combined company may seek to consolidate certain operations and functions using common information and communication systems, operating procedures, financial controls and human resource practices, including training, professional development and benefit programs. The combined company may be unsuccessful or delayed in implementing the integration of these systems and processes and, as a result, the expected benefits of a transaction with SCOR may be delayed. Furthermore, as discussed below, following the consummation of the SCOR Tender Offer, Inga Beale, our Chief Executive Officer, and Paolo De Martin, our Chief Financial Officer, will be terminated with effect as of December 31, 2007.

We entered into the SCOR Transaction Agreement with the expectation that the combination with SCOR could result in various benefits including, among other things, benefits relating to enhanced revenues, a strengthened market position for the resulting company in its businesses, cross-selling opportunities, cost savings and operating efficiencies. Achieving the anticipated benefits is subject to general competitive factors in the marketplace and a number of uncertainties, including our ability to integrate with SCOR in an efficient and effective manner. Any delay or the failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially impact the resulting company’s business, financial condition and operating results.

While we have no intention of doing so, the SCOR Transaction Agreement limits our ability to pursue alternatives to the SCOR Tender Offer

Under the terms of the SCOR Transaction Agreement, we are generally precluded from encouraging or participating in any discussions that could lead to an alternative transaction to the current transaction with SCOR. Similarly, subject to certain exceptions, our Board of Directors is restricted in its ability to withdraw or modify its recommendation that our stockholders approve the SCOR Tender Offer.

The consideration offered in the SCOR Tender Offer is substantially share based which, if taken up by shareholders, would expose them to any future SCOR share price fluctuations

The consideration offered in the SCOR Tender Offer is substantially share based which, if taken up by shareholders, would expose them to any future SCOR share price fluctuations. In addition, our review of SCOR’s business was limited to publicly available information. Consequently, we have not independently verified the public information available to us and any undisclosed or unknown liabilities of SCOR may have an adverse affect on the benefits of the combination or on SCOR’s profitability, results of operations, financial condition or prospects following the combination.

The market for the Company’s registered shares and ADSs may be less liquid following completion of the SCOR Tender Offer, and the value of registered shares and American Depository Shares may be lower

The consummation of the SCOR Tender Offer will reduce the number of holders of Converium registered shares as well as the number of Converium registered shares that might otherwise trade publicly and, depending upon the number of Converium registered shares so exchanged, could adversely affect the liquidity and market value of the remaining Converium registered shares and American Depositary Shares held by the public. The extent of the public market for the Converium registered shares and the availability of such quotations would depend upon such factors as the number of holders remaining at such time, the interest on the part of securities firms in maintaining a market in Converium registered shares or Converium American Depositary Shares, and the possible termination of registration of Converium registered shares and American Depositary Shares under the Exchange Act, would adversely affect the amount of publicly available information with respect to Converium.

The SCOR Tender Offer has not been extended in, or into, the United States or to holders of the Company’s American Depositary Shares

Because the SCOR Tender Offer has not been extended to holders of our registered shares in the United States and is not extended to holders of the Company’s American Depositary Shares, regardless of whether such American Depositary Shares are held by persons outside of the United States, to the extent you are a U.S. resident or hold American Depositary Shares, you may not participate in the SCOR Tender Offer. In that instance, following the consummation of the SCOR Tender Offer, you may hold shares or American Depositary Receipts in a Company controlled by SCOR.

The failure of SCOR to consummate the SCOR Tender Offer could negatively affect the price of our registered shares and American Depositary Shares and our future business and financial prospects.

There is no assurance that SCOR will successfully complete the SCOR Tender Offer. If the SCOR Tender Offer is not completed, our management will have spent considerable time, and incurred significant expenses, which could adversely affect our business and results of operations. Our management has spent, and will continue to spend, considerable amounts of time focusing on the integration of our businesses, which could limit their time and effort available to pursue other business activities that may be important to our operations. Additionally, the market price of our registered shares and American Depositary Shares may reflect a market assumption that the SCOR Tender Offer is likely to be consummated, and a failure to do so would likely result in a decline in the market price of our registered shares and American Depositary Shares.

ITEM 4. INFORMATION ON THE COMPANY

Converium Holding AG was incorporated in Switzerland on June 19, 2001 as a joint stock company as defined in article 620 et seq. of the Swiss Code of Obligations. We were registered on June 21, 2001 in the Commercial Register of the Canton of Zug with registered number CH-170.3.024.827-8. Our registered office is General Guisan-Quai 26, CH-8002 Zürich, Switzerland and our telephone number is +41 44 639 9335.

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A. HISTORY AND DEVELOPMENT OF THE COMPANY

On March 22, 2001, Zurich Financial Services announced its intention to divest substantially all of its third-party reinsurance business historically operated under the “Zurich Re” brand name. This business had been managed and operated as a global operation since 1998. We refer to our initial public offering and the associated transactions described below in this Form 20-F as the “Formation Transactions”. As part of the Formation Transactions, ownership of this business was consolidated under Converium Holding AG, a newly incorporated Swiss company.

The Formation Transactions consisted of the following principal steps:

• The transfer to us of the “Zurich Re” reinsurance business now conducted by Converium AG, through a series of steps including:

o Our reinsurance of this business through quota share retrocession agreements with two units of Zurich Financial Services, (the “Quota Share Retrocession Agreement”);

o The establishment of “funds withheld” balances in our favor by the applicable units of Zurich Financial Services (the “Funds Withheld Asset”), on which we will be paid investment returns by the Zurich Financial Services units;

o The transfer of assets including cash, marketable securities and participations by Zurich Financial Services and its subsidiaries to Converium, together with the assumption of liabilities;

• The acquisition of the Cologne reinsurance business through the transfer by a subsidiary of Zurich Financial Services to Converium AG of its 98.63% interest in ZRK, which was renamed Converium Rückversicherung (Deutschland) AG. Converium’s interest in Converium Rückversicherung (Deutschland) AG increased to 100% in January 2003;

• The acquisition of the North American reinsurance business through the transfer by a subsidiary of Zurich Financial Services of all of the voting securities of Zurich Reinsurance (North America) Inc. to CHNA Inc., a wholly owned subsidiary of Converium AG. In conjunction with this transfer, CHNA assumed USD 200 million of public debt from a subsidiary of Zurich Financial Services, and Zurich Reinsurance (North America), Inc. was renamed CRNA;

• The sale of 35,000,000 of our registered shares to the public by Zurich Financial Services on December 11, 2001 in our initial public offering and the subsequent sale of 5,000,000 of our registered shares to the public by Zurich Financial Services on January 9, 2002 as a result of the underwriters’ exercise of their over-allotment option, which sales resulted in the public owning 100% of our shares; and

• After our initial public offering, Converium AG used cash transferred to us by Zurich Financial Services to acquire from subsidiaries of Zurich Financial Services approximately USD 140 million of residential and commercial rental properties located in Switzerland.

As part of the Formation Transactions, Zurich Financial Services and its subsidiaries transferred cash and other assets and liabilities to Converium. The assets transferred to us included:

• The shareholders’ equity of the legal entities comprising our operating businesses;

• The operating assets of the Zurich reinsurance business; and

• The balance of the assets transferred to us consisted of investments and cash, of which approximately USD 140 million was used by Converium AG to acquire residential and commercial rental properties located in Switzerland from subsidiaries of Zurich Financial Services

For a description of the agreements and transactions involved in the Formation Transactions and our divestiture from Zurich Financial Services, including certain ongoing contractual arrangements with Zurich Financial Services, see “Item 10. — Additional Information — C. Material Contracts”.

For description of our capital raising activities that occurred in October 2004, see “Item 10. — Additional Information — B. Memorandum and Articles of Incorporation”.

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Converium Finance S.A. is a company incorporated for unlimited duration under the laws of Luxembourg on October 7, 2002. It has authorized share capital of €31,000 divided into 3,100 shares with a par value of €10 per share, 3,099 of which are owned by Converium AG and one of which is held by BAC Management S.a.r.l., a director of Converium Finance S.A., and all of which are fully paid. Converium Finance S.A.’s registered office is 54, boulevard Napoleon Ier, L-2210 Luxembourg. The objective of Converium Finance S.A., as stated in its Articles of Incorporation, is the acquisition, management, enhancement and the disposal of participations in whichever form in domestic and foreign companies.

Converium Insurance (UK) Ltd is an insurance company that incorporated for unlimited duration in the United Kingdom on November 11, 2002. It holds a license as an insurer from the United Kingdom Financial Services Authority dated May 27, 2003. Converium Insurance (UK) Ltd engages in issuing insurance and reinsurance policies in conjunction with selected cases, currently comprising of our business relating to MDU and GAUM. It has authorized share capital of GBP 60,000,000 divided into 60,000,000 shares with a par value of GBP 1 per share, all of which are owned by Converium Holdings (UK) Ltd.

Converium Underwriting Ltd is a Lloyd’s corporate capital vehicle that was incorporated for unlimited duration in the United Kingdom on October 1, 2001. It was acquired by Converium AG on October 10, 2002 and sold to Converium Holdings (UK) Ltd on December 31, 2002. Converium Underwriting Limited participates as a corporate capital provider to syndicates underwriting at Lloyd’s of London, ceding 100% of the business written under a quota share arrangement to Converium AG. It has authorized share capital of GBP 2 divided into 2 shares with a par value of GBP 1 per share, all of which are owned by Converium Holdings (UK) Ltd.

Converium PCC Ltd, Guernsey, is a company incorporated for an unlimited time in Guernsey/United Kingdom on October 31, 2000, which was set up in conjunction with the Formation Transactions of the IPO. The company holds a reinsurance license from the Guernsey Financial Services Commission dated October 12, 2001, and its purpose is to facilitate the intra-group reinsurance between certain branch offices of Converium AG and the parent.

In 2004, we formed Converium Finance (Bermuda) Ltd, as well as Converium IP Management Ltd, both of which were incorporated in Bermuda on December 17, 2004. As part of the formation process, Converium Holding AG contributed the rights to commercially exploit the Converium brand to Converium Finance (Bermuda) Ltd, which in turn sold the rights to commercially exploit the Converium brand in exchange for a loan to Converium IP Management Ltd. Converium IP Management AG, Bermuda, entered into a license agreement allowing it to commercially exploit the Converium brand with respect to our operating insurance respectively, reinsurance branch offices and subsidiaries. We implemented this corporate change mainly to comply with relevant tax rules applicable to holding companies in the Canton of Zug, Switzerland in order to protect the current tax status of Converium Holding AG as a holding company. During 2005, we subsequently transferred the domicile of Converium IP Management Ltd to Zug, Switzerland.

On December 13, 2006, Converium sold its US operations including CRNA and Converium Insurance (North America) Inc. (“CINA”) to National Indemnity Company, a Berkshire Hathaway company for a total consideration of USD 295.0 million comprising of USD 95.0 million in cash and USD 200.0 million in assumption of debt. Converium has not provided any guarantee or indemnity in respect of the reserves of the North American operations. The transaction was approved by the Insurance Department of the State of Connecticut.

On Monday, February 19, 2007, SCOR publicly announced that it had acquired a 32.9% interest in Converium’s outstanding registered shares, of which 8.3% and 24.6% were acquired through direct market purchases and share purchase agreements, respectively. On Monday, February 26, 2007, SCOR issued a pre-announcement of the then unsolicited tender offer for Converium’s registered shares (as defined below) in accordance with the laws of Switzerland.

On April 5, 2007, SCOR formally launched an unsolicited tender offer pursuant to which each of Converium’s registered share were to be exchanged for 0.5 ordinary shares of SCOR and CHF 4, the cash portion of which was to be reduced by the gross amount of any dilutive effects in respect of Converium’s registered shares prior to the consummation of the SCOR Tender Offer. On May 9, 2007, Converium and SCOR entered into the SCOR Transaction Agreement pursuant to which SCOR agreed to offer holders of Converium’s registered shares 0.5 new SCOR shares and CHF 5.50 in cash in exchange for each Converium registered share tendered and Converium agreed that its Board of Directors would recommend the SCOR Tender Offer to Converium shareholders. SCOR has further agreed to not to reduce the cash portion of the offer consideration by the Company’s gross dividend of 0.20 CHF per share for the fiscal year ended December 31, 2006. The SCOR Tender Offer is governed by the laws of Switzerland and is extended to all holders of the Company’s registered shares located outside of the United States and Japan and is not extended to holders of the Company’s American Depositary Shares, regardless of whether such American Depositary Shares are held by persons outside of the United States or Japan. The SCOR Tender Offer commenced on June 12, 2007 and will remain open for acceptances for a period of 20 business days.

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B. BUSINESS OVERVIEW

Overview

Converium Holding AG and subsidiaries (“Converium” or the “Company”) is an international reinsurer whose business operations are recognized for innovation, professionalism and service. As a multi-line reinsurer, we pursue a strategy of profitable organic growth with a geographic emphasis on Europe, Asia-Pacific, Central and South America and the Middle East and a distinct focus on global specialty lines. In addition, we underwrite and manage US-originated business through Converium AG, Zurich, with a focus on shorter-tail lines. We actively seek to develop efficient and effective reinsurance solutions to complement our target clients’ business plans and needs. We focus on core underwriting skills and on developing close client relationships while honoring our and our clients’ relationships with intermediaries.

Converium currently manages its business around three operating segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life & Health Reinsurance, which are based principally on global lines of business. In addition to the three segments’

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financial results, the Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee and other corporate functions as well as expenses not allocated to the operating segments. The business segments are supported by global business support functions such as Actuarial & Risk Management Services, and by global services such as Human Resources, Finance and IT. We believe that this structure provides a higher degree of transparency, accountability and management control. In addition to reporting segment results individually, management also aggregates results for Standard Property & Casualty Reinsurance and Specialty Lines into non-life business, as management considers this aggregation meaningful in understanding the performance of Converium.

We offer a broad range of non-life and life reinsurance products. In non-life reinsurance, our lines of business include General Third Party Liability, Motor, Personal Accident (assumed from non-life insurers), Property, Agribusiness, Aviation & Space, Credit & Surety, Engineering, Marine & Energy, Professional Liability and other Special Liability and Workers’ Compensation. In Life & Health Reinsurance, our lines of business include Life and Disability reinsurance, including quota share, surplus coverage and financing contracts and Accident & Health.

In addition to our offices in Cologne, Zug and Zurich, we have branch offices in Bermuda, Labuan, Milan, Paris, Singapore, Sydney as well as marketing offices in Buenos Aires, Sao Paulo and Tokyo and Kuala Lumpur. We have a sub-holding company in London and finance subsidiaries in Luxembourg and Bermuda, an IP company in Zug, Switzerland and a licensed reinsurance company in Guernsey, United Kingdom, facilitating intra-group reinsurance within Converium.

We underwrite reinsurance both directly with ceding companies and through intermediaries, giving us the flexibility to pursue business in accordance with our ceding companies’ preferred reinsurance purchasing method. In addition, we generate business through strategic partnerships and joint ventures such as GAUM and MDU. In 2006, 28% of our gross premiums written were written through intermediaries and 72% of our business was written on a direct basis.

In 2004, Converium’s North American operations were placed into orderly run-off and reported as the Run-Off segment to monitor this business on a stand-alone basis. On December 13, 2006, Converium sold its North American operations to National Indemnity Company, a Berkshire Hathaway company. Our North American operations were previously reported as the principal component of a separate segment, the Run-Off segment. Converium’s financial results of the North American business, including prior period amounts, have been reclassified to discontinued operations. For further details regarding the sale of the North American operations, see Note 2 to our 2006 consolidated financial statements.

Our vision

We aim to be a major player in the international reinsurance industry. Our efforts are focused on supporting our clients with leading-edge solutions. We aspire to be recognized as a learning, decisive, communicative and action-oriented organization.

Our mission

We are an international multi-line reinsurer that satisfies our clients’ needs by excelling at analyzing, assuming and managing risks. We are experts in managing our clients’ volatility and helping them optimize capital efficiency. In an ethical and responsible manner we provide:

• sustainable value growth for our shareholders;

• excellent service for our customers and intermediaries; and

• a fulfilling work environment for our employees.

Our strategy

As a multi-line reinsurer Converium pursues a strategy of profitable organic growth with a geographic emphasis on Europe, Asia-Pacific, Central and South America, and the Middle East. Reflecting its significant capabilities in this particular area, the Company places a distinct focus on global specialty lines. Converium implements its strategy by:

– Making investments in specialty lines: Based on the Company’s track record and human capital Converium is committed to further expanding its specialty portfolio, including aviation & space, engineering, marine & energy, credit & surety and agribusiness.

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– Maintaining and developing multiple distribution channels, including joint ventures: To leverage Converium’s proven skills at identifying and managing joint ventures and distribution channels which provide direct access to business, the Company will continue to seek opportunities in this field. This offers growth opportunities beyond organic business development and outright acquisitions.

– Broadening the client base: In addition to expanding relationships with existing clients Converium seeks to establish new relationships in the Company’s preferred geographical markets and lines of business.

– Expanding the knowledge base: Converium believes in the value of a knowledge-based business model, offering clients insight and services beyond pure underwriting capacity. To this end, the Company will continue to boost its intellectual capital.

– Further enhancing the risk management and control culture: These efforts will focus on further implementing a state-of-the-art Enterprise Risk Management (ERM) framework.

– Advancing cost and capital efficiency: Converium is committed to further rationalise its internal processes and setup in order to achieve a competitive administrative expense ratio. In addition, Converium constantly seeks to maximize capital efficiency by exploring opportunities for leveraging its balance sheet and transferring risks directly to capital markets.

Our core business

Our core business is to analyze, assume and manage portfolios of insurance risks, and to invest our assets so that they support the insurance risks we assume. Our strategy for each of our business segments is as follows:

Standard Property & Casualty Reinsurance

The Standard Property & Casualty Reinsurance segment is comprised of the General Third Party Liability, Motor, Personal Accident (assumed from non-life insurers) and Property lines of business. The segment strategy focuses on partnership-oriented professional reinsurance buyers in the markets Europe, Latin America and Asia. Our long-term client relationships are based on our capabilities, e.g. natural hazard expertise, financial modeling capabilities, structuring advice and claims and underwriting audits, contributing to earnings and cash flows. We remain committed to underwriting discipline to achieve the best possible shareholder return, which is only possible through cycle management.

Specialty Lines

The Specialty Lines segment includes the Agribusiness, Aviation & Space, Credit & Surety, Engineering, Marine & Energy, Professional Liability and other Specialty Liability and Workers’ Compensation lines of business. The Specialty Lines segment’s strategy is to develop specialty businesses in which Converium can position itself as a market leader and effectively leverage its intellectual assets in risk analysis, structuring, product design and risk modeling. We focus on specialty businesses because we believe that Converium possesses superior underwriting and structuring capabilities in certain areas, which is both a key driver of profitability as well as an effective barrier to entry in certain business lines.

Wherever possible, Converium seeks to develop preferred access to specialty lines through strong relationships, strategic partnerships or participations in entities that enjoy a unique position, such as strong control over the origination of their business, which prevent

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them from having to compete in annual insurance or reinsurance auctions. Examples of the approach by which we seek to develop preferred access to these businesses are our strategic partnership with MDU in the U.K. and our participation in GAUM and our shares in its pools, as well as many strong relationships with specialized mono-line insurers.

Also, Converium Underwriting Ltd, a Lloyd’s Corporate Member, has successfully provided and continues to provide third-party capacity to certain specialist Lloyd’s syndicates.

Some specialty lines are subject to cyclical pricing fluctuations. Converium remains committed to underwriting discipline to achieve the best possible shareholder return, which is only possible through cycle management.

Life & Health Reinsurance

The Life & Health Reinsurance segment comprises the Life & Disability and Accident & Health lines of business. The Life & Health Reinsurance segment’s strategy is to increase the stability of Converium’s income. Traditional life reinsurance has a low correlation to property and casualty risks and can therefore improve our risk diversification. Our Life & Health Reinsurance segment will continue to grow its activities in its existing key markets, which are Germany, Italy and France; markets with significant potential for future opportunities for us include Denmark and the Netherlands.

The business segments are supported by global business support functions such as Actuarial & Risk Management Services, and by global services such as Human Resources, Finance and IT.

Guiding principles for our business

We have established the following guiding principles for the development of our business:

• Our lead objective is to maximize economic value. The metrics we use to measure this are pre-tax operating income and “performance excess”. “Performance excess” is the measure we use to implement economic value-based management at Converium and is an internal key metric for measuring expected and actual underwriting performance. “Performance excess” represents the economic value added attached to all reinsurance contracts in our portfolio and takes into account all expected benefits and costs emanating from a contract or group of contracts, including expected premiums, expected losses and all other internal and external costs including taxes and the costs of the allocated risk-based capital. Hence, “performance excess” equals the expected net present value created for shareholders, in excess of the cost of capital;

• To optimize our overall risk profile, we balance and diversify our portfolio by line of business, by region and by duration;

• All contracts we underwrite should be profitable in expectation; that is, a “performance excess” target of at least equal to zero.

• We seek to grow our business, but sustainable profitability is a prerequisite; and

• Assumed London market retrocession, financial guarantees and underwriting authorities for assumed reinsurance are outside of our strategic scope.

In addition, we have established the following guiding principles to manage our business:

Cycle management. We have a systematic approach to the allocation of capital and resources to those lines of business and markets that meet our profitability standards, and to withdraw from business that does meet our performance thresholds. Historically, the reinsurance cycles in different lines of business and markets have not moved simultaneously. Our strong international franchise and our distribution and servicing platform provide broad access to an international reinsurance market, and enable the flexible allocation of resources to those lines of business or markets in which profitability prospects are most favorable at any point in time. Our well established relationships with clients and intermediaries, as well as our transparent pricing approach, allow us to manage the cycle by moving in and out of lines of business or markets without putting long-term business relationships at risk.

Risk management. The prominence of risk within Converium, together with its inclusive implementation, has further strengthened the Company’s Enterprise Risk Management (ERM) practices. This approach is based on five pillars: Risk Management Culture, Risk Controls, Emerging Risk Management, Risk and Capital Models, and Strategic Risk Management. ERM was designated as a distinct rating category by Standard & Poor’s (together with other rating agencies) in 2006. It is designed to focus financial institutions on

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taking a comprehensive view of their entire risk landscape, and gain a holistic approach to risk measurement, rather than having potential exposures in distinct risk areas.

Operational excellence. We manage our expense base effectively through continuous analysis of business processes and operational structures, with a view to enhancing business integration and achieving synergies and efficiencies.

Retention management. We manage our gross and net risk positions on a group-wide basis, through global risk pooling and the use of retrocession on specific line of business exposures.

Investment policy. We allocate capital primarily to support underwriting risks with the aim of optimizing the after-tax risk-return characteristics of our investment portfolio. The recently hired global asset manager assumed overall responsibility for the management of our fixed income portfolio. In order to achieve a higher yielding diversification we adopt a less defensive and more sophisticated approach towards managing this asset class, which is by far the single largest class in Converium’s investment portfolio. A shift of our assets into less constrained portfolios supports the optimization of investment yield. Nevertheless, our asset allocation continues to focus on a core portfolio of high quality bonds supplemented by complementary portfolios in other asset classes, including equities, real estate and non traditional or alternative investments.

Capital management. Our main capital management objectives focus on:

– a disciplined approach based on our state of the art Enterprise Risk Management (ERM) approach, with excess capital being deployed for profitable growth and being returned to shareholders;

– an optimized and appropriately leveraged balance sheet;

– a consistent dividend policy with a proposed sustainable pay-out ratio of 25-35%.

Our business

The table below presents, by segment, the distribution of our premiums written and segment income (loss) for the years ended December 31, 2006, 2005 and 2004. For additional information regarding the results of our operating segments, see “Item 5– Operating and Financial Review and Prospects – A. Operating Results” and the Schedule of Segment Data on pages F-9 and F-10 of the financial statements.

	Gross premiums written						Net premiums written						Segment income (loss)
	(USD millions)						(USD millions)						(USD millions)
For the year ended December 31	2006		2005		2004		2006		2005		2004		2006		2005		2004
Business Segment:
Standard Property & Casualty Reinsurance		890.6		803.1		1,509.0		816.9		739.0		1,377.4		204.6		45.9		88.3
Specialty Lines		777.0		833.1		1,655.3		729.4		737.7		1,565.3		98.9		108.9		-13.4
Life & Health Reinsurance		313.3		318.8		327.9		305.7		306.4		313.2		23.5		17.6		16.4
Corporate Center		—		—		—		—		—		—		-54.5		-49.5		-36.8
Total		1,980.9		1,955.0		3,492.2		1,852.0		1,783.1		3,255.9		272.5		122.9		54.5
Other loss														-0.5		-21.9		-4.7
Interest expense														-16.7		-17.2		-18.7
Amortization of intangible assets														—		-21.5		-9.9
Restructuring costs														0.2		-12.1		-0.2
Income tax (expense) benefit														-40.5		-16.1		4.6
Income from continuing operations														215.0		34.1		25.6
(Loss) income from discontinuing operations, net of tax														-157.9		34.6		-608.1
Net income (loss)														57.1		68.7		-582.5

The table below presents the composition of our gross premiums written by line of business for the non-life business segments and the Life & Health Reinsurance segment, separated between reported and change in accrual for the years ended December 31, 2006, 2005 and 2004:

	For the year ended December 31,
	2006						2005						2004
			Change in						Change in						Change in
	Reported		Accrual		Total		Reported		Accrual		Total		Reported		Accrual		Total
	(USD millions)						(USD millions)						(USD millions)
	Gross Premiums Written
Standard Property & Casualty Reinsurance
General Third Party Liability		241.4		-1.3		240.1		260.1		-75.9		184.2		376.2		28.5		404.7
Motor		160.8		9.7		170.5		254.3		-65.4		188.9		479.0		-7.0		472.0
Personal Accident (assumed from non-life insurers)		16.0		-0.6		15.4		23.2		-9.9		13.3		51.6		-17.9		33.7

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	For the year ended December 31,
	2006						2005						2004
			Change in						Change in						Change in
	Reported		Accrual		Total		Reported		Accrual		Total		Reported		Accrual		Total
	(USD millions)						(USD millions)						(USD millions)
	Gross Premiums Written
Property		482.8		-18.2		464.6		444.5		-27.8		416.7		631.1		-32.5		598.6
Total Standard Property & Casualty Reinsurance		901.0		-10.4		890.6		982.1		-179.0		803.1		1537.9		-28.9		1,509.0
Specialty Lines
Agribusiness		31.5		5.6		37.1		16.0		20.7		36.7		10.7		0.7		11.4
Aviation & Space		274.7		-12.5		262.2		336.7		-82.1		254.6		486.6		-10.2		476.4
Credit & Surety		72.5		-30.4		42.1		161.8		-103.4		58.4		175.9		33.2		209.1
Engineering		84.6		-16.8		67.8		112.5		-41.9		70.6		126.1		-7.6		118.5
Marine & Energy		62.5		-3.5		59.0		77.9		-13.0		64.9		86.5		-0.7		85.8
Professional Liability and other Special Liability		356.5		-43.4		313.1		346.4		13.0		359.4		422.0		18.3		440.3
Workers’ Compensation		7.7		-12.0		-4.3		84.7		-96.2		-11.5		225.1		88.7		313.8
Total Specialty Lines		890.0		-113.0		777.0		1,136.0		-302.9		833.1		1,532.9		122.4		1,655.3
Life & Health Reinsurance
Life & Disability		257.2		-2.0		255.2		233.5		14.1		247.6		231.0		16.8		247.8
Accident & Health		65.6		-7.5		58.1		67.0		4.2		71.2		90.6		-10.5		80.1
Total Life & Health Reinsurance		322.8		-9.5		313.3		300.5		18.3		318.8		321.6		6.3		327.9
Total		2,113.8		-132.9		1,980.9		2,418.6		-463.6		1,955.0		3,392.4		99.8		3,492.2

Premium accruals are impacted if and when cedents report premium adjustments over time as the underlying exposure becomes increasingly certain. The premium impact is positive, i.e., accruals increase, if the cedent has assumed a higher exposure and hence higher premium than expected at policy inception. It is typically negative if estimated premiums for the assumed exposure turn out to be lower, leading to a reduction in accruals. The process of adjusting premium accruals varies greatly because cedents in many countries around the world apply local practices for, among other things, the recording of exposure, financial reporting as well as reporting to third parties (such as their reinsurers) and the timing of recording final premiums. In addition, accruals can be impacted by contracts cancelled under special termination clauses, leading to a reduction in premium accruals.

Acquisition costs are comprised of different components, of which some are recognized in line with premiums, as opposed to others which are recognized on different bases such as the profitability of each underlying treaty.

The table below presents the composition of the related acquisition costs by line of business for the non-life business segments and the Life & Health Reinsurance segment, separated between reported and change in accrual for the years ended December 31, 2006, 2005 and 2004:

	For the year ended December 31,
	2006						2005						2004
			Change in						Change in						Change in
	Reported		Accrual		Total		Reported		Accrual		Total		Reported		Accrual		Total
	(USD millions)						(USD millions)						(USD millions)
	Acquisition Costs, gross
Standard Property & Casualty Reinsurance
General Third Party Liability		46.1		21.5		67.6		66.2		-46.5		19.7		102.3		2.7		105.0
Motor		33.0		5.0		38.0		27.0		0.7		27.7		80.7		4.1		84.8
Personal Accident (assumed from non-life insurers)		4.7		-0.3		4.4		6.2		-2.7		3.5		16.2		-0.6		15.6
Property		102.9		-0.4		102.5		116.4		-21.1		95.3		136.0		-0.4		135.6
Total Standard Property & Casualty Reinsurance		186.7		25.8		212.5		215.8		-69.6		146.2		335.2		5.8		341.0
Specialty Lines
Agribusiness		4.5		1.9		6.4		2.6		2.9		5.5		2.1		0.4		2.5
Aviation & Space		81.6		3.5		85.1		79.6		-0.8		78.8		86.5		17.3		103.8
Credit & Surety		25.1		-2.5		22.6		54.5		-29.7		24.8		59.0		4.3		63.3
Engineering		23.7		-2.1		21.6		29.8		-7.3		22.5		32.1		-2.6		29.5
Marine & Energy		14.4		-1.3		13.1		17.0		0.1		17.1		18.7		-1.1		17.6
Professional Liability and other Special Liability		41.8		15.0		56.8		51.2		-14.1		37.1		64.3		22.6		86.9

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	For the year ended December 31,
	2006						2005						2004
			Change in						Change in						Change in
	Reported		Accrual		Total		Reported		Accrual		Total		Reported		Accrual		Total
	(USD millions)						(USD millions)						(USD millions)
	Acquisition Costs, gross
Workers’ Compensation		2.6		-2.4		0.2		17.7		-21.9		-4.2		34.1		20.6		54.7
Total Specialty Lines		193.7		12.1		205.8		252.4		-70.8		181.6		296.8		61.5		358.3
Life & Health Reinsurance
Life & Disability		77.6		-12.1		65.5		163.8		-94.9		68.9		169.0		-128.0		41.0
Accident & Health		17.6		-6.0		11.6		20.4		1.2		21.6		26.3		-5.4		20.9
Total Life & Health Reinsurance		95.2		-18.1		77.1		184.2		-93.7		90.5		195.3		-133.4		61.9
Total segments		475.6		19.8		495.4		652.4		-234.1		418.3		827.3		-66.1		761.2
Amortization of DAC						-19.0						113.8						15.8
Other costs						10.3						14.0						22.0
Total						486.7						546.1						799.0

The table below presents the geographic distribution of our gross premiums written for the years ended December 31, 2006, 2005 and 2004, based on the location of the ceding companies.

	For the year ended December 31,
	2006				2005				2004
	(USD millions)		% of total		(USD millions)		% of total		(USD millions)		% of total
United Kingdom(1)		539.3		27.2		481.2		24.6		1,156.9		33.1
Germany		399.9		20.2		395.1		20.2		389.6		11.1
France		71.1		3.6		86.1		4.4		158.2		4.6
Italy		87.5		4.4		107.1		5.5		162.3		4.6
Rest of Europe		298.2		15.0		251.1		12.8		379.7		10.9
Far East		120.5		6.1		132.1		6.8		238.5		6.8
Near and Middle East		132.2		6.7		103.1		5.3		124.3		3.6
North America		235.7		11.9		306.7		15.7		752.7		21.6
Central and South America		96.5		4.9		92.5		4.7		130.0		3.7
Total		1,980.9		100.0		1,955.0		100.0		3,492.2		100.0

(1) Premiums from the United Kingdom include business assumed through GAUM and Lloyd’s syndicates for such lines of business as Aviation & Space as well as marine, where the exposures are worldwide in nature. Therefore, geographic location of the ceding company may not necessarily be indicative of the location of risk.

The table below presents the distribution of our net premiums written and net premiums earned by line of business for the non-life business segments and the Life & Health Reinsurance segment for the years ended December 31, 2006, 2005 and 2004.

	For the year ended December 31,
	2006				2005				2004
	Net		Net		Net		Net		Net		Net
	premiums		premiums		premiums		premiums		premiums		premiums
(USD millions)	written		earned		written		earned		written		earned
Standard Property & Casualty Reinsurance
General Third Party Liability		229.7		210.1		146.7		204.1		379.1		348.1
Motor		143.1		138.1		188.4		256.8		437.4		450.8
Personal Accident (assumed from non-life insurers)		12.4		9.1		13.3		14.3		34.5		43.8
Property		431.7		418.3		390.6		405.6		526.4		549.5
Total Standard Property & Casualty Reinsurance		816.9		775.6		739.0		880.8		1,377.4		1,392.2
Specialty Lines
Agribusiness		37.1		34.1		36.7		28.9		11.4		15.5
Aviation & Space		237.1		237.8		241.8		352.4		404.5		327.3
Credit & Surety		42.2		44.8		58.4		168.2		204.3		177.9
Engineering		61.7		66.1		65.5		88.7		112.2		117.3
Marine & Energy		58.1		53.4		64.0		71.7		82.5		85.1
Professional Liability and other Special Liability		297.6		291.9		282.8		295.6		436.5		410.6
Workers’ Compensation		-4.4		-4.4		-11.5		53.7		313.9		253.9

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	For the year ended December 31,
	2006				2005				2004
	Net		Net		Net		Net		Net		Net
	premiums		premiums		premiums		premiums		premiums		premiums
(USD millions)	written		earned		written		earned		written		earned
Total Specialty Lines		729.4		723.7		737.7		1,059.2		1,565.3		1,387.6
Total non-life reinsurance		1,546.3		1,499.3		1,476.7		1,940.0		2,942.7		2,779.8
Life & Health Reinsurance
Life & Disability		247.5		251.5		235.2		240.7		234.9		239.7
Accident & Health		58.2		60.9		71.2		74.1		78.3		79.0
Total Life & Health Reinsurance		305.7		312.4		306.4		314.8		313.2		318.7
Total		1,852.0		1,811.7		1,783.1		2,254.8		3,255.9		3,098.5

Types of reinsurance

Both non-life reinsurance and life reinsurance can be written on either a proportional basis or a non-proportional basis. Proportional reinsurance is also known as pro rata reinsurance. Quota share reinsurance and surplus reinsurance are types of proportional reinsurance. Some non-proportional reinsurance takes the form of excess of loss reinsurance in which the reinsurer’s obligations are only triggered after covered losses exceed a specified attachment point. In the case of proportional reinsurance, the reinsurer assumes a predetermined portion of the ceding company’s risks under the covered insurance contract or contracts. In the case of non-proportional reinsurance, the reinsurer assumes all or a specified portion of the ceding company’s risks in excess of a specified amount, known as the ceding company’s retention or the reinsurer’s attachment point, subject to a negotiated reinsurance contract limit.

Premiums that the ceding company pays to a reinsurer for proportional reinsurance are a predetermined portion of the premiums that the ceding company receives from its insured, consistent with the proportional sharing of risk. In addition, in proportional reinsurance, the reinsurer generally pays the ceding company a ceding commission. The ceding commission is usually based on the ceding company’s cost of generating the business being reinsured, which includes commissions, premium taxes, assessments and miscellaneous administrative expenses and a profit participation for originating the business, the amount of which is based on the claims experience. The ceding commission may also be affected by competitive factors. Premiums that the ceding company pays to a reinsurer for non-proportional reinsurance are not directly proportional to the premiums that the ceding company receives because the reinsurer does not assume a direct proportion of the ceding company’s risk. The frequency of claims under a proportional reinsurance contract is usually greater than under a non-proportional contract, and therefore the claims experience with proportional reinsurance contracts is generally more predictable.

Non-proportional non-life reinsurance is often written in layers. One or a group of reinsurers accepts the risk just above the ceding company’s retention up to a specified amount, at which point another reinsurer or a group of reinsurers accepts the excess liability up to an additional specified limit or the excess liability reverts to the ceding company. The reinsurer taking on the risk just above the ceding company’s retention is typically said to write lower layer excess reinsurance. A claim that reaches just beyond the ceding company’s retention will create a claims payment for the lower layer reinsurer, but not for the reinsurers of any higher layers. Claims activity in lower layer reinsurance tends to be more predictable than in higher layers due to greater frequency and availability of historical data, and therefore, like proportional reinsurance, better enables underwriters and actuaries to more accurately price the underlying risks. In a limited number of cases, reinsurance is also written on an aggregate stop-loss basis to protect the ceding company’s total portfolio from extraordinary losses resulting from the aggregation of individual risks.

Both non-life reinsurance and life reinsurance can be written either through treaty or facultative reinsurance arrangements. In treaty reinsurance, the ceding company cedes, and the reinsurer assumes, a specified portion of a type or category of risks insured by the ceding company. Generally in the industry, treaty reinsurers do not separately evaluate each of the individual risks assumed under their treaties and are largely dependent on the original risk underwriting decisions made by the ceding company’s underwriters. This dependence subjects reinsurers to the possibility that the ceding company has not adequately evaluated the risks to be reinsured and, therefore, that the premiums ceded to the reinsurer may not adequately compensate the reinsurer for the risk assumed. Accordingly, the reinsurer’s evaluation of the ceding company’s risk management and underwriting practices, as well as claims settlement practices and procedures, will usually impact the pricing of the treaty.

In facultative reinsurance, the ceding company cedes, and the reinsurer assumes, all or part of a specific risk or risks. Facultative reinsurance normally is purchased by ceding companies for risks not covered by their reinsurance treaties, for amounts in excess of the monetary limits of their reinsurance treaties and for unusual and complex risks. In addition, facultative risks often provide coverages for relatively severe exposures, which results in greater volatility. The ability to evaluate separately each risk reinsured, however, increases the probability that the reinsurance underwriter can price the contract to reflect more accurately the risks involved.

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Non-traditional reinsurance involves structured reinsurance solutions tailored to meet individual client strategic and financial objectives. Both non-life reinsurance and life reinsurance can be written on a structured/finite basis. Often these reinsurance solutions provide reinsurance protection across a company’s entire insurance portfolio. Because of the constantly changing industry and regulatory framework, as well as the changing market demands facing insurance companies, the approaches utilized in structured/finite programs are constantly evolving and will continue to do so.

We underwrite our product lines on a non-proportional and proportional basis. We integrate our facultative specialists with our underwriting professionals with treaty expertise, organizing them as focused teams around client relationship management and lines of business. We do not distinguish between treaty and facultative reinsurance, but rather between proportional and non-proportional underwriting and lines of business.

Proportional and non-proportional

We offer traditional reinsurance products on both a proportional and non-proportional basis in all our lines of business. Our business is predominantly proportional, comprising approximately 85.7% of gross premiums written during 2006. Our non-proportional business includes Property, Motor, Aviation & Space and Professional Liability and other Special Liability lines, to complement our established market position in non-proportional liability.

We believe that clients and brokers actively seek our input in the evaluation and structuring of businesses with unique or difficult risk characteristics. We believe this is a result of our innovative approach, organizational resources and financial condition. We have developed integrated teams of professionals with significant treaty and individual risk, or facultative, expertise which support the professionals we have in our branch network. We offer facultative products to a limited extent and only to a selected number of clients on a proportional and non-proportional basis. We deploy our international specialty lines experts and local specialists to design solutions to address our clients’ risk management needs.

Structured/finite

Structured/finite reinsurance business is contained within our Standard Property & Casualty Reinsurance, Specialty Lines and Life & Health Reinsurance segments. Whether working directly with the client or through a broker, our structured/finite business focuses on developing client-specific solutions after spending time with the client to understand its business needs. These client-specific solutions include such products as loss portfolio transfers and adverse loss development covers. Loss portfolio transfers involve the transfer of liability of discontinued or expired insurance programs from one company to another company for a fee. Coverage under adverse development covers is provided on an excess basis and amounts of indemnification are generally subject to specific aggregate limits.

Structured/finite products have several features that differ from traditional reinsurance products and may typically include (i) premium refunds based on actual loss experience; (ii) loss sharing provisions; (iii) additional premiums based on actual loss experience, (iv) sliding scale commission rates, (v) non-refundable reinsurer’s margins; and (vi) underwriting terms that limit the maximum aggregate exposure. Structured/finite business is classified as proportional or non-proportional, depending on its characteristics.

Non-life operations

Overview

We operate our non-life reinsurance business through our two non-life segments: Standard Property & Casualty Reinsurance and Specialty Lines. Our non-life operations had gross premiums written of USD 1,667.6 million for the year ended December 31, 2006, representing 84.2% of our total gross premiums written.

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The table below presents the loss, acquisition costs and combined ratios of our non-life reinsurance business by line of business for the years ended December 31, 2006, 2005 and 2004. This table represents an aggregation of line of business ratios for our two non-life segments. Subsequent tables present ratios for each non-life segment by line of business. Any prior underwriting year development (positive or negative) will affect the ratios of the calendar year in which the activity is recorded.

	Loss, Expense and Combined Ratios
	For the year ended December 31,
	2006									2005									2004
	Loss			Acq costs			Combined			Loss			Acq costs			Combined			Loss			Acq costs			Combined
	ratio			ratio			ratio (1)			ratio			ratio			ratio (1)			ratio			ratio			ratio (1)
General Third Party Liability		55.4	%		26.1	%		81.5	%		91.4	%		13.7	%		105.1	%		67.1	%		30.0	%		97.1	%
Motor		90.2	%		24.8	%		115.0	%		96.4	%		16.1	%		112.5	%		103.7	%		17.9	%		121.6	%
Personal Accident (assumed from non-life insurers)		70.3	%		36.3	%		106.6	%		27.3	%		25.9	%		53.2	%		54.1	%		38.4	%		92.5	%
Property		46.4	%		24.7	%		71.1	%		71.9	%		26.7	%		98.6	%		50.6	%		27.6	%		78.2	%
Agribusiness		73.3	%		15.5	%		88.8	%		78.9	%		17.3	%		96.2	%		94.8	%		21.9	%		116.7	%
Aviation & Space		66.1	%		34.8	%		100.9	%		60.9	%		26.4	%		87.3	%		53.7	%		24.5	%		78.2	%
Credit & Surety		47.3	%		52.2	%		99.5	%		59.2	%		34.3	%		93.5	%		50.1	%		30.0	%		80.1	%
Engineering		42.2	%		31.9	%		74.1	%		71.4	%		31.2	%		102.6	%		76.6	%		25.5	%		102.1	%
Marine & Energy		53.7	%		22.1	%		75.8	%		81.2	%		25.8	%		107.0	%		92.0	%		20.7	%		112.7	%
Professional Liability and other Special Liability		95.9	%		16.2	%		112.1	%		89.6	%		17.2	%		106.8	%		112.3	%		19.9	%		132.2	%
Workers’ Compensation		129.5	%		-18.2	%		111.3	%		91.8	%		20.1	%		111.9	%		96.8	%		24.5	%		121.3	%
Total non-life		65.1	%		25.9	%		91.0	%		77.4	%		22.9	%		100.3	%		77.6	%		24.5	%		102.1	%

(1) The combined ratios presented in this table exclude administration expenses. Loss ratio and acquisition costs ratio are based on net premiums earned.

For an explanation of ratio calculations, please refer to the Schedule of Segment Data on pages F-9 and F-10 to our 2006 consolidated financial statements. For an explanation of significant loss activity, see “Item 5— Operating and Financial Review and Prospects — A. Operating Results”.

Standard Property & Casualty Reinsurance

The Standard Property & Casualty Reinsurance segment’s strategy focuses on partnership-oriented professional reinsurance buyers in the markets Europe, Latin and South America and Asia. Our long-term client relationships are based on our capabilities, e.g. natural hazard expertise, financial modeling capabilities, structuring advice and claims and underwriting audits, contributing to earnings and cash flows. We remain committed to underwriting discipline to achieve the best possible shareholder return, which is only possible through cycle management.

The lines of business of the Standard Property & Casualty Reinsurance segment are as follows:

General Third Party Liability

We provide a broad range of coverage for reinsurance of industrial, manufacturer, operational, environmental, product and general third-party liability. We provide liability coverage on both a proportional and non-proportional basis.

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Motor

Motor insurance can include coverage in three major areas — liability, physical damage and accident benefits, for all of which we provide reinsurance coverage. Liability insurance provides coverage payment for injuries and for property damage to third parties. Physical damage provides for payment of damages to an insured automobile arising from a collision with another object or from other risks such as fire or theft. Accident benefits provide coverage for loss of income and medical and rehabilitation expenses for insured persons who are injured in an automobile accident, regardless of fault.

Personal Accident (assumed from non-life insurers)

We provide accident coverages for various business lines, including personal accident and travel accident.

Property

We reinsure liability for physical damage caused by fire and allied perils such as explosion, lightning, storm, flood, earthquake and for costs of debris removal, as well as coverage of business interruption and loss of rent as a result of an insured loss. Other sub-lines of Property reinsurance include cover for hail, burglary, water damage and glass breakage.

The following table presents the distribution of gross and net premiums written and net premium earned by our Standard Property & Casualty Reinsurance segment for the years ended December 31, 2006, 2005 and 2004.

	For the year ended December 31,
	2006						2005						2004
	Gross		Net		Net		Gross		Net		Net		Gross		Net		Net
	premiums		premiums		premiums		premiums		premiums		premiums		premiums		premiums		premiums
(USD millions)	written		written		earned		written		written		earned		written		written		earned
General Third Party Liability		240.2		229.7		210.1		184.2		146.7		204.1		404.7		379.1		348.1
Motor		170.6		143.1		138.1		188.9		188.4		256.8		472.0		437.4		450.8
Personal Accident (assumed from non-life insurers)		15.3		12.4		9.1		13.3		13.3		14.3		33.8		34.5		43.8
Property		464.5		431.7		418.3		416.7		390.6		405.6		598.5		526.4		549.5
Total Standard Property & Casualty Reinsurance		890.6		816.9		775.6		803.1		739.0		880.8		1,509.0		1,377.4		1,392.2

The following table presents the loss, acquisition costs and combined ratios of our Standard Property & Casualty Reinsurance segment by line of business for the years ended December 31, 2006, 2005 and 2004.

	Loss, Expense and Combined Ratios
	For the year ended December 31,
	2006									2005									2004
				Acq costs			Combined			Loss			Acq costs			Combined			Loss			Acq costs			Combined
	Loss ratio			ratio			ratio (1)			ratio			ratio			ratio (1)			ratio			ratio			ratio (1)
General Third Party Liability		55.4	%		26.1	%		81.5	%		91.4	%		13.7	%		105.1	%		67.1	%		30.0	%		97.1	%
Motor		90.2	%		24.8	%		115.0	%		96.4	%		16.1	%		112.5	%		103.7	%		17.9	%		121.6	%
Personal Accident (assumed from non-life insurers)		70.3	%		36.3	%		106.6	%		27.3	%		25.9	%		53.2	%		54.1	%		38.4	%		92.5	%
Property		46.4	%		24.7	%		71.1	%		71.9	%		26.7	%		98.6	%		50.6	%		27.6	%		78.2	%
Total Standard Property & Casualty Reinsurance		56.9	%		25.2	%		82.1	%		82.8	%		20.6	%		103.4	%		72.0	%		25.4	%		97.4	%

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(1) The combined ratios presented in this table exclude administration expenses. Loss ratio and acquisition costs ratio are based on net premiums earned.

For an explanation of ratio calculations, please refer to the Schedule of Segment Data on pages F-9 and F-10 to our 2006 consolidated financial statements. For an explanation of significant loss activity, see “Item 5—Operating and Financial Review and Prospects — A. Operating Results”.

Specialty Lines

The Specialty Lines segment’s strategy is to develop specialty businesses in which Converium can position itself as a market leader and effectively leverage its intellectual assets in risk analysis, structuring, product design and risk modeling. We focus on specialty businesses because we believe that Converium possesses superior underwriting and structuring capabilities in certain areas, which is both a key driver of profitability as well as an effective barrier to entry in certain business lines.

Wherever possible, Converium seeks to develop preferred access to specialty lines through strong relationships, strategic partnerships or participations in entities that enjoy a unique position, such as strong control over the origination of their business, which prevent them from having to compete in annual insurance or reinsurance auctions. Examples of the approach by which we seek to develop preferred access to these businesses are our strategic partnership with MDU in the U.K and our participation in GAUM and our shares in its pools, as well as many strong relationships with specialized mono-line insurers.

In addition, Converium Underwriting Ltd, a Lloyd’s Corporate Member, has successfully provided and continues to provide third-party capacity to certain specialist Lloyd’s syndicates.

Some specialty lines are subject to cyclical pricing fluctuations. Converium remains committed to underwriting discipline to achieve the best possible shareholder return, which is only possible through cycle management.

Due to the long-tail nature of many of the specialty lines of business, the emergence of accounting profit occurs after a time lag. The high levels of carried reserves necessary for the specialty lines of business underwritten by the segment can be capital consumptive during periods of strong growth in premiums written and may pose a constraint on the amount of growth and the business mix of the segment.

The lines of business of the Specialty Lines segment are as follows:

Agribusiness

We provide covers for specific named perils, traditional crop hail and bundled risks. These covers can apply to almost any product in the food and fiber chain: commodity crops, specialty crops and animal crops.

Aviation & Space

We provide reinsurance of personal accident and liability risks and hull damage in connection with the operation of aircraft and coverage of satellites during launch and in orbit.

Credit & Surety

Our credit coverages provide reinsurance for financial losses sustained through the failure for commercial reasons of an insured’s customers to pay for goods or services supplied to them. Our surety business relates to the reinsurance of risks associated with performance bonds and other forms of sureties or guarantees issued to third parties for the fulfillment of contractual obligations.

Engineering

We write all lines of engineering risks including project risks (construction all risk and erection all risk) and annual covers such as for machinery and electronic equipment, as well as consequential loss resulting from both project and annual risk.

Marine & Energy

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We provide reinsurance relating to the property and liability coverage of goods in transit (cargo insurance) and the means of their conveyance (hull insurance).

Professional Liability and other Special Liability

We offer specialized underwriting, actuarial and claims expertise for professional liability, including medical malpractice, directors and officers, architects and engineers, accountants and lawyers liability. We also provide errors and omissions reinsurance coverage for specialized and other lines of business.

Workers’ Compensation

Our products include reinsurance for statutory workers’ compensation programs, as well as individual risk excess workers’ compensation.

The following table presents the distribution of gross and net premiums written and net premiums earned by our Specialty Lines segment for the years ended December 31, 2006, 2005 and 2004.

	For the year ended December 31,
	2006						2005						2004
	Gross		Net		Net		Gross		Net		Net		Gross		Net		Net
	premiums		premiums		premiums		premiums		premiums		premiums		premiums		premiums		premiums
(USD millions)	written		written		earned		written		written		earned		written		written		earned
Agribusiness		37.1		37.1		34.1		36.7		36.7		28.9		11.4		11.4		15.5
Aviation & Space		262.2		237.1		237.8		254.6		241.8		352.4		476.5		404.5		327.3
Credit & Surety		42.2		42.2		44.8		58.4		58.4		168.2		209.1		204.3		177.9
Engineering		67.8		61.7		66.1		70.6		65.5		88.7		118.5		112.2		117.3
Marine & Energy		59.0		58.1		53.4		64.9		64.0		71.7		85.8		82.5		85.1
Professional Liability and other Special Liability		313.1		297.6		291.9		359.4		282.8		295.6		440.2		436.5		410.6
Workers’ Compensation		-4.4		-4.4		-4.4		-11.5		-11.5		53.7		313.8		313.9		253.9
Total Specialty Lines		777.0		729.4		723.7		833.1		737.7		1,059.2		1,655.3		1,565.3		1,387.6

The following table presents the loss, acquisition costs and combined ratios of our Specialty Lines segment by line of business for the years ended December 31, 2006, 2005 and 2004.

		Loss, Expense and Combined Ratios
	For the year ended December 31,
	2006									2005									2004
				Acq costs			Combined						Acq costs			Combined						Acq costs			Combined
	Loss ratio			ratio			ratio (1)			Loss ratio			Ratio			ratio (1)			Loss ratio			ratio			ratio (1)
Agribusiness		73.3	%		15.5	%		88.8	%		78.9	%		17.3	%		96.2	%		94.8	%		21.9	%		116.7	%
Aviation & Space		66.1	%		34.8	%		100.9	%		60.9	%		26.4	%		87.3	%		53.7	%		24.5	%		78.2	%
Credit & Surety		47.3	%		52.2	%		99.5	%		59.2	%		34.3	%		93.5	%		50.1	%		30.0	%		80.1	%
Engineering		42.2	%		31.9	%		74.1	%		71.4	%		31.2	%		102.6	%		76.6	%		25.5	%		102.1	%
Marine & Energy		53.7	%		22.1	%		75.8	%		81.2	%		25.8	%		107.0	%		92.0	%		20.7	%		112.7	%
Professional Liability and other Special Liability		95.9	%		16.2	%		112.1	%		89.6	%		17.2	%		106.8	%		112.3	%		19.9	%		132.2	%
Workers’ Compensation		129.5	%		-18.2	%		111.3	%		91.8	%		20.1	%		111.9	%		96.8	%		24.5	%		121.3	%
Total Specialty Lines		73.8	%		26.6	%		100.4	%		72.9	%		24.9	%		97.8	%		83.2	%		23.6	%		106.8	%

(1) The combined ratios presented in this table exclude administration expenses. Loss ratio and acquisition costs ratio are based on net premiums earned.

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For an explanation of ratio calculations, please refer to the Schedule of Segment Data on pages F-9 and F-10 to our 2006 consolidated financial statements. For an explanation of significant loss activity, see “Item 5—Operating and Financial Review and Prospects — A. Operating Results”.

Life & Health Reinsurance

The Life & Health Reinsurance segment contains the following lines of business:

• Life & Disability; and

• Accident & Health.

We offer these lines of business on an international scale. We primarily conduct our Life & Disability reinsurance business from Cologne, Germany. We have implemented a strategy to effectively grow our life reinsurance business. In addition, we have established branch offices in Milan and Paris. We also utilize our non-life offices in many parts of the world to facilitate direct contacts with our Life & Health Reinsurance clients.

As a result of these initiatives, our Life & Disability and Accident & Health lines of business written from our European offices have grown significantly in recent years, with our net premiums written increasing from USD 196.0 million in 2001 to USD 305.7 million at the end of 2006.

Our primary goal is to write Life & Health Reinsurance business that generates an attractive expected return. Our strategy focuses on:

• maintaining underwriting discipline and pursuing business that is attractive on a risk-adjusted basis;

• pursuing growth in markets we believe offer attractive opportunities, such as Germany, Italy, France and the Middle East;

• maintaining a low expense ratio;

• selectively providing services in certain target markets to build loyalty and attract premiums;

• providing structured/finite solutions; and

• leveraging our capital markets expertise which, among other things, provides us with additional capacity to write business.

We are seeking to grow our Life & Health business operations considerably while not compromising our underwriting standards. We believe that Life & Health Reinsurance will represent an increasing percentage of our business going forward.

We are focusing on the life reinsurance business because, among other reasons, we believe that the market for life reinsurance is growing. In addition, life reinsurance business tends to be less cyclical than non-life reinsurance due to more predictable claims experience.

We expect that the demand from life insurers for financial support and reinsurance services will continue to increase, particularly in Europe. We believe our capital markets and other non-traditional expertise will help us bring additional innovative solutions to our clients and further enhance the market position of our life operations.

In addition to the growth in our life insurance markets described above, we believe that the following factors will also contribute to increased demand for life reinsurance:

• demutualizations of life insurance companies;

• aging of the population;

• privatization of benefits that used to be provided by governments;

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• deregulation and increased competition among primary insurance companies from new entrants, such as banks and other financial services companies; and

• the increasing need for products that reduce the volatility of earnings following the increasing adoption of international accounting standards in many of the markets we serve.

We also believe that our health business will positively contribute to the overall profitability of this segment. We intend to carefully apply our cycle management approach and monitor the market development in this area to be able to recognize early indications of turning market conditions.

Competition

The reinsurance business is competitive and, except for regulatory considerations, there are relatively few barriers to entry. We compete with other reinsurers based on many factors, primarily:

• financial strength;

• expertise, reputation, experience and qualifications of employees;

• local presence;

• client relationships;

• products and services offered;

• premium levels; and

• contract terms and conditions.

As a direct writer of reinsurance, we compete with a number of major direct marketers of reinsurance both in local markets and internationally. We also compete with a number of major reinsurers who write business through reinsurance brokers. We believe that our largest competitors, both locally and internationally, are:

• Munich Reinsurance Company;

• Swiss Reinsurance Company;

• Hannover Re Group;

• SCOR;

• PartnerRe Group; and

• Lloyd’s syndicates active in the London market.

Non-life underwriting, pricing/structuring and accumulation control

We regard underwriting and pricing as core skills. Underwriting is the process by which we identify desirable clients and lines of business, cultivate profitable opportunities and assess and manage our exposure, claims settlement and reserving risk for any particular exposure. In our view, underwriting requires a deep understanding of the client, their business and the market in which the client operates. In evaluating business opportunities, we rely heavily on a collaborative underwriting process that emphasizes communication and information sharing among our underwriting, actuarial/modeling, claims, legal and finance personnel. We bring together all of those disciplines to properly understand, assess, price and execute policies in a manner appropriate to the nature of the risk.

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Our underwriters coordinate to access our expertise and balance sheet capabilities to optimize solutions for our clients’ business needs. We have underwriting specialists throughout our worldwide organization, covering a wide range of disciplines that help us assess our risk exposures. In an effort to better serve our reinsurance clients, we combine our underwriters and actuaries in client management teams.

Specifically, we have access to significant internal actuarial expertise, which we deploy to assess pricing adequacy and to develop associated capital allocation approaches and risk models. Additionally, our underwriting process draws upon our multidisciplinary specialists, who include engineers, meteorologists, environmental scientists, economists, geologists, seismologists, physicist and mathematicians. These specialists and actuaries are based around the world and work together to ensure and facilitate the application of best practices and the consideration of the most recent scientific developments. Moreover, we actively utilize and develop risk models and other sophisticated tools, many of which are proprietary.

In developing underwriting guidelines, we formulate our risk demand, assess market conditions, quality of risks, past experience and expectations about future exposure. Where appropriate, we seek to limit our capacity on a per claim, per event and per year basis, and employ aggregate annual limits and index clauses, which reset retention in the event of claims inflation. The overall objective of these procedures is to achieve an appropriate expected return on equity while safeguarding our solvency and creditworthiness. In particular, we seek to maintain a sufficient level of overall capital to retain a strong financial capitalization under normal circumstances and an adequate capitalization after a significant loss.

During the underwriting process, we carefully seek to ensure that we employ coherent and consistent structures, pricing and wording such that all of our contracts and commitments are in line with our underwriting guidelines. Compliance with these rules is regularly reviewed by our senior management, who may effect adjustments as deemed appropriate. For non-standard transactions, our legal staff is involved both in transaction structuring and contract wording throughout the process.

Additionally, during the underwriting process, we assess and seek to control the amount and concentration of risk underwritten for various areas by analyzing aggregates and accumulation by region, peril or line of business, such as property catastrophe, aviation, Marine & Energy, Agribusiness and Credit & Surety. We normally use proprietary as well as commercially available tools to monitor our accumulations and relate them to our overall risk appetite. Aggregates are revised regularly and adapted in line with our current strategy and willingness and ability to bear risk, and transformed into rules and parameters for underwriting decisions.

We are committed to underwriting for profit. In pricing, we are committed to price to an after-tax target return that reflects the conditions in the investment markets and the riskiness of the portfolio. Meeting this target requires a constant management of the underwriting cycle including the avoidance of under-priced business.

We allocate capital to transactions based on how they contribute to our portfolio’s 1-in-100 year or worse losses. Business aggregating with existing treaties (that is, treaties that do not diversify well within our existing portfolio) are allocated a disproportionately larger amount of capital than treaties that diversify well. Similarly, larger treaties are allocated a disproportionately larger amount of capital than smaller treaties. This capital approach helps the portfolio become more diverse and optimizes the treaty mix.

In pricing business, we analyze various aspects of a prospective non-life reinsured’s business including, but not limited to, historical and projected loss and exposure data, expected future loss costs, historical and projected premium rate changes, financial stability and history, classes and nature of underlying business and policy forms, changes in the underlying risk exposure over time, underwriting and claims guidelines, aggregation of loss potential (between contracts), the dependence of risk factors relevant to the proposed policy with those relevant to the rest of our portfolio, existing reinsurance programs (including potential uncollectible reinsurance) and the quality and experience of management.

Our core pricing approach is to estimate the underlying frequency and severity of losses, adjusted for trends, so that we can develop an aggregate probability distribution of ultimate loss. In order to understand the cash flows, we estimate premium collection and loss payout patterns. Taking into account the transaction structure, we then create an aggregate probability distribution of the profit function of the contract that reflects risk-free investment income generated by the cash flows, commissions, brokerage, internal expenses and taxes. We estimate the risk capital by analyzing the treaty’s dependency on the current and future planned portfolio. Key factors that we utilize in the calculation of risk capital are the loss profile of the contract, the duration of the liabilities and the correlation of the risk factors with the remainder of our book of business. From this, the performance of the deal, or Performance Excess, is then computed as the expected profitability of the deal less the cost of capital.

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We also consider other items in our pricing analysis such as client and line of business desirability and associated business opportunities. Whenever necessary, we develop or enhance additional tools to assess non-traditional or unusual structures. For specialized lines, such as Aviation, Agribusiness, Marine & Energy and Credit & Surety, we have developed and continue to enhance pricing models based on risk factors specific to those lines of business. Our comprehensive approach to risk modeling, and our integration of analytical expertise in client-focused teams, allows us to quantify the potential financial impact of these measurable risks.

Our models give us the capability to easily and quickly analyze a contract under numerous structures. This in turn allows us the flexibility to be creative, innovative and responsive in seeking to create a structure that satisfies our profit goals and risk appetite while simultaneously satisfying our clients’ objectives. Our modeling expertise and development of very efficient computational algorithms and simulations enable us to price different structures promptly. We are able to access our pricing system and databases online and from anywhere around the world.

In order to fully realize the value of this ability, we seek to gain a deep and thorough understanding of the subject business being covered. For most of our business, including all large and complex contracts, actuaries and other technical experts are part of the transaction team. They build the models and, jointly with the underwriters, price and structure the transaction. Often, they will also visit the client. For the remainder of our business, internal actuaries or other experts including engineers, meteorologists, environmental scientists, economists, geologists, seismologists, physicist and mathematicians provide the analytic tools for the underwriters’ use.

In order to provide maximum feedback to our underwriting teams, we have developed management information systems that track the profitability of each contract from the time it is written until the last dollar is paid. We compare ultimate loss ratios with our original expectations and use this information to populate our databases. We utilize this information to analyze the relationships between historic profitability and such variables as size of contract, production source, structure of transaction and size of client.

Non-life claims management

We have relationships with a large number of cedents. These cedents are domiciled in many countries around the world and typically apply local practices and regulations when handling losses. This leads to a wide variety of approaches, in among other things, setting individual claims reserves, recording loss data and handling loss adjustments. In particular, the legal systems, loss reporting and applicable accounting rules can vary greatly by country and can potentially lead to inconsistent information and information flow from our cedents to us, with respect to timing, format and level of detail. All of these factors need to be considered appropriately when managing and assessing claims.

Individual claims reported to our non-life operating units are monitored and managed by Claims Services personnel according to global guidelines and procedures. At this level, claims administration includes reviewing initial loss reports, monitoring claims handling activities of clients, requesting additional information where appropriate, establishing initial case reserves and approving payment of individual claims. Claims Services personnel have payment and case reserving authorities commensurate with individual experience.

In addition to managing reported claims and conferring with ceding companies on claims matters, our Claims Services team conducts periodic audits of specific claims and the overall claims procedures of our clients at the offices of ceding companies. We rely on our ability to effectively monitor the claims handling and claims reserving practices of ceding companies in order to establish the proper reinsurance premium for reinsurance agreements and to establish proper loss reserves. Moreover, prior to accepting certain risks, our Claims Services will, as requested by underwriters, conduct pre-underwriting claims audits of prospective ceding companies.

We attempt to evaluate the ceding company’s claims-handling practices, including the organization of their claims department, their fact-finding and investigation techniques, their loss notifications, the adequacy of their reserves, their negotiation and settlement practices and their adherence to claims-handling guidelines. Following these audits, Claims Services provides feedback to the ceding company, including an assessment of the claims operation and, if appropriate, recommendations regarding procedures, processing and personnel.

Our non-life operating units work together to coordinate issues in a cooperative effort involving claims services, actuarial, risk modeling and underwriting functions. For example, our Claims Services personnel help coordinate the reserving and analysis of headline loss event exposure across our organization.

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The Claims Services team is able to provide value-added services to customers, e.g., assessment, consultation and issuing publications, including surveys on topics of interest.

Life operations underwriting and claims

We have developed underwriting guidelines, policies and procedures with the objective of controlling the quality and pricing of the life reinsurance business we write. Our life reinsurance underwriting process emphasizes close collaboration among our underwriting, actuarial, administration and claims departments. We determine whether to write reinsurance business by considering many factors, including the type of risks to be covered, ceding company retention and binding authority, product and pricing assumptions and the ceding company’s underwriting standards, financial strength and distribution systems.

We believe that one of our strengths is our expertise in medical underwriting. We seek to work closely with our clients and, as a value-added service, share this expertise in order to build client loyalty and better understand their risks.

We generally do not assume 100% of a life reinsurance risk and require the ceding company to retain at least 20% of every reinsured risk. We regularly update our underwriting policies, procedures and standards to take into account changing industry conditions, market developments and changes in medical technology. We also endeavor to ensure that the underwriting standards and procedures of our ceding client entities are compatible with ours. To this end, we conduct periodic reviews of our ceding companies’ underwriting and claims procedures.

Life, accident and disability claims generally are reported on an individual basis by the ceding company. In case of large, difficult or doubtful claims, cedents provide us with all supporting documents. We also investigate claims generally for evidence of misrepresentation in the policy application and approval process. In addition to reviewing and paying claims, we monitor both specific claims and overall claims handling procedures of ceding companies.

We monitor the loss development of our life reinsurance treaties and compare them to our expected returns on a regular basis. In the case of significant deviations, we may seek to negotiate alternative contract provisions, including increased premiums or higher retentions.

For our life reinsurance business, the interaction between our actuaries and underwriters is very close, as most of our underwriters are also mathematicians. We use commercial as well as proprietary tools to assess the profitability of the business. Our life underwriting seeks to ensure that our expected stream of distributable profits will earn an adequate risk-adjusted return. Our analysis also includes sensitivity measures to control the risk exposure of our life portfolio.

Catastrophe risk management and protection

Natural peril and man-made catastrophe risk management is an essential part of our overall corporate risk management plan. To help us measure and monitor our exposure to natural catastrophic events, we have established a line-of-business function that together with members of senior management with underwriting, actuarial, risk management and other specialized expertise, review relevant aspects of our catastrophe underwriting and risk management.

An integral part of our Global Catastrophe Risk Management is our Natural Hazards Team, located in Zurich. This specialized team is responsible for modeling our global catastrophe exposure, and provides support to underwriters and pricing actuaries in our offices around the world. Natural Hazards Team members are integrated with our actuarial and risk modeling staff. We believe that centralizing key catastrophe risk functions in our Natural Hazards Team helps produce a consistent catastrophe exposure analysis across our international operations. For example, our catastrophe risk specialists design, maintain and support state-of-the-art risk modeling software to which our underwriters have direct access.

In addition, we have adopted a central monitoring system (the Global Cat Data Platform), which helps us to manage our worldwide accumulations of catastrophe risk by peril and region. In our analyses we focus on key zones where we face a geographic concentration or peak exposures, such as European windstorm risk. This centralized analysis is essential for an international reinsurer such as Converium, since we may write business for the same peril or region from more than one of our worldwide offices. Also, we endeavor to monitor clash potential, both from lines other than property catastrophe as well as between certain perils and regions.

A major component of our natural catastrophe risk management approach is to employ global portfolio optimization and geographic diversification. By utilizing careful risk selection, pricing and modeling of portfolio additions, we seek to diversify our exposures

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while optimizing available capacity and maximizing our expected return on equity. This approach helps us to fully capitalize on the natural catastrophe reinsurance premiums our balance sheet supports, while reducing the expected net impact of catastrophe losses. We believe this strategy leaves us well positioned to write additional business during periods of improving market conditions.

The principal goals of our natural hazard risk management procedures include:

•	Measuring, monitoring and managing natural hazard exposures: For measuring natural hazard exposures, we use specially developed software and techniques. For example, we use third-party models developed by specialized consultants to assist with catastrophe underwriting and accumulation control. We also compare models for certain perils or regions where our models indicate higher variability. In addition, we have developed fully proprietary probability-based monitoring tools to enhance the utility of our models.
	Our central monitoring system models loss potentials for storm and earthquake scenarios to help us measure our accumulation of risk by type of peril and geographic region. We continuously perform accumulation analyses during renewal season. We believe that this centralized review helps us monitor and manage our natural catastrophe loss potential and to take remedial action if there is a risk that our accumulations will reach levels that are not acceptable under our guidelines. In addition, our monitoring system serves as the basis for structuring our own reinsurance protection.
•	Assisting with optimal capacity utilization: We use return on risk based capital considerations to help us to optimize expected profits from our catastrophe portfolio and to seek to improve its performance. We do this by dynamically adjusting capacity allocation during renewal periods as business is written, thereby optimizing our worldwide capacity and exploiting our diversification potential. We also review pricing levels in several markets prior to renewal, in order to incorporate this information in our business strategy.
•	Supporting clients in all elements of natural hazards risk management: The expertise developed by our catastrophe risk specialists in understanding and managing catastrophe risk allows us to assist our clients in assessing their own loss potential and in designing efficient risk transfer mechanisms. Further, we utilize our expertise to influence property catastrophe exposure reporting in the industry. We believe that the use of data standards will improve data quality, enable more accurate risk assessment and reduce costs.
•	Following post-disaster loss developments: Our catastrophe risk specialists produce estimates of our expected losses promptly after a catastrophe event. This rapid review helps us assess our liquidity needs and determine whether we need to take any remedial action.

Historically, a majority of the natural catastrophe reinsurance we have written relates to exposures within Europe, Japan and the United States. Accordingly, we are exposed to natural catastrophic events which affect these regions, such as European windstorm, Japanese earthquake and US hurricane and earthquake events. Our estimated potential losses, on a probable maximum loss basis, before giving effect to our retrocessional protection, are currently managed to a self-imposed maximum gross event limit of USD 400 million for a 250-year return period loss.

We use retrocessional reinsurance protection to assist our efforts to ensure that our risk tolerance is not exceeded on a per event or aggregate basis. We actively seek to combine traditional reinsurance protection with capital market solutions, in order to diversify our sources of risk bearing capital. We have developed substantial capital markets expertise, which we can use both to provide additional capacity to our clients and to improve our own results and risk profile.

In 2006, we had the benefit of USD 81.0 million event limit from traditional reinsurance protections for our non-US property portfolio in excess of USD 50.0 million for any natural catastrophe affecting our property portfolio. In addition, we purchased cover for natural catastrophes affecting our non-US property portfolio in excess of USD 25.0 million with cover up to USD 50.0 million, whereby first-event coverage was limited to certain perils. This coverage is reviewed periodically and the majority of the coverage was placed with companies with a single A financial strength ratings or above.

In addition, in 2004, we entered into a transaction with Helix 04 Ltd (“Helix 04”), a dedicated Bermuda special purpose exempted company that ultimately provides us with specific high limit catastrophe protection. Helix 04’s business consists solely of issuing five-year catastrophe securities; Helix 04 entered into a counterparty contract with us whereby Helix 04 will make payments to us from its funds to cover defined catastrophic losses. The owners of the securities are entitled to receive their original investment, plus interest

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on the notes, paid quarterly, less any loss payments made to us. The Helix 04 transaction replaced the Trinom transaction that we had in place since 2001. See Note 10 to our 2006 consolidated financial statements for additional information on Helix.

Payments from Helix 04 to Converium AG are based on modeled reinsurance losses on a notional portfolio. In a modeled loss contract, the covered party’s aggregate exposure to each geographical region and type of catastrophe, by line of business, is compared to industry-wide data in order to produce the covered party’s market share of particular loss events by line of business using commercially available natural catastrophe loss simulation modeling software. The software simulates a catastrophe, at various levels of severity, by generating certain probabilistic loss distributions, in order to calculate industry-wide losses and the corresponding losses for the covered party on a “ground-up basis”, by line of business. These losses are then compared to the modeled loss contracts to determine the amount of the covered party’s recovery in respect of such an event.

Converium exercised its right to reset the notional portfolio by notice on April 24, 2006 with an effective date of June 30, 2006 to realign the notional portfolio with Converium’s anticipated portfolio for the remaining three-year term of the contract.

The Helix 04 contract is first triggered when notional losses reach USD 154.8 million (USD 150.0 million before reset). The second trigger is hit when notional losses reach USD 176.2 million (USD 175.0 million before reset). It then pays out according to a sliding scale of notional losses up to USD 276.2 million (USD 275.0 million before reset).

Converium estimates its gross loss for each of the 2006 catastrophe events to be significantly less than the Helix 04 activation threshold of USD 154.8 million for each such event, and therefore; Converium will not file a trigger event request in respect of these losses.

The annual cost of Helix 04 to Converium is USD 6.1 million for the year ended December 31, 2006. The annual charge to Converium is not impacted by the occurrence of a loss event that is protected by Helix 04, unlike the prior contract in respect of Trinom, where Converium was required to pay higher amounts for the remainder of the term of the contract. The Helix 04 counter-party contract is not treated as reinsurance and accordingly the charge is reflected through other income (loss) although the cost of the counter-party contract is amortized over the term of the contract in a manner similar to reinsurance.

Unlike traditional reinsurance, the Helix 04 transaction is fully collateralized to eliminate any counterparty credit risk on recoveries. Helix 04 provides a second event protection over a five-year horizon, securing a fixed-price capacity, which cannot be impaired by a severe first industry event. Due to the nature of the transaction, we are exposed to modeling uncertainty, meaning that the modeled loss might deviate somewhat from the actual indemnity loss of the notional portfolio (basis risk).

Lastly, with respect to man-made catastrophes such as acts of terrorism, we have introduced an appropriate monitoring and accumulation approach. We utilize a matrix system to track for each contract the level of exclusion (absolute or partial, sub limit or other) and its level of exposure. While our methodology is being further developed and refined, it enables appropriate monitoring of our current exposure.

Retrocessional reinsurance

We purchase retrocessional reinsurance to better manage risk exposures, protect against catastrophic losses, access additional underwriting capacity and to stabilize financial ratios. The insurance or indemnification of reinsurance is called a retrocession, and a reinsurer of a reinsurer is called a retrocessionaire. We aggregate our ceded risk across our operations to achieve superior terms and pricing for our retrocessional coverage and to help us better assess our overall portfolio risk. Additionally, we incorporate the use of retrocessional coverage as a component of our underwriting process.

The major types of retrocessional coverage we purchase include the following:

• specific coverage for certain property, engineering, aviation, motor and liability exposures;

• catastrophe coverage for property business;

• property clash coverage for potential accumulation of liability from treaties and facultative agreements covering losses arising from the same event or occurrence; and

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We have established a control procedure whereby our Chief Executive Officer and Chief Risk Officer, along with the other members of our senior executive team, review the business purpose for all reinsurance purchases. One or more members of our senior executive team, generally our Chief Risk Officer, approve all purchases before they are bound.

Prior to entering into a retrocessional agreement, we analyze the financial strength and rating of each retrocessionaire and the financial performance and rating status of all material retrocessionaires is thereafter monitored. In addition, as part of our evaluation before purchasing reinsurance we also consider the accounting implications of the particular transaction.

Retrocessional reinsurance arrangements generally do not relieve Converium from its direct obligations to its reinsureds. Thus, a credit exposure exists with respect to reinsurance ceded to the extent that any retrocessionaire is unable or unwilling to meet the obligations assumed under the retrocessional agreements. At December 31, 2006 and 2005, Converium held USD 210.4 million and USD 470.6 million, respectively, in collateral as security under related retrocessional agreements in the form of deposits, securities and/or letters of credit.

In the event our retrocessionaires are not able or willing to fulfill their obligations under our reinsurance agreements with them, we will not be able to realize the full value of the reinsurance recoverable balance. We record a reserve to the extent that reinsurance recoverables are believed to be uncollectible. The reserve is based on an evaluation of each retrocessionaire’s individual balances and an estimation of their uncollectible balances.

Bad debt provisions of USD 11.3 million have been recorded for estimated uncollectible premiums receivable and reinsurance recoverables at December 31, 2006, compared with USD 28.1 million at December 31, 2005. The decrease is mainly due to the sale of our North American operations in December 2006.

The following table sets forth Converium’s ten largest retrocessionaires as of December 31, 2006, based on non-life underwriting reserves and future life benefits, and their respective Standard & Poor’s or A.M. Best financial strength rating.

		Underwriting reserves
		and future life benefits				S & P/A.M.
Retrocessionaire	Retrocessionaire Group	(USD million)		% of total		Best Rating
Lloyd’s Syndicates	Lloyd’s		85.8		13.3	A/A
ICM Re S.A.	ICM Re		37.9		5.8	NR
AIOI Insurance Co. Ltd	AIOI Insurance Co. Ltd		34.7		5.4	A+/A
Transamerica Reinsurance	AEGON Group		33.6		5.2	AA/A+
QBE	QBE Insurance Group		31.8		4.9	A+/A
Zurich Financial Services	Zurich Financial Services		27.3		4.2	A+/A
Sompo	Sompo Japan Insurance Group		18.5		2.9	AA-/A+
AXA Re	AXA Group		17.5		2.7	AA-/A
Hannover Rückversicherung	Hannover Re		11.4		1.8	AA-/A
RGA	RGA Reinsurance Group		10.8		1.7	AA-/A+
Total underwriting reserves and future life benefits of top ten retrocessionaires			309.3		49.3
All other retrocessionaires			337.9		50.7
Total underwriting reserves and future life benefits			647.2		100.0

As a consequence of the Formation Transactions, Converium AG has assumed both the benefits and the financial risks relating to third-party reinsurance recoverables under the Quota Share Retrocession Agreement. We manage all third-party retrocessions related to the business reinsured by Converium AG under the Quota Share Retrocession Agreement. ZIC and ZIB are obligated under the Quota Share Retrocession Agreement, during its term, to maintain in force, renew or purchase third-party retrocessions covering the business covered by the Quota Share Retrocession Agreement at our sole discretion.

In addition, Zurich Financial Services, through its subsidiaries, provided us with a degree of retrocessional reinsurance coverage following the Formation Transactions. In particular, Zurich Financial Services, through its subsidiaries, has agreed to arrangements that cap our net exposure for losses and loss expenses arising out of the September 11th terrorist attacks at USD 289.2 million (subsequently reduced to USD 231.0 million following the sale of our North American operations) the amount of loss and loss expenses we recorded as of September 30, 2001. As part of these arrangements, subsidiaries of Zurich Financial Services have agreed to take responsibility for non-payment by the retrocessionaires of Converium AG and Converium Rückversicherung (Deutschland) AG with regard to losses arising out of the September 11th attacks. Our only retrocessionaire for this business is a unit of Zurich Financial Services. Therefore, we are not exposed to potential non-payments by retrocessionaires for this

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event in excess of the USD 289.2 million cap, although we will be exposed to the risk of non-payment of Zurich Financial Services units and we will be exposed to credit risk from these subsidiaries of Zurich Financial Services. Our recorded losses and loss expenses, net of retrocessional recoveries and the cap from ZFS through its subsidiaries, were reduced from USD 289.2 million to USD 231.0 million, following the sale of our North American operations.

In order to provide additional comfort in regards to our reserve position, in August of 2004 we acquired a retrospective stop-loss retrocession cover from National Indemnity Company, a Standard & Poor’s AAA-rated member of the Berkshire Hathaway group of insurance companies. The retrospective stop-loss retrocession cover was commuted in December 2006 in preparation for the sale of our North American Operations and after a review of coverage requirements. See Note 10 to our 2006 consolidated financial statements for additional information on this cover and for further information on retrocessional risk management.

Loss and loss expense reserves

Establishment of loss and loss expense reserves

We are required by applicable insurance laws and regulations and US GAAP to establish reserves for payment of losses and loss expenses that arise from our products. These reserves are balance sheet liabilities representing estimates of future amounts required to pay losses and loss expenses for insured claims which have occurred at or before the balance sheet date, whether already known to us or not yet reported. Significant periods of time can elapse between the occurrence of an insured claim and its reporting by the insured to the primary insurance company and subsequently by the insurance company to its reinsurance company. Loss reserves fall into two categories: reserves for reported losses and loss expenses, and reserves for losses and loss expenses incurred but not yet reported (“IBNR”).

Upon receipt of a notice of claim from a ceding company, we establish a case reserve for the estimated amount of the ultimate settlement. Case reserves are usually based upon the amount of reserves reported by the primary insurance company and may subsequently be increased or reduced as deemed necessary by our claims departments. We also establish reserves for loss amounts that have been incurred but not yet reported, including expected development of reported claims.

These IBNR reserves include estimated legal and other loss expenses. We calculate IBNR reserves by using generally accepted actuarial techniques. We utilize actuarial tools that rely on historical data and pricing information and statistical models as well as our pricing analyses. We revise reserves as additional information becomes available and as claims are reported and paid.

Our estimates of reserves from reported and unreported losses and related reinsurance recoverable assets are reviewed and updated periodically. Adjustments resulting from this process are reflected in current income. Our analysis relies upon the basic assumption that past experience, adjusted for the effect of current developments and likely trends, is an appropriate basis to estimate our current loss and loss adjustment expense liabilities. Because estimation of loss reserves is an inherently uncertain process, quantitative techniques frequently have to be supplemented by professional and managerial judgment. In addition, trends that have affected development of reserves in the past may not necessarily occur or affect reserve development to the same degree in the future.

The uncertainty inherent in loss estimation is particularly pronounced for long-tail lines such as umbrella, general and professional liability and motor liability, where information, such as required medical treatment and costs for bodily injury claims, will only emerge over time. In the overall reserve setting process, provisions for economic inflation and changes in the social and legal environment are considered. The uncertainty inherent in the reserving process for primary insurance companies is even greater for the reinsurer. This is because of, among other things, the time lag inherent in reporting information from the insurer to the reinsurer and differing reserving practices among ceding companies. As a result, actual losses and loss expenses may deviate, perhaps materially, from expected ultimate costs reflected in our current reserves.

In setting reserves, we utilize the same integrated, multi-disciplinary approach we use to establish our reinsurance terms and conditions. After an initial analysis by reserving actuaries, preliminary results are shared with appropriate underwriters, pricing actuaries, claims and finance professionals and senior management. Final actuarial recommendations incorporate feedback from these professionals.

CORE is our proprietary global loss reserve estimation system. It applies a number of standard actuarial reserving methods on a contract-by-contract basis. This allows us to calculate estimates of IBNR for each transaction based on its own characteristics. We aggregate the reserves indicated for each transaction to arrive at the total reserve requirement (“bottom-up approach”).

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In addition to these bottom-up approaches we utilize standard top-down analyses. For these methods we aggregate the majority of our business into a limited number of homogeneous classes and apply standard actuarial reserving techniques. These top-down analyses provide an alternative view that is less dependent on pricing information. The comparison of these different approaches, namely bottom-up and top-down, provide additional insights into the reserve position and can lead to reserve adjustments in either bottom-up or top-down approaches or both.

In accordance with US GAAP, we do not establish contingency reserves for future catastrophic losses in advance of the event’s occurrence. As a result, a catastrophe event may cause material volatility in our incurred losses and a material impact on our reported income, subject to the effects of our retrocessional reinsurance. For further details on our catastrophe risk and reinsurance programs, see “— Catastrophe risk management and protection” and “— Retrocessional reinsurance”.

Core reserving methodology

Expected loss/expected loss ratio

Reinsurance contracts are typically priced using proprietary pricing models. The expected loss ratio for each reinsurance contract is normally the expected loss ratio derived at the pricing of the reinsurance contract and may be subject to adjustments based on re-pricing of the reinsurance contract.

All reserve indications are conducted at the reinsurance contract level typically on a gross and retroceded basis; net loss and allocated loss adjustment expense reserve indications are typically derived by netting gross and retroceded loss and allocated loss adjustment expense reserve indications. Unallocated loss adjustments expense reserve provisions are derived at the business segment level.

Our reserving tool applies a number of standard actuarial reserving methods on a contract-by-contract basis. This allows us to calculate estimates of IBNR for each transaction based on its own characteristics. We aggregate the reserves indicated for each transaction to arrive at the total reserve requirement (“bottom-up approach”).”

Every reinsurance contract is assigned to a reserving group referred to as a Reserve Equity Cell or REC. Each REC typically contains reinsurance contracts with identical or similar characteristics in respect to:

• underlying risk (e.g. line of business), geographic region or treaty type (i.e. proportional or non-proportional); and

• the time period at which losses are expected to be paid and reported (i.e. expected paid loss development factors and expected reported development factors).

For each REC, expected paid loss development factors and expected reported loss development factors are derived from either:

• statistics developed by pricing actuaries, or

• actual paid loss and reported loss (of the reinsurance contracts assigned to a given REC) aggregated into underwriting year triangles.

It is our policy to review regularly expected paid loss development factors and expected reported loss development factors for each REC.

For each REC and underwriting year, ultimate losses are projected using the following five standard actuarial methods:

• Expected Loss Method (normally derived from pricing as described above);

• Paid Loss Bornhuetter Ferguson Method;

• Incurred Loss Bornhuetter Ferguson Method;

• Paid Loss Development Method;

• Incurred Loss Development Method.

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For each reinsurance contract within a given REC and underwriting year, one reserving method is selected based on professional actuarial judgment. Standard practice is to select the expected loss method for a relatively immature underwriting year (i.e. underwriting year and REC for which the expected reported loss as at the valuation period (e.g., December 31, 2006) is less than 50% of the ultimate loss that will eventually be reported) when the actual loss experience is not yet deemed credible. In addition, actual reported losses and expected reported losses are compared and in cases where the actual versus expected are materially different, the reserving actuary may (especially if the actual losses reported are higher than expected) either:

• select a different actuarial method (i.e. to be more responsive to actual loss experience);

• revise the expected loss (see expected loss / expected loss ratio above);

• revise the expected paid loss and / or expected reporting loss patterns.

The indicated ultimate loss is intended to represent the expected ultimate loss for the full exposure of each contract at the reserving date (e.g. December 31, 2006). Additional reserve provisions can be added for known losses (notified) that have not been recorded yet in our system.

Typically the indicated ultimate loss for each contract is then adjusted by the ratio of base earned premium to base ultimate premium in order to calculate a reserve provision (IBNR) only to the exposed / expired portion of the reinsurance contract as of the reserving date. The base premium excludes loss sensitive premium adjustments.

For each REC and underwriting year we select best estimate of ultimate losses within a reasonable range. The range estimates are done at the REC level and are not aggregated to the business segment or consolidated level.

Adequacy of reserves

Given the inherent uncertainty of the loss estimation process described above, we employ a number of methods to develop a range of estimates. On the basis of our actuarial reviews, we believe our liability for gross losses and loss expenses, referred to as gross reserves, and our gross reserves less reinsurance recoverables for losses and loss expenses ceded, referred to as net reserves, at the end of all periods presented in our financial statements were determined in accordance with our established policies and were reasonable estimates based on the information known at the time our estimates were made. These analyses were based on, among other things, original pricing analyses as well as our experience with similar lines of business, and historical trends, such as reserving patterns, exposure growth, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions. However, since the establishment of loss reserves is an inherently uncertain process, the ultimate cost of settling claims may deviate from our existing loss and loss adjustment expense reserves, perhaps materially. Any adjustments that result from changes in reserve estimates are reflected in our results of operations.

Unforeseen losses, the type or magnitude of which we cannot predict, may emerge in the future. These additional losses could arise from newly acquired lines of business, changes in the legal environment, extraordinary events affecting our clients such as reorganizations and liquidations or changes in general economic conditions. We continue to conduct pricing and loss reserving studies for many casualty lines of business, including those in which preliminary loss trends are noted.

Development of prior years’ reserves: Converium has experienced moderate favorable developments of its loss reserves. Since 2002, Converium has recorded USD (425.6) million of favorable development from continuing operations on prior year’s non-life business (2002: USD (113.9) million; 2003: USD (195.7) million; 2004: USD 72.8 million; 2005 USD (86.0) million; and 2006 USD (102.8) million).

For the year ended December 31, 2006, Converium reported net favorable development of prior years’ loss reserves of USD 102.8 million. The Standard Property & Casualty Reinsurance segment was positively impacted by net favorable development of prior years’ loss reserves of USD 54.1 million primarily related to the Property and General Third Party Liability lines of business of USD 45.1 million and USD 24.6 million, respectively, partially offset by net adverse development of prior years’ loss reserves related to the Motor line of business of USD 16.5 million. The Specialty Lines segment was positively impacted by net favorable development of prior years’ loss reserves of USD 48.7 million primarily related to the lines of business: Aviation & Space and Engineering of USD 34.9 million and USD 16.2 million, respectively, partially offset by net adverse development of prior years’ loss reserves related to the Professional Liability and other Special Liability line of business of USD 17.6 million.

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For the year ended December 31, 2005, Converium recorded net favorable development of prior years’ loss reserves of USD 86.0 million. The Standard Property & Casualty Reinsurance segment was positively impacted by net favorable development of prior years’ loss reserves of USD 30.7 million primarily related to the Property line of business of USD 73.3 million, partially offset by net adverse development of prior years’ loss reserves within the Motor and General Third Party Liability lines of business of USD 25.0 million and USD 23.4 million, respectively. The Specialty Lines segment was positively impacted by net favorable development of prior years’ loss reserves of USD 55.3 million primarily related to the Aviation & Space line of business of USD 57.5 million.

For the year ended December 31, 2004, Converium recorded net adverse development of prior years’ loss reserves of USD 72.8 million. The Standard Property & Casualty Reinsurance segment was negatively impacted by net adverse development of prior years’ loss reserves of USD 11.3 million primarily related to adverse development within the Motor line of business of USD 78.7 million, which was partially offset by net favorable development of prior years’ loss reserves related to the Property line of business of USD 77.8 million. The Specialty Lines segment was negatively impacted by net adverse development of prior years’ loss reserves of USD 61.5 million primarily related to adverse developments of the Professional Liability and other Special Liability and Engineering lines of business of USD 116.1 million and USD 13.7 million, respectively, partially offset by net favorable development of prior years’ loss reserves related to: Credit & Surety (USD 30.2 million), Aviation & Space (USD 24.6 million) and Workers’ Compensation (USD 16.4 million) lines of business.

The positive reserve development as described herein in “— Loss Reserve Development” have been determined in accordance with our loss reserving policies as described in “— Loss and Loss Adjustment Expense Reserves — Establishment of Loss and Loss Adjustment Expense Reserves”, and was recorded in accordance with our established accounting policies as described in Note 1(d) to our 2006 consolidated financial statements. Under these policies, we review and update our reserves as experience develops and new information becomes known, and we bring our reserves to a reasonable level within a range of reserve estimates by recording an adjustment in the period when the new information confirms the need for an adjustment.

Converium recently commissioned a reserve study by a major independent actuarial firm to analyze December 31, 2006 non-life loss and allocated adjustment expense reserves in depth, and the conclusions of this reserve study support the total level of corresponding booked gross and net reserves. The final version of this reserve study will be considered as part of the full range of information that Converium considers during the normal reserve assessment process in future quarters. Consequently, whilst there is support to the total level of reserves there could be fluctuations in lines of business or segments in future quarters.

Effects of currency fluctuations

A significant factor affecting movements in our net reserve balances has been currency exchange rate fluctuations. These fluctuations affect our net reserves because we report our results in US dollars. As of December 31, 2006, approximately 66% of our loss reserves are for liabilities that will be paid in a currency other than the US dollar. We establish these reserves in original currency, and then, during our consolidation process, translate them to US dollars using the exchange rates as of the balance sheet date. Any increase or decrease in reserves resulting from this translation process is recorded directly to shareholders’ equity and has no impact on current earnings. When new losses are incurred or adjustments to prior years’ reserve estimates are made, these amounts are reflected in the current year net income at the average exchange rates for the period.

Loss reserve development

The first table below presents changes in the historical non-life loss and loss adjustment expense reserves that we established in 1996 and subsequent years. The top lines of the tables show the estimated loss and loss adjustment reserves, gross and net of reinsurance, for unpaid losses and loss expenses as of each balance sheet date, which represent the estimated amount of future payments for all losses occurring prior to that date. The upper, or paid, portion of the first table presents the cumulative amount of payments of the loss and loss adjustment expense amounts through each subsequent year in respect of the reserves established at each initial year-end. Losses paid in currencies other than the US dollar are translated at consolidation into US dollars using the average foreign exchange rates for periods in which they are paid. The lower, or reserve re-estimated portion, gross and net of reinsurance, of the first table shows the re-estimate of the initially recorded loss and loss adjustment expense reserve as of each succeeding period-end, including claims paid, but recalculated using the foreign exchange rates for each subsequent period-end. The reserve estimates change as more information becomes known about the actual losses for which the initial reserves were established. The cumulative redundancy/(deficiency) lines at the bottom of the table are equal to the initial reserves less the liability re-estimated as of December 31, 2006.

Conditions and trends that have affected the development of our reserves for losses and loss expenses in the past may or may not necessarily occur in the future, and accordingly, our future results may or may not be similar to the information presented in the tables below.

The table below presents our loss and loss expense reserve development as of the dates indicated. These numbers also include our discontinued operations prior to 2006. The movements in 2006 reflect the sale of our North American operations in December 2006.

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	As of December 31,
(USD millions, except percentages)	1996			1997			1998			1999			2000			2001			2002			2003			2004			2005			2006
Gross reserves for losses and loss expenses		2,245.3			2,636.4			2,987.6			3,482.3			4,504.1			5,642.3			6,876.9			7,879.7			8,908.3			7,568.9			6,348.6
Reinsurance recoverable		106.9			290.1			457.3			640.9			892.3			1,099.2			1,085.7			1,041.3			914.5			761.0			604.9
Initial net reserves for losses and loss expenses		2,138.4			2,346.3			2,530.3			2,841.4			3,611.8			4,543.1			5,791.2			6,838.4			7,993.8			6,807.9			5,743.7
Cumulative paid as of:
One year later		466.0			514.5			610.0			850.6			890.6			1,171.0			1,504.4			1,938.9			1,995.3			2,303.7
Two years later		721.2			843.0			968.8			1,339.2			1,575.8			2,119.4			2,760.8			3,321.3			3,885.0
Three years later		921.7			1,064.4			1,250.7			1,670.1			2,180.9			3,027.2			3,755.0			4,835.8
Four years later		1,062.2			1,261.7			1,438.6			2,029.2			2,749.6			3,726.4			4,974.5
Five years later		1,178.3			1,336.5			1,622.3			2,312.8			3,210.1			4,719.3
Six years later		1,197.5			1,436.7			1,772.9			2,594.4			3,956.1
Seven years later		1,249.3			1,545.8			1,930.5			3,085.5
Eight years later		1,319.4			1,638.1			2,243.1
Nine years later		1,374.0			1,836.1
Ten years later		1,434.2
Net reserves re-estimated as of:
One year later		1,901.5			2,145.6			2,292.6			2,915.7			3,727.5			4,722.5			5,995.3			7,432.3			7,407.9			7,071.9
Two years later		1,853.5			2,051.3			2,276.7			3,039.3			3,932.6			4,951.0			6,490.6			7,054.2			7,453.6
Three years later		1,736.4			1,970.4			2,303.4			3,039.2			4,200.1			5,441.2			6,270.1			7,067.3
Four years later		1,677.3			1,989.1			2,337.8			3,189.2			4,576.2			5,323.5			6,364.2
Five years later		1,661.2			1,990.7			2,414.7			3,400.6			4,519.8			5,411.6
Six years later		1,645.9			2,013.0			2,504.1			3,385.9			4,552.1
Seven years later		1,649.3			2,069.5			2,493.1			3,400.9
Eight years later		1,684.6			2,049.1			2,504.8
Nine years later		1,666.6			2,052.0
Ten years later		1,674.4
Reinsurance recoverable re-estimated as of December 31, 2006		335.6			421.5			696.0			1,220.4			1,225.3			1,131.8			1,035.3			840.7			920.2			876.3
Gross reserves re-estimated as of December 31, 2006		2,010.0			2,473.5			3,200.8			4,621.3			5,777.4			6,543.4			7,399.5			7,908.0			8,373.8			7,948.2
Cumulative net redundancy/(deficiency)		464.0			294.3			25.5			-559.5			-940.3			-868.5			-573.0			-228.9			540.2			-264.0
Cumulative redundancy/(deficiency) as a percentage of initial net reserves		21.7	%		12.5	%		1.0	%		-19.7	%		-26.0	%		-19.1	%		-9.9	%		-3.3	%		6.8	%		-3.9	%
Cumulative gross redundancy/(deficiency)		235.3			162.9			-213.2			-1,139.0			-1,273.3			-901.1			-522.6			-28.3			534.5			-379.3
Cumulative redundancy/(deficiency) as a percentage of initial gross reserves		10.5	%		6.2	%		-7.1	%		-32.7	%		-28.3	%		-16.0	%		-7.6	%		-0.4	%		6.0	%		-5.0	%

As a significant portion of our reserves relate to liabilities payable in currencies other than US dollars, any fluctuations of the US dollar to those currencies will have an impact on the reserve redundancy/(deficiency). As shown on the table above, the net reserve position for 1998 developed favorably from USD 2,530.3 million as of December 31, 1998 to USD 2,504.8 million as of December 31, 2006, reflecting a redundancy of USD 25.5 million. However, shown on the table below, applying the exchange rate as of December 31, 1998 to the 1998 reserves re-estimated as of December 31, 2006 would result in re-estimated reserves of USD 2,600.2 million, or a deficiency of USD (69.9) million, illustrating that a substantial part of the apparent redundancy is due to currency movements, which may or may not persist to the date claims are actually paid. As a result of these currency movements, the cumulative redundancy/(deficiency) shown above is considerably higher/(lower) as of December 31, 2006 than if the reserves were shown on a constant exchange rate basis for all years presented. Due to the inherent volatility of exchange rates, this effect may change in the future. Accordingly, we expect that future changes in foreign exchange rates will impact our reserve adequacy re-estimates. However, with respect to our primary currencies, we believe that the potential volatility of our liabilities is offset to a large extent by our efforts to invest in assets denominated in the same currency.

The table above also shows that our net loss reserves have developed more frequent redundancies/(lower deficiencies) than our gross loss reserves. Changes in estimates of our net losses directly impact our reported results. Accordingly, our estimates of reinsurance recoveries on incurred losses and our collections of those recoveries from our retrocessionaires also directly impact our reported results. See “— Retrocessional reinsurance” above for a discussion of the types of retrocessional reinsurance coverage that we purchase.

At December 31, 2006, we recorded USD 604.9 million of underwriting reserves, retro excluding reserves for life benefits, retro. Approximately 42.4% of this amount relates to recoverables in connection with the September 11th terrorist attacks.

The following table shows the development of our initial reserves net of reinsurance using the same exchange rates in effect when each of the initial reserves was set to re-estimate the reserves in subsequent years. These numbers also include our discontinued operations prior to 2006 and the movements in 2006 reflect the sale of our North American operations in December 2006.

	As of December 31,
(USD millions, except percentages)	1996			1997			1998			1999			2000			2001			2002			2003			2004			2005			2006
Initial net reserves for losses and loss expenses		2,138.4			2,346.3			2,530.3			2,841.4			3,611.8			4,543.1			5,791.2			6,838.4			7,993.8			6,807.9			5743.7
Net reserves re-estimated as of:
One year later		2,004.9			2,108.6			2,394.7			3,008.1			3,779.5			4,698.3			5,735.4			7,185.8			7,808.4			6,641.7
Two years later		1,925.4			2,078.8			2,414.4			3,152.5			3,935.5			4,836.4			6,103.4			7,079.0			7,651.2
Three years later		1,865.4			2,016.6			2,465.6			3,130.1			4,132.7			5,211.6			6,051.5			7,003.4
Four years later		1,819.3			2,035.0			2,474.0			3,230.8			4,442.4			5,205.1			6,018.3
Five years later		1,799.4			2,023.7			2,511.6			3,415.0			4,455.0			5,202.9
Six years later		1,775.9			2,017.9			2,588.8			3,441.4			4,443.8
Seven years later		1,755.5			2,065.5			2,609.8			3,427.8
Eight years later		1,782.5			2,069.3			2,600.2
Nine years later		1,782.0			2,057.5
Ten years later		1,774.2
Cumulative redundancy/(deficiency)		364.2			288.8			-69.9			-586.4			-832.0			-659.8			-227.1			-165.0			342.6			166.2
Cumulative redundancy/(deficiency) as a percentage of initial net reserves		17.0	%		12.3	%		-2.8	%		-20.6	%		-23.0	%		-14.5	%		-3.9	%		-2.4	%		4.3	%		2.4	%

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The payment pattern of our loss and loss expense reserves varies from year to year. Based on historical payment patterns and other relevant data, we estimate that the mean time to payment, on an undiscounted basis, of our loss and loss expense provisions, including future life benefits, as of December 31, 2006, was 4.2 years. We expect this average payment period to change as our mix of business changes, as well as due to changes of payment patterns and fluctuations in currency exchange rates.

Reconciliation of beginning and ending loss and loss expense reserves

The table below is a summary reconciliation of the beginning and ending reserves for losses and loss expenses, net of reinsurance, for the years ended December 31, 2006, 2005 and 2004.

	2006		2005		2004
(USD millions)
As of January 1,
Gross reserves for losses and loss expenses		7,568.9		8,908.3		7,879.7
Less reinsurance recoverable		-761.0		-914.5		-1,041.3
Less net reserves for losses and loss expenses for discontinued operations		-1,309.7		—
Net reserves for losses and loss expenses		5,498.2		7,993.8		6,838.4
Losses and loss expenses incurred (1),(2) Current year		1,234.2		1,922.3		2,881.9
Prior years		-145.2		-186.1		350.2
Total		1,089.0		1,736.2		3,232.1
Losses and loss expenses paid(2) Current year		229.8		451.0		541.4
Prior years		1,016.7		1,995.3		1,938.9
Total		1,246.5		2,446.3		2,480.3
Foreign currency translation effects		403.0		-475.8		403.6
As of December 31,
Net reserves for losses and loss expenses		5,743.7		6,807.9		7,993.8
Reinsurance recoverable		604.9		761.0		914.5
Gross reserves for losses and loss expenses		6,348.6		7,568.9		8,908.3

(1)	The loss and loss expenses incurred includes USD 114.2 million, USD 178.3 million and USD 128.0 million of loss and loss expenses included in the Life & Health reinsurance segment for the years ended December 31, 2006, 2005 and 2004, respectively.
(2)	Figures for 2005 and 2004 are as originally reported. Loss and loss expenses incurred and loss and loss expenses paid from discontinued operations were USD 55.8 million and USD 924.1 million and USD 948.1 million and USD 1,066.3 million for 2005 and 2004, respectively.

In 2006, Converium recorded USD 145.2 million of favorable development at the 2006 average exchange rate and USD 186.1 million of favorable development at the 2005 average exchange rate. See “ — Adequacy of Reserves”.

Prior years’ favorable net loss expenses incurred in 2006 of USD 145.2 million were primarily driven by net favorable development of prior years’ loss reserves of USD 102.8 million (See “— Adequacy of reserves”), and the reversal of reserves relating to prior years’ premium accruals in the amount of USD 42.4 million.

Prior years’ favorable net loss expenses incurred in 2005 of USD 111.2 million were primarily driven by net favorable development of prior years’ loss reserves of USD 86.0 million (See “— Adequacy of reserves”), and the reversal of reserves relating to prior years’ premium accruals in the amount of USD 25.2 million.

Prior years’ favorable net loss expenses incurred in 2004 of USD 101.5 million were primarily driven by net adverse development of prior years’ loss reserves of USD 72.8 million (See “— Adequacy of reserves”), the reduction of a reinsurance recoverable of USD 12.0 million, which was partially offset by the reversal of reserves relating to prior years’ premium accruals in the amount of USD 186.3 million.

Reserves for asbestos and environmental losses

We have exposure to liabilities for asbestos and environmental impairment from our assumed reinsurance contracts, primarily arising from business written by Converium Rückversicherung (Deutschland) AG, historically known as Agrippina Rückversicherung AG and subsequently known as Zürich Rückversicherung (Köln) AG (“ZRK”). Our asbestos and environmental exposure primarily originates from US business written through the London Market and from treaties directly written with reinsurers in the United States.

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We cancelled our relevant London Market reinsurance contracts in 1966 and 1967. At the time, we reduced our participation in asbestos and environmental-exposed US treaties, with the eventual result that Converium Rückversicherung (Deutschland) AG ceased property and liability underwriting in the United States in 1990. Due to uncertainties as to the definitions and to incomplete reporting from clients, exact separation of asbestos and environmental exposures cannot be reached. Converium AG’s exposure is also minimal because, under the terms of the Quota Share Retrocession Agreement, Converium AG will only reinsure business written with an inception or renewal date on or after January 1, 1987. In 1986, our contract wording was revised, consistent with a general industry change, such that asbestos and environmental claims were generally excluded.

As of December 31, 2006 and 2005, our total loss and adjustment expense reserves, including additional reserves and IBNR reserves, for US-originated asbestos and environmental losses were approximately USD 49.2 million, respectively for each year or 0.9% and 0.7%, respectively of our total net reserves for losses and loss expenses, respectively. This provision includes reserves originally communicated by our cedents, together with additional reserves we established.

We estimate that the survival ratio of our asbestos and environmental risk portfolio, calculated as the ratio of reserves held, including IBNR, over claims paid over the average of the last three years, was 13.8 years at December 31, 2006 and 14.1 years as of December 31, 2005. Survival ratio is an industry measure of the number of years it would take a company to exhaust its reserves for asbestos and environmental liabilities based on that company’s current level of claims payments.

Reserving for asbestos and environmental claims is subject to a range of uncertainties that has historically been greater than those presented by other types of claims. Among the complications are a lack of historical data, long reporting delays and uncertainty as to the number and identity of insureds with potential exposure. In addition, there are complex, unresolved legal issues regarding policy coverage and the extent and timing of contractual liability.

These uncertainties and issues are not likely to be resolved in the near future. Consequently, traditional loss reserving techniques cannot wholly be relied on and, therefore, the uncertainty with respect to the ultimate cost of these types of claims is greater than the uncertainty relating to standard lines of business. In addition, changes to existing legal interpretation, new legislation or new court decisions could materially impact our reserves, results of operations, cash flows and financial position in future periods.

Investments

Our overall financial results are in large part dependent upon the quality and performance of our investment portfolio. Net investment income and net realized capital gains (losses) accounted for 13.4%, 11.4% and 7.7% of our revenues for the years ended December 31, 2006, 2005 and 2004, respectively.

Our assets are invested with the objective of achieving investment returns consistent with those of the markets in which we invest, using state-of-the-art risk management techniques to optimize, diversification, tax regulatory and liquidity considerations. We principally focus on high quality, liquid securities and seek to invest in securities whose durations correspond to the estimated payout patterns of the reinsurance liabilities they support.

Our approach to fixed income investments is to limit credit risk by focusing on investments rated predominantly “A” or better by Standard & Poor’s, Moody’s or similar rating agencies, and to reduce concentration risk by limiting the amount that may be invested in securities of any single issuer or group of issuers. With respect to equity investments, we seek to diversify our equity portfolio so as to provide a broad exposure across major sectors of individual stock markets. To reduce the effects of currency exchange rate fluctuations, we seek to match the currencies of our investments with the currencies of our underlying reinsurance liabilities.

Our investments are managed mostly by external investment managers, and their performance is measured against benchmarks. Our investment practices are governed by guidelines established and approved by our Board of Directors. Although these guidelines stress diversification of risks, conservation of principal and liquidity, these investments are subject to market-wide risks and fluctuations, as well as risks inherent in particular securities.

As of December 31, 2006 and 2005, total invested assets (excluding cash and cash equivalents) were USD 5,765.3 million and USD 6,634.3 million, respectively.

The sale of our North American operations in December 2006 resulted in a decrease of total invested assets including cash and cash equivalents of USD 883.2 million.

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The table below presents the carrying value of our consolidated investment portfolios as of December 31, 2006, 2005 and 2004.

	For the year ended December 31,
	2006				2005				2004
	USD		% of		USD		% of		USD		% of
	millions		total		millions		total		millions		total
Fixed maturities securities		3,840.8		60.0		4,963.4		68.1		5,685.2		67.1
Equity securities		734.7		11.5		362.6		5.0		399.4		4.7
Funds Withheld Asset		940.7		14.7		1,020.1		14.0		1,305.1		15.4
Short-term investments		44.9		0.7		253.1		3.5		117.3		1.4
Other investments		204.2		3.2		35.1		0.5		279.2		3.3
Total investments		5,765.3		90.1		6,634.3		91.1		7,786.2		91.9
Cash and cash equivalents		633.1		9.9		647.3		8.9		680.9		8.1
Total investments and cash and cash equivalents		6,398.4		100.0		7,281.6		100.0		8,467.1		100.0

In 2006, we liquidated our private equity investments in a secondary market transaction from the investment portfolio in our North American operations to reflect the run-off situation and to accommodate expected for upcoming liquidity requirements. Due to the sale of our North American operations and their concentration on investments in fixed maturities securities, our allocation to fixed maturity securities declined significantly. For the continuing operations, in the second half of 2006, we sold twelve Swiss direct real estate holdings together with 800,000 shares of PSP Swiss Property AG and reallocated the proceeds into Real Estate Investment Trusts (“REITs”). Furthermore, in line with our asset/liability management (“ALM”) approach, we realigned our investment portfolio towards our strategic asset allocation, whereby, we increased our exposure to equity securities by approximately USD 240.0 million to 8.3% and modestly increased our alternative investments exposure by investments in hedge funds.

Fixed maturities

As of December 31, 2006, our fixed maturities portfolio, excluding the Funds Withheld Asset (described more fully below), had a carrying value of USD 3,840.8 million and represented 60.0% of our total investment portfolio including cash and cash equivalents (74.7% including the Funds Withheld Asset). This represents a decrease in carrying value of USD 1,122.6 million, or 22.6%, from December 31, 2005. This decrease was primarily driven by the liquidation of available for sale fixed maturity securities in connection with the sale of our North American operations.

We invest in government, agency and corporate fixed income securities of issuers from around the world that meet our liquidity and credit standards. We place an emphasis on investing in listed fixed income securities that we believe to be liquid.

The table below presents the composition of our fixed income securities portfolio, excluding short-term investments, based on carrying value by scheduled maturity.

(USD millions, except percentages)	Estimated fair value		% of total		Carrying value		% of total
As of December 31, 2006	Available-for-sale (AFS)		AFS		Held-to-maturity (HTM)		HTM
Less than one year		249.9		8.0		—		—
One year through five years		1,931.6		61.8		599.4		83.4
Five years through ten years		689.6		22.1		118.9		16.6
Over ten years		53.1		1.7		—		—
Subtotal		2,924.2		93.6		718.3		100.0
Mortgage and asset-backed securities		6.2		0.2		—		—
Unit trust bonds		192.1		6.2		—		—
Total as of December 31, 2006		3,122.5		100.0		718.3		100.0

Most of our fixed income securities are rated by Standard & Poor’s, Moody’s or similar rating agencies. As of December 31, 2006, approximately 92.9% of our fixed income securities portfolio was invested in securities rated A or better by these agencies and approximately 83.3% was invested in AAA/Aaa rated securities.

The table below presents the composition of our fixed income securities portfolio by rating as assigned by Standard & Poor’s or Moody’s, using the lower of these ratings for any security where there is a split rating.

(USD millions, except percentages)	Estimated fair value		% of total		Carrying value		% of total
As of December 31, 2006	Available-for-sale (AFS)		AFS		Held-to-maturity (HTM)		HTM
AAA/Aaa		2,508.6		80.4		691.9		96.3
AA/Aa2		100.3		3.2		7.8		1.1

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(USD millions, except percentages)	Estimated fair value		% of total		Carrying value		% of total
As of December 31, 2006	Available-for-sale (AFS)		AFS		Held-to-maturity (HTM)		HTM
A/A2		313.5		10.0		18.6		2.6
BBB/Baa2		94.1		3.0		—		—
BB		11.5		0.4		—		—
B		9.2		0.3		—		—
Not rated (1)		85.3		2.7		—		—
Total as of December 31, 2006		3,122.5		100.0		718.3		100.0

(1) Includes USD 77.1 million private collateralized loans issued by German banks with a credit rating equivalent to S&P AAA

Equity securities

As of December 31, 2006, our equity securities portfolio had a carrying value of USD 734.7 million (including PSP Swiss Property AG and REITs). This represents an increase in carrying value of USD 372.1 million, or 102.6%, from December 31, 2005, which was due to the strategic investment decision to increase our holdings in equity securities. Equity securities, excluding PSP Swiss Property AG and REITS, were approximately 8.3% and 3.9% of our total investment portfolio, including cash and cash equivalents, as of December 31, 2006 and December 31, 2005, respectively.

Our equity portfolio consists of listed securities held either directly or through funds. Substantially, all the equity portfolios are invested in developed markets. As experienced in recent years, the equity markets around the world can produce highly volatile and significantly varied results due to local and worldwide economic and political conditions.

As of December 31, 2006, we have no exposure to private equity investments as compared with approximately USD 46.9 million for the same period of 2005. In 2006, we liquidated our private equity investments in a secondary market transaction from the investment portfolio in our former North American operations to reflect the run-off situation and to accommodate expected for upcoming liquidity requirements.

As of December 31, 2006 and 2005, gross unrealized gains on our equity securities portfolio were USD 121.8 million and USD 76.0 million and gross unrealized losses were USD 1.7 million and USD 1.1 million, respectively. We have reviewed the securities that have declined in value and have recorded impairments accordingly. See “Item 5. — Operating and financial review and prospects — A. Operating results —Critical accounting policies” for additional information on our impairment policy.

Our guidelines also restrict our maximum investment in any one equity security or industry sector by reference to local benchmarks and applicable insurance regulations. As of December 31, 2006, excluding our investments in funds, no single equity security represented more than 5% of our equity securities portfolio.

Funds Withheld Asset

The transfer of certain historical reinsurance business to Converium was affected as of July 1, 2001 by means of the Quota Share Retrocession Agreement with ZFS. In addition, on that date, the Funds Withheld Asset was established. Its initial balance was set to match the net balance of the liabilities, less the premium receivables (including outstanding collectible balances and reinsurance deposits) on the business to which the Quota Share Retrocession Agreement applies. As of December 31, 2006, the Funds Withheld Asset was USD 940.7 million. The decrease of USD 79.4 million over December 31, 2005 was substantially due to paid claims.

In general, the Funds Withheld Asset is reduced by paid claims, profit commissions, amounts paid to maintain the retrocession agreements and other amounts paid on the business subject to the Quota Share Retrocession Agreement and is increased by premiums (less premium refunds), salvage and subrogation, recoveries under retrocession agreements, profit commissions and other amounts received for the business subject to the Quota Share Retrocession Agreement. The balance of the Funds Withheld Asset will decrease over time. However, business historically written on the Zurich Insurance Company (“ZIC”) and Zurich International (Bermuda) Ltd (“ZIB”) balance sheets was written on the Converium balance sheet and continued to be renewed, where it met Converium’s profitability targets. As a result, we will generate operating cash flow from the new and renewal business written by Converium, which we expect to at least partially offset reductions of the balance of the Funds Withheld Asset.

See Note 16 to our 2006 consolidated financial statements for additional information on the Funds Withheld Asset and a recent change to the underlying agreement.

Short-term investments

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Our short-term investment portfolio includes investments in fixed-term deposits and fiduciary investments. These investments generally have maturities of between three months and one year. As of December 31, 2006, we had short-term investments with a carrying value of USD 44.9 million, representing 0.7% of our total investment portfolio, including cash and cash equivalents. Short-term investments at December 31, 2005 were USD 35.1 million or 0.5% of our total investment portfolio, including cash and cash equivalents.

Real estate

At December 31, 2006, we had real estate held for investment through a direct real estate fund of USD 44.7 million, consisting primarily of investments in commercial real estate in the Eurozone. Our real estate investments, both direct and indirect totaled USD 144.6 million at December 31, 2005. Converium sold its Swiss direct real estate holdings in the fourth quarter of 2006 and reinvested the proceeds in diversified global real estate investment trust securities, which are included in the equity securities category. As of December 31, 2006, the total amount invested in REITs was USD 148.1 million. In addition to these direct and indirect real estate investments, Converium owns a 2.0% participation in PSP Swiss Property AG (an indirect real estate investment, included within the equity securities category) with a market value of USD 56.0 million as of December 31, 2006 compared with USD 76.8 million or 3.8% in 2005. In the third quarter of 2006, we sold 800,000 shares representing 1.8% of participation in PSP Swiss Property AG for proceeds of USD 40.9 million. Our total real estate portfolio represented 3.9% of our total investment portfolio, including cash and cash equivalents.

Other investments

As of December 31, 2006 and December 31, 2005, we had USD 168.5 million and USD 107.4 million, respectively in funds of hedge funds. This investment is included under the caption “Other investments” in the balance sheet.

Premiums receivable

We had premiums receivable of USD 880.9 million at December 31, 2006 compared with USD 1,059.3 million at December 31, 2005, a decrease of USD 178.4 million, or 16.8%. Premiums receivable include those currently due, as well as deferred premiums receivable, which is comprised primarily of accruals on premium balances which have not yet been reported and which are not contractually due to be paid until some time in the future. Current premiums receivable represented 13.0% and 18.3% of total premiums receivable at December 31, 2006 and December 31, 2005, respectively and accrued premiums receivable represented 87.0% and 81.7%, respectively. Bad debt provisions of USD 9.2 million have been recorded for estimated uncollectible premiums receivable at December 31, 2006, compared with USD 11.6 million at December 31, 2005.

Reinsurance assets

Retrocessional reinsurance arrangements generally do not relieve Converium from its direct obligations to its reinsureds. Thus, a credit exposure exists with respect to reinsurance ceded to the extent that any retrocessionaire is unable or unwilling to meet the obligations assumed under the retrocessional agreements. At December 31, 2006 and 2005, Converium held USD 210.4 million and USD 470.6 million, respectively, in collateral as security under related retrocessional agreements in the form of deposits, securities and/or letters of credit. Bad debt provisions of USD 2.1 million have been recorded for estimated uncollectible reinsurance recoverables at December 31, 2006, compared with USD 16.5 million at December 31, 2005.

As of December 31, 2006, we had reserves for unpaid losses, loss expenses and future life benefits from retrocessionaires of USD 647.2 million compared with USD 805.1 million at December 31, 2005. The reduction is primarily due to the sale of the North American operations.

Capital expenditures

For the three years ended December 31, 2006, we invested a total of USD 6.7 million in fixed assets. Most of these amounts were invested in equipment and information technology, and were financed from our free cash flow. Capital investments will considerably increase in the next two years due to major enhancements with the replacement of our current reinsurance administration systems with a new integrated reinsurance software package with total projected costs of USD 17.0 million.

Ratings

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During the course of 2006, Converium interacted frequently with Standard & Poor’s and A.M. Best. On February 28, 2007, Standard & Poor’s Ratings Services raised its long-term counterparty credit and insurer financial strength ratings on Switzerland-based reinsurer Converium AG and its long-term insurer financial strength ratings on guaranteed operating entities Converium Rückversicherung (Deutschland) AG and Converium Insurance (U.K.) Ltd. to “A-” from “BBB+”. At the same time, Standard & Poor’s removed these ratings from CreditWatch, where they had been placed with positive implications on Oct. 17, 2006. The outlook on all entities is stable.

Regulation

General

The business of reinsurance is regulated in most countries, although the degree and type of regulation varies significantly from one jurisdiction to another. Reinsurers are generally subject to less direct regulation than primary insurers in most countries. In Switzerland and Germany, we operate under relatively less intensive regulatory regimes. Historically, neither Swiss nor German regulations have materially restricted our business. However, in the United States, licensed reinsurers must comply with financial supervision standards comparable to those governing primary insurers.

This regulation, which is described in more detail below, generally is designed to protect policyholders rather than investors, and relates to such matters as rate setting; limitations on dividends and transactions with affiliates; solvency standards which must be met and maintained; the licensing of insurers and their agents; the examination of the affairs of insurance companies, which includes periodic market conduct examinations by the regulatory authorities; annual and other reports, prepared on a statutory accounting basis; establishment and maintenance of reserves for unearned premiums and losses; and requirements regarding numerous other matters. US regulations accordingly have in the past materially affected our US business operations, although not, we believe, in a manner disproportionate to or unusual in our industry. We allocate considerable time and resources to comply with these requirements, and could be adversely affected if a regulatory authority believed we had failed to comply with applicable law or regulation.

We believe that Converium and all of its subsidiaries are in material compliance with all applicable laws and regulations pertaining to their business and operations. Set forth below is a summary of the material regulations applicable to us.

Switzerland

Converium AG has received an operating license from the Federal Office of Private Insurance (Bundesamt für Privatversicherungen) (the “FOPI”), an administrative unit of the Swiss Ministry of Finance (Eidgenössisches Finanzdepartment) and is subject to the continued supervision by the FOPI pursuant to the Swiss Insurance Supervisory Act of December 17, 2004 (Versicherungsaufsichtsgesetz) (“ISA”). The FOPI has supervisory authority as well as the authority to make decisions to the extent that the Swiss Ministry of Finance is not explicitly designated by law. On January 1, 2006 a completely revised ISA together with an Implementing Ordinance entered into force. The main changes are an amended definition of solvency (Art. 9) which includes consideration of financial and operational risks, an emphasis on risk management aspects, the control of corporate governance elements by the FOPI and an increased transparency and consumer protection. The most important new feature is the introduction of the Swiss Solvency Test (“SST”), a risk-based capital model which preempts the forthcoming changes in the EU based upon the proposed EU Solvency II Directive. Insurance undertakings are allowed to use their internal risk models if they comply with certain conditions of a qualitative, quantitative and organizational nature defined and accepted by the FOPI. Furthermore, as a result of the revised ISA, FOPI may decide to establish a Group Supervision over Converium, in accordance with Art. 65 of the ISA. By virtue of the relevant provisions on Group Supervision as defined in the revised ISA, Converium companies outside of Switzerland could become the subject of certain supervisory powers of FOPI.

Unlike insurance business, which is strictly regulated in Switzerland, regulation of reinsurance business is less intensive and most of the technical rules for direct insurers are not applicable to the reinsurance business. The supervision exercised by the FOPI is mainly indirect through the supervision of direct insurance companies and the reinsurance arrangements which they have established. Reinsurance companies from other countries which conduct only reinsurance business in Switzerland from their foreign domicile are exempt from supervision by the FOPI. Based upon a decree of the Federal Council of November 30, 2001, a commission has been constituted to consider a revision of the overall framework of the Swiss banking and insurance supervision. The first part of the report was released in July 2003 by the commission. The proposal includes the formation of a uniform financial services authority, which will become the supervisory authority for banks (currently supervised by the Federal Banking Commission) and insurance (currently supervised by the FOPI).

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Under current regulations, Swiss insurance and reinsurance companies cannot operate in any field other than reinsurance and insurance. This rule is subject to exceptions, which are granted by the FOPI. Generally, these exceptions are granted if the nature and volume of the proposed non-insurance or non-reinsurance business does not threaten the solvency of the company. Investments in an entity operating outside the reinsurance or insurance field are subject to supervisory authority approval if the investment represents more than 20% (or 10% in the case of a life insurance business) of the share or cooperative capital of the non-insurance entity or if the investment represents more than 10% of the insurer’s or reinsurer’s shareholders’ equity.

The FOPI requires each reinsurance company to submit a business plan which provides details about the calculation of its technical reserves and about its retrocession policies, and information about the reinsurer’s solvency. The FOPI initially examines documents relating to the company’s solvency, organization and management. If all legal requirements are met, an operating license is granted by the Swiss Ministry of Finance. Thereafter, companies must submit an annual business report, including financial statements, detailing information on all aspects of their business activities, such as premium income, paid out benefits, reserves and profits.

By letter dated September 27, 2004, the FOPI has requested that Converium AG provide notice on certain intra-group transactions between Converium AG and its subsidiaries including loans, guarantees, cost sharing agreements, capital injections, and investments in subsidiaries. Furthermore the FOPI requested by letter dated October 14, 2004 certain additional information including Converium’s business strategy, planning, reserves, solvency and collateral issues. Converium is cooperating with the FOPI and is providing all required information and documentation.

In December 2004, per the FOPI’s request, Converium AG agreed to submit for approval the following intra-group transactions: intra-group loans and capital increases to subsidiaries exceeding USD 100.0 million; guarantees exceeding USD 10.0 million; transfer of portfolios or novations involving changes in reserves exceeding USD 25.0 million, dividends to Converium Holding AG and all intra-group reinsurance transactions that are not at arm’s length. Absent consent of the FOPI, the intra-group transactions exceeding the thresholds cannot be executed, which may in turn have an impact on the funding in conjunction with intra-group transactions.

United States

US reinsurance regulation of our non-US reinsurance subsidiaries

Converium AG and Converium Rückversicherung (Deutschland) AG, our non-US reinsurance subsidiaries, also assume reinsurance from primary US insurers. In order for primary US insurers to obtain financial statement credit for the reinsurance obligations of our non-US reinsurers, our non-US reinsurers must satisfy reinsurance requirements. Non-US reinsurers that are not licensed in a state generally may become accredited by filing certain financial information with the relevant state commissioner and maintaining a US trust fund for the payment of valid reinsurance claims in an amount equal to the reinsurer’s US reinsurance liabilities covered by the trust plus an additional USD 20 million. In addition, unlicensed and unaccredited reinsurers may secure the US primary insurer with funds equal to its reinsurance obligations in the form of cash, securities, letters of credit or reinsurance trusts.

Terrorism legislation

On November 26, 2002, President George W. Bush signed into law the Terrorism Risk Insurance Act of 2002 (“TRIA”). This legislation establishes a program under which the Federal government will share the risk of loss arising from future terrorist attacks with the insurance industry. The law does not apply to reinsurers, and the federal government does not share in the risk of loss emanating from future terrorist attacks with the reinsurance industry. Each reinsurer is free to make its own contractual arrangements with its ceding partners, as it deems appropriate.

Regarding our ceding companies, TRIA, provides for the federal government to share with the insurance industry the risk of loss from certain future terrorist attacks. Each participating insurance company must pay covered losses equal to a deductible based on a percentage of direct earned premiums for specified commercial insurance lines from the previous calendar year. TRIA was originally scheduled to expire at the end of 2005, but was extended in December 2005 for an additional two years. As extended, the insurer deductible will be increased from 15% in 2005 to 17.5% in 2006 and 20% in 2007. For losses in excess of a company’s deductible, the federal government will cover 90.0% of the excess losses in 2006, while companies retain the remaining 10.0%, with the government’s share decreasing to 85.0% in 2007. Losses covered by the program remain capped annually at USD 100.0 billion. The extended TRIA will establish a new program trigger under which federal compensation will become available only if aggregate insured losses sustained by all insurers exceed USD 50.0 million from a certified act of terrorism occurring after March 31, 2006 and

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USD 100.0 million for losses resulting from a certified act which occurs on or after January 1, 2007. This new trigger will be in addition to the USD 5.0 million certification threshold for an event to be certified.

Congress is considering an extension to TRIA. However, we cannot assure you that TRIA will be extended beyond 2007 or whether it will be extended on a permanent or temporary basis, and its expiration could have an adverse effect on our clients, the industry or us.

Legislative and regulatory proposals

New federal legislation, the Non-Admitted and Reinsurance Reform Act of 2007 (the “NRRA”) has been introduced in the U.S. House of Representatives. If enacted in its present form, the NRRA would establish the U.S. ceding insurer’s domiciliary state as the sole regulatory authority with respect to credit for reinsurance and establish steam lined processes for the procurement and regulation of non-admitted surplus lines insurance. In addition, the Insurance Industry Competition Act of 2007 (the “IICA”) has been introduced in the U.S. Senate and the U.S. House of Representatives. If enacted in its current form, the IICA would remove the insurance industry’s antitrust exemption created by the McCarran-Ferguson Act, which provides that insurance companies are exempt from federal antitrust law so long as they are regulated by state law, absent boycott, coercion or intimidation.

State law initiatives affecting the insurance and reinsurance markets in the U.S. and worldwide also continue to evolve. For example, Florida has enacted recent insurance reforms which significantly increase the state’s subsidy of insurance rates. The legislation allows Citizens Property Insurance Corp., traditionally the state’s insurer of last resort, and private insurers to purchase property catastrophe reinsurance from the Florida Hurricane Catastrophe Fund at prices well below current market prices. Such reforms may cause a decline in premiums assumed by the private reinsurance industry.

We are unable to predict whether any of the foregoing proposed legislation, or any other proposed laws and regulations will be adopted, the form in which any such laws and regulations would be adopted, or the effect, if any, these developments would have on our operations and financial condition.

European Union directives

Our businesses in the United Kingdom and Germany, as well as in the other member states of the EU and the European Economic Area, (the “EEA”), are impacted by EU directives. These directives are implemented through legislation in each member state. Switzerland, which is not a member state of the EU, entered into a treaty with the EU in 1989 which allows Swiss direct insurers, other than life insurers, the free establishment of branches and subsidiaries within the EU. Without being part of the EEA or being bound by contract, Switzerland reviews and largely conforms its financial services regulations to EU directives.

The new EU Reinsurance Directive adopted on November 16, 2005 is based largely on solvency related concepts stipulated in the prior directive adopted by the European Union (the “EU”) for insurance companies. The Directive does not provide for any discrimination of non-EU based reinsurance companies. However, if the individual EU member states, in implementing the EU Reinsurance Directive, should include any discriminatory regulations with respect to reinsurers of a non-EU member state, this could be a disadvantage for Converium AG in its doing business in the EU, as Converium AG derives a substantial proportion of its revenues within the EU and any competitive disadvantage we face there could have an adverse effect on our financial condition, results of operations or cash flows. However, a large portion of those revenues are being written through our subsidiary in the EU member state Germany, where no negative impact can arise from the implementation of the directive. In addition Converium has a second subsidiary in the UK, which also is an EU member.

Germany

Converium Rückversicherung (Deutschland) AG is regulated in Germany and is engaged exclusively in the reinsurance business. It is thus an insurance enterprise within the meaning of the German Insurance Supervision Act and as such is subject to governmental supervision. This supervision is exercised by the Federal Insurance Supervisory Office (BaFin) located in Bonn, Germany.

Until the end of 2004, and in contrast to insurance enterprises, companies that had been engaged exclusively in reinsurance activities were subject to a less extensive scope of governmental supervision. The supervisory authority’s monitoring of reinsurers was limited to ensuring their compliance with the specific accounting regulations applicable to insurance enterprises. For this purpose, reinsurance enterprises were required to submit quarterly and annual financial statements to the supervisory authority.

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In addition, reinsurers were obligated to submit detailed reports on the nature and volume of their business to the supervisory authority in accordance with the Ordinance on Reporting by Insurance Enterprises to the Federal Insurance Supervisory Office.

Under the old regime, German reinsurers used to only be supervised indirectly, principally through the supervision of primary insurance companies. In particular, the Federal Insurance Supervisory Office requires German insurance companies to monitor their reinsurance agreements, which has led to the creation of internal rating systems for reinsurers by German insurance companies.

The German legislative has passed an enhanced supervisory act that now fully integrates the reinsurance industry into the regulatory scheme applicable to the insurance industry under the EU Directive on reinsurance. See “— European Union directives”. The new law became effective on January 1, 2005. The new regulation has an impact on various aspects of reinsurers, including legal form of the company, location of the headquarters, qualification of the executive management, control procedures towards shareholders, investment principles, solvency requirements and special intervention rights for the supervising bodies.

The supervisory authority may, at its discretion, perform inspections at the reinsurer’s premises to verify compliance with these statutory obligations.

The remaining items of the EU directive have been prepared for a white paper. The German federal cabinet decided on this paper on April 25, 2006 and submitted it to the parliament for approval. The new law is expected to become effective in 2007 and contains issues such as:

• implementation of the principle of supervision in the member state of the company’s head office;

• approval of the European stock corporation as a form of enterprise;

• additional supervision of reinsurers within an insurance group;

• introduction of regulations for finance reinsurance;

• supervision of special purpose vehicles; and

• introduction of the supervision of branches belonging to reinsurance companies in countries outside the EU-member countries.

In addition, extensive work has been initiated by the local German supervisory authority and the German insurance association in order to prepare for a risk based solvency system (Solvency II), which should be similar to the Basel II requirements enacted for the banking industry. Solvency II is not expected to be released prior to 2008/2009.

German Branch Office

In December 2004, Converium AG established a branch office in Cologne, Germany. This move was made in response to the favorable legal regulatory environment in Germany as the rules regarding establishment of branch offices were changed as of January 1, 2005. We do not currently transact any business in this branch.

Asia

Restrictions imposed by the Monetary Authority of Singapore

Citing developments affecting the Converium Group, in 2004 the Monetary Authority of Singapore had imposed certain restrictions on the conduct of our business originating from our Singapore branch.

Following our ratings upgrade to single A -, the Monetary Authority of Singapore lifted these restriction on March 26, 2007.

C. ORGANIZATIONAL STRUCTURE

Converium Holding AG has substantially no net assets other than its ownership of 100% of the shares in each of Converium AG, Zurich, Converium Finance (Bermuda) Ltd., and Converium IP Management Ltd., Zug. As of December 31, 2006, Converium AG

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held approximately 49% of our net assets itself, and an additional 51% through its direct and indirect ownership of each of our subsidiaries.

We are a multinational group of companies with insurance and reinsurance subsidiaries and other companies organized in jurisdictions worldwide. Our significant subsidiaries are Converium AG, Converium Finance S.A., Converium Rückversicherung (Deutschland) AG and Converium Holding (UK) Ltd., which holds our subsidiaries in the United Kingdom. Converium AG owns directly or indirectly, 100% of all of our operating companies.

The following chart summarizes our corporate structure.

D. PROPERTY, PLANTS AND EQUIPMENT

Our operational head office is located at General Guisan Quai 26, 8002 Zurich, Switzerland, where we lease an aggregate of 227,226 square feet. We also maintain offices at our German headquarters in Cologne, Germany, at Clever Strasse 36, 50668 Köln, Germany where we lease an aggregate of 44,918 square feet.

In addition to our headquarter offices, we lease space for our branch and marketing offices.

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4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. OPERATING RESULTS

The following discussion and analysis should be read in conjunction with our 2006 consolidated financial statements, including the related notes to those financial statements. This discussion contains forward-looking statements that involve risks and uncertainties and actual results may differ materially from the results described or implied by these forward-looking statements. See “Cautionary note regarding forward-looking statements”.

Overview

Converium currently manages its business around three operating segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life & Health Reinsurance, which are based principally on global lines of business. In addition to the three segments’ financial results, the Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee and other corporate functions as well as expenses not allocated to the operating segments. In addition to reporting segment results individually, management also aggregates results for Standard Property & Casualty Reinsurance and Specialty Lines into non-life business, as management considers this aggregation meaningful in understanding the performance of Converium.

In non-life reinsurance, our lines of business include General Third Party Liability, Motor, Personal Accident (assumed from non-life insurers), Property, Agribusiness, Aviation & Space, Credit & Surety, Engineering, Marine & Energy, Professional Liability and other Special Liability and Workers’ Compensation. In Life & Health Reinsurance, our lines of business include Life and Disability reinsurance, including quota share, surplus coverage and financing contracts and Accident & Health.

We underwrite reinsurance both directly with ceding companies and through intermediaries, giving us the flexibility to pursue business in accordance with our ceding companies’ preferred reinsurance purchasing method. In addition, we generate business through strategic partnerships and joint ventures such as GAUM and MDU. In 2006, 28% of our gross premiums written were written through intermediaries and 72% were written on a direct basis.

On December 13, 2006, Converium sold its North American operations, which was placed into orderly run-off in 2004, to National Indemnity Company, a Berkshire Hathaway company, for total consideration of USD 295.0 million comprising of USD 95.0 million in cash and USD 200.0 million in assumption of debt. Converium has not provided any guarantee or indemnity in respect of the reserves of the North American operations. The transaction was approved by the Insurance Department of the State of Connecticut. Our North American operations were previously reported as the principal component of a separate segment, the Run-Off segment. Converium’s financial results of the North American business, including prior period amounts, have been reclassified to discontinued operations. For further details regarding the sale of the North American operations, see Note 2 to our 2006 consolidated financial statements.

We prepare segregated financial information for each of our operating segments. In the future, we plan to continue conducting our business and measuring our financial and operating performance based on these segments.

We derive our revenues principally from:

• premiums from our non-life and life reinsurance and insurance businesses;

• investment income and investment gains from our portfolio of invested assets, net of investment expenses; and

• interest on premium and loss deposits withheld by our clients.

Our costs and expenses principally consist of:

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• losses and loss expenses, which include:

• non-life reinsurance and insurance losses and loss expenses;

• death and other life reinsurance benefits;

• operating and administration costs, which include:

• treaty and individual risk acquisition costs, commonly referred to as commissions;

• overhead costs, predominantly consisting of salaries and related costs;

• interest expenses; and

• income taxes.

Our profitability depends to a large extent on:

• the quality of our underwriting and pricing;

• the level of incurred losses and commissions;

• the timing of loss and benefit payments;

• our ability to earn appropriate yields on our investment portfolio;

• our ability to manage operating and administration costs; and

• our ability to efficiently and effectively manage risk, including retrocessions.

When reviewing our financial statements, there are certain business characteristics that affect the reporting of our results. The most significant factors are set forth below.

Critical accounting policies

Our discussion and analysis of the financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these financial statements in accordance with US GAAP requires the use of estimates and judgments that affect the reported amounts and related disclosures. Changes in our financial and operating environment could influence the accounting estimates that support our financial statements. The following presents those accounting policies that management believes are the most critical to its operations and those policies that require significant judgment on the part of management. The assumptions and judgments used by management are the ones they believe to be the most appropriate at this time. However, as described below, these estimates could change materially if different information or assumptions were used. The descriptions below are summarized and have been simplified for clarity. A more detailed description of these and other significant accounting policies used by us in preparing our financial statements is included in the Notes to the Consolidated Financial Statements.

Non-life loss and loss expense reserves

We are required by applicable insurance laws and regulations, as well as US GAAP, to establish reserves for payment of losses and loss expenses that arise from our non-life reinsurance and insurance businesses. Loss and loss expense reserves are based on estimates of future payments to settle claims, including legal and other expenses. The liability for unpaid losses and loss expenses for property and casualty business includes amounts determined from loss reports on individual cases (“case reserves”) and amounts for losses incurred but not yet reported (“IBNR”), including expected development of reported claims. Upon receipt of a notice of claim from a ceding company, we establish a case reserve for the estimated amount of the ultimate settlement. Case reserves are usually based upon the amount of reserves reported by the primary insurance company and may subsequently be increased (“additional case reserves” or “ACR’s”) or reduced if necessary to reflect our best estimate of the liability, by our claims departments. Our cedents are domiciled in

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many countries around the world and typically apply local practices and regulations when handling losses. This leads to a wide variety of approaches, in among other things, setting individual claims reserves, recording loss data and handling loss adjustments. In particular, the legal systems, loss reporting and applicable accounting rules can vary greatly by country and can potentially lead to inconsistent information and information flow from our cedents to us, with respect to timing, format and level of detail. These factors are considered when managing and assessing claims and establishing loss reserves and should be noted when reviewing the gross reserve splits in the table below.

					Total gross non-life loss
	Case reserves		IBNR		reserves
Standard Property & Casualty		1,423.6		1,141.9		2,565.5
Specialty Lines		1,940.3		1,558.0		3,498.3
Life & Health Reinsurance		79.5		205.3		284.8
Total		3,443.4		2,905.2		6,348.6

The Life & Health Reinsurance segment contains loss reserves related to Accident and Health business.

If a contract is commuted, we reduce loss and loss expenses carried on our balance sheet and record a gain or loss for the difference between loss and loss expenses carried on our balance sheet and the commutation payment.

We estimate our loss and loss expense reserves on the basis of facts reported to us by ceding companies and in conjunction with actuarial estimates and methodologies for instances where we have not received reports from ceding companies. Our estimates of losses and loss expenses are subject to assumptions reflecting economic and other factors such as inflation rates, changes in legislation, court rulings, case law and prevailing concepts of liability, which can change over time. In addition, if ceding company data is not provided to us on a timely basis, this could potentially impact the accuracy of our estimates. The risks associated with making the estimate for assumed loss reserves include, among other things, those uncertainties prevalent in making assumptions for long-tailed lines of business, the time lag in information reporting by cedents and differing reserving approaches among cedents.

The amount of time that elapses before a claim is reported to the cedent and then subsequently reported to the reinsurer is commonly referred to in the industry as the “reporting tail”. Lines of business for which claims are reported quickly are commonly referred to as “short-tailed” lines; and lines of business for which a longer period of time elapses before claims are reported to the reinsurer are commonly referred to as “long-tailed” lines. The uncertainty inherent in loss estimation is particularly pronounced for long-tail lines such as umbrella, general and professional liability and motor liability, where information, such as required medical treatment and costs for bodily injury claims, will only emerge over time. In the overall reserve setting process, provisions for economic inflation and changes in the social and legal environment are considered. The uncertainty inherent in the reserving process for primary insurance companies is even greater for the reinsurer. This is because of, among other things, the time lag inherent in reporting information from the insurer to the reinsurer and differing reserving practices among ceding companies.

As a consequence, the estimation of loss and loss expense reserves is dependent on many assumptions and selection of parameters, and their combination. One of the most critical assumptions, particularly for lines with long-tail characteristics, is the selection of the reporting tail. The reporting tail is the period of time that elapses before a claim is reported to the cedent and then subsequently reported to the reinsurer. A change of this factor can lead to a substantially different estimate of ultimate losses and therefore reserves for loss and loss expenses. This change in the tail factor could be triggered by any of the drivers mentioned above, or a combination thereof.

As a result of these uncertainties and other factors, actual losses and loss expenses may deviate, perhaps materially, from expected ultimate costs which are reflected in our current reserves. This is evident in our actual experience of prior years’ calendar year favorable net loss expenses incurred development, which was as follows:

			Favorable development of
			prior years’ net loss
	Net loss reserves		expenses incurred during		Development on prior
	beginning of year		the year		years' loss reserves (%)
2004		4,614.7		101.5		2.2
2005		5,817.7		111.2		1.9
2006		5,498.2		145.2		2.6

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The current year development reflects the composite effect of the factors described above. It is not possible to identify the effect of each individual factor because of the inter-relationship between such factors.

Prior years’ favorable net loss expenses incurred in 2006 of USD 145.2 million were primarily driven by net favorable development of prior years’ loss reserves of USD 102.8 million, and the reversal of reserves relating to prior years’ premium accruals in the amount of USD 42.4 million.

Prior years’ favorable net loss expenses incurred in 2005 of USD 111.2 million were primarily driven by net favorable development of prior years’ loss reserves of USD 86.0 million and the reversal of reserves relating to prior years’ premium accruals in the amount of USD 25.2 million.

Prior years’ favorable net loss expenses incurred in 2004 of USD 101.5 million were primarily driven by net adverse development of prior years’ loss reserves of USD 72.8 million, the reduction of a reinsurance recoverable of USD 12.0 million, which was partially offset by the reversal of reserves relating to prior years’ premium accruals in the amount of USD 186.3 million.

We, like other reinsurers, do not separately evaluate each of the individual risks assumed under reinsurance treaties, therefore we are largely dependent on the original underwriting decisions made by ceding companies. We are subject to the risk that our ceding companies may not have adequately evaluated the risks to be reinsured and that the premiums ceded to us may not adequately compensate us for the risks we assume. To mitigate this risk our claims departments conduct periodic audits of specific claims and the overall claims procedures of our clients at the offices of ceding companies. We rely on our ability to effectively monitor the claims handling and claims reserving practices of ceding companies in order to establish proper loss reserves. Moreover, prior to accepting certain risks, our claims departments are often requested by underwriters to conduct pre-underwriting claims audits of prospective ceding companies. We attempt to evaluate the ceding company’s claims-handling practices, including the organization of their claims departments, their fact-finding and investigation techniques, their loss notifications, the adequacy of their reserves, their negotiation and settlement practices and their adherence to claims-handling guidelines. Following these audits, the claims departments provide feedback to the ceding company, including an assessment of the claims operation and, if appropriate, recommendations regarding procedures, processing and personnel.

We use historical loss information in our assessment/analysis of existing loss reserves and/or as a means of noticing unusual trends in the information received from the cedents. Our analyses of estimated loss reserves are based on, among other things, original pricing analyses as well as our experience with similar lines of business and historical trends, such as reserving patterns, exposure growth, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions. Our estimates of reserves from reported and unreported losses and related reinsurance recoverable assets are reviewed and updated periodically. Adjustments resulting from this process are reflected in current income. Our analyses rely upon the basic assumption that past experience, adjusted for the effect of current developments and likely trends, is an appropriate basis to estimate our current loss and loss expense liabilities. Because estimation of loss reserves is an inherently uncertain process, quantitative techniques frequently have to be supplemented by professional and managerial judgment. In addition, trends that have affected development of reserves in the past may not necessarily occur or affect reserve development to the same degree in the future.

The impact of changes in loss estimates can be mitigated by risk diversification. Risk diversification is a basic risk management tool in the insurance and reinsurance industry; as a multi-line reinsurer there are always likely to be reserve adjustments at the line of business level. Our book of business is broadly diversified by line of business as well as balanced by region and by the expected duration of its claims obligations.

Our Standard Property and Casualty Reinsurance segment is primarily comprised of short and medium-tail lines of business and accounted for 40.4%, 40.0%, and 45.4% of our gross non-life loss and loss expense reserves at December 31, 2006, 2005 and 2004, respectively. Our Specialty Lines segment is primarily comprised of medium and long-tail lines of business and accounted for 55.1%, 55.2% and 50.3% of our gross non-life loss and loss expense reserves at December 31, 2006, 2005 and 2004, respectively. As discussed in the reporting tail description above, this factor can have a significant impact on the volatility of reserves and the uncertainties that exist in the reserve estimation process.

Premiums

When we underwrite business, we receive premiums for assuming the risk. Premiums written in any given period include premiums reported to us by our clients and those we estimate and accrue on contracts underwritten. Reported premiums written and earned are based upon reports received from cedents, supplemented by our own estimates of premiums written for which ceding company reports

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have not been received.

In a typical reporting period, we generally earn a portion of the premiums written during that period together with premiums that were written during earlier periods. Likewise, some part of our premiums written will not be earned until future periods. We allocate premiums written but not yet earned to an unearned premium reserve, which represents a liability on our balance sheet. As time passes, the unearned premium reserve is gradually reduced and the corresponding amount is released through the income statement as premiums earn. Premiums are typically earned on a pro-rata basis over the period that the coverage is in effect. Our premium earned and written estimates are regularly reviewed and enhanced as information is reported to us by our clients and we are able to refine our estimates and assumptions. Differences between such estimates and actual amounts are recorded in the period in which estimates are changed or the actual amounts are determined.

A key assumption used by Management to arrive at its best estimate of assumed premiums is its assessment of expected reporting lags. In addition, they also use the following assumptions: (i) estimated written premium, (ii) change in mix of business; and (iii) ceding company seasonality of premium writing.

Management uses information provided by ceding companies as the initial basis for determining its premium accrual estimates and then further refines it based on known trends within the industry and the book of business.

We write a wide range of different types of insurance and reinsurance policies, some of which are earned during periods shorter than one reporting period, while some are earned during substantially longer periods. This mix of business can change significantly from one period to the next and these changes can cause the relationship between written and earned premiums to differ, perhaps significantly, on a year-to-year basis. Typically, differences in the percentage growth or decline between premiums written and earned mainly reflect this difference in our mix of business from year to year. Our underwriters and client relationship managers, in their analysis of trends, relate the change in premiums earned to the change in premiums written.

Similarly, the seasonality of premium writings are also analyzed on a regular basis by our underwriters and client relationship managers, taking into account the underlying business, the local market environments and emerging trends.

Our estimation procedures are also affected by the timeliness and comprehensiveness of the information our clients provide to us. The time lag between the release of this information from the ceding company to us can be significant and depends on the reporting frequency of the underlying accounts.

Consideration receivable for a retroactive reinsurance contract is recognized as premiums earned at the inception of the contract.

Deposit accounting

In the ordinary course of business, we both purchase, or cede and sell, or assume, property and casualty reinsurance protection. For both ceded and assumed reinsurance, risk transfer requirements mainly those in SFAS 113, “Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts” must be met in order to obtain reinsurance accounting, principally resulting in the recognition of cash flows under the contract as premium and losses. If risk transfer requirements are not met, a contract is to be accounted for under deposit accounting, typically resulting in the recognition of cash flows under the contract as a deposit asset or liability and not as revenue or expense. Generally, to meet risk transfer requirements, a reinsurance contract must include both insurance risk, consisting of underwriting and timing risk and a reasonable possibility of a significant loss for the assuming entity.

Reinsurance and insurance contracts that include both significant risk sharing provisions, such as adjustments to premiums or loss coverage based on loss experience and relatively low policy limits as evidenced by a high proportion of maximum premium assessments to loss limits, can require considerable judgment to determine whether or not risk transfer requirements are met. For such contracts, often referred to as finite or structured products, we require that risk transfer be specifically assessed for each contract by developing expected cash flow analyses at contract inception. To support risk transfer, the cash flow analyses must support the fact that a significant loss is reasonably possible. For purposes of cash flow analyses, we generally use a risk-free rate of return consistent with the expected average duration of loss payments. In addition, to support insurance risk, we must prove the reinsurer’s risk of loss varies consistently with that of the reinsured and/or support various scenarios under which the assuming entity can recognize a significant loss.

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In the event that a transaction does not meet risk transfer requirements, the transaction will be accounted for in accordance with AICPA Statement of Position 98-7, “Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk” (“SOP 98-7”). SOP 98-7 applies to proposed, assumed and ceded reinsurance transactions that fail risk transfer because there is (1) underwriting risk and timing risk but the underwriting risk is not significant or (2) significant underwriting risk but timing risk is not significant, or (3) underwriting risk and timing risk but not significant underwriting and timing risk. In general, most of the assumed finite transactions underwritten by Converium fail the risk transfer test because there is underwriting risk and timing risk but the underwriting risk is not significant. In these instances a deposit asset/liability is recognized on the balance sheet based on the net cash flows of the transaction. These amounts accrete interest income/expense utilizing the effective interest method based on amounts ultimately estimated to be paid and the time to settlement of the asset/liability. Most of the finite transactions also include a non-refundable fee (reinsurer’s margin) which is retained by the reinsurer irrespective of the experience on the contract. This fee is recognized as other income/expense over the coverage period of the policy and is not recorded as a deposit asset/liability.

In the event that the circumstances change and a loss will be ceded to the contract which will not ultimately be supported by an interest rate that can be earned on the deposit, then the deposit will be recognized into income/expense over the coverage period of the contract and a loss liability/recoverable will be recognized equal to the expected losses on the contract discounted by the risk free rate in accordance with SOP 98-7.

Reinsurance recoverables

We cede reinsurance to retrocessionaires in the normal course of business. Under US GAAP, reinsurance is recorded gross in the balance sheet. Reinsurance assets (recoverables) include the balances due from retrocessionaires for paid and unpaid losses and loss expenses, ceded unearned premiums and ceded future life benefits. Amounts recoverable from retrocessionaires are estimated in a manner consistent with the liabilities associated with the reinsured contracts.

Retrocessional reinsurance arrangements generally do not relieve us from our direct obligations to our reinsureds. Thus, a credit exposure exists with respect to reinsurance ceded to the extent that any retrocessionaire is unable or unwilling to meet the obligations assumed under the retrocessional agreements. Failure of retrocessionaires to indemnify us due to insolvencies or disputes could result in uncollectible amounts and losses to us. We establish an allowance for potentially uncollectible recoverables from retrocessionaires for amounts owed to us that management believes will not be collected. In addition, we immediately charge operations for any recoverable balances that are deemed to be uncollectible. Collateral and other offsets are considered in determining the allowance or expense.

Foreign currency translation

We report our financial information in US dollars. However, a large portion of our revenues and expenses are denominated in other currencies including the Euro, UK pound, Swiss franc and Japanese yen. Since these currencies are functional currencies for our business units, translation differences are recorded directly in shareholders’ equity.

Invested assets

The majority of our fixed maturities and equity securities are classified as available-for-sale; these investments are carried at fair value. Fixed maturities for which we have the intent and ability to hold to maturity are classified as held-to-maturity. Held-to-maturity securities are carried at amortized cost, if purchased, or carrying value, if transferred from the available-for-sale category to the held-to-maturity category. The difference between the fair value and amortized cost at the date of transfer of such securities is amortized over the life of the respective securities. The carrying value of transferred securities is the fair value at the date of transfer less unamortized net unrealized gains. Fixed maturities and equity securities, which we buy with the intention to resell in the near term, are classified as trading and are carried at fair value. Unrealized gains or losses on investments carried at fair value, except those designated as trading, are recorded in other comprehensive income, net of deferred income taxes.

Investments in which the Company has significant influence over the operating and financial policies of the investee are accounted for under the equity method of accounting. Under this method, the Company records its proportionate share of income or loss from such investments in its results for the period. Any decline in value of equity method investments considered by management to be other than temporary is charged to income in the period in which it is determined.

Other- than- temporary impairment

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Based on quantitative and qualitative factors, the Company reviews at least quarterly individual debt and equity securities classified as held-to-maturity or available-for-sale, for whether or not there is an indication that a decline in fair value below the investment security’s carrying value is considered other-than-temporary.

If the decline in fair value is judged to be other-than-temporary, and management does not have the intent and ability to hold the investment until recovery, impairment is deemed to have occurred and the cost basis of the security shall be written down to fair value as the new cost basis. The amount of this write-down should be recognized as impairment of securities in the statement of income.

For all marketable and non-marketable equity and debt securities where the cost basis has remained in excess of the fair value for twelve months consecutively and the fair value has declined by 20% or more of the cost basis, except in circumstances where potential recovery for equity securities can be conclusively demonstrated and documented, the declines will be presumed to be other-than-temporary and thus impaired and must be written down to the fair value. Furthermore, management believes that where there is a 50% or more magnitude of decline, an impairment provision should immediately be recognized.

For securities expected to be sold, an other-than-temporary charge should be recognized if the Company does not expect the fair value to recover prior to the expected date of sale.

Converium has outsourced investment management to recognized and experienced professional funds managers that operate and are monitored in relation to the specific investment guidelines of the Company and has sufficient control to support our ability and intent assertions where applicable.

Income taxes

Deferred income taxes are provided for all temporary differences that are based on the difference between the financial statement carrying amounts and the income tax bases of assets and liabilities, tax effected using enacted local income tax rates and laws. In addition, a deferred tax asset has been established for net operating loss carry forwards. Converium has significant net operating loss carry forwards that the Company can use to offset future taxable income. Realization of the deferred tax asset related to these carry forwards is dependent upon generating sufficient taxable income within specified future periods. Converium establishes a valuation allowance against its net deferred tax asset based upon its assessment if it is more than likely than not that some or the entire deferred tax asset will not be realized in the applicable jurisdiction. In establishing the appropriate valuation allowance against its deferred tax asset, Converium must, to the extent that no valuation allowance has been established, make judgments about its ability to recognize the benefit of the asset over time, including its ability to utilize the net operating loss carry forwards.

The Company does not affirmatively apply the exception to the recognition of deferred taxes under Accounting Principles Board Opinions No. 23 (APB23), “Accounting for Income Taxes—Special Areas”, and therefore is required under SFAS No. 109 to provide for taxes on the undistributed earnings of its foreign subsidiaries and foreign corporate joint ventures. However, due to various factors, including no positive undistributed earnings in any foreign subsidiaries or joint ventures and the availability of the participation exemption, no provision for taxes is made on earnings of the foreign subsidiaries and joint ventures.

Converium is subject to income taxes in Switzerland and various foreign jurisdictions. Significant judgment is required in determining the Company’s worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is uncertain. Accruals for tax contingencies are provided, if necessary, in accordance with the requirements of SFAS No. 5, “Accounting for Contingencies".

Goodwill and other intangible assets

Goodwill and intangible assets with an indefinite life are no longer amortized with effect from January 1, 2002, in accordance with SFAS 142. The Company continues to review the carrying value of goodwill related to all of its investments for any impairment on an annual basis. If it is determined that an impairment exists, the Company adjusts the carrying value of goodwill to fair value. The impairment charge is recorded in the period in which it is determined.

Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. The Company evaluates both the expected useful life and the recoverability of its intangible assets whenever changes in circumstances warrant. If it is determined that an impairment exists, the excess of the unamortized balance over the fair value of the intangible asset will be charged to income at that time. If it has been determined that the estimated useful life of the intangible asset has changed the

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remaining unamortized balance of the intangible asset will be amortized on a straight-line basis over the newly determined expected useful life of the asset. See Note 7 to our 2006 consolidated financial statements for further information on goodwill and intangible assets

Investment results

Investment results are an important part of our overall profitability. Our net investment income increased by USD 2.6 million, or 1.0% for the year ended December 31, 2006 as compared with the same period in 2005. The average total invested assets remained largely unchanged. However, the lower income contribution from the Funds Withheld Asset which was attributable to the declining balance on this asset, was more than offset by higher investment income from short dated investments reflected in other investment income, due to generally higher yields as a result of an inverted yield curve environment. Our net investment income increased by USD 30.3 million, or 13.3% for the year ended December 31, 2005 as compared with the same period in 2004. The increase largely resulted from growth in total invested assets during 2005, and a reallocation from equity securities into income generating fixed maturities securities. We paid fees in the amount of USD 8.1 million, USD 9.8 million and USD 11.6 million to our asset managers and custodians in 2006, 2005 and 2004, respectively, including other investment-related costs. Our average net investment income yield (pre-tax) was 4.2% for the year ended December 31, 2006 as compared with 4.2% and 3.9% for the same periods in 2005 and 2004, respectively.

An increasing component of net investment income arises from income received on business written on a funds withheld basis such as certain Lloyd’s transactions. As these assets are reported under funds held by reinsureds and do not form part of the average total invested assets, while the investment income from these funds held by reinsureds is included in our net investment income, there is an increase of 0.2 points for 2006 in the reported average net investment income yield (pre-tax). Excluding this effect, the average net investment income yield (pre-tax) would have been 4.0%, 3.9% and 3.7% for the years ended December 31, 2006, 2005 and 2004, respectively.

The following table shows the average pre-tax yields and investment results on our investment portfolio for the years ended December 31, 2006, 2005 and 2004.

	Net Investment Income and Net Realized and Unrealized Capital Gains (Losses)
								Year Ended December 31,
	2006							2005							2004
	Net					Realized		Net					Realized		Net					Realized
	investment		Pre-tax			gains		investment		Pre-tax			gains		investment		Pre-tax			gains
(USD millions, except yields)	income		yield (%)			(losses)		income		yield (%)			(losses)		income		yield (%)			(losses)
Fixed maturity securities		152.5		4.0	%		-18.6		153.8		4.0	%		-4.8		112.9		3.4	%		1.9
Equity securities		5.6		1.1	%		23.5		5.8		1.8	%		40.0		13.2		2.9	%		34.9
Funds Withheld Asset		52.1		5.2	%				62.6		5.3	%				75.1		5.4	%
Short-term and other investments		60.5		7.1	%		14.0		44.7		5.4	%		-3.9		36.8		5.9	%		-5.6
Less investment expenses		-10.3							-9.1							-10.5
Total		260.4		4.2	%				257.8		4.2	%				227.5		3.9	%
Net realized capital gains (losses)		18.9							31.3							31.2
Net investment income and net realized capital gains (losses)		279.3		4.5	%				289.1		4.7	%				258.7		4.5	%
Change in net unrealized gains (losses)		25.1							-15.2							8.0
Total investment return		304.4		5.0	%				273.9		4.5	%				266.7		4.6	%

(1) In line with the income statement presentation for discontinued operations, yields have been calculated by excluding the North American operation’s invested assets from the average total invested assets sums for 2005 and 2004

Our average total investment income yield (pre-tax) was 4.5% for the year ended December 31, 2006 as compared with 4.7% for 2005 and 4.5% for 2004. Yields are calculated based on the average of beginning and ending total invested asset balances (including cash and cash equivalents). The total investment income yield was slightly lower in 2006 as compared with 2005. In 2006, net realized gains were predominately driven by the sale of Swiss direct real estate holdings, while realized gains on equity securities were offset by realized losses on fixed maturities securities and impairment. The 2005 and 2004 yields were positively impacted by realized gains resulting from the sale of equity securities to adjust our asset allocation in order to reduce investment portfolio risks. In addition, our average total investment income yield (pre-tax) was negatively impacted by USD 11.7 million, USD 9.2 million and USD 6.2 million of impairment charges during 2006, 2005 and 2004, respectively.

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Our average total investment return (pre-tax) was 5.0% for the year ended December 31, 2006 as compared with 4.5% and 4.6% for the same periods in 2005 and 2004, respectively. Our 2006 total investment return was positively impacted by the strong performance of equity securities markets and hedge funds, which also resulted in positive changes in unrealized gains. Additionally, the sale of our North American operations reduced total unrealized losses by USD 26.5 million. This positive development was partially offset by the lower valuation on fixed maturities securities due to yield curve shifts. In 2005, the change in net unrealized gains was driven by a reduction in net unrealized capital gains due to the realization of gains triggered by the sale of equity securities, partially offset by the continued positive development of the stock markets.

Pursuant to the agreement signed on March, 15, 2007 with Deutsche Asset Management AG to offer strategic investment support, we initiated a project to evaluate the continued classification of investments into available for sale and held to maturity accounting categories.

Restructuring costs

For the year ended December 31, 2006 we incurred a restructuring benefit of USD 0.2 million due to the release of restructuring accruals as compared with expenses of USD 12.1 million for the same period in 2005. In 2005, the reduction in overall business volume required organizational changes and an adjustment to our global cost base including employee terminations and closure of smaller offices. In 2004 we recorded restructuring costs of USD 0.2 million.

Income tax

We are subject to local income tax requirements in the jurisdictions in which we operate. Significant judgment is required in determining our worldwide provision for income taxes and recording the related assets and liabilities. The income tax expense in our financial statements therefore reflects a number of different local tax rates, and as a result may change from one period to the next depending on both the amount and the geographic contribution of our taxable income or loss. In addition, the income tax we pay is based on local tax returns in which our reported income or loss and expenses may differ from that reported in our financial statements.

As a result of changes in our geographic contribution of taxable income or loss as well as changes in the amount of our non-taxable income and expense and changes in our valuation allowance, the relationship between our reported income before tax and our income tax expense may change significantly from one period to the next.

Converium recorded an income tax expense of USD 40.5 million and USD 16.1 million for the years ended December 31, 2006 and 2005, respectively and an income tax benefit of USD (4.6) million for the year ended December 31, 2004. Our global effective tax rate for continuing operations was 15.9% for the year ended December 31, 2006 as compared with 32.1% and (21.9)% for the same periods of 2005 and 2004, respectively. For the year ended December 31, 2006, Converium’s consolidated income tax expense of USD 40.5 million comprised of USD 10.3 million of current income tax expense and USD 30.2 million of deferred income tax expense. The current income tax portion reflects the net tax paying position of some affiliated companies. Due to the establishment of a full valuation allowance in 2004 on the net deferred tax position for certain affiliates in Switzerland, no deferred income tax expense has been reported for these entities. For all other jurisdictions the Company applies the annual effective tax rate to calculate the income tax expense on a jurisdiction-by-jurisdiction basis.

As of December 31, 2006, Converium had total net operating losses carried forward of USD 1,040.5 million available to offset future taxable income of certain branches and subsidiaries. All of these net operating losses carried forward relate to Converium Rückversicherung (Deutschland) AG and Converium AG. Converium AG’s net operating losses expire in the years 2011 through 2013. The benefits of these carryforwards are dependent on the generation of taxable income in those jurisdictions in which they arose and accordingly, a valuation allowance has been provided where management has determined that it is more likely than not that the carryforwards will not be utilized.

As a result of the rating upgrade in 2007, “roadmap to sustainable value creation” and other events occurring post year end, the company completed the regular assessment of the need for a valuation allowance as at March 31, 2007, and determined that a substantial release was required during 2007. Each quarter Converium reassesses the need for a valuation allowance in light of all available information, which could result in a change in this position.

For further information about our income tax expenses, see Note 12 to our 2006 consolidated financial statements.

Regulatory and legislative environment

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Our business is subject to regulation in all of the jurisdictions in which we operate. Regulation includes compliance with applicable laws covering operating and reporting requirements, monitoring of solvency and reserves and asset valuation. Changes in government policy or taxation also may affect our results of operations. In addition, political, judicial and legislative developments could broaden the intent and scope of coverage of existing policies written by our clients, which may result in additional liabilities for reinsurers. See “Item 4. — Information on the Company — B. Business Overview — Regulation”.

Results of operations

The table below presents summary income statement data for the years ended December 31, 2006, 2005 and 2004.

	For the year ended December 31,
	2006		2005		2004
	(USD millions)
Revenues:
Gross premiums written		1,980.9		1,955.0		3,492.2
Net premiums written		1,852.0		1,783.1		3,255.9
Net premiums earned		1,811.7		2,254.8		3,098.5
Net investment income		260.4		257.8		227.5
Net realized capital gains (losses)		18.9		31.3		31.2
Total revenues		2,091.0		2,543.9		3,357.2
Benefits, losses and expenses:
Losses, loss expenses and life benefits		-1,187.8		-1,720.1		-2,395.0
Acquisition costs		-482.1		-537.4		-753.9
Other operating and administration expenses		-148.6		-163.5		-153.8
Other loss		-0.5		-21.9		-4.7
Interest expense		-16.7		-17.2		-18.7
Amortization of other intangible assets		—		-21.5		-9.9
Restructuring costs		0.2		-12.1		-0.2
Total benefits, losses and expenses		-1,835.5		-2,493.7		-3,336.2
Income from continuing operations before taxes		255.5		50.2		21.0
Income tax (expense) benefit		-40.5		-16.1		4.6
Income from continuing operations		215.0		34.1		25.6
(Loss) income from discontinued operations, net of tax		-157.9		34.6		-608.1
Net income (loss)		57.1		68.7		-582.5

For the year ended December 31, 2006, we reported income from continuing operations of USD 215.0 million compared with USD 34.1 million for the same period in 2005. Our 2006 figures demonstrate the quality of our underlying book of business, the absence of any major catastrophic events, as well as a satisfactory net investment income. The significant increase in profit is driven by an improvement in the non-life combined ratio from 107.0% in 2005 to 96.3% in 2006. In addition, our results were positively impacted by the net favorable impact of prior accident years on the technical result of USD 52.1 million, resulting from net favorable development of prior years’ loss reserves of USD 102.8 million, which were offset by reductions in premiums and other expenses of USD 50.7 million.

However, the costs of defending the class actions, see “Item 8. — Financial Information —A. Consolidated Statements and Other Financial Information — Class Action Lawsuits”, may have a material impact on our operating results in future reporting periods and an unfavorable outcome could have a materially adverse effect on the Company’s financial condition, results of operations and cash flows.

The (loss) income from discontinued operations comprises of the sale of the North American operations (discontinued business), which were sold to the National Indemnity Company. In 2006, loss from discontinued operations was USD 157.9 million, consisting of a total transaction loss of USD 190.1 million which was recognized upon the completion of the sale on December 13, 2006. This was offset by income from operations of discontinued business of USD 32.2 million.

Net income from operations of discontinued business was USD 32.2 million and USD 34.6 million for the years ended December 2006 and 2005, respectively compared with a net loss for the year ended December 2004 of USD 608.1 million. The positive results in 2005 reflect commutations after our North American operations were put into run-off in 2004. The net loss from discontinued operations in 2004 included the net adverse impact of prior year accident years on the technical result of USD 506.4 million and an impairment of goodwill of USD 94.0 million.

Our 2005 results were positively impacted by the net favorable impact of prior accident years on the technical result of USD 42.8 million, resulting from net favorable development of prior years’ loss reserves of USD 86.0 million, which were offset by the reductions in premiums and other expenses of USD 43.2 million as well as a satisfactory net investment income. However, our

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results were adversely impacted by significant natural catastrophe losses totaling USD 149.2 million from Winter Storm Erwin, the Continental European floods and the US hurricanes, which had an effect of 7.7 points on our 2005 non-life combined ratio of 107.0%.

The table below shows the reconciliation between pre-tax operating income and net income (loss). We use pre-tax operating results to measure the performance of our underlying reinsurance operations, as this measure focuses on the underlying fundamentals of our operations without the influence of realized gains and losses from the sale of investments, or other non-operating items such as goodwill, impairment or restructuring costs.

	For the year ended December 31,
	2006		2005		2004
	(USD millions)
Pre-tax operating income continuing operations		236.4		52.5		-0.1
Net realized capital gains		18.9		31.3		31.2
Amortization of other intangible assets		—		-21.5		-9.9
Restructuring costs		0.2		-12.1		-0.2
Income from continuing operations before taxes		255.5		50.2		21.0
Income from continuing operations		215.0		34.1		25.6
(Loss) income from discontinued operations		-157.9		34.6		-608.1
Net income (loss)		57.1		68.7		-582.5

Year ended December 31, 2006 compared with year ended December 31, 2005

Converium consolidated net income

For the year ended December 31, 2006, we reported net income of USD 57.1 million compared with USD 68.7 million for the same period in 2005.

Converium consolidated income from continuing operations

For the year ended December 31, 2006, we reported income from continuing operations of USD 215.0 million compared with USD 34.1 million for the same period in 2005. Our 2006 figures demonstrate the quality of our underlying book of business, the absence of any major catastrophic events, as well as a satisfactory net investment income. The significant increase in profit is driven by an improvement in the non-life combined ratio from 107.0% in 2005 to 96.3% in 2006. In addition, our results were positively impacted by the net favorable impact of prior accident years on the technical result of USD 52.1 million, resulting from net favorable development of prior years’ loss reserves of USD 102.8 million, which were offset by reductions in premiums and other expenses of USD 50.7 million.

The Company uses pre-tax operating results to measure the performance of our underlying reinsurance operations without the influence of realized gains and losses from the sale of investments, or other non-operating items such as goodwill, impairment and restructuring costs. We reported a pre-tax operating income from continuing operations of USD 236.4 million for the year ended December 31, 2006 as compared with a pre-tax operating income of USD 52.5 million for the same period in 2005.

We reported net realized gains on investments of USD 18.9 million and USD 31.3 million for the years ended December 31, 2006 and 2005, respectively. Net realized gains for 2006 largely reflect the sale of our holdings in Swiss direct real estate of USD 130.1 million in gross proceeds which generated pre-tax realized gains of USD 18.7 million. Net realized capital gains for 2005 primarily related to the sale of equity securities which were driven by our asset reallocation, which generated proceeds of approximately USD 39.6 million. This positive impact was partially offset by USD 2.4 million related to the partial impairment of our 48% participation in SATEC, which we sold in December 2005.

Converium consolidated (loss) income from discontinued operations

The (loss) income from discontinued operations comprises of the sale of our North American operations (discontinued business), which were sold to the National Indemnity Company. In 2006, loss from discontinued operations was USD 157.9 million, consisting of a total transaction loss of USD 190.1 million which was recognized upon the completion of the sale on December 13, 2006. This was offset by income from operations of discontinued business of USD 32.2 million.

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Net income from operations of discontinued business was USD 32.2 million and USD 34.6 million for the years ended December 2006 and 2005, respectively. Income from operations of discontinued business of USD 32.2 million includes commutation gains in connection with the sales transaction of our North American operations. The positive results in 2005 reflect commutations after our North American operations were put into run-off in 2004.

Converium consolidated premiums

For the year ended December 31, 2006, gross premiums written increased by 1.3% and net premiums written increased by 3.9% showing a resilient franchise and visible progress made towards the Company’s turnaround in 2006. Net premiums earned have decreased due to the impact of the ratings downgrades in 2004.

For the year ended December 31, 2006, net premiums written in Standard Property & Casualty Reinsurance increased by USD 77.9 million, or 10.5%, Specialty Lines decreased by USD 8.3 million, or 1.1% and net premiums written in the Life & Health Reinsurance segment decreased by USD 0.7 million, or 0.2%. On a consolidated basis we ceded 6.5% and 8.8% of our gross premiums written for the years ended December 31, 2006 and 2005, respectively.

Converium consolidated net investment income and net realized capital gains (losses)

Investment results are an important part of our overall profitability. Our net investment income increased by USD 2.6 million, or 1.0% for the year ended December 31, 2006 as compared with the same period in 2005. The average total invested assets remained largely unchanged. However, the lower income contribution from the Funds Withheld Asset which was attributable to the declining balance on this asset, was more than offset by higher investment income from short-dated investments reflected in other investment income, due to generally higher yields as a result of an inverted yield curve environment. We paid fees in the amount of USD 8.1 million and USD 9.8 million to our asset managers and custodians for the years ended December 31, 2006 and 2005, respectively, including other investment-related costs. Our average net investment income yield (pre-tax) was 4.2% for the year ended December 31, 2006 as compared with 4.2% for the same period in 2005.

An increasing component of net investment income arises from income received on business written on a funds withheld basis such as certain Lloyd’s transactions. As these assets are reported under funds held by reinsureds and do not form part of the average total invested assets, while the investment income from these funds held by reinsureds is included in our net investment income, there is an increase of 0.2 points for 2006 on the reported average net investment income yield (pre-tax). Excluding this effect, the average net investment income yield (pre-tax) would have been 4.0% and 3.9% for the years ended December 31, 2006 and 2005, respectively.

Our average total investment income yield (pre-tax) was 4.5% for the year ended December 31, 2006 as compared with 4.7% for 2005. Yields are calculated based on the average of beginning and ending total invested asset balances (including cash and cash equivalents). The total investment income yield was slightly lower in 2006 as compared with 2005. In 2006, net realized gains were predominately driven by the sale of Swiss direct real estate holdings, while realized gains on equity securities were offset by realized losses on fixed maturities securities and impairment. In addition, our average total investment income yield (pre-tax) was negatively impacted by USD 11.7 million and USD 9.2 million of impairment charges during 2006 and 2005, respectively. See “Critical accounting policies” for details on our fixed maturities and equity securities impairment policy.

Our average total investment return (pre-tax) was 5.0% for the year ended December 31, 2006 as compared with 4.5% for the same periods in 2005. Our 2006 total investment return was positively impacted by the strong performance of equity securities markets and hedge funds, which also resulted in positive changes in unrealized gains. Additionally, the sale of our North American operations reduced total unrealized losses by USD 26.5 million. This positive development was partially offset by the lower valuation on fixed maturities securities due to yield curve shifts. In 2005, the change in net unrealized gains was driven by a reduction in net unrealized capital gains due to the realization of gains triggered by the sale of equity securities, partially offset by the continued positive development of the stock markets.

Converium consolidated losses, loss expenses and life benefits

Our losses, loss expenses and life benefits incurred decreased for the year ended December 31, 2006 as compared with the same period of 2005 due to a reduction in overall business volume, the absence of any major catastrophic events as well as net favorable development of prior years’ loss reserves. The results for the year ended December 31, 2005 were impacted by the effects of natural catastrophes, which added 7.7 points to the non-life loss ratio.

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Development of prior years’ loss reserves: For the year ended December 31, 2006, we reported net favorable development of prior years’ loss reserves of USD 102.8 million. The Standard Property & Casualty Reinsurance segment was positively impacted by net favorable development of prior years’ loss reserves of USD 54.1 million primarily related to the Property and General Third Party Liability lines of business of USD 45.1 million and USD 24.6 million, respectively, partially offset by net adverse development of prior years’ loss reserves related to the Motor line of business of USD 16.5 million. The Specialty Lines segment was positively impacted by net favorable development of prior years’ loss reserves of USD 48.7 million primarily related to the lines of business: Aviation & Space and Engineering of USD 34.9 million and USD 16.2 million, respectively, partially offset by net adverse development of prior years’ loss reserves related to the Professional Liability and other Special Liability line of business of USD 17.6 million.

For the year ended December 31, 2005, we recorded net favorable development of prior years’ loss reserves of USD 86.0 million. The Standard Property & Casualty Reinsurance segment was positively impacted by net favorable development of prior years’ loss reserves of USD 30.7 million primarily related to the Property line of business of USD 73.3 million, partially offset by net adverse development of prior years’ loss reserves within the Motor and General Third Party Liability lines of business of USD 25.0 million and USD 23.4 million, respectively. The Specialty Lines segment was positively impacted by net favorable development of prior years’ loss reserves of USD 55.3 million primarily related to the Aviation & Space line of business of USD 57.5 million.

Impact of property catastrophe losses: The year ended December 31, 2006 exhibited insignificant natural catastrophe activity with total incurred losses of USD 10.5 million. There were no individual large losses, defined as those in excess of USD 10.0 million or more of net incurred losses to us.

The year ended December 31, 2005 exhibited significant natural catastrophe activity and included the following large losses, defined as those in excess of USD 10.0 million or more of net incurred losses:

(USD millions)
Winter Storm Erwin	32.5
Continental European Floods	24.8
Hurricane Katrina	33.2
Hurricane Rita	14.1
Hurricane Wilma	44.6
Total	149.2

For the non-life business, total net incurred losses from these natural catastrophes were USD 149.2 million which added 7.7 points to the non-life loss ratio of 77.4% for the year ended December 31, 2005. Excluding these events, our non-life loss ratio for the year would have been 69.7%.

Guaranteed Minimum Death Benefit (GMDB) business: For the years ended December 31, 2006 and 2005, there were no additional reserving actions required for the GMDB book of business. As a result of the positive performance of the US stock markets, GMDB’s net amount at risk further decreased to USD 353.9 million at December 31, 2006 from USD 478.2 million at December 31, 2005.

September 11th terrorist attacks: The September 11th terrorist attacks in the United States represented one of the largest loss events in the insurance industry’s history. In 2001, we recorded gross losses and loss expenses of USD 692.9 million arising out of the terrorist attacks (including losses from our subsequently sold North American operations). These losses are capped through an agreement with ZFS. Our recorded losses and loss expenses, net of retrocessional recoveries and the cap from ZFS through its subsidiaries, were reduced from USD 289.2 million to USD 231.0 million, following the sale of our North American operations. We will be exposed to the risk of non-payment of ZFS’ units and we are exposed to credit risk from these subsidiaries of ZFS. We are not exposed to potential non-payments by retrocessionaires for these events in excess of the cap. In 2006, 2005 and 2004, there was no additional development in net reserves for the September 11th terrorist attacks.

Asbestos and environmental exposures: As of December 31, 2006 and 2005, we had reserves for environmental impairment liability and asbestos-related claims of USD 49.2 million, respectively, for each year. Our survival ratio (calculated as the ratio of reserves held, including IBNR, over claims paid over the average of the last three years) for asbestos and environmental reserves was 13.8 years at December 31, 2006 and 14.1 years at December 31, 2005.

Converium consolidated acquisition costs

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Acquisition costs primarily relate to commissions on treaty and individual risk business. For the year ended December 31, 2006 our acquisition costs decreased as compared with the same period of 2005 primarily as a result of the reduction of our overall business volume. Our non-life acquisition costs ratio increased for the year ended December 31, 2006 primarily driven by a relatively low acquisition cost ratio in 2005 due to the receipt of reinsurance premiums to close (“RITC”) on our Lloyd’s participations on which there were no acquisition costs.

Converium consolidated operating and administration expenses

Operating and administration expenses decreased for the year ended December 31, 2006 as compared with the same period in 2005 resulting from the 2005 cost management measures. The decrease in administration costs reflects lower average staffing levels, the non-recurrence of the expenses associated with staff retention plans in 2005, the closure of some of our smaller offices in 2005 as well as the full amortization of some of our internal software systems in 2005. Accordingly, the non-life administration expense ratio decreased for the year ended December 31, 2006 as compared with the same period of 2005.

Converium consolidated other loss

Other loss was USD 0.5 million for the year ended December 31, 2006 as compared with USD 21.9 million for the same period in 2005. Other loss in 2006 includes increased interest income from business written on a funds held basis and lower costs of USD 19.9 million incurred from our Lloyd’s participations compared with USD 24.0 million in 2005. Additionally, 2006 includes an income of USD 5.3 million due to the recovery on a balance previously written off. Other loss for the year ended December 31, 2005 includes a USD 9.0 million charge related to our strategic alliance with MDU, (See Note 17 for further information) and a charge of USD 2.4 million related to our investment in SATEC.

Converium consolidated interest expense, amortization of intangible assets and restructuring costs

Interest expense: Interest expense remained relatively stable for the year ended December 31, 2006 as compared with the same period in 2005. Interest expense primarily includes payment on the Guaranteed Subordinated Notes. See Note 11 to our 2006 consolidated financial statements for additional information on our outstanding debt.

Amortization of intangible assets: There was no amortization of intangible assets for the year ended December 31, 2006 compared with USD 21.5 million same period in 2005. The amortization amount in 2005 relates to the intangible asset for Global Aerospace Underwriting Managers Limited (“GAUM”). For additional information on GAUM see Notes 7 and 17 to our 2006 consolidated financial statements.

Restructuring costs: For the year ended December 31, 2006 we incurred a restructuring benefit of USD 0.2 million due to the release of restructuring accruals as compared with expenses of USD 12.1 million for the same period in 2005. In 2005, the reduction in overall business volume required organizational changes and an adjustment to our global cost base including employee terminations and closure of smaller offices.

Converium consolidated income tax expense

We recorded an income tax expense of USD 40.5 million and USD 16.1 million for the years ended December 31, 2006 and 2005, respectively. Our global effective tax rate for continuing operations was 15.9% for the year ended December 31, 2006 as compared with 32.1% for the same period of 2005. For the year ended December 31, 2006, Converium’s consolidated income tax expense of USD 40.5 million comprised of USD 10.3 million of current income tax expense and USD 30.2 million of deferred income tax expense. The current income tax portion reflects the net tax paying position of some affiliated companies. Due to the establishment of a full valuation allowance in 2004 against existing net deferred tax assets our operations in Switzerland reported no income tax and no deferred income tax expense. For all other jurisdictions the Company applies the annual effective tax rate to calculate the income taxes on a jurisdiction-by-jurisdiction basis.

The 2005 consolidated income tax expense of USD 16.1 million comprised of a current income tax expense of USD 12.0 million and a deferred income tax expense of USD 4.1 million.

Converium consolidated combined ratios

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Our non-life combined ratio was 96.3% in 2006 and 107.0% in 2005. The decrease in 2006 of the non-life combined ratio resulted from the absence of any major catastrophic events as well as net favorable impact of prior accident years on the technical result of USD 52.1 million. In 2005, our combined ratio was negatively impacted by the catastrophic losses of the US hurricanes and Continental European floods.

Year ended December 31, 2005 compared with year ended December 31, 2004

Converium consolidated net income (loss)

For the year ended December 31, 2005 we reported a net income of USD 68.7 million compared with a net loss of USD 582.5 million for the same period in 2004.

Converium consolidated income from continuing operations

For the year ended December 31, 2005, we reported income from continuing operations of USD 34.1 million compared with USD 25.6 million for the same period in 2004. Our 2005 results were positively impacted by the net favorable impact of prior accident years on the technical result of USD 42.8 million, resulting from net favorable development of prior years’ loss reserves of USD 86.0 million, which were offset by the reductions in premiums and other expenses of USD 43.2 million as well as a satisfactory net investment income. However, our results were adversely impacted by significant natural catastrophe losses totaling USD 149.2 million from Winter Storm Erwin, the Continental European floods and the US hurricanes, which had an effect of 7.7 points on our 2005 non-life combined ratio of 107.0%.

We reported a pre-tax operating income from continuing operations of USD 52.5 million for the year ended December 31, 2005 as compared with a pre-tax operating loss of USD 0.1 million for the same period in 2004.

We reported net realized gains on investments of USD 31.3 million and USD 31.2 million for the years ended December 31, 2005 and 2004, respectively. The 2005 net realized capital gains primarily resulted from higher realized capital gains on the sale of equity securities offset by higher realized losses on fixed maturity securities in connection with ordinary trading activity. The 2004 net realized capital gains reflected the sales of equity securities to adjust the Company’s asset allocation to reduce investment portfolio risk.

Converium consolidated income (loss) from discontinued operations

Net income from operations of discontinued business was USD 34.6 million for the year ended December 2005 as compared with a net loss of USD 608.1 million for the same period of 2004. The positive results in 2005 reflect commutations after our North American operations were put into run-off in 2004. The net loss from discontinued operations in 2004 included the net adverse impact of prior year accident years on the technical result of USD 506.4 million and an impairment of goodwill of USD 94.0 million

Converium consolidated premiums

For the year ended December 31, 2005, gross premiums written decreased by 44.0%, net premiums written decreased by 45.2% and net premiums earned decreased by 27.2% primarily due to the ratings downgrades which occurred in 2004.

For the year ended December 31, 2005, net premiums written in Standard Property & Casualty Reinsurance decreased by USD 638.4 million, or 46.3%, Specialty Lines decreased by USD 827.6 million, or 52.9% and net premiums written in the Life & Health Reinsurance segment decreased by USD 6.8 million, or 2.2%. On a consolidated basis we ceded 8.8% and 6.8% of our gross premiums written for the years ended December 31, 2005 and 2004, respectively.

Net premiums earned for the year ended December 31, 2005 decreased at a slower rate than the corresponding net premiums written as premiums are still being earned from business written in prior underwriting years.

Converium consolidated net investment income and net realized capital gains (losses)

Our net investment income increased by USD 30.3 million, or 13.3% for the year ended December 31, 2005 as compared with the same period in 2004. The increase largely resulted from growth in total invested assets during 2005, and a reallocation from equity securities into income generating fixed maturities securities. We paid fees in the amount of USD 9.8 million and USD 11.6 million to

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our asset managers and custodians for the years ended December 31, 2005 and 2004, respectively, including other investment-related costs. Our average net investment income yield (pre-tax) was 4.2% for the year ended December 31, 2005 as compared with 3.9% for the same periods in 2004.

An increasing component of net investment income arises from income received on business written on a funds withheld basis such as certain Lloyd’s transactions. These assets are reported under funds held by reinsureds and do not form part of the average total invested assets, while the investment income from these funds held by reinsureds is included in our net investment income. Excluding this effect, the average net investment income yield (pre-tax) would have been 3.9% and 3.7% for the years ended December 31, 2005 and 2004, respectively.

Our average total investment income yield (pre-tax) was 4.7% for the year ended December 31, 2005 as compared with 4.5% for 2004. Yields are calculated based on the average of beginning and ending total invested asset balances (including cash and cash equivalents). The 2005 and 2004 yields were positively impacted by realized gains resulting from the sale of equity securities to adjust our asset allocation in order to reduce investment portfolio risks. In addition, our average total investment income yield (pre-tax) was negatively impacted by USD 9.2 million and USD 6.2 million of impairment charges during 2005 and 2004, respectively. See “Critical accounting policies” for details on our fixed maturities and equity securities impairment policy.

Our average total investment return (pre-tax) was 4.5% for the year ended December 31, 2005 as compared with 4.6% for the same period in 2004. In 2005, the change in net unrealized gains was driven by a reduction in net unrealized capital gains due to the realization of gains triggered by the sale of equity securities, partially offset by the continued positive development of the stock markets.

Converium consolidated losses, loss expenses and life benefits

Our losses, loss expenses and life benefits incurred decreased for the year ended December 31, 2005 as compared with the same period of 2004 due to a reduction in overall business volume as well as net favorable development of prior years’ loss reserves. This decrease was partially offset by the effects of natural catastrophes, which added 7.7 points to the non-life loss ratio. The results for the year ended December 31, 2004 were similarly impacted by natural catastrophes which added 3.5 points to the non-life loss ratio as well as net adverse development of prior years’ loss reserves.

Development of prior years’ loss reserves: For the year ended December 31, 2005, we recorded net favorable development of prior years’ loss reserves of USD 86.0 million. The Standard Property & Casualty Reinsurance segment was positively impacted by net favorable development of prior years’ loss reserves of USD 30.7 million primarily related to the Property line of business of USD 73.3 million, partially offset by net adverse development of prior years’ loss reserves within the Motor and General Third Party Liability lines of business of USD 25.0 million and USD 23.4 million, respectively. The Specialty Lines segment was positively impacted by net favorable development of prior years’ loss reserves of USD 55.3 million primarily related to the Aviation & Space line of business of USD 57.5 million.

For the year ended December 31, 2004, we recorded net adverse development of prior years’ loss reserves of USD 72.8 million. The Standard Property & Casualty Reinsurance segment was negatively impacted by net adverse development of prior years’ loss reserves of USD 11.3 million primarily related to adverse development within the Motor line of business of USD 78.7 million, which was partially offset by net favorable development of prior years’ loss reserves related to the Property line of business of USD 77.8 million. The Specialty Lines segment was negatively impacted by net adverse development of prior years’ loss reserves of USD 61.5 million primarily related to adverse developments of the Professional Liability and other Special Liability and Engineering lines of business of USD 116.1 million and USD 13.7 million, respectively, partially offset by net favorable development of prior years’ loss reserves related to: Credit & Surety (USD 30.2 million), Aviation & Space (USD 24.6 million) and Workers’ Compensation (USD 16.4 million) lines of business.

Impact of property catastrophe losses: The year ended December 31, 2005 exhibited significant natural catastrophe activity and included the following large losses, defined as those in excess of USD 10.0 million or more of net incurred losses:

(USD millions)
Winter Storm Erwin	32.5
Continental European Floods	24.8
Hurricane Katrina	33.2
Hurricane Rita	14.1
Hurricane Wilma	44.6
Total	149.2

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For the non-life business, total net incurred losses from these natural catastrophes were USD 149.2 million which added 7.7 points to the non-life loss ratio of 77.4% for the year ended December 31, 2005. Excluding these events, our non-life loss ratio for the year would have been 69.7%. In 2004, our large natural catastrophe losses included hurricanes in the US and the Caribbean, the Japanese typhoons and the tsunami in the Indian Ocean, with a total net impact of USD 98.4 million. These natural catastrophes added 3.5 points to the non-life loss ratio of 77.6% for the year ended December 31, 2004. Excluding these events, our non-life loss ratio for the year would have been 74.1%.

Based on current estimates of losses from the catastrophic events that occurred during 2005, we did not file a trigger event request regarding our catastrophe protection provided under our Helix 04 Limited counterparty contract in respect of these losses. See Note 10 to our 2006 consolidated financial statements for further information on our Helix catastrophic protection.

Guaranteed Minimum Death Benefit (GMDB) business: For the year ended December 31, 2005 and 2004 there were no additional reserving actions required for the GMDB book of business. As a result of the positive performance of the US stock markets, GMDB’s net amount at risk further decreased to USD 478.2 million at December 31, 2005 from USD 635.5 million at December 31, 2004.

September 11th terrorist attacks: The September 11th terrorist attacks in the United States represented one of the largest loss events in the insurance industry’s history. In 2001, we recorded gross losses and loss expenses of USD 692.9 million arising out of the terrorist attacks (including losses from our subsequently sold North American operations). These losses are capped through an agreement with ZFS. Our recorded losses and loss expenses, net of retrocessional recoveries and the cap from ZFS through its subsidiaries, were reduced from USD 289.2 million to USD 231.0 million, following the sale of our North American operations. We will be exposed to the risk of non-payment of ZFS’ units and we are exposed to credit risk from these subsidiaries of ZFS. We are not exposed to potential non-payments by retrocessionaires for these events in excess of the cap. In December 2004, a federal jury in New York concluded that the two planes that crashed into the World Trade Center during the attacks of September 11th, for insurance purposes, represented two separate attacks. This ruling increased our gross losses and loss expenses by USD 8.7 million, but as our losses are capped at USD 231.0 million by ZFS, as described above, this ruling did not have an effect on our net loss position. In 2005 and 2004, there was no additional development in net reserves for the September 11th terrorist attacks.

Asbestos and environmental exposures: As of December 31, 2005 and 2004, we had reserves for environmental impairment liability and asbestos-related claims of USD 49.2 million for each year. Our survival ratio (calculated as the ratio of reserves held, including IBNR, over claims paid over the average of the last three years) for asbestos and environmental reserves was 14.1 years at December 31, 2005 and 13.6 years at December 31, 2004.

Converium consolidated acquisition costs

Acquisition costs primarily relate to commissions on treaty and individual risk business. For the year ended December 31, 2005 our acquisition costs decreased and our non-life acquisition cost ratio remained relatively stable compared with the same period of 2004. Acquisition costs decreased as a result of the reduction in overall business volume; however premiums were still being earned from business written in prior underwriting years.

Converium consolidated operating and administration expenses

In 2005, operating and administration expenses increased as compared with 2004 primarily due to expenditures relating to the restatement that occurred during 2005/2006 and costs resulting from staff retention plans. The non-life administration expense ratio increased in 2005 as compared with 2004 resulting from the measures referred to above as well as from the sharp decrease in premium volume in 2005 compared with 2004.

Converium consolidated other loss

Other loss for the years ended December 31, 2005 and 2004 was USD 21.9 million and USD 4.7 million, respectively. Other loss for the year ended December 31, 2005 includes a USD 9.0 million charge related to our strategic alliance with MDU, (See note 17 for further information) and a charge of USD 2.4 million related to our investment in SATEC.

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Converium consolidated interest expense, goodwill and other intangible assets and restructuring costs

Interest expense: Interest expense remained relatively stable for the year ended December 31, 2005 as compared with the same period in 2004. Interest expense primarily includes payment on the Guaranteed Subordinated Notes. See Note 11 to our 2006 consolidated financial statements for additional information on our outstanding debt.

Amortization of intangible assets: Amortization of other intangible assets was USD 21.5 million for the year ended December 31, 2005 as compared with USD 9.9 million for the same period in 2004. The amortization amounts in 2005 and 2004 relate to the intangible asset for Global Aerospace Underwriting Managers Limited (“GAUM”). The charge for 2005 increased due to the fact that the remaining useful life of the intangible asset was reassessed in the fourth quarter of 2004 to be less than one year which led to the accelerated amortization. For additional information on GAUM see Notes 7 and 17 to our 2006 consolidated financial statements.

Restructuring costs: Converium recorded restructuring costs of USD 12.1 million for the year ended December 31, 2005 compared with USD 0.2 million for the same period of 2004. In 2005, the reduction in overall business volume required organizational changes and an adjustment to our global cost base including employee terminations and closure of smaller offices.

Converium consolidated income tax (expense) benefit

We recorded an income tax expense of USD 16.1 million for the year ended December 31, 2005 compared with an income tax benefit USD 4.6 million in 2004. Our global effective tax rate for continuing operations was 32.1% for the year ended December 31, 2005 as compared with (21.9)% for the same period of 2004. For the year ended December 31, 2005, Converium’s consolidated income tax expense of USD 16.1 million comprised of USD 12.0 million of current income tax expense and USD 4.1 million of deferred income tax expense. The current income tax portion reflects the net tax paying position of some affiliated companies.

Converium consolidated combined ratios

Our non-life combined ratio was 107.0% in 2005 and 105.7% in 2004. The increase in the non-life combined ratio resulted from the negative impact on underwriting results of US hurricanes, Continental European floods and increased expenditures relating to the Restatement.

Results of Operations by Operating Segment

Converium currently manages its business around three operating segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life & Health Reinsurance, which are based principally on global lines of business. In addition to the three segments’ financial results, the Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee and other corporate functions as well as expenses not allocated to the operating segments. In addition to reporting segment results individually, management also aggregates results for Standard Property & Casualty Reinsurance and Specialty Lines into non-life business, as management considers this aggregation meaningful in understanding the performance of Converium.

	Year ended December 31,
	2006		2005		2004
	(USD millions)
Segment income (loss):
Standard Property & Casualty Reinsurance		204.6		45.9		88.3
Specialty Lines		98.9		108.9		-13.4
Life & Health Reinsurance		23.5		17.6		16.4
Corporate Center		-54.5		-49.5		-36.8
Total segment income (loss)		272.5		122.9		54.5
Other loss		-0.5		-21.9		-4.7
Interest expense		-16.7		-17.2		-18.7
Amortization of other intangible assets		—		-21.5		-9.9
Restructuring costs		0.2		-12.1		-0.2
Income (loss) from continuing operations before taxes		255.5		50.2		21.0
Income tax (expense) benefit		-40.5		-16.1		4.6
Income (loss) from continuing operations		215.0		34.1		25.6
(Loss) income from discontinuing operations, net of tax		-157.9		34.6		-608.1
Net income (loss)		57.1		68.7		-582.5

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Non-life

The table below presents information regarding results of operations of our non-life business for the years ended December 31, 2006, 2005 and 2004. This information is further discussed on a segment basis below.

	Year ended December 31,
	2006		2005		2004
	(USD millions, except ratios)
Revenues:
Gross premiums written		1,667.6		1,636.2		3,164.3
Net premiums written		1,546.3		1,476.7		2,942.7
Net premiums earned		1,499.3		1,940.0		2,779.8
Net investment income and net realized capital gains		250.1		260.4		239.5
Total revenues		1,749.4		2,200.4		3,019.3
Losses and expenses:
Losses and loss expenses		-975.4		-1,502.1		-2,157.7
Acquisition costs		-388.0		-445.1		-681.4
Other operating and administration expenses		-82.5		-98.4		-105.3
Total losses and expenses		-1,445.9		-2,045.6		-2,944.4
Segment income		303.5		154.8		74.9
Ratios (%):
Non-life loss ratio		65.1		77.4		77.6
Non-life acquisition costs ratio		25.9		22.9		24.5
Non-life administration expense ratio		5.3		6.7		3.6
Non-life combined ratio		96.3		107.0		105.7

Standard Property & Casualty Reinsurance

The table below presents information regarding the results of operations of our Standard Property & Casualty Reinsurance segment for the years ended December 31, 2006, 2005 and 2004.

	Year ended December 31,
	2006		2005		2004
	(USD millions, except ratios)
Revenues:
Gross premiums written		890.6		803.1		1,509.0
Net premiums written		816.9		739.0		1,377.4
Net premiums earned		775.6		880.8		1,392.2
Net investment income and net realized capital gains (losses)		109.6		119.9		104.4
Total revenues		885.2		1,000.7		1,496.6
Losses and expenses:
Losses and loss expenses		-441.1		-729.6		-1,003.0
Acquisition costs		-195.6		-181.3		-353.3
Other operating and administration expenses		-43.9		-43.9		-52.0
Total losses and expenses		-680.6		-954.8		-1,408.3
Segment income		204.6		45.9		88.3
Ratios (%):
Loss ratio		56.9		82.8		72.0
Acquisition costs ratio		25.2		20.6		25.4
Administration expense ratio		5.4		5.9		3.8
Combined ratio		87.5		109.3		101.2

Year ended December 31, 2006 compared with year ended December 31, 2005

Standard Property & Casualty Reinsurance segment income

Standard Property & Casualty Reinsurance reported a segment income of USD 204.6 million and USD 45.9 million in 2006 and 2005, respectively. Segment income was primarily affected by the following:

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•	The recognition of net favorable impact of prior accident years on the technical result of USD 38.6 million in 2006, resulting from net positive development of prior years’ loss reserves of USD 54.1 million, offset by reductions in premiums and other expenses of USD 15.5 million.
	The net favorable development of prior years’ loss reserves of USD 54.1 million in 2006 was primarily related to the Property and General Third Party Liability lines of business of USD 45.1 million and USD 24.6 million, respectively, partially offset by net adverse development of prior years’ loss reserves within the Motor line of business of USD 16.5 million.
•	A strong underwriting result within the property catastrophe and non-catastrophe book of business due to the absence of any major catastrophe losses in 2006.
•	In 2005, segment income was impacted by a number of large natural catastrophes. The Standard Property & Casualty segment experienced a total net impact of USD 78.4 million in losses from hurricanes in the United States (Hurricane Katrina: USD 25.6 million, Hurricane Rita: USD 11.2 million and Hurricane Wilma: USD 41.6 million).
	In addition, in 2005, the continental European floods in Switzerland, Germany, Austria and Romania and Winter Storm Erwin resulted in net pre-tax losses of USD 24.8 million and USD 32.5 million, respectively. The overall pre-tax effect from the natural catastrophes mentioned above was USD 135.7 million.
•	In 2005, offsetting these catastrophes, we recorded a net favorable impact of prior accident years on the technical result of USD 19.7 million, resulting from net favorable development of prior accident years’ loss reserves of USD 30.7 million offset by reductions in premiums and other expenses of USD 11.0 million.
	The net favorable development of prior years’ loss reserves of USD 30.7 million was primarily related to the Property line of business of USD 73.3 million, partially offset by net adverse development of prior years’ loss reserves within the Motor and General Third Party Liability lines of business of USD 25.0 million and USD 23.4 million, respectively.

Standard Property & Casualty Reinsurance premiums

For the year ended December 31, 2006, gross premiums written increased by 10.9% to USD 890.6 million, net premiums written increased by 10.5% to USD 816.9 million and net premiums earned decreased by 11.9% to USD 775.6 million. The decrease of net premiums earned in 2006 reflects the impact of the ratings downgrades in 2004 with significantly lower earned premiums from prior underwriting years.

For the year ended December 31, 2006, the increase in net premiums written in the Standard Property & Casualty Reinsurance segment by line of business included:

• Property increased by 10.5% or USD 41.1 million to USD 431.7 million, primarily due to increased business; and

• General Third Party Liability increased by 56.6% or USD 83.0 million to USD 229.7 million, reflecting additional Lloyd’s business as well as revisions of premium estimates in 2005.

These increases were partially offset by a decrease in the Motor line of business by 24.0% or USD 45.3 million to USD 143.1 million, reflecting this years’ closing of the 2003 Lloyd’s underwriting year as well as a decrease in the Personal accident (assumed from non-life insurers) by 6.8% or USD 0.9 million to USD 12.4 million.

Standard Property & Casualty Reinsurance net investment income and net realized capital gains (losses)

Standard Property & Casualty Reinsurance recorded net investment income and net realized capital gains of USD 109.6 million for the year ended December 31, 2006, a decrease of USD 10.3 million, or 8.6%, compared with net investment income and net realized capital gains of USD 119.9 million for the same period in 2005.

Standard Property & Casualty Reinsurance losses and loss expenses

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Standard Property & Casualty Reinsurance had losses and loss expenses incurred of USD 441.1 million in 2006, a decrease of USD 288.5 million, or 39.5%, over 2005. The loss ratio was 56.9% in 2006 as compared with 82.8% in 2005.

In 2006, the Standard Property & Casualty Reinsurance segment recorded net favorable development of prior years’ loss reserves of USD 54.1 million in 2006 which was primarily related to the Property and General Third Party Liability lines of business of USD 45.1 million and USD 24.6 million, respectively. This was partially offset by net adverse development of prior years’ loss reserves within the Motor line of business of USD 16.5 million.

In 2006, losses and loss expenses incurred decreased due to the absence of any major catastrophe losses in 2006.

In 2005, the Standard Property & Casualty Reinsurance segment was impacted by a number of large natural catastrophes. The Standard Property & Casualty segment experienced a total net impact of USD 78.4 million in losses from hurricanes in the United States (Hurricane Katrina: USD 25.6 million, Hurricane Rita: USD 11.2 million and Hurricane Wilma: USD 41.6 million).

In addition, in 2005, the continental European floods in Switzerland, Germany, Austria and Romania and Winter Storm Erwin resulted in net pre-tax losses of USD 24.8 million and USD 32.5 million, respectively. The overall pre-tax effect from the natural catastrophes mentioned above was USD 135.7 million.

Slightly offsetting the aforementioned items was net favorable development of prior years’ loss reserves of USD 30.7 million which was primarily related to the Property line of business of USD 73.3 million, partially offset by net adverse development of prior years’ loss reserves within the Motor and General Third Party Liability lines of business of USD 25.0 million and USD 23.4 million, respectively.

Standard Property & Casualty Reinsurance acquisition costs

Acquisition costs primarily relate to commissions on treaty and individual risk business. The Standard Property & Casualty Reinsurance segment’s acquisition costs increased by USD 14.3 million from USD 181.3 million in 2005 to USD 195.6 million in 2006. The acquisition cost ratio was 25.2% in 2006 as compared with 20.6% for the same period of 2005. The increase is mainly driven by a relatively low acquisition cost ratio in 2005 due to the receipt of reinsurance premiums to close (“RITC”) on our Lloyd’s participations on which there were no acquisition costs.

Standard Property & Casualty Reinsurance operating and administration expenses

Operating and administration expenses remained flat at USD 43.9 million in 2006 while the administration expense ratio decreased from 5.9% in 2005 to 5.4% in 2006 due to the increase in net premiums written.

Standard Property & Casualty Reinsurance combined ratios

Standard Property & Casualty Reinsurance’s combined ratio was 87.5% in 2006 and 109.3% in 2005. The decrease in the combined ratio was primarily due to the absence of major catastrophe losses and the net favorable development of prior years’ loss reserves.

Year ended December 31, 2005 compared with year ended December 31, 2004

Standard Property & Casualty Reinsurance segment income

Standard Property & Casualty Reinsurance reported a segment income of USD 45.9 million and USD 88.3 million in 2005 and 2004, respectively. In addition to the overall reduction in business volume as a result of the ratings downgrades that occurred in 2004, the segment income was primarily affected by the following:

•	The effect of large natural catastrophes that occurred in 2005 impacted the Standard & Property & Casualty Reinsurance segment. The segment experienced a total net impact of USD 78.4 million in losses from hurricanes in the United States (Hurricane Katrina: USD 25.6 million, Hurricane Rita: USD 11.2 million and Hurricane Wilma: USD 41.6 million).
	In addition, in 2005, the Continental European floods in Switzerland, Germany, Austria and Romania and Winter Storm Erwin resulted in net pre-tax losses of USD 24.8 million and USD 32.5 million, respectively. The overall pre-tax effect from the

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	natural catastrophes mentioned above was USD 135.7 million. In 2004, pre-tax results within the Standard Property & Casualty segment were impacted by USD 55.3 million related to natural catastrophes.
•	Slightly offsetting the aforementioned items was the recognition of a net favorable impact of prior accident years on the technical result in the amount of USD 19.7 million, resulting from net favorable development of prior accident years’ loss reserves of USD 30.7 million, offset by reductions in premium, related losses and acquisition costs of net USD 11.0 million for the year ended December 31, 2005.
	In 2004, we recorded a net adverse impact of prior accident years on the technical result in the amount of USD 53.3 million, resulting from net adverse development of prior accident years’ loss reserves of USD 11.3 million and reductions in premium, related losses and acquisition costs of net USD 42.0 million for the year ended December 31, 2004.

Standard Property & Casualty Reinsurance premiums

For the year ended December 31, 2005, gross premiums written decreased 46.8% to USD 803.1 million, net premiums written decreased 46.3% to USD 739.0 million and net premiums earned decreased 36.7% to USD 880.8 million. For the year ended December 31, 2005, the reduction in net premiums written in the Standard Property & Casualty Reinsurance segment by line of business included:

• Motor (decreased by 56.9% or USD 249.0 million to USD 188.4 million), largely reflecting reduced writings in the France and United Kingdom books of business due to profitability considerations as well as cancellation of business due to the ratings downgrades in 2004;

• Property (decreased by 25.8% or USD 135.8 million to USD 390.6 million), primarily due to the rating downgrades in 2004;

• General Third Party Liability (decreased by 61.3% or USD 232.4 million to USD 146.7 million), due to rating downgrades and revisions of premium estimates on our London Market North America and United Kingdom books of business; and

• Personal accident (assumed from non-life insurers) (decreased by 61.4% or USD 21.2 million to USD 13.3 million), primarily as a result of the cancellation or non-renewal of business and reduced shares in current business due to the ratings downgrades in 2004.

Standard Property & Casualty Reinsurance net investment income and net realized capital gains (losses)

Standard Property & Casualty Reinsurance recorded net investment income and net realized capital gains of USD 119.9 million for the year ended December 31, 2005, an increase of USD 15.5 million, or 14.8%, compared with net investment income and net realized capital gains of USD 104.4 million for the same period in 2004. The investment result was positively impacted by realized gains resulting from the sale of equity securities to adjust our asset allocation in order to reduce investment portfolio risks.

Standard Property & Casualty Reinsurance losses and loss expenses

Standard Property & Casualty Reinsurance had losses and loss expenses incurred of USD 729.6 million in 2005, a decrease of USD 273.4 million, or 27.3%, over 2004. The loss ratio was 82.8% in 2005 as compared with 72.0% in 2004.

In 2005, the Standard Property & Casualty Reinsurance segment recorded net favorable development of prior years’ loss reserves of USD 30.7 million which was primarily within the Property line of business of USD 73.3 million. Partially offsetting this was net adverse development of prior years’ loss reserves within the Motor and General Third Party Liability lines of business of USD 25.0 million and USD 23.4 million, respectively.

The Standard Property & Casualty segment experienced a total net impact of USD 78.4 million in losses from hurricanes in the United States (Hurricane Katrina: USD 25.6 million, Hurricane Rita: USD 11.2 million and Hurricane Wilma: USD 41.6 million).

In addition, in 2005, the Continental European floods in Switzerland, Germany, Austria and Romania and Winter Storm Erwin resulted in net pre-tax losses of USD 24.8 million and USD 32.5 million, respectively.

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In 2004, the Standard Property & Casualty Reinsurance segment recorded net adverse development of prior years’ loss reserves of USD 11.3 million which was primarily related to adverse development within the Motor line of business of USD 78.7 million, which was partially offset by net favorable development of prior years’ loss reserves related to the Property line of business of USD 77.8 million.

In addition, the segment was also impacted by USD 55.3 million in losses related to natural catastrophes.

Standard Property & Casualty Reinsurance acquisition costs

Acquisition costs primarily relate to commissions on treaty and individual risk business. The Standard Property & Casualty Reinsurance segment’s acquisition costs decreased by USD 172.0 million, or 48.7% to USD 181.3 million. The acquisition costs ratio was 20.6% in 2005 as compared with 25.4% in 2004. The decrease was due to the receipt of reinsurance premiums to close (“RITC”) on our Lloyd’s participations on which there are no acquisition costs.

Standard Property & Casualty Reinsurance operating and administration expenses

Operating and administration expenses decreased by USD 8.1 million or 15.6% to USD 43.9 million in 2005 while the administration expense ratio increased from 3.8% in 2004 to 5.9% in 2005 due to the significant reduction in net premiums written.

Standard Property & Casualty Reinsurance combined ratios

Standard Property & Casualty Reinsurance’s combined ratio was 109.3% in 2005 and 101.2% in 2004. The increase in the combined ratio was primarily driven by the natural catastrophes in 2005 which impacted the combined ratio by 15.4 points.

Specialty Lines

The table below presents information regarding the results of operations of our Specialty Lines segment for the years ended December 31, 2006, 2005 and 2004.

	Year ended December 31,
	2006		2005		2004
	(USD millions, except ratios)
Revenues:
Gross premiums written		777.0		833.1		1,655.3
Net premiums written		729.4		737.7		1,565.3
Net premiums earned		723.7		1,059.2		1,387.6
Net investment income and net realized capital gains (losses)		140.5		140.5		135.1
Total revenues		864.2		1,199.7		1,522.7
Losses and expenses:
Losses and loss expenses		-534.3		-772.5		-1,154.7
Acquisition costs		-192.4		-263.8		-328.1
Other operating and administration expenses		-38.6		-54.5		-53.3
Total losses and expenses		-765.3		-1,090.8		-1,536.1
Segment income (loss)		98.9		108.9		-13.4
Ratios (%):
Loss ratio		73.8		72.9		83.2
Acquisition costs ratio		26.6		24.9		23.6
Administration expense ratio		5.3		7.4		3.4
Combined ratio		105.7		105.2		110.2

Year ended December 31, 2006 compared with year ended December 31, 2005

Specialty Lines segment income

Specialty Lines reported segment income of USD 98.9 million and USD 108.9 million in 2006 and 2005, respectively.

• The large decrease of net premiums earned in 2006 reflects the impact of the ratings downgrades in 2004 with significantly lower earned premiums from prior underwriting years.

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• Offsetting the decrease in segment income in 2006 was the recognition of net favorable impact of prior accident years on the technical result of USD 13.5 million, resulting from net favorable development of prior years’ loss reserves of USD 48.7 million, offset by reductions in premiums and other expenses of USD 35.2 million.

The net favorable development of prior years’ loss reserves of USD 48.7 million in 2006 primarily related to the lines of business: Aviation & Space and Engineering of USD 34.9 million and USD 16.2 million, respectively, partially offset by net adverse development of prior years’ loss reserves related to the Professional Liability and other Special Liability line of business of USD 17.6 million.

• In 2005, we recorded a net favorable impact of prior accident years on the technical result of USD 23.1 million, resulting from net favorable development of prior years’ loss reserves of USD 55.3 million offset by reductions in premiums and other expenses of USD 32.2 million.

The net favorable development of prior years’ loss reserves of USD 55.3 million primarily related to the Aviation & Space line of business of USD 57.5 million.

Specialty Lines premiums

For the year ended December 31, 2006, gross premiums written decreased by 6.7% to USD 777.0 million, net premiums written decreased by 1.1% to USD 729.4 million and net premiums earned decreased by 31.7% to USD 723.7 million. Premium volumes for the year ended December 31, 2006 were still impacted by the ratings downgrades that occurred in 2004.

For the year ended December 31, 2006, the reduction in net premiums written in the Specialty Line segment by line of business included:

• Aviation & Space decreased by 1.9% or USD 4.7 million to USD 237.1 million;

• Credit & Surety decreased by 27.7% or USD 16.2 million to USD 42.2 million;

• Engineering decreased by 5.8% or USD 3.8 million to USD 61.7 million and;

• Marine & Energy decreased by 9.2% or USD 5.9 million to USD 58.1 million.

For the year ended December 31, 2006, these decreases were partially offset by an increase in net premiums written in the Professional Liability and other Special Liability line of business by 5.2% or USD 14.8 million to USD 297.6 million due to our Lloyd’s participations partially offset by the non-renewal of US casualty business. Furthermore, the Agribusiness line of business increased by 1.1% or USD 0.4 million to USD 37.1 million due to our decision to expand our business written in Europe.

Specialty Lines net investment income and net realized capital gains (losses)

Net investment income and net realized capital gains remained flat at USD 140.5 million for the year ended December 31, 2006 compared with net investment income and net realized capital gains of USD 140.5 million for the same period in 2005.

Specialty Lines losses and loss expenses

Specialty Lines had losses and loss expenses incurred of USD 534.3 million in 2006, a decrease of USD 238.2 million, or 30.8%, over 2005. The loss ratio was 73.8% in 2006 as compared with 72.9% in 2005.

In 2006, the Specialty Lines segment recorded net favorable development of prior years’ loss reserves of USD 48.7 million in 2006 primarily related to the lines of business: Aviation & Space and Engineering of USD 34.9 million and USD 16.2 million, respectively, partially offset by net adverse development of prior years’ loss reserves related to the Professional Liability and other Special Liability line of business of USD 17.6 million.

In 2005, the segment recorded net favorable development of prior years’ loss reserves of USD 55.3 million primarily related to the

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Aviation & Space line of business of USD 57.5 million.

Specialty Lines acquisition costs

Acquisition costs decreased USD 71.4 million, or 27.1%, in 2006 due to the lower volume of business. The acquisition cost ratio increased for the year ended December 31, 2006 from 24.9% to 26.6% primarily due to an additional fronting commission for the GAUM business in relation to the ratings downgrades in 2004.

Specialty Lines Operating and administration expenses

Operating and administration expenses decreased by USD 15.9 million or 29.2% to USD 38.6 million in 2006 compared with USD 54.5 million in 2005, however the administration expense ratio decreased by 2.1 points to 5.3% as a result of the reduced operating and administration expenses in 2006 compared with 2005.

Specialty Lines combined ratios

The Specialty Lines combined ratio was 105.7% and 105.2% for the years ended December 31, 2006 and 2005, respectively.

Year ended December 31, 2005 compared with year ended December 31, 2004

Specialty Lines segment income (loss)

Specialty Lines reported segment income of USD 108.9 million in 2005 versus a segment loss of USD 13.4 million in 2004. The results for the Specialty Lines segment are reflective of the overall reduction in business volume as a result of the ratings downgrades that occurred in 2004. In addition to the overall reduction in business volume, the segment income was primarily affected by the following:

• In 2005, the Specialty Lines segment recorded a net favorable impact of prior accident years on the technical result of USD 23.1 million, resulting from net favorable development of prior accident years’ loss reserves of USD 55.3 million offset by reductions in premiums and other expenses of USD 32.2 million.

The net favorable development of prior years’ loss reserves of USD 55.3 million primarily related to the Aviation & Space line of business of USD 57.5 million.

• Slightly offsetting the increase in segment income in 2005 was the net impact of losses arising from Hurricanes Katrina, Rita and Wilma within the United States in the amount of USD 13.5 million.

• In 2004, we recorded a net adverse impact of prior accident years on the technical results in the amount of USD 69.7 million, resulting from net adverse development of prior accident years’ loss reserves of USD 61.5 million, and reductions in premium, related losses and acquisition costs of net USD 8.2 million for the year ended December 31, 2004.

The net adverse development of prior years’ loss reserves of USD 61.5 million primarily related to adverse developments of the Professional Liability and other Special Liability and Engineering lines of business of USD 116.1 million and USD 13.7 million, respectively, partially offset by net favorable development of prior years’ loss reserves related to: Credit & Surety (USD 30.2 million), Aviation & Space (USD 24.6 million) and Workers’ Compensation (USD 16.4 million) lines of business.

Specialty Lines premiums

For the year ended December 31, 2005, gross premiums written decreased by 49.7% to USD 833.1 million, net premiums written decreased by 52.9% to USD 737.7 million and net premiums earned decreased by 23.7% to USD 1,059.2 million. Premium volume for the year ended December 31, 2005 was impacted by the ratings downgrades that occurred in 2004, which resulted in clients canceling their business or reducing their shares with us. In 2004, premium volume was impacted by clients exercising their rights of special termination under various reinsurance contracts, which resulted in a reduction of estimated ultimate premium in the second half of 2004. In addition to the reductions triggered by special termination clauses, the decrease of the Specialty Lines segment’s net premiums written was further affected by adjustments of ultimate premium estimates due to the implementation of enhanced procedures for establishing written premium estimates throughout 2004.

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For the year ended December 31, 2005, the reduction in net premiums written in the Specialty Line segment by line of business included:

• Aviation & Space (decreased by 40.2% or USD 162.7 million to USD 241.8 million);

• Credit & Surety (decreased by 71.4% or USD 145.9 million to USD 58.4 million);

• Professional Liability and other Special Liability (decreased by 35.2% or USD 153.7 million to USD 282.8 million);

• Engineering (decreased by 41.6% or USD 46.7 million to USD 65.5 million);

• Marine & Energy (decreased by 22.4% or USD 18.5 million to USD 64.0 million); and

• Workers’ Compensation (decreased by 103.7% or USD 325.4 million to USD (11.5) million); which in addition to the reduction caused by the ratings downgrades was further impacted by a reduction in premium estimates.

For the year ended December 31, 2005, these decreases were partially offset by an increase in net premiums written in the Agribusiness line of business, which increased by 221.9% or USD 25.3 million to USD 36.7 million. This reflected the decision to write this business out of Converium AG, Zurich and to grow the business written in Europe.

Specialty Lines net investment income and net realized capital gains (losses)

Specialty Lines reported net investment income and net realized capital gains of USD 140.5 million for the year ended December 31, 2005, an increase of USD 5.4 million, or 4.0%, compared with net investment income and net realized capital gains of USD 135.1 million for the same period in 2004.

Specialty Lines losses and loss expenses

Specialty Lines had losses and loss expenses incurred of USD 772.5 million in 2005, a decrease of USD 382.2 million, or 33.1%, over 2004.

In 2005, the segment recorded net favorable development of prior years’ loss reserves of USD 55.3 million primarily related to the Aviation & Space line of business of USD 57.5 million.

For 2004, the segment recorded adverse development of prior years’ loss reserves of USD 61.5 million primarily related to Professional Liability and other Special Liability and Engineering lines of business in the amounts of USD 116.1 million and USD 13.7 million, respectively. These adverse developments were partially offset by net favorable development of prior years’ loss reserves related to the Credit & Surety, Aviation & Space and Workers’ Compensation lines of business in the amounts of USD 30.2 million, USD 24.6 million and USD 16.4 million, respectively.

The loss ratio was 72.9% in 2005 as compared with 83.2% in 2004, a decrease of 10.3 percentage points.

Specialty Lines acquisition costs

Acquisition costs decreased by USD 64.3 million, or 19.6%, in 2005 due to the lower volume of business. The acquisition costs ratio increased for the year ended December 31, 2005 from 23.6% in 2004 to 24.9% in 2005 due to the additional fronting commission for the GAUM business because of the ratings downgrades in 2004.

Specialty Lines operating and administration expenses

Operating and administration expenses increased by USD 1.2 million or 2.3% to USD 54.5 million in 2005 compared with USD 53.3 million in 2004, however the administration expense ratio increased by 4.0 points to 7.4% as a result of the reduced premium volume in 2005 versus 2004.

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Specialty Lines combined ratios

The Specialty Lines combined ratio was 105.2% and 110.2% for the years ended December 31, 2005 and 2004, respectively. The decrease in the combined ratio in 2005 resulted from the recording of net favorable development of prior years’ loss reserves, which led to a reduction of 10.3 points in the loss ratio of 72.9% as compared with 2004. This positive trend was partially offset by an increased administration expense ratio of 7.4% for the year ended December 31, 2005 as compared with 2004.

Life & Health Reinsurance

The table below presents information regarding the results of operations of our Life & Health Reinsurance segment for the years ended December 31, 2006, 2005 and 2004.

	Year ended December 31,
	2006		2005		2004
	(USD millions, except ratios)
Revenues:
Gross premiums written		313.3		318.8		327.9
Net premiums written		305.7		306.4		313.2
Net premiums earned		312.4		314.8		318.7
Net investment income and net realized capital gains (losses)		29.2		28.7		19.2
Total revenues		341.6		343.5		337.9
Losses and expenses:
Losses, loss expenses and life benefits		-212.4		-218.0		-237.3
Acquisition costs		-94.1		-92.3		-72.5
Other operating and administration expenses		-11.6		-15.6		-11.7
Total benefits, losses and expenses		-318.1		-325.9		-321.5
Segment income		23.5		17.6		16.4
Ratios (%):
Acquisition costs ratio		30.1		29.3		22.7
Administration expense ratio		3.8		5.1		3.7

Year ended December 31, 2006 compared with year ended December 31, 2005

Life & Health Reinsurance segment income

Life & Health Reinsurance reported segment income of USD 23.5 million and 17.6 million for the years ended December 31, 2006 and 2005, respectively. Segment income is comprised of technical results, less other income (loss), total investment results and other operating and administration expenses.

Although there was a slight decrease in our overall business volume, the total results exhibit the segment’s ability to retain business despite the effects of the ratings downgrades that occurred in 2004. The segment’s positive performance in 2006 was primarily attributable to new, and the expansion of existing reinsurance transactions, particularly within Continental Europe.

The technical result for the year ended December 31, 2006 was USD 16.3 million as compared with USD 14.2 million for the same period of 2005. Technical result is defined as net premiums earned minus losses, loss expenses and life benefits minus acquisition costs plus other technical income (mainly technical interest).

The increase in the technical result in 2006 was primarily attributable to our European and Middle East markets, where we were able to increase our business with current and new cedents.

For the years ended December 2006 and 2005 there were no additional reserve actions required for our Guaranteed Minimum Death Benefit (GMDB) book of business.

Life & Health Reinsurance premiums

For the year ended December 31, 2006, gross premiums written decreased by 1.7% to USD 313.3 million, net premiums written decreased by 0.2% to USD 305.7 million and net premiums earned decreased by 0.8% to USD 312.4 million. Net premiums written for the Life & Disability

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line of business increased by 5.2% or USD 12.3 million, compared with 2005, which was primarily driven by new business within our European market. The Accident & Health line of business decreased by 18.3% or USD 13.0 million, compared with 2005, which was mainly due to non-renewal of unprofitable treaties within our European market. This decrease was partially offset by growth within our Middle East market.

Life & Health Reinsurance net investment income and net realized capital gains (losses)

Life & Health Reinsurance reported net investment income and net realized capital gains of USD 29.2 million for the year ended December 31, 2006 compared with net investment income and net realized capital gains of USD 28.7 million for the same period of 2005. The investment results were positively impacted by the disposal of Swiss direct real estate holdings, while realized gains on equity securities were largely offset by realized losses on fixed maturities securities and impairment postings.

Life & Health Reinsurance losses, loss expenses and life benefits

Life & Health Reinsurance had losses, loss expenses and life benefits incurred of USD 212.4 million, a decrease of USD 5.6 million, or 2.6%, in 2006. This decrease was mainly due to the non-renewal of unprofitable treaties within the Accident & Health line of business in our European markets.

Life & Health Reinsurance acquisition costs

Acquisition costs increased by USD 1.8 million, or 2.0%, to USD 94.1 million for the year ended December 31, 2006 as compared with USD 92.3 million for 2005 as a result of new reinsurance transactions in Continental Europe, which carry higher acquisition costs in the early years of a contract. The acquisition cost ratio was 30.1% in 2006 and 29.3% in 2005.

Life & Health Reinsurance operating and administration expenses

Operating and administration expenses decreased USD 4.0 million, or 25.6%, in 2006. The life administration expense ratio was 3.8% in 2006 as compared with 5.1% in 2005.

Year ended December 31, 2005 compared with year ended December 31, 2004

Life & Health Reinsurance segment income

Life & Health Reinsurance reported segment income of USD 17.6 million and USD 16.4 million for the years ended December 31, 2005 and 2004, respectively.

Although there was a slight decrease in our overall business volume, the total Life & Health Reinsurance results exhibit the segment’s ability to retain business despite the effects of the ratings downgrades that occurred in 2004.

Technical result for the year ended December 31, 2005 was USD 14.2 million as compared with USD 16.4 million for the same period of 2004. Technical result is defined as net premiums earned minus losses, loss expenses and life benefits minus acquisition costs plus other technical income (mainly interest on deposits).

The decrease in the technical result in 2005 was primarily attributable to the cancellation of existing reinsurance transactions in Latin America as well as the establishment of an additional provision for the Asian tsunami of USD 0.7 million.

For the years ended December 2005 and 2004 there were no additional reserve actions required for our Guaranteed Minimum Death Benefit (GMDB) book.

Life & Health Reinsurance premiums

For the year ended December 31, 2005, gross premiums written decreased by USD 9.1 million or 2.8% to USD 318.8 million, net premiums written decreased by USD 6.8 million or 2.2% to USD 306.4 million and net premiums earned decreased by USD 3.9 million or 1.2% to USD 314.8 million. The reduction in net premiums written was primarily within the health line of business which decreased by 30.8% or USD 10.3 million to USD 23.1 million. The decline was attributable to the cancellation of existing reinsurance transactions in the Middle East in 2004 and a reduction of business in Latin America due to our ratings downgrades and the decision

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to close down our life operations in Buenos Aires. Additionally, premiums decreased in our non-active North American markets, as expected, both in the health line of business as well as the life line of business. These decreases were partially offset by new business written in the Middle East and Continental Europe as well as the expansion of existing reinsurance transactions in 2005.

Life & Health Reinsurance net investment income and net realized capital gains (losses)

Life & Health Reinsurance reported net investment income and net realized capital gains of USD 28.7 million for the year ended December 31, 2005 compared with net investment income and net realized capital losses of USD 19.2 million for the same period of 2004. The investment results were positively impacted by realized gains resulting from the sale of equity securities to adjust our asset allocation in order to reduce investment portfolio risks.

Life & Health Reinsurance losses, loss expenses and life benefits

Life & Health Reinsurance had losses, loss expenses and life benefits incurred of USD 218.0 million, a decrease of USD 19.3 million, or 8.1%, in 2005. This decrease was mainly due to the cancellation of existing reinsurance transactions in the Middle East in 2004 as well as reduced business in our inactive North American markets.

Life & Health Reinsurance acquisition costs

Acquisition costs increased USD 19.8 million, or 27.3%, to USD 92.3 million for the year ended December 31, 2005 as compared with USD 72.5 million for 2004. This increase is related to the increase in financing business which shows high acquisition costs in the first year of the contract. The acquisition costs ratio was 29.3% in 2005 and 22.7 % in 2004.

Life & Health Reinsurance operating and administration expenses

Operating and administration expenses increased USD 3.9 million, or 33.3%, in 2005. The life administration expense ratio was 5.1% in 2005 as compared with 3.7% in 2004.

Corporate Center

The table below presents information regarding the results of operations of our Corporate Center for the years ended December 31, 2006, 2005 and 2004. The Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee, and other global functions.

	Year ended December 31,
	2006		2005		2004
	(USD millions)
Other operating and administration expenses		-54.5		-49.5		-36.8
Segment loss		-54.5		-49.5		-36.8

Year ended December 31, 2006 compared with year ended December 31, 2005

Corporate Center operating and administration expenses

The Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee and other corporate functions as well as other expenses not allocated to the operating segments. The Corporate Center costs increased for the year ended December 31, 2006 as compared with the same period of 2005 primarily due to increased legal, audit fees and costs associated with Sarbanes-Oxley compliance.

Year ended December 31, 2005 compared with year ended December 31, 2004

Corporate Center operating and administration expenses

The Corporate Center costs increased for the year ended December 31, 2005 as compared with the same period of 2004 due to increased legal, audit and consulting fees of approximately USD 15.0 million, primarily relating to the internal review and the Restatement.

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B. LIQUIDITY AND CAPITAL RESOURCES

We operate a treasury function responsible for managing our banking relationships, capital raising activities, including equity and debt issues, our overall cash, cash pooling and liquidity positions and the payment of internal and external dividends. Individual subsidiaries are responsible for managing local cash and liquidity positions, including the repayment of debt.

In the event of local short-term cash requirements, internal loans are available, subject to certain required approvals based on amount.

Liquidity requirements

Our principal cash requirements are for paying reinsurance and insurance claims, which could periodically include significant cash requirements related to catastrophic events, for servicing debt, investment in businesses, payments for our business operations, capital expenditures, servicing retrocessional arrangements and payment of dividends to shareholders.

Letters of credit

As of December 31, 2006, Converium had total letters of credit outstanding of USD 1,974.5 million, which included USD 1,898.0 million secured and USD 76.5 million unsecured.

Letters of credit
(USD million)	Date of agreement	Duration	Capacity		Utilized		Assets pledged
Syndicated letter of credit facility	Nov 29, 2004	3 years		1,600.0		1,053.2		1,074.7
Bilateral letters of credit	various	various		1,120.0		844.8		898.8
Unsecured letters of credit	Aug 11, 2006	1 year		250.0		76.5		—
Total letters of credit				2,970.0		1,974.5		1,973.5
Other pledges
Deposit account for cedents								282.5
Internal trust								486.6
Total other pledges								769.1

There are financial covenants attached to the syndicated letter of credit facility including restrictions on total borrowing up to 35% of tangible net worth (shareholders’ equity less goodwill) and tangible net worth must remain greater than USD 1,237.5 million at all times. Converium pays commission fees on outstanding letters of credit, which are distributed to the facility banks and can only be impacted by a change in the Company’s credit rating. The maximum amount of this fee is 0.50%.

On August 11, 2006, Converium secured an uncollateralized USD 250.0 million letter of credit facility from a leading European banking group, at market conditions. It will be primarily used to support third party claims related to the underwriting business. As of December 31, 2006, the total outstanding letter of credit under this facility was USD 76.5 million.

As of December 31, 2006, Converium reported total investments including cash and cash equivalents and excluding the Funds Withheld Asset of USD 5,457.7 million. Of this total, USD 1,973.5 million was pledged as collateral relating to outstanding letters of credit.

Interest on debt and short-term borrowings was USD 16.7 million, USD 17.2 million and USD 18.7 million for the years ended December 31, 2006, 2005 and 2004, respectively. We had no scheduled debt repayments in 2006, 2005 or 2004. The carrying value of our outstanding debt was USD 194.1 million at December 31, 2006, USD 391.2 million at December 31, 2005 and USD 391.1 million at December 31, 2004.

Liquidity sources

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Our principal liquidity sources consist of premiums, fees, investment income, proceeds from the sale and maturity of investment securities and borrowings. Our business units pay reinsurance and insurance claims and benefits and operating expenses predominantly from their own cash resources. As a reinsurer, our future cash flows are inherently difficult to predict. We do not expect the Funds Withheld Asset to have a material impact on our liquidity, as we will not be required to access our own liquidity sources for claims under the Quota Share Retrocession Agreement. Under the Quota Share Retrocession Agreement, Zurich Insurance Company (“ZIC”) and Zurich International Bermuda Ltd. (“ZIB”) have the right to prepay to us, in whole or in part, the balance of the Funds Withheld Asset. For more detail on cash flows see “— Capital requirements”.

Asset/Liability Management

The use of asset/liability management, or ALM, is a key tool in managing the assets part of our business and the determination of our capital requirements. Through the use of ALM, we principally manage our long-term market risks and we seek to understand and manage the dynamic interactions between our assets and liabilities. We utilize and continually develop firm-wide ALM processes and models to manage our aggregate financial risks and the correlation between financial risks and underwriting risks. The primary goal of our ALM procedures is to match, in terms of timing and currency, anticipated claims payments to our cedents with investment income and repayments generated by our invested assets and to improve our understanding of the correlation between financial risks and underwriting risks. Because fixed income securities generally provide more stable investment income than equity securities, the majority of our investments are in fixed income instruments. Although our ALM techniques are based on theoretical and empirical models and can lead to incorrect assumptions, we believe that the careful use of these ALM techniques leads to a better understanding of the risk/return profile inherent in our assets and liabilities and is therefore an important element of our risk, capital allocation and investment management process. Our principal ALM techniques include cash flow analysis, scenario testing and stochastic modeling. See “Item 4. — Information on the Company — B. Business Overview – Investments” for additional information on our invested asset base.

Dividends from subsidiaries

As a holding company, Converium Holding AG relies in large part on cash dividends and other permitted payments from its subsidiaries to make principal and interest payments on debt, to pay other outstanding obligations and to pay dividends to shareholders. Converium Holding AG paid a gross dividend of CHF 0.10 for the business year 2005 and CHF 0.20 for the business year 2006 to its shareholders. The dividend payments were made on April 18, 2006 and May 15, 2007 respectively. Converium is subject to legal restrictions on the amount of dividends it may pay to its shareholders. Similarly, the company laws of countries in which our entities operate may restrict the amount of dividends payable by such entities to their parent companies. In addition, the ability of our entities to pay dividends may be restricted or influenced by minimum capital and solvency requirements that are imposed by regulators in the countries in which the entities operate. Dividend payments from Converium AG to Converium Holding AG may be subject to regulatory review. (see Notes 15 and 21 to our 2006 consolidated financial statements).

Debt outstanding

As of December 31, 2006, we had total debt outstanding with a principal amount of USD 200.0 million and a carrying amount of USD 194.1 million.

This debt is comprised of USD 200.0 million principal amount of non-convertible, unsecured, guaranteed subordinated notes, issued by Converium Finance S.A. in December 2002, which are irrevocably and unconditionally guaranteed on a subordinated basis by each of Converium Holding AG and Converium AG. These notes mature in full on December 23, 2032 and bear interest at the rate of 8.25%. The first call date is December 24, 2007. (See Notes 11 and 15 to our 2006 consolidated financial statements). We had no scheduled debt repayments in 2006, 2005, or 2004.

Capital requirements

As of December 31, 2006, we had total shareholders’ equity of USD 1,846.0 million (USD 12.63 per share) compared with USD 1,653.4 million (USD 11.29 per share) as of December 31, 2005, an increase of USD 192.6 million (USD 1.34 per share). The increase primarily reflects net income of USD 57.1 million, which includes the loss on disposal of our North American operations, an increase in cumulative translation adjustments of USD 95.0 million as well as an increase in net unrealized gains (losses) on

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investments of USD 55.3 million. In 2006, a dividend in the amount of CHF 0.10 per share was paid to shareholders or an aggregate of USD 11.7 million. Book value is calculated using shares outstanding at the end of the period.

	Year ended December 31,
	2006		2005		2004
	(USD millions)
Cash flow data:
Cash provided by (used in) operating activities		79.2		-399.9		358.7
Net cash (used in) provided by investing activities		-42.8		363.8		-315.4
Net cash (used in) provided by financing activities		-91.6		-36.8		347.8
Effect of exchange rate changes on cash and cash equivalents		41.0		39.3		9.0
Change in cash and cash equivalents		-14.2		-33.6		400.1
Cash and cash equivalents, beginning of period		647.3		680.9		280.8
Cash and cash equivalents, end of period		633.1		647.3		680.9

Cash and cash equivalents decreased by USD 14.2 million to USD 633.1 million as of December 31, 2006 from USD 647.3 million as of December 31, 2005. Our cash position primarily decreased due to the sale of our North American operations with a negative impact on cash and cash equivalents of USD 273.8 million.

Our cash flows from operating activities result principally from premiums, collections on losses recoverable and investment income, net of paid losses, acquisition costs and administration expenses. For the year ended December 31, 2006, the Company generated positive cash inflow from operating activities mainly due to the solid business result of 2006. This was offset by cash outflows due to commutation payments from our former North American operations during the first half of 2006 as well as claims payments which included losses from major catastrophes incurred in prior years. The significant decrease of cash flow from operating activities to USD 399.9 million cash outflow for the year ended December 31, 2005 compared with an inflow of USD 358.7 million in 2004 was due to the reduction in overall business volume and commutation payments during 2005. Cash provided for these measures was mainly obtained through the liquidation of investments.

The net cash outflow used in investing activities of USD 42.8 million for the year ended December 31, 2006 reflects the impact of the sale of the North American Operations in the fourth quarter 2006, a net outflow of USD 273.8 million (proceeds less cash sold). The proceeds of the sale of Swiss direct real estate held in 2006 provided net cash inflow of USD 130.1 million.

Cash used in financing activities for the year ended December 31, 2006 was USD 91.6 million and included cash payments of USD 76.2 million related to deposit liabilities compared with USD 36.8 million cash used in financing activities in 2005. For the year ended December 31, 2004, cash provided by financing activities was USD 347.8 million which was primarily driven by the proceeds, net of related expenses, received from the Rights Offering that occurred in October 2004, offset by the payment of dividends to shareholders.

As of December 31, 2006, Converium Holding AG had cash and cash equivalents of USD 18.4 million. Significant cash needs in 2007 will be payments of the 2006 dividend to shareholders and interest payments to Converium Finance S.A., Luxembourg of approximately USD 10.5 million, related to the note payable with a principle of USD 150.0 million. The cash needs are primarily financed through existing cash funds held at Converium Holding AG, inter-company loan receivables from Converium AG, Switzerland, Converium IP Management AG, Switzerland and Converium Finance Ltd., Bermuda.

We believe that our capital, liquidity and borrowing ability are sufficient to support our business and meet our present liquidity requirements.

New accounting standards

The following new standards have been or will be required to be adopted by Converium in the future:

SFAS 155, “Accounting for Certain Hybrid Instruments”

In February 2006, the FASB issued SFAS 155, “Accounting for Certain Hybrid Instruments"(SFAS 155). This Statement amends SFAS 133,“Accounting for Derivative Instruments and Hedging Activities and SFAS 140,“Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. The Standard allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host contract) if the holder elects to account for the investment on a fair value basis. SFAS 155 also clarifies and amends certain other provisions in SFAS 133 and SFAS 140. This Statement is effective for all financial instruments acquired or issued in fiscal years beginning after September 15, 2006. This

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guidance is currently not expected to have a material impact on the Company’s results of operations and financial position.

SFAS 157 “Fair Value Measurements”

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements” (SFAS 157). This standard provides enhanced guidance for using fair value to measure assets and liabilities. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently in the process of evaluating the effect that the adoption of SFAS 157 will have on its results of operations and financial position.

The Company adopted SFAS 158 on December 31, 2006. See Note 1 (q) Employee benefits to our 2006 consolidated financial statements.

SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). The fair value option established by SFAS 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A company shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option may generally be applied instrument by instrument, is irrevocable, and, is applied only to entire instruments and not to portions of instruments. SFAS 159 becomes effective for financial years beginning after November 15, 2007. Converium is in the process of determining the impact of SFAS 159.

FASB Interpretation No. FIN 48,“Accounting for Uncertainty in Income Taxes–an interpretation of FASB Statement No. 109”

In June 2006, the FASB issued FASB Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes”, which clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation requires that the impact of a tax position is recognized and measured in the consolidated financial statements, if that position is more likely than not of being sustained in an audit, based on the technical merits of the position. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure. The new guidance is applicable for periods beginning after December 15, 2006 and is not expected to have a material impact on the Company’s financial condition or results of operations in 2007.

FASB Staff Position (“FSP”) SFAS 123(R)-5 “Amendment of FASB Staff Position SFAS 123(R)-1”

In October 2006, the FASB issued FSP SFAS 123(R)-5, “Amendment of FASB Staff Position SFAS 123(R)-1”, which addresses whether a modification of an instrument in connection with an equity restructuring should be considered a modification for the purposes of applying SFAS 123(R)-1. This FSP becomes effective for fiscal years beginning after October 10, 2006 and is currently not expected to have a material impact on the Company’s results of operations and financial position.

FASB Staff Position (“FSP”) FIN 46(R)-6 “Determining the Variability to be Considered in Applying FASB Interpretation No. 46(R)”

In April 2006, the FASB issued FSP FIN 46(R)-6, "Determining the Variability to be Considered in Applying FASB Interpretation No. 46(R)”. This FSP addresses how an entity should determine the variability when applying FIN 46(R). The variability will determine if an entity is a variable interest entity as well as the amounts of any expected losses or residual returns. This FSP is effective for reporting periods commencing after July 15, 2006. The Company is currently in the process of evaluating the impact that this FSP will have on its results of operations and financial position.

SEC Staff Accounting Bulletin 108 (SAB 108) – “Considering the Effects of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial Statements”

In September 2006, the SEC staff issued SAB 108, "Considering the Effects of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial Statements". SAB 108 was issued to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. At December 31, 2006, the date of required adoption, this new guidance did not have a material impact on the results of operations and financial positions.

      C. RESEARCH AND DEVELOPMENT, PATENTS, LICENSES

Not Applicable

      D. TREND INFORMATION

See “— A. Operating Results”, the risk factors titled “As a result of ongoing investigations of the insurance and reinsurance industry and non-traditional insurance products, we conducted an internal review and analysis of certain of our reinsurance transactions and have previously restated our financial statements, however the governmental inquiries are ongoing” and “We are a defendant in a class action lawsuit related to the Company’s announcement on July 20, 2004 that second quarter 2004 results would fall short of expectations due to higher than modeled U.S. casualty loss emergence primarily related to the underwriting years 1996 to 2001” on pages 103, and the related description of the governmental inquires in the section titled “Review of certain of Converium’s reinsurance transaction” and the class action lawsuit in the section titled “Class action lawsuits” on pages 103 and 104, respectively.

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      E. OFF-BALANCE SHEET ARRANGEMENTS

Not Applicable

      F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

	Payment due by period
Contractual Obligations			Less than 1						More than
(USD thousands)	Total		year		1-3 years		3-5 years		5 years
Long-Term Debt Obligations – Principal		200,000		—		—		—		200,000
Long-Term Debt Obligations –Interest		429,000		16,500		33,000		33,000		346,500
Operating Lease Obligations		45,000		10,100		18,800		16,100		—
Losses and loss expenses, gross (1)		6,348,600		1,523,400		1,936,100		1,142,500		1,746,600
Future life benefits, gross (1)		510,700		42,400		124,600		103,700		240,000
Total		7,533,300		1,592,400		2,112,500		1,295,300		2,533,100

(1) The Company’s unpaid losses and loss expenses and future life benefits represent management’s best estimate of the cost to settle the ultimate liabilities based on information available as of December 31, 2006 and are not fixed amounts payable pursuant to contractual commitments. The timing and amounts of actual claims payments related to these reserves might vary significantly based on many factors including large individual losses as well as general market conditions.

For further detail on our long-term debt principal and interest payments, see Note 11 to our 2006 consolidated financial statements. For further detail on our operating lease payments, see Note 20 to our 2006 consolidated financial statements.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

      A. DIRECTORS AND SENIOR MANAGEMENT

Board of Directors

Converium’s global strategy is set by its Board of Directors, the body with ultimate responsibility for Converium’s policies and management, including investment, treasury, solvency and liquidity policies. The Board of Directors consists of no less than four and no more than nine members. Currently it comprises five. With wide-ranging experience in the reinsurance sector, this group represents an appropriate mix of skills for the effective governance of a major international reinsurance organization. The Board of Directors oversees Converium’s affairs and offers regular directives to the Global Executive Committee. All Board members except Derrell J. Hendrix (whose term expired and he did not stand for re-election at the AGM on May 10, 2007), are non-executive and independent. None of the Board members have ever held an executive position within Converium or any of its subsidiaries. No interlocking directorships exist between the Board members of Converium and board members of any other company. Each Board member must disclose any material relationship with the company or potential conflict of interests, annually, in a special statement which is evaluated by the Audit Committee. Following this evaluation the Board of Directors affirmatively determines which members of the Board of Directors qualify as independent.

The composition of the Board of Directors includes a cross section of geography and professional experience. The members of the Board of Directors are elected for a term of office of not more than three years, after which they become eligible for re-election. In case of the election of a substitute, the new Board member finishes the term of office of the predecessor.

The Board of Directors is headed by the Chairman or, in his absence, by the Vice Chairman. The Board of Directors meets as often as circumstances require, but at least four times per year. In 2006 the Board of Directors met seven times physically and held five further meetings by way of conference call. The average attendance of Board members at Board and Committee meetings was over 90%.

Meetings generally last one day, with Committee meetings preceding Board meetings. Agendas are set by the Chairman of the Board of Directors or the pertinent Chairman of the Committee respectively. At each of its meetings the Board of Directors must be informed, through formal reports by the Chief Executive Officer (CEO) and the members of the Global Executive Committee (GEC), about the course of the business and the activity of the business segments and the GEC. In case of important business incidents, the Board of Directors must be informed without delay. Furthermore, each Board member receives appropriate information with respect to any matter to be considered by the Board of Directors. For financial reporting purposes, this includes an appropriate quarterly

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reporting package comprising financial and investment information including consolidated financial accounts of Converium and its business segments. The CEO, the Chief Financial Officer (CFO) and the General Legal Counsel attend Board meetings on a regular basis. Members of the GEC and other executives attend meetings at the Chairman’s invitation. In addition, conference calls and meetings between Board members and members of the GEC are held to resolve formal matters or to exchange information. The Board of Directors performs an annual self-evaluation and sets its objectives based upon this evaluation. Annually it reviews the performance of the CEO and approves his or her objectives.

The Head of Internal Audit reports directly to the Audit Committee, and the Board meets regularly with Converium’s external auditors, and, as may be necessary, with outside consultants to review the business, better understand all laws and policies, and support the management in meeting requirements and expectations.

The members of the Board, their years of birth, nationality and terms of office as at December 31, 2006 were as follows:

Name	Year of Birth	Nationality	Term Expires in
Markus Dennler (Chairman)(1)(3)	1956	Swiss	2008
Rudolf Kellenberger (Vice-Chairman)(2)(3)	1945	Swiss	2008
Lennart Blecher (1)(2)(3)	1955	Swedish	2009
Detlev Bremkamp (1)(2)	1944	German	2009
Derrell J. Hendrix (2)(4)	1953	American	2007
Harald Wiedmann (1)(3)	1945	German	2009

At the Annual General Meeting on April 11, 2006 Peter C. Colombo, Chairman, Georg Mehl, Vice-Chairman, Terry G. Clarke, George G. C. Parker and Anton K. Schnyder stepped down from the Board of Directors.

(1)	Member of the Nomination and Remuneration Committee
(2)	Member of the Finance and Risk Committee
(3)	Member of the Audit Committee
(4)	Term expired, did not stand for re-election at the Annual General Meeting on May 10, 2007.

Curricula Vitae of the Board members

Markus Dennler served in a series of positions within the Credit Suisse Group, ultimately as a member of the Executive Board of Credit Suisse Financial Services and as Chief Executive Officer responsible for the global operational Life & Pensions business. Previously, he was a member of the Corporate Executive Board of Winterthur Insurance (subsidiary of Credit Suisse Group). Markus Dennler studied law at the University of Zurich and graduated in 1982. He received his doctorate degree in 1984 and was admitted to the Bar of Zurich in 1986. Further he attended the International Bankers School in New York and the Harvard Business School (AMP) in Boston. Currently he is Vice Chairman of Implenia, a member of the Board of Directors of Swissquote Group and Petroplus as well as a councillor of the British-Swiss Chamber of Commerce.

Rudolf Kellenberger served as Deputy Chief Executive Officer of Swiss Re from April 1, 2000 until the end of 2004. In this function he dedicated much of his time to tasks within the Corporate Center, in particular in the field of Management Development, Regulatory Affairs and E-Business Development. Previously, he served in a series of positions within Swiss Re’s Executive Board assuming responsibilities for the Northern European reinsurance sector and Special Lines and, as of July 1998, taking on the leadership of Swiss Re’s then newly founded Europe division. Rudolf Kellenberger studied civil engineering at the Federal Institute of Technology (ETH), Zurich, graduating in 1970. He is Chairman of the Swiss Aviation Pool and a member of the Board of Directors of Swiss Life.

Lennart Blecher is Managing Director of the HypoVereinsbank in Munich, Germany, and is responsible for relationships with major European clients. From 2002 to 2004 he was the Managing Director of Acquisitions & Business Development for GE Commercial Finance in London. Between 1988 and 2002 he held a number of positions within the ABB Group in Zurich, Switzerland, including General Counsel of the Financial Services Group, President of Structured Finance and President of Equity Ventures. Before working for ABB, Mr Blecher was an attorney in Sweden. He obtained a law degree from Lund University in Sweden in 1980 and an international law qualification from Dallas University in 1985. Mr Blecher is a Board member of Nordkap Bank in Zurich, the Volito Group in Malmö, Sweden (as well as co-owner), AIG Private Bank in Zurich, and Brunswick Rail Leasing in Russia. He is also a member of the advisory board of EQT Opportunity Fund in Stockholm, Sweden. During the period from 2000 to 2002 he was Deputy Chairman of the Swedish Export Credit Corporation.

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Detlev Bremkamp served in a number of functions on the Board of Management at Allianz AG from 1991 to 2005, including responsibilities for European and overseas business, marine and aviation, alternative risk transfer and reinsurance. Prior to being promoted to the Board, he held a number of senior positions within the Allianz Group between 1971 to 1991, including Managing Director of Allianz Europe, and as member of the Board of Management within Allianz Versicherung. Mr Bremkamp did his apprenticeship with Allianz and completed further training programs with British insurers, brokers and Lloyd’s of London. He is a member of the supervisory board of ABB AG in Mannheim and Hochtief AG in Essen, both in Germany and Allianz Compagnia Italiana Finanziamenti S.p.A in Milan, Italy. Furthermore, he is on the advisory board of Lehman Brothers, London, and the Baye rische Landesbank in Munich, Germany. In addition, Mr Bremkamp holds a number of board memberships in several other companies and committees in the financial sector.

Derrell J. Hendrix, whose term expired and he did not stand for re-election at the Annual General Meeting on May 10, 2007, is Chief Executive Officer of RISC Ventures LLC and the RISConsulting Group LLC, a Boston-based risk management consulting company which he founded in 1996 together with Hannover Rückversicherungs AG (through its US subsidiary, Insurance Corporation of Hannover). Mr Hendrix served from 1995 to 1996 as Managing Director and Head of Derivatives at the Bank of Boston. He began his career at Citibank in 1977, and from 1980 through 1995 he held various department head positions in Citicorp’s banking and investment banking operations in Toronto, Hong Kong and London. Mr Hendrix holds a Master of Arts from the Fletcher School of Law and Diplomacy, Medford, Massachusetts, and a Bachelor of Arts from Amherst College, Amherst, Massachusetts.

Harald Wiedmann has been President of the German Accounting Standards Board in Berlin, Germany, since 2006. Before that, he worked in a variety of capacities within the KPMG Group from 1992 to 2005, first as a member of the Executive Board, then, from 1998 to 2005, as the CEO of KPMG Deutsche Treuhand-Gesellschaft AG, and, from 2002 until 2005, as Chairman of KPMG Europe, Middle East and Africa. From 1996 he was a member of the Executive Committee and the International Board of KPMG International. Prior to its merger with KPMG, he held a number of positions from 1974 in Peat Marwick Treuhand, an audit firm based in Frankfurt, Germany, most recently as Managing Partner. Professor Wiedmann was a member of the Main Technical Committee of the German Institute of Auditors (Hauptfachausschuss des Institutes der Wirtschaftsprüfer) from 1988 to 1997, holding the post of President from 1993. He graduated with a degree in law from the German University of Munich in 1969 and obtained his doctorate and tax advisory qualification in 1976. He is an honorary professor at the University in Frankfurt and the Technical University in Berlin, both in Germany. He is the author of a number of publications on audit-related subjects and holds several professional memberships. Presently he is a member of the supervisory board of Praktiker Bau- und Heimwerkermärkte Holding AG, Wincor Nixdorf AG, ProSiebenSat.1 Media AG and Merz Pharma AG & Co KG and serves as member of the supervisory boards of several other non-listed companies in Germany.

The business address for each member of our Board of Directors is Converium Holding AG, General Guisan-Quai 26, CH-8002 Zürich Switzerland.

Global Executive Committee

The Board of Directors has delegated the management of Converium to the Global Executive Committee (GEC). The GEC comprises an Executive Management Team, consisting of eight members as of December 31, 2006. The function of Chief Operating Officer whose responsibilities include reinsurance accounting, information technology, claims management and Sarbanes-Oxley compliance, was introduced as at July 1, 2006. The Head of Specialty Lines assumed additional responsibility for the Life & Health segment as of February 1, 2007. At the same time the number of members of the GEC was reduced from eight to seven. The GEC is generally responsible for implementing Converium’s global strategy, ensuring effective collaboration between each subsidiary and business segment, and reviewing progress against financial and operating plans as approved by the Board of Directors.

At December 31, 2006 the members of our Global Executive Committee, their years of birth, nationality and positions held as well as those who joined through the date of this Form 20-F are as follows:

Name	Year of Birth	Nationality	Position Held
Inga K. Beale	1963	British	Chief Executive Officer
Paolo De Martin (3)	1969	Italian	Chief Financial Officer
Christian Felderer	1954	Swiss	General Legal Counsel
Benjamin Gentsch (4)	1960	Swiss	Head of Specialty Lines
Markus Krall (1)	1962	German	Chief Risk Officer
Christoph Ludemann (6)	1956	German	Head of Life & Health Reinsurance
Frank Schaar (6)	1960	German	Head of Standard Property & Casualty Reinsurance
Andreas Zdrenyk (2)	1959	Swiss	Chief Operating Officer
Jakob Eugster (5)	1952	Swiss	Head of Standard Property & Casualty Reinsurance

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Changes to the Global Executive Committee effective July 1, 2006:

(1) Appointment of Markus Krall as Chief Risk Officer and member of the Global Executive Committee, replacing Hans-Peter Boller. Markus Krall will leave the Company by June 30, 2007.

(2) Appointment of Andreas Zdrenyk as Chief Operating Officer and member of the Global Executive Committee.

(3) Appointment of Paolo De Martin as Chief Financial Officer and member of the Global Executive Committee, replacing Andreas Zdrenyk (interim Chief Financial Officer, February 28, 2005 until June 30, 2006).

Changes to the Global Executive Committee effective February 1, 2007:

(4) Benjamin Gentsch Head of Specialty Lines assumes additional responsibility for Life & Health Reinsurance replacing Christoph Ludemann

(5) Appointment of Jakob Eugster as Head of Standard Property & Casualty Reinsurance and member of the Global Executive Committee replacing Frank Schaar.

(6) Resigned from the Global Executive committee.

Inga K. Beale assumed the position of Chief Executive Officer as of February 1, 2006. She joined the Prudential Assurance Company, London, UK in 1982 as an underwriter specializing in reinsurance. In 1992 she joined GE Insurance Solutions where she headed up the UK Reinsurance Underwriting team. In 2001, Inga Beale took on the role of Global Underwriting Audit Leader in Kansas City, USA. Ms Beale became Global Underwriting CoE Leader in 2002 and in 2003 assumed responsibility for the Property & Casualty reinsurance business throughout Continental Europe, the Middle East and Africa. In 2004, she was appointed President and Chairman of the Board of Management of GE Frankona Rückversicherungs-AG in Munich, Germany. In 1987 she became an Associate of the Chartered Insurance Institute (ACII). She attended Newbury College, UK, where in 1981 she qualified in business studies, majoring in economics, mathematics and accountancy. Ms Beale is a director of Global Aerospace Underwriting Managers Ltd. (GAUM) and Medical Defence Union Services Ltd. (MDUSL).

Paolo De Martin serves as Chief Financial Officer of Converium as of July 1, 2006. He joined General Electric Company in 1995 as a finance trainee in London. In 1997 he was recruited in GE’s internal auditing & consulting group, charged with assignments in multiple GE businesses in the Americas, Europe and Asia-Pacific. In 2001, Paolo De Martin was promoted to Executive Manager for GE Capital Europe and then joined GE Insurance Solutions as financial planning and analysis manager for Global Property and Casualty Reinsurance. As of 2003 he was CFO for GE Frankona group. Prior to joining GE he gained a two-year entrepreneurial experience in the eyeglasses business as founder and managing partner of an eyewear manufacturer. Paolo De Martin is a 1993 graduate in Business Economics of Ca’ Foscari University, Italy.

Christian Felderer is the General Legal Counsel and an Executive Vice President of Converium. He joined Zurich Re in 1997 and has more than 20 years experience in the insurance and reinsurance industry, most recently as Senior Legal Counsel for Zurich Re and General Counsel for Converium. Between 1990 and 1997 Mr Felderer had various management responsibilities within the Zurich Group’s International Division, including the establishment and management of the Captives and Financial Risk Management department and management of the Claims organization of the International Division. From 1986 to 1990 he was Corporate Legal Counsel in the General Counsel’s Office of the Zurich Insurance Group, and from 1983 to 1986 he was an underwriter in the Casualty department of the International Division. Mr Felderer has a law degree from the University of Zurich and is admitted to the Bar of the Canton of Zurich.

Benjamin Gentsch is the Executive Vice President for Specialty Lines. In 1998, he joined Zurich Re as the Chief Underwriting Officer Overseas where he was given the task of strengthening the company’s position in the Asian, Australian, African and Latin American markets. In addition, he took charge of the Global Aviation reinsurance department and built up the Professional Risk and Global Marine reinsurance departments. In September 2002, Mr Gentsch was appointed Chief Executive Officer of Converium Zurich. Between 1986 and 1998, he held various positions at Union Reinsurance Company, Zurich, where from 1990 he was responsible for treaty reinsurance business in Asia and Australia. He is a director of Global Aerospace Underwriting Managers Ltd.

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(GAUM) and Medical Defence Union Services Ltd. (MDUSL). Mr Gentsch holds a degree in business administration of the University of St. Gallen, with a focus on risk management and insurance.

Markus Krall served as Chief Risk Officer from July 1, 2006 and will leave the Company by June 30, 2007. He was a senior partner at McKinsey & Company in Frankfurt and Head of the Risk Management Practice in Central Europe as well as a member of the Global Leadership Group of the Risk Management Practice. In this role he led a portfolio of global risk management assignments and projects spanning banking and insurance in Europe, the United States, the Middle East, Asia and Australia. Among the clients Mr Krall served were several of the global top 20 financial services providers, regulatory bodies and supranational institutions. He held that role since 2003 when he joined McKinsey & Company. Mr Krall started his professional career at Allianz AG Holding in Munich in 1991 as a member of the Executive Board’s staff. In 1994, he moved to the consulting profession with a focus on financial services, first for the Boston Consulting Group in Frankfurt, then, as from 1997, for Oliver Wyman & Company where he specialized in risk management for financial services institutions and was elected Partner and Director in 2000. He is a German citizen, holds a diploma and a PhD in economics from the University Freiburg i.Br., Germany. He completed his postgraduate studies at the Imperial University of Nagoya, Japan.

Christoph Ludemann was the Executive Vice President for Life & Health Reinsurance until January 31, 2007. He joined Converium in September 2002, bringing to the Company 20 years’ experience in the reinsurance market. From 1990 until 2002 Mr Ludemann was responsible for General Cologne Re’s European and Latin American life and health markets, and from 1995 until 2002 he was also a member of the Executive Board of Management of General Cologne Re of Vienna. Between 1983 and 1990, he worked as General Cologne Re’s Marketing Manager for the Netherlands, Scandinavia and Austria. Mr Ludemann has a degree in mathematics and insurance economics from the University of Cologne.

Frank Schaar was the Executive Vice President for Standard Property & Casualty Reinsurance until January 31, 2007. He joined Zürich Rückversicherung (Köln) AG as Chief Executive Officer in 2000. Previously he was employed by Hannover Re for 17 years until 1999, most recently serving as a Managing Director and a member of the extended board in charge of Asia, Australia and Africa. From 1982 until 1997, Mr Schaar served in various capacities, most recently as Senior Vice President with responsibility for Germany. Mr Schaar holds a degree in insurance economics and worked as a lecturer in reinsurance at the Institute for Professional Development of the Insurance Association in Hannover for ten years.

Andreas Zdrenyk serves as Chief Operating Officer as of July 1, 2006. He joined Zurich Re in 1998 and gained in-depth insight into the Company’s operations in various functions such as Chief Financial Officer of Zurich Re, Zurich, Converium Zurich and Converium Group, Head of Internal Audit & Consulting and Global Chief Information Officer. Prior to joining Zurich Re, Andreas Zdrenyk spent a total of 16 years with the Winterthur Swiss Insurance Group, six years of which as regional Head of Internal Audit North America based in the United States. Since December 5, 2005, Mr Zdrenyk is a director of Medical Defense Union Services Ltd. (MDUSL). Andreas Zdrenyk holds a Master in Business Administration from Cox School of Business, Dallas, USA and a Master in Information Systems/Information Technology degree from the Swiss Association of Commerce, Zurich, Switzerland.

Member of the GEC as of February 1, 2007 Curricula Vitae

Jakob Eugster is Converium’s Executive Vice President for Standard Property & Casualty Reinsurance, effective February 1, 2007. After finishing his studies in Sargans, Switzerland, he started his reinsurance career in 1974 at Swiss Re in Zurich, with a focus on the German market. Jakob Eugster later became the assistant to Swiss Re’s CEO before assuming the client relationship responsibility for Switzerland and Austria. In 1998 he was appointed Member of the Executive Team of Swiss Re’s Europe division, taking charge of the Swiss and Austrian markets as well as selected German clients. From 2002 to 2005 he served as Managing Director of the German office of Benfield, one of the world’s leading reinsurance brokers. In this Munich-based role he was responsible for developing Benfield’s German, Swiss and Austrian markets. From 1993 to 1995 Jakob Eugster attended the University of St. Gallen International Management Seminar for insurance industry executives.

The standard notice period for termination of members of the Global Executive Committee is six months, with the exception of the Chief Executive Officer and Chief Risk Officer who have a notice period of twelve months, reflecting the traditional practice of Swiss-based companies.

The business address for each current member of our Global Executive Committee is General Guisan-Quai 26, 8022 Zurich, Switzerland.

     B. COMPENSATION

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Compensation of Directors

Directors’ fees have been determined to ensure that we can attract and retain individuals who possess an appropriate mix of skills for the effective governance of a major international reinsurance organization. The compensation is a mix of cash and share-based payments.

Board remuneration

For the term of office 2005/2006, basic cash compensation for an ordinary Board member, set at CHF 100,000 (USD 79,860), includes compensation for the membership of one Committee. Board members are entitled to receive equity compensation granted at the end of the respective period for which it is due, which shall comprise Converium shares equal to a value of CHF 25,000 (USD 19,965) with a restriction period of three years, and share options equal to a value of CHF 25,000 (USD 19,965) calculated on the Black-Scholes-Merton formula on the basis of Converium’s share price at the beginning of the period. The Chairman is entitled to an increase of 50% and the Vice Chairman to one of 25% of the individual elements of the compensation package. The following compensation was agreed for membership of a second and third Committee:

• CHF 4,000 (USD 3,194) for membership of a second Committee

• CHF 3,000 (USD 2,396) for membership of a third and any subsequent Committee and additionally,

• CHF 5,000 (USD 3,993) if the member holds one or more chairmanships in the Committees.

Board Members receive an additional compensation for any Board or Committee meetings in addition to the regular number of meetings as follows:

• CHF 5,000 (USD 3,993) for any additional meeting with physical presence by the member

• CHF 2,500 (USD 1,997) for a meeting with attendance by phone or video conference by a member

Non-executive members of the Board of Directors receive compensation of CHF 12,522 (USD 10,000) annually for a membership in the Board of Directors and CHF 6,220 (USD 5,000) for a membership in a Committee of Converium Reinsurance (North America) Inc.

For the term 2006/2007 the overall cash compensation for the Board of Directors is as follows:

Function	CHF		(USD)
Ordinary Board Member – No Committee Chair		106,667		85,184
Ordinary Board Member – With Committee Chair		146,467		116,968
Vice Chairman of the Board		220,000		175,692
Chairman of the Board		440,000		351,384

One half of the cash compensation is paid on the date of the Annual General Meeting at the beginning of the annual period for which the Board members serve and the other half on the date of the Annual General Meeting at the end of the annual period.

In addition to the cash compensation the Board of Directors are entitled to an equity compensation granted on the date of the Annual General Meeting at the end of the annual period, which comprises of Converium shares in an amount equal to one quarter of the cash compensation, subject to a restriction period of three years and Converium share options in an amount equal to one quarter of the cash compensation calculated on the Black-Scholes-Merton formula on the basis of the Converium share price at the beginning of the period.

The Board of Directors has further authorized the payment of additional compensation in recognition of the additional extraordinary work performed by the Chairman in connection with the SCOR Tender Offer on an hourly/daily basis derived from the compensation for his regular work. As Chairman’s compensation is based on an assumption that he will spend 72 work days a year in his capacity, the Board set the maximum amount of daily compensation for his work on the SCOR Tender Offer by dividing his total annual compensation by 72. Additionally, members of the Board of Directors (other than the Chairman) are entitled to receive additional compensation in connection with their participation at special meetings of the Board of Directors, if any, related to the SCOR Tender Offer (CHF 5,000 for attending in person and CHF 2,500 for attending by phone or video conference).

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The remuneration of the Board of Directors is not performance-related.

The following table illustrates the compensation paid to each Board member in 2006. Cash compensation paid at the date of each Ordinary General Meeting comprises 50% of the cash compensation due for the ending annual period and 50% for the commencing annual period.

	Cash			Shares		Shares held at		Options		Options held
	Compensation (in			allocated in		December 31,		allocated in		at December
	USD)			2006		2006(1)		2006(2)		31, 2006(3)
Board Member
Markus Dennler		336,211			2,110		2,111		5,774		5,774
Rudolf Kellenberger		190,466			2,110		2,111		5,774		5,774
Lennart Blecher		58,564			1		1		—		—
Detlev Bremkamp		58,564			1		1		—		—
Derrell J. Hendrix(7)		106,501			2,110		3,289		5,774		13,282
Harald Wiedmann		58,564			1		1		—		—
Peter C. Colombo(6)		296,281	(4)		3,165		n.a.		—		11,264
Georg Mehl(6)		114,200			2,637		n.a.		3,217		12,463
Terry G. Clarke(6)		708,311	(5)		2,110		n.a.		5,774		13,026
Georg G.C. Parker(6)		73,471			2,110		n.a.		5,774		13,282
Anton K. Schnyder(6)		109,408			2,110		n.a.		5,774		13,282

(1)	Includes shares personally bought.
(2)	Options vest immediately, have a term of 10.5 years and an exercise price equal to fair market value at the beginning of the period for which they were granted.
(3)	An adjustment to the exercise price of all options outstanding prior to the 2004 rights offering was completed in 2005 in order to account for the dilution of the value of the options as a result of the 2004 rights offering. The reduction in exercise price maintains the same Black-Scholes-Merton value of the option before and after the 2004 rights offering. Upon termination of their mandate, the Directors have to exercise any options within 24 months otherwise they are forfeited.
(4)	Includes severance payment of CHF 100,000 (USD 79,860) following his resignation as Chairman effective April 11, 2006.
(5)	Includes total compensation for services rendered as CEO and Director until February 1, 2006 and April 11, 2006 respectively as well as severance payments of CHF 300,000 (USD 239,580) following his resignation as CEO and CHF 100,000 (USD 79,860) following his resignation as Director.
(6)	Office ending at the Annual General Meeting of April 11, 2006
(7)	Term expired, did not stand for re-election at the Annual General Meeting on May 10, 2007.

Converium has retained the RISConsulting Group LLC, of which Mr Hendrix (a former director) is co-owner and Chief Executive Officer, for certain consulting services. Converium paid total fees of USD 20,833 (CHF 25,918) to the RISConsulting Group LLC for services rendered in 2005. In 2006 the RISConsulting Group LLC did not render any services. Mr Hendrix is also a manager and owner of approximately 57% of the outstanding share capital of RISC Ventures LLC, a Delaware-based limited liability company created to manage and operate companies engaged in commercializing technologies and intellectual properties developed by the RISConsulting Group LLC and its affiliates. In April 2004, Converium AG invested USD 2.0 million in RISC Ventures LLC for an approximate 17.5% ownership interest in that entity. Converium sold its 17.5% ownership interest in RISC Ventures LLC to a third party at book value on October 28, 2005.

In 2006 neither Converium nor any of its subsidiaries granted loans, advance payments or credit lines to Board members, senior management or parties closely related to them. As of the end of December 2006 no such loans, advance payments or credit lines are outstanding. No shares and options are held by closely linked parties of the members of the Board.

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Compensation of senior management

Global Executive Committee remuneration

The Nomination and Remuneration Committee sets compensation levels for members of the GEC and proposes to the Board the remuneration of the Chief Executive Officer.

Compensation for each member of the GEC consists of a base salary and an incentive component based on Converium’s and the individual’s performance. The incentive component may vary highly from year to year depending on the corporate and personal achievement of the incentive award targets set annually by the Board of Directors.

The Nomination and Remuneration Committee determines the awards paid out to the GEC. The performance-based incentive component consists of the Annual Incentive Plan (AIP) and the Long-Term Incentive Plan (LTIP). In 2006 a minimum of 25% of the performance-based compensation paid under the AIP was paid in the form of Converium shares. As of 2007, the AIP will be paid out in cash only. The LTIP is part of Converium’s executive share ownership program and designed to align the interests of management closely with those of shareholders as well as to encourage stock ownership. In 2006, 50% of the award paid out under the LTIP was delivered in Converium shares and the other 50% of the award was paid out in non-qualified options. As of 2007 LTIP awards will be made with Converium shares only. These shares will vest after three years (cliff vesting).

Total aggregate compensation of all officers of the GEC in 2006 was USD 6.4 million (CHF 8.0 million). This total includes base salary and cash awards made under short- and long-term incentive plans paid during 2006, and the estimated value of other compensation-related items.

Two members of the GEC, Peter Boller and Terry G.Clarke, gave up their functions during 2006. In line with contractual obligations a total of USD 1.0 million (CHF 1.2 million) (including share awards) was paid to these individuals in 2006. No further payments were made to former members of the GEC in 2006.

GEC members held shares and options at the end of December 2006. Some were awarded under Converium’s AIP and LTIP, some converted to Converium shares and options from employee participation plans of Converium’s former parent, Zurich Financial Services, and others bought in conjunction with the Initial Public Offering or otherwise. No options are held by closely linked parties. GEC members participate in local pension plans. More information about Converium’s employee participation and pension plans is contained in notes 13 and 14 to the 2006 financial statements.

Upon a take-over situation all outstanding options and shares granted to the members of the GEC or other staff would vest immediately. Furthermore in such a situation the employment agreements with the members of the GEC provide for a severance payment in the amount of an annual base salary and 100% of the GEC member’s personal Annual Incentive Plan target in case the employment agreement is terminated by the employer (or under certain circumstances – i.e. in case of a constructive termination – by the GEC member) within 12 months after the completion of a take-over situation.

As part of the transaction agreement between Converium and SCOR S.A. (dated May 9, 2007), Converium AG will enter into termination agreements with Inga Beale and Paolo De Martin. Subject to the settlement of the tender offer the agreements terminate the employment agreement between Converium AG and Inga Beale respectively Paolo De Martin by December 31, 2007. As part of the agreement Converium will pay USD 3.4 million (CHF 4.2 million) to Inga Beale and USD 2.0 million (CHF 2.5 million) to Paolo De Martin releasing the Company from all obligations as of December 31, 2007 (including severance payments mentioned in the paragraph above).

Employee incentive and benefit plans

An important component of our compensation program is the provision of additional employee benefits designed to encourage our employees to pursue our annual and longer-term objectives. These incentive plans are designed to attract, retain and motivate executives and staff to achieve performance-related targets and align the interests of our employees with those of our shareholders.

Accordingly, we have established incentive programs where benefits are linked to both corporate, financial and business as well as individual performance targets. Additionally, our long-term incentive plans include equity participation and stock option plans or their equivalent. These plans took effect at the time of the Formation Transactions. Their terms are summarized below.

Share Plan

Converium has adopted a standard stock option plan for our non-US employees and an omnibus share plan for our US employees. These arrangements, which we refer to collectively as the “Share Plan”, establish the framework by which we grant awards to selected executives, employees and consultants of Converium and its subsidiaries. In addition, our subsidiaries are able to establish so-called “sub-plans” under the Share Plan in order to address local law and competitive practice concerns. However, we intend that the terms of these sub-plans will be substantially the same as the Share Plan.

The shares required under the plans are purchased in the open market.

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Awards are granted at the discretion of our Remuneration Committee. Generally, the size of a participant’s award is based on the level of responsibility and position, market conditions and the extent of the executive or employee’s prior participation in the Converium plans described above.

New options granted have an exercise price equal to the market value of the shares or ADSs on date of grant, 25% vest immediately on the grant date and 25% each year thereafter and will have a 10.5 year term. For 2001 and 2002, most restricted shares granted vest in their entirety after six years, subject to acceleration after year three based on the achievement of certain performance objectives. Beginning in 2003, most restricted shares granted vest ratably over three years. Shares also vest upon retirement.

In connection with these plans, we incurred approximately USD 4.2 million of incentive compensation expense in 2006.

Grants to Global Executive Committee

Global Executive Committee members held shares and options at the end of December 2006. Some were awarded under Converium’s AIP and LTIP, some converted to Converium shares and options from employee participation plans of Converium’s former parent, Zurich Financial Services, and others bought in conjunction with the Initial Public Offering or otherwise. No options are held by closely related parties.

									Options vested of
			Shares held at				Options held at		options held at
	Shares granted		December 31,		Options granted		December 31,		December 31,
	in 2006 (1)		2006 (2)		in 2006 (3)		2006		2006
Global Executive Committee member
Inga Beale		19,109		—		56,105		56,105		14,027
Paolo De Martin		26,949		18,726		23,629		23,629		5,907
Christian Felderer		19,351		22,119		37,665		110,484		50,148
Benjamin Gentsch		35,706		78,276		53,202		210,012		123,123
Markus Krall(6)		9,046		—		25,992		25,992		6,498
Christoph Ludemann(4)		19,733		14,616		40,937		114,073		47,443
Frank Schaar(4)		26,224		23,107		54,333		219,046		131,121
Andreas Zdrenyk		16,302		18,643		31,781		88,177		40,645
Peter Boller(5)		9,070		34,699		21,106		153,907		100,656

(1)	Shares granted in 2006 include shares awarded under the LTIP, which are subjected to various vesting schedules, and shares purchased through the employee stock purchase plan. During the vesting period there is a risk of forfeiture in case of any termination of the employment relationship.
(2)	Includes only vested shares (includes shares held by closely related parties).
(3)	Options have an exercise price equal to the market value of the shares on date of grant, 25% vest immediately on the grant date and 25% each year thereafter, and have a 10.5-year term. The strike price of all options outstanding prior to the Rights Offering in 2004 was adjusted in 2005 in order to account for the dilution of the value of the options as a result of the Rights Offering. The reduction in the strike price maintains the same Black-Scholes-Merton value of the option before and after the Rights Offering and does not reflect any other decrease in the share price.
(4)	Resigned from the Global Executive committee on February 1, 2007.
(5)	Resigned from the Global Executive committee on July 1, 2006.
(6)	Will resign from the Global Executive committee by June 30, 2007.

As of the date of this Form 20-F filing, none of the members of Global Executive Committee beneficially owns more than 1% of our shares.

Annual Incentive Plan

We have also established annual incentive plans, whose primary purpose is to provide direct annual financial incentive to employees who achieve corporate performance goals established under our annual operating plan. Our subsidiaries are able to establish separate plans to address local law and competitive practice concerns, but we intend that the terms will be substantially the same and refer to

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these plans collectively as the “Annual Incentive Plan”. Employees are eligible for target awards under the Annual Incentive Plan (AIP) ranging from 5% to 200% of base salary. The size of the target award is determined by the employee’s position and competitive data for similar positions at peer companies. We set performance goals for participating employees and, in keeping with our performance-based philosophy, the resulting awards decrease or increase substantially if our actual corporate performance fails to meet or exceeds target levels. The awards may range from below or above the target amounts. The performance goals include both financial and non-financial measures.

In 2006 participants in our Annual Incentive Plan were permitted to defer a portion of their bonus into restricted shares or units under our “Annual Incentive Deferral Plan”. Unless otherwise determined by Converium, employees who determined to do so received a 25% premium, paid in restricted shares or bookkeeping units representing shares, on the amount deferred that will vest in their entirety in three years. Effective 2007, the AIP will be paid out in cash only. Accordingly, there are no entitlements to premium shares for awards paid in 2007 and after.

Upon a take-over situation an accelerated vesting of premium shares (which were granted in 2005 and 2006) will occur. The rules for the cash payout for 2007 remain unchanged.

Employee Stock Purchase Plan

Converium adopted an Employee Stock Purchase Plan (the “ESPP”) on January 1, 2002. The ESPP has two offering periods beginning January 1 and July 1 of each year. Substantially all employees meeting specified service requirements are eligible to participate in the ESPP. Participants may contribute between 1% and 15% of base salary towards the purchase of Converium Holding AG shares, up to certain limits. Employees who enroll in the ESPP purchase Converium Holding AG shares at 85% of the lower of the stock’s fair market value on the first or last day of the offering period. Effective January 1, 2007, we adopted changes to the ESPP. Under the new plan rules substantially all employees may contribute once a year up to 15% of their base salary towards the purchase of Converium Holding AG shares. The purchase price is set at 75% of the closing price of the stock fair market value on the grant date (usually the date of the AGM of Converium). Theses shares have a selling restriction of 1 year which would be lifted in case of a take-over situation.

Employee retention plan

In September 2004, Converium adopted a retention plan for certain of its key employees in order to ensure the successful continuation of business operations and the orderly run-off of its formerly owned North American operations. The total cost of the program was USD 28.8 million, over a 3 year period with the last installment paid in January 2006. The continuing operations portion was USD 7.1 million and USD 11.6 million for 2005 and 2004, respectively. Additionally included in the results for discontinued operations for 2006 is an accrual of USD 0.8 million for payments to certain North American employees following the finalization of the sale of the North American operations in December 2006. The liability for the balance of North American employees’ retention plans is covered by Berkshire Hathaway in accordance with the sale agreement.

Long Term Incentive Plan (“LTIP”)

The LTIP is designed to align the interests of management closely with those of shareholders and to encourage share ownership. LTIP awards are made to senior employees and are awarded in a combination of 50% Converium shares and 50% options to purchase shares in Converium Holding AG. Shares vest ratably over three years. Options are issued with an exercise price equal to the market value of the shares on the grant date. 25% of the options vest immediately on the grant date and 25% vest each year thereafter or upon retirement. The options expire 10.5 years after the date of grant. As of 2007 LTIP awards will be made with Converium shares only. These shares will vest after three years (cliff vesting). Upon a take-over situation all outstanding options and shares granted to LTIP participants would vest immediately. Converium intends to settle its obligations from the accelerated vesting in connection with the SCOR Tender Offer in the form of cash payment payable on the first day of the additional acceptance period. The Company is currently assessing the impact on the statement of income of the respective accounting period.

Executive IPO Option Plan

In connection with the Formation Transactions, Converium granted certain executives options to purchase shares in Converium Holding AG (the “Executive IPO Option Plan”). Under the Executive IPO Option Plan, 420,000 options to purchase shares in Converium Holding AG were awarded. The exercise prices were equal to the market value of the shares or ADSs on the grant date. Executive IPO Options are now fully vested and expire 10.5 years after the date of grant.

For further information on our share-based incentive plans, see Note 14 to our 2006 consolidated financial statements.

C. BOARD PRACTICES

Board committees

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The Board of Directors has three Committees, which meet in conjunction with or prior to Board meetings, as necessary, and regularly report and submit proposals to the Board of Directors. Each Committee has a Chairman who directs the meetings according to a set agenda, and a secretary, currently the General Legal Counsel.

The Nomination and Remuneration Committee

The Nomination and Remuneration Committee comprises of at least three Board members and currently comprises four. Only independent Directors are eligible to serve on the Nomination and Remuneration Committee. In order to qualify as independent, a member may not accept any consulting, advisory or compensatory fee, other than his/her Board compensation, from the Company. In addition, a Nomination and Remuneration Committee member may not be a person affiliated with the Company or any of its subsidiaries. Standing invitees are the Chief Executive Officer (CEO) and the Chief Human Resources Officer.

The Nomination and Remuneration Committee proposes to the Board of Directors the appointment of members of the Board of Directors, of the Committees of the Board of Directors and of their chairpersons, the Chairman and Vice Chairman of the Board of Directors, the CEO and the members of the Global Executive Committee. They appoint and dismiss the General Legal Counsel (if not a member of the Global Executive Committee), the Head of Internal Audit and any outside directors of Converium companies. Furthermore the Nomination and Remuneration Committee sets the compensation levels for the GEC (except the CEO) and the Head of Internal Audit, and proposes to the Board of Directors the overall remuneration for the CEO and for each of the members of the Board of Directors. They elaborate the principles of compensation, of the incentive schemes, of bonus payments for the employees and submit them to the Board of Directors for approval. Their tasks and responsibilities also include the review of overall compensation above USD 750,000, the acceptance of Executive and Board memberships in third companies by GEC members, contracts between Converium and any GEC members or any of their family members, not at arm’s length and any guidelines relating to the granting of loans by Converium to Converium employees. In 2006 the Remuneration and Nomination Committee met seven times physically.

The Finance and Risk Committee

The Finance and Risk Committee comprises of at least three Board members and currently comprises four. A majority of the members has to be financially literate. Standing invitees are the Chief Executive Officer, the Chief Financial Officer, the Chief Risk Officer, the Chief Investment Officer and the Head of Financial & Rating Models.

The Finance and Risk Committee approves external providers of asset management services and capital increases in subsidiaries between USD 5 million and USD 20 million. It initiates and reviews the Credit Rating strategy of Converium and reviews the planned tactical asset allocation, group-wide cash management, financial performance of the asset management operations and the use of derivatives. The tasks and responsibilities also include the proposal to the Board of the accounting standards framework, the annual budget and financial plans, investment and treasury policy, solvency and liquidity planning, strategic asset allocation, tax planning, the allocation of expenses to be charged to the Corporate Center, capital increases and the use of contingent or authorized capital, and share purchase program for Converium other than in connection with the operation of employee compensation plans, as well as exchange listings and de-listings.

The Finance and Risk Committee liaises with Converium’s Risk Management functions to review and identify Converium’s areas of greatest risk and their efficient management. It assesses and submits to the Board of Directors for approval Converium’s Risk Management Policy and the overall risk appetite for the most significant risk activities. It is responsible for the review and approval of the yearly risk management report, Converium’s risk assessment catalogue and action plans. In 2006 the Finance and Risk Committee held four meetings.

The Audit Committee

The Audit Committee comprises at least three Board members and currently comprises four. Only independent directors are eligible to serve on the Audit Committee. In order to qualify as independent, a member may not accept any consulting, advisory or compensatory fee from the Company. In addition, an Audit Committee member may not be a person affiliated with the Company or any of its subsidiaries. Standing invitees are the Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, the Head of Internal Audit, the Global Financial Controller and the external auditor.

The Audit Committee recommends the appointment and dismissal of the external auditors to the Board of Directors, overviews the external auditors, supervises and reviews the effectiveness of the compliance policy including all compliance matters with material

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financial/reputational consequences, approves any public disclosure in conjunction with Converium’s financial results or any other disclosure with significant impact for Converium’s business, cooperates with the internal and external auditors in order to identify any possible deficiencies in the internal control mechanisms of Converium and discusses the annual audit report with the external and internal auditors as well as with management.

The tasks and responsibilities of the Audit Committee include the review of any financial statements, the approval of the quarterly and half-year results (except 4th quarter), review and assessment of any significant accounting and reporting issues as well as the review of Converium’s year-end results, reserve policy and dividend policy. The Audit Committee is briefed on how Converium’s management develops preliminary external announcements and interim financial information and assesses the fairness of such preliminary and interim statements on the basis of Converium’s applicable accounting principles. In 2006 the Audit Committee met nine times physically and held one meeting by way of conference call.

The Audit Committee is supported in its supervisory task by Group Internal Audit (GIA). GIA assists the Audit Committee in providing an independent, objective assurance and consulting activities that are designed to add value and improve an organization’s operations. GIA helps the organization in accomplishing its objectives by bringing a systematic approach for evaluating and improving the effectiveness of risk management, internal controls and governance processes.

GIA reports directly to the Audit Committee and covers all operations of Converium worldwide. GIA has unrestricted access to all relevant documents and information. The Audit Committee also approves the audit plans and the budgets of GIA.

In 2006, GIA conducted various regular audit projects and executed the “Management Testing of the Internal Controls over Financial Reporting” (ICOFR) required by the Sarbanes-Oxley Section 404 on behalf of management.

Group Internal Audit is compliant with the Standards for Professional Practice of Internal Auditing set out by the Institute of Internal Auditors. This was confirmed by an external quality assessment review performed by KPMG.

The objectives of GIA, which were formally approved by the Audit Committee, are:

• To evaluate the reliability and controls for the financial and risk reporting systems and to provide reasonable assurance that material errors and irregularities will be detected and that corrective actions are implemented on a timely basis.

• To evaluate the reliability and integrity of financial and operational information.

• To evaluate compliance with policies, plans, procedures, regulations, laws and contracts.

• To safeguard the company assets.

• To evaluate and promote efficient use of resources.

• To review operations to ascertain whether results are consistent with established goals and whether the operations are being carried out as planned.

• To review specific operations at the request of the Audit Committee (or management as appropriate).

The areas of responsibility of the Board of Directors, its Committees and the Global Executive Committee as well as the other corporate bodies are defined in the Organizational By-laws of Converium Holding AG, which are available on the internet at www.converium.com.

At the annual general meeting of Converium Holding AG on April 11, 2006 G. C. Parker stepped down from the Board of Directors and Audit Committee. Mr Harald Wiedmann has been elected as the new audit committee financial expert.

Indemnification of officers and directors

We maintain customary directors’ and officers’ insurance for our directors and officers.

In addition, we have entered into agreements with certain of our directors pursuant to which we have agreed to indemnify each such director for legal expenses incurred in conjunction with his or her professional liability to shareholders, bondholders, creditors or others caused by actions or omissions by such person in his or her capacity as a director, except where such professional liability was caused by the intent or negligence of such director and provided that (i) such indemnification is in our best interest considering the facts and circumstances and (ii) such legal expenses are not covered by our existing Directors and Officers Liability Insurance or are otherwise reimbursable to such director by the plaintiff.

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New committee structure

In its Constituent Meeting of April 11, 2006, the newly composed Board of Directors resolved a revised structure of the Board Committees which comprised an amalgamation of the Nomination and Remuneration Committees into the Nomination and Remuneration Committee, combining the functions of the previous two committees into one; the renaming of the Finance Committee into Finance and Risk Committee and allocating certain risk and risk management related responsibilities to this committee and an amendment of the functions of the Audit Committee to reflect recent development in the corporate governance area, in particular but not limited to the development in conjunction with Sarbanes-Oxley. The revised Organizational By-laws can be accessed through Converium’s website (www.converium.com).

D. EMPLOYEES

As of December 31, 2006, Converium employed 532 people globally, including 319 at our offices in Switzerland, 142 at our offices in Germany, 24 in other European countries, 29 in the Asia-Pacific region and 42 in other regions.

A relatively small number of our employees are represented by unions. We have not experienced any material work stoppages in recent years and we believe that our relations with our employees are excellent.

The following table shows the number of employees by geographic location and category of activity:

	As of December 31,
	2006			2005		2004
Number of employees		532			594		771
Breakdown by geographic location:
Switzerland		319			294		369
United States		—			89		138
Germany		142			143		169
Asia-Pacific region		29			28		33
Other regions		42			40		62
Breakdown by main category of activity:
Underwriting		171			195		257
Finance		63	(1)		153		212
Actuarial		57			50		67
Other		241			196		235

(1) The substantial decrease in the Finance function results from the shift of employees to the Chief Operating Officer function, which was established on July 1, 2006.

E. SHARE OWNERSHIP

As of the date of this annual report, none of the members of our Board of Directors or Global Executive Committee beneficially owns more than 1% of our shares. In addition, none of the members of our Board of Directors or Global Executive Committee have an ownership interest in a company that is a major client or broker of Converium. For an explanation of shares and options, see “Item 6. — Directors, Senior Management and Employees — B. Compensation”.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

As of May 31, 2007, 87,942,160 shares were registered in our share register. These shares were owned by 4,315 shareholders, of which 3,992 were private individuals holding 3.61% of total outstanding shares, 84 were foundations and pension funds holding 1.79% of total outstanding shares and 239 were other legal entities holding 54.55% of total outstanding shares.

As of May 31, 2007, 14 holders with registered addresses in the United States, including nominees with registered addresses in the United States, held 3,565,327 of our registered shares and 7 holders with registered addresses in the United States, including nominees with registered addresses in the United States, held 5,741,564 ADSs. Brokers and other nominees hold certain of our registered shares and ADSs. In addition, some holders of our

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registered shares have not or may not register their holdings. Consequently, the above figures may not state the actual number of US beneficial holders or the number of registered shares or ADSs beneficially held by persons in the United States.

As of the date of this annual report, and in accordance with the notification requirements as set by the SWX Swiss Stock Exchange, the following are direct or indirect owners of 5% or more of our outstanding shares:

• SCOR S.A., Paris, France: 32.9% (date of notification February 19, 2007). SCOR is a French reinsurer that operates in over 120 countries.

Our major shareholders hold the same voting rights as all other shareholders.

On April 5, 2007, SCOR formally commenced a then-unsolicited tender offer for Converium. On May 9, 2007, the Company and SCOR entered into the SCOR Transaction Agreement pursuant to which the Company agreed that its Board of Directors would unanimously support and recommend the SCOR Tender Offer. If SCOR is successful and the SCOR Tender Offer is consummated, it may result in a change in control of the Company under Swiss law.

B. RELATED PARTY TRANSACTIONS

There were no unpaid loans, including guarantee commitments, granted to the Converium directors and members of the Converium Global Executive Committee as of December 31, 2006.

GAUM

In 2003, Converium finalized an agreement to acquire a 25% stake in GAUM, a leading international commercial and general aviation underwriting agency, as a part of its strategy to strengthen its long-term position in the Aviation and Space line of business. At that same time, Converium entered into a pool members’ agreement under which it became a member of the aviation and aerospace pools run by GAUM and its subsidiary, Associated Aviation Underwriters Inc.

In February 2004, Converium AG acquired a further 5.1% stake in GAUM from RSA increasing its overall stake to 30.1%.

For the 2006, 2005 and 2004 underwriting years, Converium has committed 27.25% of the overall pool’s capacity of the aviation risks managed by GAUM. Gross premiums assumed through the pools managed by GAUM were USD 230.8 million, USD 206.2 million and USD 289.0 million for 2006, 2005 and 2004 respectively.

In the light of changing business circumstances associated with Converium’s S&P rating downgrade in the third quarter of 2004, Converium entered into fronting agreements with Munich Re and National Indemnity in order to support and sustain the aviation business from GAUM. These fronting agreements initially extended to September 30, 2005, however Converium has subsequently entered into a further series of fronting agreements with National Indemnity Company and Munich Re under similar terms and conditions which ensured Converium’s continued participation in the pool of GAUM through December 31, 2006. Converium also entered into a further agreement to extend the fronting agreement with the two counterparties until December 31, 2007 in respect of United States and Canadian sourced business and in respect of business sourced from the rest of the world.

The pool members’ agreement with respect to GAUM provides that if a member of the pool has its financial strength rating downgraded below BBB+ by Standard & Poor’s Rating Service it may be served with a notice terminating its membership in the pool upon approval by the committee of representatives of the pool. Converium expects that continuation of its membership at its current rating is likely to be conditional upon its entering fronting arrangements acceptable to other pool members in a timely fashion and thereafter maintaining such arrangements. If Converium’s membership were to be reduced to less than a 5% share, it would not be permitted to participate in future pool business and would have to collateralize by way of a letter of credit its obligations under the business written by the pool in its name prior to its termination. If Converium’s pool membership were terminated, it may also be required to sell its 30.1% stake in GAUM.

At December 31, 2006 and December 31, 2005, the current carried value of goodwill associated with the 30.1% stake in GAUM was GBP 13.1 million (USD 23.4 million) and GBP 13.2 million (USD 23.6 million).

See Note 7 to our 2006 consolidated financial statements for additional information on GAUM goodwill and intangible assets.

At December 31, 2006 and December 31, 2005 Converium had an outstanding shareholder loan to GAUM of GBP 15.2 million (USD 29.8 million) and GBP 15.2 million (USD 26.1 million) at the respective balance sheet dates.

In May 2007, the Company signed a sales agreement to sell a 2.6% stake in GAUM to Münchner Rückversicherungs-Gesellschaft Aktiengesellschaft in München (“Munich Re”) for a purchase price of USD 2.6 million (at a fixed exchange rate of 1.86 against GBP), the right to part of the RSA Loan for GBP 1.3 million and additional Deferred Consideration of 2.6%. The transaction is subject to approval of the European antitrust authorities.

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MDU

Converium entered into a strategic alliance with the MDU that resulted in a 49.9% participation in MDUSL. MDUSL distributes medical malpractice insurance policies to the members of the MDU. As a result of the initial FSA approval in respect of general liability business, insurance policies underwritten by Converium Insurance (UK) Ltd were issued to members of the MDU beginning July 1, 2003. These insurance policies replaced policies formerly issued in the United Kingdom by ZFS’ entities, the majority of which were reinsured by Converium. Gross premiums written from MDU were USD 187.6 million, USD 178.6 million and USD 170.9 million for 2006, 2005 and 2004, respectively.

The MDU Shareholders’ Agreement provides that if Converium’s credit rating is lowered by more than seven points, from its initial “A+” rating, by a recognized credit ratings agency, the MDU may serve Converium with a Termination Notice. Within sixty days after service of such termination notice, MDU has the right to purchase Converium’s 49.9% shareholding in MDU Services Ltd. at a price to be mutually agreed upon by the parties, or to be determined by a valuation expert. See Note 7 to our 2006 consolidated financial statements for additional information on MDU.

The current terms of the MDU Shareholders’ Agreement require that Converium will provide a price concession, starting in 2010 and annually thereafter based upon a predetermined formula under which a price concession, which will be equal to 50% of the amount by which the present value profit, of a particular underwriting year, as calculated 10 years after that underwriting year has expired, exceeds a pre-agreed target expected present value profit. Converium has recognized a charge of USD 7.7 million and USD 9.0 million for 2006 and 2005 respectively in other (loss) income reflecting the current view of how the Company will settle this obligation.

At December 31, 2006 and December 31, 2005, the balance sheet obligation included in other liabilities was USD 16.7 million and USD 9.0 million respectively.

SCOR

On February 19, 2007, SCOR publicly announced that it had acquired a 32.9% interest in Converium’s outstanding registered shares, of which 8.3% and 24.6% were acquired through direct market purchases and share purchase agreements, respectively. On April 5, 2007, SCOR formally launched an unsolicited tender offer pursuant to which each of Converium’s registered share were to be exchanged for 0.5 ordinary shares of SCOR and CHF 4. On May 9, 2007, Converium and SCOR entered into the SCOR Transaction Agreement pursuant to which SCOR agreed to increase the consideration payable to holders of Converium’s registered shares to 0.5 new SCOR shares and CHF 5.50 in cash in exchange for each Converium registered share tendered and Converium agreed that its Board of Directors would recommend the SCOR Tender Offer to Converium shareholders. SCOR has further agreed to not to reduce the cash portion of the offer consideration by the Company’s proposed gross dividend of 0.20 CHF per share for the fiscal year ended December 31, 2006. The SCOR Tender Offer is governed by the laws of Switzerland and in case of a successful consummation may result in a change in control of the Company. Other than the Transaction Agreement - see Item 10 C Material Contracts - there are no material transactions with SCOR group.

The business as described under related party transactions contains termination provisions which give the ceding company or counterparty the right of termination in the event of a change in control. Whether a change in control has taken place or not will ordinarily be determined by the legal jurisdiction which governs the individual contract concerned. The exercise of termination provisions following a change in control could have a material adverse impact on our business, operating results and financial conditions.

C. INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Financial statements

See our 2006 consolidated financial statements beginning on page F-1.

Legal proceedings, claims and litigation

Converium Holding AG and its subsidiaries are continuously involved in legal proceedings, claims and litigation arising, for the most part, in the ordinary course of its business operations as a reinsurer. The outcome of such current legal proceedings, claims and litigation could have a material effect on operating results or cash flows when resolved in a future period. However, in the opinion of management, these matters are not material to Converium’s financial position, with the exception of the matters described below:

Canada Life

On December 21, 2001, The Canada Life Assurance Company (“Canada Life”), brought an action against Converium Rückversicherung (Deutschland) AG (“Converium Germany”) in the United States District Court of the Southern District of New York. Canada Life alleged that Converium Germany breached certain quota share retrocession agreements with Canada Life by failing to indemnify its full percentage of Canada Life’s September 11th losses and by failing to post an USD 82.4 million letter of credit for its alleged liability pursuant to the ISA facilities’ underlying agreements. Converium Germany disputed this claim on the grounds that its liability under the pertinent contracts is limited and also raised other contract defenses. After litigation in the federal courts concerning jurisdictional issues, which Canada Life lost, Canada Life agreed to arbitration. The organizational meeting of the arbitrators took place on October 8, 2003. Since then, pursuant to an order by the arbitration panel, Converium Germany obtained a letter of credit of USD 65.97 million to be drawn down upon, if at all, should two of the three arbitrators issue an award in favor of Canada Life. A two-week hearing was conducted in July 2005. The arbitration panel since has rendered a final award in favor of

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Converium Germany. On May 9, 2006 (and later amended twice), Canada Life brought an action against the umpire of the arbitration panel and Converium Germany in the Ontario, Canada Superior Court of Justice seeking to set aside the final award. Canada Life alleges that the umpire was biased and unable to perform his duties. Canada Life also filed a Verified Petition against Converium Germany in the United States District Court of the District of New Jersey seeking, among other relief, to vacate the final award. Converium Germany recently filed a motion to dismiss the New Jersey action. On December 31, 2006 the letter of credit expired. The trial in the Canadian proceeding is scheduled to commence in September 2007.

Converium Germany disagrees with the factual and legal arguments of both lawsuits and contends that the final award is valid and binding. However, due to the uncertainties inherent in proceedings of this nature, Converium was unable to evaluate the likelihood of an unfavorable outcome or to estimate the amount or range of any potential loss resulting from these lawsuits.

Converium Germany has fully reserved this claim. However, arrangements entered into with ZFS provide for the claim to be covered by the agreed-to cap for September 11th related losses provided to Converium by ZFS in conjunction with Converium’s Initial Public Offering.

Review of certain of Converium’s reinsurance transactions

Ongoing investigations of the insurance and reinsurance industry and non-traditional insurance and reinsurance products are being conducted by U.S. and international regulators and governmental authorities, including the U.S. Securities and Exchange Commission and the New York Attorney General.

On March 8, 2005, MBIA issued a press release stating that MBIA’s audit committee undertook an investigation to determine whether there was an oral agreement with MBIA under which MBIA would replace Axa Re Finance as a reinsurer to Converium Reinsurance (North America) Inc. (CRNA), one of our former North American subsidiaries, by no later than October 2005. The press release stated that it appeared likely that MBIA made such an agreement or understanding with Axa Re Finance in 1998. Thereafter, on April 19, 2005, CRNA received subpoenas from the U.S. Securities and Exchange Commission and the Office of the New York Attorney General seeking documents related to certain transactions between CRNA and MBIA. Converium has also received additional inquiries from the Securities and Exchange Commission and other governmental authorities in Europe regarding non-traditional insurance and reinsurance products and/or the restatement of its financial statements. The inquiries are ongoing and Converium is fully cooperating with the governmental authorities.

In view of the industry investigations and the events relating to MBIA described above, Converium engaged independent outside counsel to assist it in a review and analysis of certain of its reinsurance transactions, including the MBIA transactions. The internal review, which was overseen by the Audit Committee, addressed issues arising from the ongoing governmental inquiries and Converium’s own decision to review certain additional items. The internal review involved the assessment of numerous assumed and ceded transactions including structured/finite risk and other reinsurance transactions and encompassed all business units of Converium, a review of hundreds of thousands of e-mails, attachments to e-mails and other documents and interviews of all current members of the Global Executive Committee and the Board of Directors, as well as certain former members of senior management and other employees of Converium. The Audit Committee believes that the scope and process of the internal review has been sufficient to determine whether Converium’s assumed and ceded transactions were improperly accounted for as reinsurance, rather than as deposits. After discussing the findings of Converium’s extensive internal review with independent outside counsel, the Audit Committee determined that certain accounting corrections were appropriate and authorized the Restatement of Converium’s financial statements as of and for the years ended December 31, 2004 through 1998. As part of this process, the Audit Committee has involved its independent group auditors, PricewaterhouseCoopers Ltd. Financial information and for each of the quarters ended March 31, 2003 through June 30, 2005. have also been restated. For further information regarding these accounting adjustments, please refer to Converium’s 2005 Annual Report. (See Note 3 to our 2005 consolidated financial statements on page F-17 to the 2005 20-F filed with the SEC on June 29, 2006) (Additionally, 2002 was further restated as discussed in Note (1) to the 2006 consolidated financial statements on page F-3). Previously published financial statements regarding any of the above periods should no longer be relied upon.

As noted above, Converium is fully cooperating with the governmental authorities and are in the process of sharing the results of our internal review with the relevant authorities. Although the internal review was extensive, the ongoing governmental inquiries, or other developments, could result in further restatements of Converium’s financial results in the future and could have a materially adverse effect on Converium.

Class action lawsuits

Following the Company’s announcement on July 20, 2004, that second quarter 2004 results would fall short of expectations due to higher than modeled U.S. casualty loss emergence primarily related to the underwriting years 1996 to 2001, six securities law class

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action lawsuits were brought against the Company and several of its officers and directors in the United States District Court for the Southern District of New York between October 4, 2004 and December 2, 2004 (collectively, the “Federal Actions”).

On December 9, 2004, another securities law class action lawsuit, Rubin v. Converium Holding AG, et al., Index No. 04-117332, was brought against the Company and certain of its officers and directors in the Supreme Court of the State of New York for the County of New York (the “Rubin Action”). The Rubin Action was removed to the United States District Court for the Southern District of New York. Rubin moved to remand his action to state court.

On July 14, 2005, the Court signed an order in the Federal Actions appointing Public Employees’ Retirement System of Mississippi and Avalon Holdings Inc. lead plaintiffs. On September 23, 2005, the lead plaintiffs filed a consolidated amended class action complaint (the “Complaint”) setting forth their claims. The Complaint includes the Louisiana State Employees’ Retirement System as an additional named plaintiff.

The Complaint names as defendants the Company; former directors Terry G. Clarke, Peter C. Colombo, Georg F. Mehl, George G.C. Parker, Derrell J. Hendrix and Anton K. Schnyder; former officers Dirk Lohmann, Martin Kauer and Richard Smith; former director Jürgen Förterer; ZFS; UBS AG; and Merrill Lynch International. The Complaint asserts claims for violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12 and 15 of the Securities Act of 1933 and alleges, among other things, that the Company misrepresented and omitted material information in various public disclosures during the period from December 11, 2001, through September 2, 2004 because the Company did not establish adequate loss reserves to cover claims by policyholders; that the Company’s announced reserve increases prior to July 20, 2004, were insufficient; and that, as a result of the foregoing, the Company’s earnings and assets were materially overstated. The putative class of plaintiffs on whose behalf these lawsuits have been asserted consists of all buyers of the Company’s stock from December 11, 2001, through and including September 2, 2004. Plaintiffs are seeking unspecified compensatory damages, attorney’s fees, witness fees and expert fees.

On December 23, 2005, the defendants moved to dismiss the Complaint. On February 17, 2006 the lead plaintiffs submitted a memorandum of law in opposition to all defendants’ motions to dismiss the Complaint.

On April 21, 2006, plaintiffs moved for leave of Court to file a proposed Consolidated Second Amended Class Action Complaint, to amend their Complaint to add, among other things, Securities Act claims based on Converium’s March 1, 2006, restatement of its financial accounts from 1998 through 2005.

On November 16, 2006, the Court consolidated all of the actions, including the Rubin action. On November 27, 2006, Rubin’s motion to remand his action to state court was withdrawn. On December 1, 2006, Plaintiffs submitted a proposed Consolidated Second Amended Class Action Complaint as a substitute for the previously proposed Second Amended Class Action Complaint, which made certain changes to the previously proposed Consolidated Second Amended Class Action Complaint.

On December 28, 2006, the Court issued an Opinion and Order granting in part and denying in part defendants’ motions to dismiss the Complaint. The Court dismissed the claims against all defendants alleging violations of Sections 11, 12 and 15 of the Securities Act of 1933 as well as claims asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) based upon allegations that the Company misrepresented and omitted material information in its December 11, 2001, initial public offering prospectus and registration statement. The Court denied the motion to dismiss those claims against the Company and three of its former officers alleging that those defendants violated Section 10(b) and Section 20(a) of the Exchange Act by misrepresenting and omitting material information in various public disclosures following the Company’s initial public offering. Also on December 28, 2006, the Court denied plaintiffs’ motion to amend their complaint. The Court further ordered that the parties who remain in the actions, including the Company, engage in settlement discussions before a Magistrate Judge. A settlement conference took place before a Magistrate Judge on February 15, 2007 but did not result in a settlement.

On January 12, 2007, plaintiffs filed a motion for reconsideration of the Court’s December 28, 2006 order. The defendants filed an opposition to that motion on February 5, 2007, and plaintiffs filed a reply brief in further support of their motion on February 20, 2007. On April 9, 2007, the Court granted Plaintiffs’ motion for reconsideration in part and denied it in part. The Court granted Plaintiffs’ motion to reconsider its dismissal of Exchange Act claims arising out of the initial public offering. The Court indicated that it will address the other arguments Defendants made to support dismissal of those claims in a forthcoming opinion. The Court denied Plaintiffs’ motion to reconsider the dismissal of the Securities Act claims, as well as denial of their motion to file a Consolidated Second Amended Class Action Complaint.

The consolidated actions are in the discovery phases; thus, the timing and outcome of these matters are not currently predictable. The costs of defending the class action may have a material impact on our operating results in future reporting periods and an unfavorable outcome could have a materially adverse effect on the Company’s financial condition, results of operations and cash flows.

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Dividends and dividend policy

The Annual General Meeting of shareholders held in Zug on April 11, 2006 approved the proposal of the Board of Directors to allocate CHF 14,668,946 of available earnings to dividends that resulted in a gross dividend of CHF 0.10 per registered share. The dividend payment was made on April 18, 2006.

For the business year 2006 the Annual General Meeting held in Zurich on May 10, 2007 approved the proposal of the Board of Directors to allocate CHF 29,337,892 of available earnings to dividends that resulted in a gross dividend of CHF 0.20 per registered share. The dividend payment was made on May 15, 2007.

Our dividend policy in future periods will depend on a number of factors including our results of operations, our financial condition, our capital and cash requirements, general business conditions, legal, contractual and regulatory restrictions regarding the payment of dividends by us and other factors. Holders of shares and ADSs with respect to the underlying shares are entitled to receive payment in full of any dividends declared. The Board of Directors pursues a target pay-out ratio of 25-35%.

As a holding company, we are dependent on dividends, and interests from our subsidiaries to pay cash dividends. The payment of dividends by our subsidiaries to their parent companies is restricted by applicable laws and regulations. To the extent our subsidiaries are restricted from paying dividends to Converium Holding AG, we may be unable to pay dividends to our shareholders. For further information on the restrictions on our ability to pay dividends, see Note 21 to our 2006 consolidated financial statements. In addition to the dividend restrictions, Converium AG’s ability to pay dividends may be restricted by certain directions issued by FOPI.

Under Swiss corporate law, we may only pay dividends if we have either sufficient profits available for distribution or if we have sufficient free reserves pursuant to our statutory (non-consolidated) balance sheet and the provisions of Swiss law to allow for distributions from that reserve.

As long as the general reserves amount to less than 20% of our nominal share capital, Swiss corporate law requires at least 5% of our annual net profits to be retained as general reserves. Any net profits remaining after this retention are eligible to be distributed as dividends, subject to approval by our shareholders at a shareholders’ meeting, and our independent group auditors must confirm that a dividend proposal by our Board of Directors complies with our Articles of Incorporation and Swiss law.

B. SIGNIFICANT CHANGES

Except as otherwise disclosed in this annual report, there has been no significant change in our financial position since December 31, 2006.

ITEM 9. THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS

Market price information

Trading on the SWX Swiss Exchange

The table below presents the highest and lowest reported sale price for our registered shares on the SWX Swiss Exchange for the periods indicated, expressed in Swiss francs. On June 7, 2007, the latest practicable day before the printing of this annual report, the last reported closing price of our registered shares on the SWX Swiss Exchange was CHF 21.95 per registered share.

	High		Low
	CHF		CHF
Calendar Year 2002		89.75		54.85
Calendar Year 2003		74.50		49.60
Calendar Year 2004 (1)		73.75		7.42
Calendar Year 2005:		14.60		9.00
First Quarter		12.20		10.05
Second Quarter		12.50		9.00
Third Quarter		13.40		9.90
Fourth Quarter		14.60		12.05
Calendar Year 2006:		17.00		11.75
First Quarter		16.55		13.40
Second Quarter		16.40		12.15
Third Quarter		15.70		11.75

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	High		Low
	CHF		CHF
Fourth Quarter		17.00		14.90
Last 6 Months:
December 2006		16.60		15.35
January 2007		18.70		16.30
February 2007		22.35		17.85
March 2007		21.50		19.55
April 2007		23.25		20.95
May 2007		23.05		21.06

(1) Includes the effect of the 2004 rights offering.

Trading on the New York Stock Exchange

The table below presents the highest and lowest reported closing price for our ADSs on the New York Stock Exchange. On June 7, 2007 the latest practicable day before the printing of this annual report, the last reported sale price of our ADSs on the New York Stock Exchange was USD 8.88 per ADS.

	High		Low
	USD		USD
Calendar Year 2002		28.52		18.30
Calendar Year 2003		26.63		19.15
Calendar Year 2004		29.57		3.15
Calendar Year 2005:		5.54		3.59
First Quarter		5.18		4.44
Second Quarter		5.20		3.59
Third Quarter		5.09		3.96
Fourth Quarter		5.54		4.58
Calendar Year 2006:		6.79		4.72
First Quarter		6.45		5.23
Second Quarter		6.77		4.85
Third Quarter		6.33		4.72
Fourth Quarter		6.79		6.00
Last 6 Months:
December 2006		6.79		6.40
January 2007		7.75		6.62
February 2007		8.35		7.05
March 2007		8.78		7.99
April 2007		9.54		8.67
May 2007		9.44		8.48

B. PLAN OF DISTRIBUTION

Not applicable.

C. MARKETS

Converium registered shares have a listing on the SWX Swiss Exchange under the symbol “CHRN”. Converium ADSs are listed in the United States on the New York Stock Exchange, or NYSE under the symbol “CHR”. The NYSE is the only trading market for our ADSs in the United States. Each of our ADSs represents one-half of one of our registered shares. We expect that the SWX Swiss Exchange will remain the principal trading market for our registered shares.

The 8.25% Guaranteed Subordinated Notes due 2032 are securities of Converium Finance S.A., a société anonyme incorporated under the laws of Luxembourg, and a wholly-owned subsidiary of Converium AG, and have a listing under the symbol “CHF” on the New York Stock Exchange.

D. SELLING SHAREHOLDERS

Not applicable.

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E. DILUTION

Not applicable.

F. EXPENSES OF THE ISSUE

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

B. MEMORANDUM AND ARTICLES OF INCORPORATION

See “Description of Shares and Share Capital” in the Registration Statement on Form F-1, file number 333-14106, filed with the SEC under the Securities Act of 1933 on December 10, 2001. The Articles of Incorporation were amended in 2004 and 2006 to reflect the following changes to our issued, authorized and conditional share capital.

Issued share capital

Upon incorporation on June 19, 2001, Converium Holding AG had share capital of CHF 100,000 divided into 10,000 fully paid registered shares with a nominal value of CHF 10 each, all of which were entitled to receive dividends. On September 24, 2001, the Extraordinary General Meeting of the shareholders passed two resolutions to increase the share capital to CHF 400 million, divided into 40 million fully paid registered shares with a nominal value of CHF 10 each, all of which were entitled to receive dividends.

In October 2004, Converium’s share capital was increased by CHF 533,416,225 by issuing 106,683,245 shares at CHF 5 each. The additional shares were issued and Converium’s corresponding capital increase (and reduction of the nominal value) were recorded, in the Commercial Register of the Canton of Zug, Switzerland on October 12, 2004. After the registration of the shares in the Commercial Register of the Canton of Zug, Converium’s issued, outstanding share capital was CHF 733,447,310, divided into 146,689,462 shares with a nominal value of CHF 5.

The Board of Directors proposed to the Annual General Meeting of May 10, 2007 that CHF 2.50 be remitted to the shareholders by way of a reduction of the ordinary share capital from CHF 733,447,310 to CHF 366,723,655 by reducing the par value of registered shares from CHF 5 to CHF 2.50.

The Annual General Meeting did not approve the proposal for the capital reduction for the purpose of a par value repayment to shareholders.

Authorized share capital

At the Annual General Meeting on April 27, 2004, the shareholders resolved to create authorized share capital and amended the Articles of Incorporation, which provides that the Board of Directors is authorized, on or before April 27, 2006, to increase the share capital by the issuance of up to a maximum of four million fully paid-up registered shares each of CHF 10 nominal value amounting to a maximum of CHF 40 million. Subsequent to the reduction of the nominal value of each of Converium’s shares from CHF 10 to CHF 5 as a result of the resolution by the shareholders at the EGM of September 28, 2004, Converium’s authorized capital is now CHF 20,000,000 with the Board being authorized to issue up to four million shares.

At the Annual General Meeting on April 11, 2006 the shareholders resolved to extend the authority of the Board of Directors to increase the share capital until April 11, 2008.

At December 31, 2006, no shares were issued from the authorized share capital.

Contingent share capital

At the Annual General Meeting on April 27, 2004, Converium Holding AG amended its Articles of Incorporation to state that the previously available conditional share capital for use in conjunction with the employee participation plans has been replaced by a conditional share capital for option rights and/or conversion rights for a number of four million shares or CHF 40,000,000 in nominal share capital.

Subsequent to the reduction of the nominal value of each of Converium’s shares in October 2004, its conditional capital is now for a

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number of four million shares of CHF 5 nominal value each, amounting to a maximum of CHF 20,000,000 pursuant to which up to four million shares can be issued upon exercise of conversion or option rights allotted in connection with bonds and other financial market instruments.

At December 31, 2006, no shares were issued from the contingent share capital.

Information policy

In conjunction with the invitation for the Annual General Meeting, all registered shareholders are provided with an invitation and a summary report on Converium’s financial results for the current financial year. Upon request, a full annual report with the financial statements can be ordered. Additionally, all ADS holders, upon request, receive a copy of the current annual report including financial statements, through their brokers. Furthermore, all financial and other information released by Converium is accessible on Converium’s web page at www.converium.com as well as through the SEC.

Statutory Quorums

According to Article 13 of Converium’s Articles of Incorporation, resolutions at the General Meetings of Shareholders are taken with the majority of votes cast.

In accordance with the provisions of Swiss law (Article 704 Swiss Code of Obligations) Converium’s Articles of Incorporation require two thirds of votes to be represented and the absolute majority of the nominal values of the shares represented is required for resolution on the following:

• an alteration of the purpose of Converium

• the creation of super-voting shares

• restrictions on the transfer of registered shares and the removal of such restrictions as well as restrictions to vote and the removal of such restrictions

• an authorized or contingent increase of share capital

• an increase of share capital by conversion of capital surplus, by contribution in kind or for the purpose of an acquisition of assets and the grant of special rights

• a restriction or exclusion of the subscription right or advance subscription right

• a change of Converium’s registered office

• the dissolution of Converium without liquidation

Convocation of the General Meeting of the Shareholders

According to Article 9 of Converium’s Articles of Incorporation, the General Meetings are convened at least 20 days prior to the meetings. This is in accordance with the provision of Swiss company law (Article 700 Code of Obligations).

Article 10 of the Articles of Incorporation provides for shareholders whose combined share holdings represent an aggregate nominal amount of at least CHF one million to be able to demand an item to be included on the agenda of a General Meeting. Such demand must be made at least 45 days prior to the meeting. This is in accordance with the provision of Swiss company law (Article 699 paragraph 2 Code of Obligations).

Registration in the Share Register

The date by which holders of registered shares can be registered in Converium’s share register in connection with attending the General Meeting of shareholders is set by the Board of Directors in its preparatory Board Meeting prior to the General Meeting.

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For 2007, the date by which a shareholder had to be registered in the share register was May 8, 2007 in order to be invited to the Annual General Meeting of May 10, 2007, at Kongresshaus, Gartensaal, 8002, Switzerland.

Shareholder votes on equity-based compensation plans

The NYSE rules require that shareholders must vote on all equity based compensation plans and any material revisions to the terms of such plans. Converium does not comply with this requirement, as under Swiss Company Law, the approval of compensation plans is not an authority of the General Meeting, but of the Board of Directors. The reason for not providing for approval of equity based compensation plans is the fact that the capital of a Swiss company is determined in the Articles of Incorporation and, therefore, each increase of capital has to be submitted for shareholders’ approval. If equity based compensation plans result in a need for a capital increase, the shareholders’ approval is mandatory. If, however, shares for such plans are purchased in the open market, shareholders do not have the authority to vote.

C. MATERIAL CONTRACTS

The Master Agreement

The Master Agreement set out the overall principles and the rights and obligations of the parties in connection with the Formation Transactions. It also addressed the relationship between Zurich Financial Services and Converium following the Formation Transactions. In particular, the Master Agreement provides for:

• the separation of substantially all of the third party reinsurance business from the businesses of Zurich Financial Services; and

• the consolidation of this business under Converium Holding AG.

The third party reinsurance business that has been retained by Zurich Financial Services includes the Zurich Centre Group business as described below and the reinsurance business written by ZIC with inception or renewal dates prior to January 1, 1987.

In the Master Agreement, Zurich Financial Services and Converium made certain representations and warranties with respect to matters including the assets of and titles to the assumed business. In addition, each of Zurich Financial Services and Converium made certain covenants, principally intended to effect our separation from the other businesses of Zurich Financial Services.

Further, each of Zurich Financial Services and Converium agreed, following the completion of the Formation Transactions:

• to execute the agreements, and to cooperate and act in accordance with the arrangements described below; and

• not to, except for certain specified exceptions, disclose confidential information of the other party or an entity of such party’s group which is not known to third parties but which is known by the parties due to the fact that the parties were previously part of the same group of companies or as a result of the Formation Transactions contemplated by the Master Agreement.

In addition, the Master Agreement provided that we bear up to a maximum of USD 50 million of the costs and expenses related to the consummation of the Formation Transactions, including advisors’ fees, retention costs and stamp duty taxes. Zurich Financial Services reimbursed us for costs and expenses in excess of this amount.

September 11th Coverage

Zurich Financial Services, through its subsidiaries, agreed to arrangements that cap our net exposure for losses and loss expenses arising out of the September 11th terrorist attacks at USD 289.2 million, the amount of net loss and loss expenses we recorded as of September 30, 2001. As part of these arrangements, these subsidiaries of Zurich Financial Services agreed to take responsibility for non-payment by the retrocessionaires of Converium AG and Converium Rückversicherung (Deutschland) AG with regard to losses arising out of the September 11th attacks in excess of the USD 289.2 million cap. Our only retrocessionaire for this business is a unit of Zurich Financial Services. Therefore, we are not exposed to potential non-payments by retrocessionaires for these events in excess of the USD 289.2 million cap, although we are exposed to the risk of non-payment of Zurich Financial Services units and we are exposed to credit risk from these subsidiaries of Zurich Financial Services. Our recorded losses and loss expenses, net of retrocessional recoveries and the cap from ZFS through its subsidiaries, were reduced from USD 289.2 million to USD 231.0 million,

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following the sale of our North American operations. See — Note 8 to our 2006 consolidated financial statements, and “Item 4. — Information on the Company — B. Business Overview — Retrocessional Reinsurance”.

Acquisition of the Converium AG business

Historically, Converium AG was not a separate legal entity and underwrote substantially all of its business pursuant to reinsurance policies issued by ZIC and ZIB, both subsidiaries of Zurich Financial Services, and was operated as the Zurich Re Zurich business unit of Zurich Financial Services. These subsidiaries were retained by Zurich Financial Services. In June 2001, we incorporated Converium AG, based in Zurich, which is a wholly owned subsidiary of Converium Holding AG. Since October 1, 2001, Converium AG has written its new and renewal business on the balance sheet of the new legal entity.

Certain Converium AG reinsurance business was acquired from ZIC and ZIB via the Quota Share Retrocession Agreement, described in more detail below, and the Asset Purchase and Assumption of Liability Agreement between ZIC and Converium AG, dated September 28, 2001. Under this Agreement, ZIC transferred to Converium AG tangible assets, marketable securities and liabilities relating to the business written by the Zurich operations.

Quota Share Retrocession Agreement

In connection with the Formation Transactions, the transfer of certain historical reinsurance business to Converium AG by ZIC and ZIB was affected by means of the Quota Share Retrocession Agreement effective July 1, 2001. The covered business consists of the business historically managed by Converium, which has an inception or renewal date on or after January 1, 1987 and consists of substantially all of the third party assumed reinsurance business written by ZIC and ZIB, under the “Zurich Re” brand name. The liabilities Converium AG assumed include all net unearned premiums, net losses and loss expenses and experience account balances relating to this business.

The Quota Share Retrocession Agreement provides for the payment of premiums to Converium AG by ZIC as consideration for assuming the covered liabilities. The Quota Share Retrocession Agreement provides that these premiums are on a “funds withheld” basis, whereby the premium is not immediately paid, but is rather retained by ZIC and credited to a funds withheld account, which is referred to as the Funds Withheld Asset.

Because the business subject to the Quota Share Retrocession Agreement consists of business that was historically managed by Converium, this business is already reflected in the financial statements. Any reinsurance business written by ZIC or ZIB that is not part of the historically managed and operated third-party reinsurance business of Converium is not covered by the Quota Share Retrocession Agreement and all related legal rights and obligations of this business have been retained by ZIC and ZIB. Accordingly, this business is excluded from the financial statements. Therefore, execution of the Quota Share Retrocession Agreement has no impact on results of operations as reported.

Converium AG will receive the surplus remaining with respect to the Funds Withheld Asset, if any, after all liabilities have been discharged. Any surplus or any additional cash flows will be recorded in the financial statements in the period when they occur. Additionally, ZFS has the right to prepay to Converium AG the full amount or a portion thereof of the Funds Withheld Asset prior to termination of the agreement.

On December 23, 2005, an Amendment was agreed by the parties to the Quota Share Retrocession Agreements by way of which Section 7.01 — FW Cash Calls — was amended, with immediate effect, to provide, that Converium has the right, by giving 60-days prior written notice to ZFS, to ask for payment in cash on January 1 and July 1 of each calendar year, for the first time on July 1, 2006, of up to 25% of the total funds withheld sub-account balances, as per the most recent quarterly statements, under the respective agreements with ZFS. Furthermore, Converium has the right, at any time upon giving 60-days prior written notice, to ask for the residual balance of the funds withheld account falling below USD 100.0 million, to be paid in cash and in case Converium’s insurers financial strength rating as assigned by Standard & Poor’s is A or higher the latter amount is increased to USD 200.0 million.

Converium AG continues to administer the transferred business on behalf of ZIC and ZIB, which remain liable to the original cedents of the business. Additionally, Converium AG manages third-party retrocessions related to the business transferred. Converium bears the credit risk for uncollectible reinsurance balances excluding those related to the September 11th terrorist attacks. Converium AG has a broad right of offset under the Quota Share Retrocession Agreement so that reinsurance balances owed to ZIC and ZIB may be offset against the Funds Withheld Asset account directly.

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The Quota Share Retrocession Agreement provides for commutation and termination for special reasons, such as insolvency of a party or loss of its authorization to do business or a change of control of Converium AG or Converium Holding AG. Each of the parties agrees to indemnify the other against liability or expense incurred by reason of its conduct or failure to act in appropriate circumstances. The Quota Share Retrocession Agreement contains other provisions that are customary for an agreement of this nature.

Acquisition of the Converium Rückversicherung (Deutschland) AG business

Converium Rückversicherung (Deutschland) AG was historically known as Agrippina Rückversicherung and subsequently known as ZRK. Historically, Zurich Re Zürich, ZIC and GRI all wrote reinsurance business through policies issued by ZRK. As part of the Formation Transactions, business not managed by us but written on contracts issued by ZRK was novated, commuted or retroceded to affiliates of Zürich Financial Services or third parties. Our financial statements reflect the business that remains the financial responsibility of Converium Rückversicherung (Deutschland) AG and exclude novated and commuted business from all periods presented.

The Converium Rückversicherung (Deutschland) AG reinsurance businesses were acquired through the transfer by Zurich Financial Services to Converium AG of its 98.63% interest in ZRK pursuant to the Agreement for the Sale and Transfer of Shares in Zürich Rückversicherung (Köln) Aktiengesellschaft, dated September 28, 2001. Converium’s interest in Converium Rückversicherung (Deutschland) AG increased to 100% in January 2003.

GRI Retained business

GRI is an internal operating unit of Zurich Financial Services whose principal role is to accumulate risks underwritten by primary and direct providers of insurance in a manner which allows GRI to access the third party reinsurance market. GRI’s internal operations were wholly autonomous from the third party reinsurance business conducted by us. Moreover, Converium never used GRI to access external reinsurance markets.

Prior to the Formation Transactions, the GRI operation was partially conducted through policies issued by CRNA and ZRK. However, the GRI operation was managed exclusively by GRI’s management team. Additionally, Zurich Financial Services did not alter the capital ascribed to support our business as a result of the GRI business formerly written on our balance sheets. As a consequence of the Formation Transactions, all GRI business previously written on our balance sheets has been novated, commuted or retroceded to affiliates of Zurich Financial Services or third parties. Any related rights and obligations of ours have been extinguished. Accordingly, all of this business is excluded from our financial statements.

Other indemnity matters

Pursuant to the Master Agreement, we and Zurich Financial Services have indemnified each other for certain matters, such as liabilities arising out of our respective businesses, and for breaches of our respective representations and warranties and other customary matters.

In particular, we agreed to indemnify Zurich Financial Services and its affiliates for:

• liabilities assumed by or transferred to us in the separation;

• liabilities incurred by Zurich Financial Services or its affiliates (other than us) while carrying on business on our behalf pursuant to the terms of agreements entered into in connection with the Formation Transactions before and after the dates of the separation of US and non-US business from Zurich Financial Services;

• liabilities incurred by us on our own behalf at any time, which are deemed to be or become a liability of Zurich Financial Services or any of its affiliates (other than us); and

• losses suffered by Zurich Financial Services or any of its affiliates (other than us) that relate to any reasonable action to avoid, resist or defend against liabilities assumed by or indemnified against by us.

Zurich Financial Services correspondingly agreed to indemnify us for:

• liabilities retained by Zurich Financial Services and its affiliates and not assumed by or transferred to us in the separation;

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• liabilities arising out of or relating to the assets not assumed by or transferred to us in the separation;

• liabilities arising out of specified contracts we have not assumed pursuant to the terms of the Quota Share Retrocession Agreement; and

• losses suffered by us or any of our affiliates that relate to any reasonable action to avoid, resist or defend against liabilities not relating to our business.

Moreover, we agreed with Zurich Financial Services to allocate amongst ourselves liabilities that may arise under relevant securities laws as a result of any misstatements or omissions contained in the various annual report documentation to be distributed to our shareholders or as a result of the Formation Transactions themselves.

In addition, pursuant to the tax sharing and indemnity agreements described below, we and Zurich Financial Services have agreed to indemnify each other for certain tax liabilities arising out of the Formation Transactions and certain other potential liabilities that arose while we were affiliated with Zurich Financial Services.

Also, we agreed to indemnify Zurich Financial Services and its subsidiaries for losses arising from Zurich Financial Services’ involvement in the MDU strategic partnership to the extent such indemnifiable losses had been caused by the misconduct or negligence of our employees or arising out of our business.

Furthermore, as part of the Underwriting Agreement entered into by Converium and ZFS with the underwriting banks in the IPO, Converium has agreed to indemnify the underwriting banks for certain costs, expenses and/or losses or damages suffered by the underwriting banks in conjunction with the underwriters involvement in the Class Action Law Suits.

Tax sharing agreements

We entered into Tax Sharing and Indemnification Agreements with:

• ZRCH, in respect of the US Converium entities, which we refer to as the “US Tax Sharing Agreement”; and

• Zurich Financial Services in respect of the non-US Converium entities, which we refer to as the “Non-US Tax Sharing Agreement”.

The tax allocation agreement in effect involving CRNA and CINA was terminated as to those parties. CRNA and CINA paid the compensation due under the tax allocation agreement through the date of sale of CRNA to CHNA. Under the US Tax Sharing Agreement, payments previously made may be adjusted based on amendments to the tax returns or completion of IRS audits. The US Tax Sharing Agreement provides we will generally be liable for taxes imposed on our US entities in respect of periods prior to and after the transfer. However, ZRCH will be liable to us for specified taxes, which will include any taxes arising out of the transfer of the US entities to us, any taxes imposed in respect of the stop-loss reinsurance policy from ZIC from 1997 to 2001 and certain other matters.

The Non-US Tax Sharing Agreement provides in general that we will be liable for all taxes arising from the business previously conducted by ZIC and Zurich Rückversicherung (Deutschland) AG, whether arising prior to or subsequent to the transfer to Converium. We are also liable for branch taxes arising from the Converium branches located in Malaysia, Singapore and Australia as well as representative offices in Buenos Aires, London, Sao Paolo, Kuala Lumpur and Tokyo. As described above, under the Master Agreement we will be liable for all taxes related to the consummation of the Formation Transactions together with all other costs and expenses of our Initial Public Offering, up to an aggregate of USD 50 million. In addition, all taxes relating to the Formation Transactions but incurred after the Formation Transactions will be borne by Converium. See “— The Master Agreement”.

The tax sharing agreements also set forth the responsibilities for filing tax returns affecting the Converium entities, and the conduct of audits and similar proceedings. The obligations of ZRCH under the US Tax Sharing Agreement are guaranteed by ZIC.

Swiss tax consequences to Converium of the Formation Transactions

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Under the terms of the Swiss tax rulings obtained by Zurich Financial Services and granted by the Swiss Federal and Zurich Cantonal Tax Administrations, the offering of Converium shares to the public in our initial public offering triggered retroactively Swiss stamp duty at the rate of 1% of the fair market value of Converium at the level of Converium Holding AG.

As part of the Master Agreement, Zurich Financial Services has agreed to reimburse us for certain costs and expenses related to the Formation Transactions, including the stamp duty taxes described above. See “— The Master Agreement”.

Continuing relationships with Zurich Financial Services

In addition to the agreements described above, we have certain continuing relationships with Zurich Financial Services, including those described below.

Other agreements and arrangements

As described in more detail above, the separation of our business from that of Zurich Financial Services, in part pursuant to reinsurance agreements, including the Quota Share Retrocession Agreement and the Master Novation and Indemnity Agreement, has entailed us and Zurich Financial Services and its affiliates having continuing obligations to reinsure each other and to provide services in connection with the administration of the run-off of the business we transferred to each other.

Lease arrangements

Converium AG leases office space from Zurich Financial Services. The lease term is fixed until 2011, with two renewal options for three-year terms each. The lease payments are fixed with annual rent escalations based on a cost of living index.

Converium Rückversicherung (Deutschland) AG leases office space from Oppenheim Immobilien Kapitalanlagegesellschaft mbH (Zürich Lebensversicherung Aktiengesellschaft) Deutschland) before the sale of the building. The lease term is for a period of ten years ending in 2008, with an option to renew for up to two additional ten-year terms. Lease payments have bi-annual rent escalations based on changes in local real estate price indices.

SCOR Transaction Agreement

On April 5, 2007, SCOR formally commenced a then- unsolicited tender offer for Converium. On May 9, 2007, Converium and SCOR entered into the SCOR Transaction Agreement pursuant to which SCOR agreed to increase the consideration payable in the SCOR Tender Offer to 0.5 new SCOR shares and CHF 5.50 in cash in exchange for each Converium registered share tendered and Converium agreed that its Board of Directors would recommend the improved SCOR Tender Offer to Converium shareholders. The Company has agreed that during the pendency of the SCOR Tender Offer it will continue to operate its business in the ordinary course consistent with past practice and abstain from taking any actions outside the ordinary course of business consistent with past practice. The Company has also agreed to refrain from continuing, or entering into, discussions with third parties which could result in a tender offer for Converium’s registered shares or otherwise result in a merger, sale of assets, restructuring or recapitalization of the Company. Pursuant to the SCOR Transaction Agreement, the Company must promptly give notice to SCOR the Company receives a superior offer, which is generally defined to include any public offer to all of the Company’s shareholders on terms and conditions that the Board of Directors determines in good faith, after consideration of its fiduciary duties, to be superior for the Company’s shareholders when compared as a whole to the terms and conditions of the SCOR Tender Offer, provided that (i) the consideration offered is not less than that offered by SCOR on a fully diluted basis and (ii) the conditions of a superior offer are no more restrictive than the conditions of the SCOR Tender Offer (a “Superior Offer”). During the three day period following the delivery of notice of a Superior Offer to SCOR, the Company and SCOR have agreed to renegotiate in good faith the terms of the SCOR Tender Offer. If the Company and SCOR are unable to renegotiate the terms of the SCOR Tender Offer, the Company’s Board of Directors may withdraw their recommendation of the SCOR Tender Offer and the Company may terminate the SCOR Transaction Agreement.

Pursuant to the SCOR Transaction Agreement, the Company has agreed that each of its current members of the Board of Directors will resign if the SCOR Tender Offer is successful. The Company has also agreed that following the settlement of the SCOR Tender Offer, the employment contracts of Inga Beale, our Chief Executive Officer, and of Paolo De Martin, our Chief Financial Officer, will be terminated with effect as of December 31, 2007. Pursuant to the termination agreement to be entered into with Ms. Beale following the settlement of the SCOR Tender Offer, Ms. Beale will be entitled to receive a lump sum payment in the amount of CHF 4.2 million in full settlement and discharge of any rights of any nature, whether known or unknown, actual or contingent, that Ms. Beale may have against the Company on December 31, 2007. Pursuant to the termination agreement to be entered into with Mr. De Martin following the settlement of the SCOR Tender Offer, Mr. De Martin will be entitled to receive a lump sum payment in the amount of CHF 2.5 million in full settlement and discharge of any rights of any nature, whether known or unknown, actual or contingent, that Mr. De Martin may have against the Company on December 31, 2007.

Following the settlement of the SCOR Tender Offer, SCOR has agreed to maintain Converium’s strong presence in Zurich, Switzerland.

D. EXCHANGE CONTROLS AND OTHER LIMITATIONS

Other than in connection with government sanctions imposed on Yugoslavia, Myanmar, Zimbabwe, Iraq, Ivory Coast, Liberia, Sierra Leone, Uzbekistan, Belarus, Sudan, North Korea, Congo, Lebanon, Iran and persons and organizations with connections to Osama bin Laden, the “al Qaeda” group or the Taliban, there are currently no laws, decrees or regulations in Switzerland that restrict the export or import of capital, including, but not limited to, Swiss foreign exchange controls on payment of dividends, interest or liquidation proceeds, if any, to non-Swiss resident holders of shares. In addition, there are no limitations imposed by Swiss law or the Company’s Articles of Incorporation on the rights of non-Swiss residents or non-Swiss citizens to hold or vote the shares of the Company.

There are currently no laws, decrees or regulations in Luxembourg that restrict the export or import of capital, including, but not limited to, Luxembourg foreign exchange controls on the payment of principal, interest or liquidation proceeds, if any, to non-resident holders of notes.

E. TAXATION

The following is a summary of the principal US Federal income tax and Swiss tax consequences to a holder of shares or ADSs. This discussion does not purport to address all tax consequences of the acquisition, ownership and disposition of shares or ADSs and does not take into account the specific circumstances of any particular holders (such as tax-exempt entities, certain insurance companies, broker-dealers, traders in securities that elect to mark to market, holders liable for alternative minimum tax, holders that actually or constructively own 10% or more of the voting shares of Converium, holders that hold shares or ADSs as part of a straddle or a hedging or conversion transaction or holders whose functional currency is not the US dollar, etc.), some of which may be subject to special rules. This summary is based on the tax laws of Switzerland and the United States (including the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed regulations thereunder, published rulings and court decisions as in effect on the date hereof), as well as the Convention Between the United States of America and the Swiss Confederation, which we call the US/Switzerland Treaty, all of which are subject to change (or change in interpretation), possibly with retroactive effect. We have not, and will not, request a ruling from the US Internal Revenue Service concerning the tax consequences of any aspect of the transactions described herein. This discussion does neither generally address any aspects of Swiss taxation other

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than income and capital taxation and Swiss stamp duties nor of US taxation other than federal income taxation. Holders are urged to consult their tax advisors regarding the Swiss and other tax consequences of owning and disposing of shares or ADSs as well as the US federal, state and local and other tax consequences of owning and disposing of shares or ADSs.

Swiss taxation

Generally, holders of ADSs will be treated as owners of the registered shares underlying the ADSs for Swiss tax purposes. Accordingly, except as noted, the Swiss tax consequences discussed below apply equally to holders of the registered shares and ADSs.

This discussion does not, as already mentioned above, generally address any aspects of Swiss taxation other than income and capital taxation and Swiss stamp duties. Holders are urged to consult their tax advisors regarding the Swiss and other tax consequences of owning and disposing of shares or ADSs.

Withholding tax on dividends and distributions

Dividends paid and similar in-kind distributions (including dividends of liquidation proceeds and share dividends) made by Converium to a holder of shares or ADSs are subject to a federal withholding tax at a rate of 35%. The withholding tax must be withheld by Converium from the gross distribution, and paid over to the Swiss Federal Tax Administration. The withholding tax is refundable in full to a Swiss resident who receives a distribution if such resident is the beneficial owner of the payment and duly reports the gross distribution received on his personal tax return.

Obtaining a refund of Swiss withholding tax for US residents

Article 10 of the US/Switzerland Treaty provides for a reduced 15% withholding tax rate for US individual and corporate shareholders who are entitled to claim treaty benefits, which may be further reduced to 5% in the case of a corporate shareholder owning at least 10% of the voting rights. Relief under the US/Switzerland Treaty is granted by way of a refund. Under the ADS program in effect through The Bank of New York, a US holder of ADSs that qualifies for US/Switzerland Treaty benefits will not be required to undertake any action with respect to the partial or full refund of the Swiss withholding tax. On the payment date of the dividend, Converium will pay 65% of the gross dividend to The Bank of New York on behalf of the ADS holders. The Bank of New York will file a Form 82 accompanied by a shareholder list and a DTC participant list for each program. Based on this refund application, the refundable withholding tax will be refunded by the Swiss Federal Tax Administration to The Bank of New York on behalf of the eligible US holders of ADSs. The Bank of New York will pay 85% or 95% of the dividend to the eligible US holders of ADSs, depending on the applicable US/Switzerland Treaty rate. Such holders should receive the ADS dividend within approximately one month of the payment of the dividend by Converium. Relief under the US/Switzerland Treaty is granted for holders of shares by way of a refund of the withholding tax. A US holder of shares may obtain the applicable refund of Swiss withholding tax by filing a Swiss Federal Tax Administration Form 82 with the Swiss Federal Tax Administration.

Income tax on dividends

A Swiss resident or a foreign resident subject to Swiss taxation who receives a dividend or similar distribution (including liquidation proceeds in excess of the nominal value of the shares) from us is required to include such amounts in his personal income tax return. In some cantons such person may be entitled to a privileged tax treatment of such dividend income for cantonal and municipal tax purposes. However, such beneficial treatment generally requires a substantial shareholding in Converium. A Swiss shareholder which itself is a company or a cooperative may, under certain circumstances, benefit from an exemption of the dividend from income taxation (participation exemption/Beteiligungsabzug).

For purposes of the above paragraph and the discussion under “Capital Gains Tax upon Disposal of Shares”, a foreign resident subject to Swiss taxation refers to a non-Swiss resident person that maintains in Switzerland a permanent establishment or fixed place of business to which the shares are attributable.

Capital gains tax upon disposal of shares

A Swiss resident who holds shares as part of such resident’s private, non-business assets will not be subject to any Swiss federal, cantonal or municipal income taxation on gains realized upon the sale or other disposal of shares. However, under certain conditions, shares can be deemed to be part of the business assets of an individual, i.e. an individual may be treated as a professional trader in securities, with the consequence of taxation of any capital gains as business income. Furthermore, private gains realized upon a

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repurchase of shares by us may be re-characterized as taxable dividend income if some conditions are met. In the case of such re-characterization of capital gains into dividend income, income tax will be levied on the difference between the repurchase price and the underlying nominal value of the shares. Capital gains realized on shares held as part of the business assets of a Swiss resident or a foreign resident subject to Swiss taxation are included in the taxable income of such persons.

Persons who are not resident in Switzerland for tax purposes are not subject to any Swiss taxes with respect to gains realized upon a sale of shares or ADSs, unless the shares or ADSs are attributable to a permanent establishment or fixed place of business maintained by such non-resident person in Switzerland. However, under some conditions, dividend withholding tax will become due if shares are repurchased by Converium.

A Swiss resident or a foreign resident subject to Swiss taxation which is a shareholder and which itself is a company or a cooperative may, under certain circumstances, be eligible for relief from taxation with respect to capital gains (participation exemption/Beteiligungsabzug). However, the participation exemption on capital gains applies only in the case of a shareholding quota sold of at least 20% held over an uninterrupted period of at least one year.

Stamp Duties upon transfer of shares

The sale or purchase of shares or ADSs, whether by Swiss resident or non-resident holders, may be subject to a Swiss securities transfer stamp duty, calculated on the sale proceeds, if it occurs through or with a Swiss bank or other Swiss securities dealer as defined in the Swiss Federal Stamp Tax Act.

United States federal income taxation

This discussion applies only to beneficial owners of shares or ADSs that hold the shares or ADSs as capital assets and are US holders. For purposes of this discussion, a “US holder” for US federal income tax purposes is either (1) a citizen or resident of the United States, (2) a corporation, or other entity treated as a corporation, organized under the laws of the United States or any state thereof or the District of Columbia thereof, (3) an estate the income of which is subject to US federal income tax without regard to its source, or (4) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust.

This discussion does not, as already mentioned above, address any aspects of US taxation other than US federal income taxation and it does not purport to be a comprehensive discussion of all the US federal income tax considerations that may be relevant to a particular person’s individual circumstances. Holders are urged to consult their tax advisors regarding the US federal, state and local and other tax consequences of owning and disposing of shares or ADSs.

US holders of ADSs will be treated as owners of the shares underlying the ADSs for US federal income tax purposes. Accordingly, except as noted, the US federal income tax consequences discussed below apply equally to US holders of ADSs and shares. This discussion is based in part upon representations of The Bank of New York and assumes that each obligation provided for in, or otherwise contemplated by, the deposit agreement and any related agreement will be performed in accordance with its respective terms.

Taxation of dividends

Subject to the passive foreign investment company (“PFIC”) rules described below, US holders will include in gross income the gross amount of any distribution, other than certain pro rata distributions of common shares, paid (before reduction for Swiss withholding taxes) by Converium out of its current or accumulated earnings and profits (as determined for US federal income tax purposes) as foreign source ordinary income when the dividend is actually or constructively received by the US holder. The dividend will not be eligible for the dividends-received deduction. Dividends paid to a non-corporate US holder before January 1, 2011 will be taxable to the holder at a maximum tax rate of 15% provided that the shares or ADSs are held for more than 60 days during the 121 day period beginning 60 days before the ex-dividend date and the holder meets other holding period requirements. The amount of the dividend paid in Swiss francs will be the US dollar value of the Swiss francs received, including the amount of any Swiss tax withheld, determined at the spot Swiss franc/US dollar rate on the date such dividend is received, which for holders of ADSs would be the date such dividend is received by The Bank of New York, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations will be treated as ordinary income or loss. Such gain or loss will generally be income from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a return of capital

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to the extent of the US holder’s basis in the shares or ADSs and thereafter as capital gain. The amount of any distribution of property other than cash will be the property’s fair market value on the date of the distribution.

Subject to certain limitations, the Swiss tax withheld in accordance with the US/Switzerland Treaty and paid over to Switzerland will be creditable against the US holder’s US federal income tax liability. One such limitation is that a foreign tax credit is only allowed for withholding tax on a dividend if the shareholder has held the shares with respect to which the dividend is paid for more than 15 days during the 31 day period beginning on the date which is 15 days before the date on which the shares become ex-dividend with respect to the dividend. To the extent a refund of the tax withheld is available to a US holder under the US/Switzerland Treaty, the amount of tax withheld that is refundable will not be eligible for credit against the US holder’s US federal income tax liability. See “— Swiss Taxation — Obtaining a Refund of Swiss Withholding Tax for US Residents” above for the procedures for obtaining a refund of tax.

The ability of a US holder to utilize foreign taxes as a credit to offset US taxes is affected by complex limitations and conditions. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends paid by Converium will generally constitute “passive income”.

A US holder may elect to claim all foreign taxes paid as an itemized deduction in lieu of claiming a foreign tax credit. A deduction does not reduce US tax on a dollar-for-dollar basis like a tax credit could, but the availability of the deduction is not affected by the conditions and limitations applicable to foreign tax credits. US holders should consult their tax advisors to determine whether and to what extent a foreign tax credit would be available to them.

The US Treasury Department has expressed concern that parties to whom ADSs are pre-released may be taking actions that are inconsistent with the claiming by US holders of ADSs of foreign tax credits for US federal income tax purposes. Such actions would also be inconsistent with the claiming of the reduced rate of tax applicable to dividends received by certain non-corporate US holders, described above. Accordingly, the discussion of the creditability of foreign taxes and the availability of the reduced rate for dividends received by certain non-corporate US holders could be affected by future actions that may be taken by the US Treasury Department.

Sale or exchange

Subject to the PFIC rules described below, gain or loss recognized by a US holder on the sale, exchange or other disposition of shares or ADSs will be subject to US federal income taxation generally as capital gain or loss in an amount equal to the difference between the US holder’s adjusted tax basis in the shares or ADSs and the amount realized on the disposition. Capital gain or loss will be long-term capital gain or loss where the shares or ADSs have been held for more than one year. Any gain or loss recognized will generally be treated as US source gain or loss. US holders are urged to consult their own tax advisors about the treatment of capital gains, which may be taxed at lower rates than ordinary income for non-corporate taxpayers, and capital losses, the deductibility of which may be limited.

The surrender of ADSs in exchange for shares, or vice versa, will not result in the realization of gain or loss for US federal income tax purposes.

PFIC rules

Converium believes that it was not a PFIC for US federal income tax purposes for 2006and it does not expect to be considered a PFIC in the foreseeable future. However, since PFIC status depends upon the composition of a company’s income and assets and the market value of its assets (including, among others, less than 25 percent owned equity investments), there can be no assurance that Converium will not be considered a PFIC for any taxable year. If Converium were treated as a PFIC for any taxable year during which a US holder held a share or ADS, certain adverse consequences could apply to the US holder.

If Converium were treated as a PFIC for any taxable year, gain recognized by such US holder on a sale or other disposition of a share or ADS would be allocated ratably over the US holder’s holding period for the share or ADS. The amounts allocated to the taxable year of the sale or other exchange and to any year before Converium became a PFIC would be taxed as ordinary income in the year of the disposition. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect (for individuals or corporations, as appropriate) for the year to which it is allocated and an interest charge would be imposed on the amount allocated to such taxable year. This tax and interest is treated as a direct increase to the US holder’s tax liability for the current year. Further, any distribution in respect of ADSs or shares in excess of 125 percent of the average of the annual distributions on ADSs or shares received by the US holder during the preceding three years or the US holder’s holding period, whichever if shorter, would be subject

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to taxation as described above. Certain elections (including the mark to market election and the qualified electing fund election) may be available to US persons that may mitigate the adverse consequences resulting from PFIC status.

In addition, if Converium were to be treated as a PFIC in a taxable year in which Converium pays a dividend or the prior taxable year, the 15% dividend rate discussed above with respect to dividends paid to non-corporate US holders would not apply.

Backup withholding

A US holder may, under certain circumstances, be subject to “backup withholding” with respect to dividends paid on the shares or ADSs or the proceeds of sale, exchange, or other disposition of shares or ADSs unless such holder (1) is a corporation or comes within certain other exempt categories, and, when required, demonstrates this fact or (2) provides a correct taxpayer identification number, certifies that it is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules. Any amount withheld under these rules will be creditable against the US holder’s federal income tax liability, provided appropriate information is furnished to the IRS. A US holder who does not provide a correct taxpayer identification number may be subject to penalties imposed by the IRS.

F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENT BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

You may read and copy documents referred to in this annual report that have been filed with the SEC at the SEC’s public reference room located at:

451 Fifth Street, NW
Washington DC 20549, USA

Please call the SEC at 1-800-SEC-0330 for further information on the public reference room and their copy charges.

In addition, documents referred to above are available from Converium at it headquarters, located at:

General Guisan-Quai 26, CH-8002 Zürich,

I. SUBSIDIARY INFORMATION

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

As a provider of reinsurance solutions, effective risk management is fundamental to our ability to protect both the interests of our clients and shareholders. We have accordingly established risk and investment management processes and procedures to actively manage our exposure to qualitative and quantitative market risks. Our risk and investment management procedures focus on ensuring that all of our operating units consistently follow suitable, structured and controlled processes and procedures, with specific guidelines and limits tailored to the characteristics of each business.

We consider our market risk to consist primarily of our exposure to adverse market value changes in our assets, across both short-and long-term periods. Our market risk includes multiple sources of market price fluctuations, including interest rate risks, credit risks, prepayment risks, liquidity risks, sector risks and other risks. Short-term market risks relate primarily to our exposure to adverse market value changes in our assets and the potential inability to realize asset values on a timely basis.

We principally manage our long-term market risks through a procedure we refer to as asset/liability management, or ALM, through

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which we seek to understand and manage the dynamic interactions between our assets and liabilities. We utilize and continually develop firm-wide ALM processes and models to manage our aggregate financial risks and the correlation between financial risks and underwriting risks. The primary goal of our ALM procedures is to match, in terms of timing and currency, anticipated claims payments to our cedents with investment income and repayments generated by our invested assets and to improve our understanding of the correlation between financial risks and underwriting risks. Because fixed income securities generally provide more stable investment income than equity securities, the preponderance of our investments are in fixed income instruments. Although our ALM techniques are based on theoretical and empirical models and can lead to incorrect assumptions, we believe that the careful use of these ALM techniques leads to a better understanding of the risks inherent in our assets and liabilities and is therefore an important element of our risk and investment management process. Our principal ALM techniques include cash flow analysis, scenario testing and stochastic modeling. (See the ALM graph in the Risk Management section).

To help manage our aggregate exposure to concentration and credit risks, we analyze the concentration of our risk by entity, risk category (asset, underwriting, retrocession), industry and credit rating. These concentrations and credit risks are reviewed every six months by our ALM Committee as a part of the review and approval of the ALM report.

Sensitivity analyses for invested assets

Approximately 88.8% of our investment securities are classified for accounting purposes as available-for-sale. These securities are carried at their fair market value as of the balance sheet date with movements in fair value recorded in shareholders’ equity. In contrast to these assets, certain liability reserves, particularly non-life reinsurance reserves, are not shown at fair market values as of the balance sheet date. Therefore, US GAAP accounting practices typically result in more volatile assets than liabilities. This, in turn, may lead us to report more volatile shareholders’ equity on our balance sheet than we believe may economically be the case.

The following risk analyses on interest rate, foreign exchange and equity market risks do not take into account that there are strategies in place to minimize the exposures to market fluctuations. These strategies include, among others, changes in asset allocation and the sale of investments and the management of the portfolio duration. As the risk analyses focus on the identification of risk exposures that impact the market value of assets alone and assume that the change in the value of assets is temporary while the liability reserves would not change, it is important for the reader to recognize that the risks discussed herein are significantly mitigated to the extent that the Company’s investment strategy allows market forces to influence the economic valuation of both assets and liabilities in generally the same way.

•	Interest rate risk — We have based our computations of interest rate sensitivity on numerous assumptions. Therefore they should not be relied on as indicative of future results.
	Our investments are subject to interest rate risks. Fluctuations in interest rates have a direct impact on the market valuation of our fixed income portfolio, such that market values of fixed income securities fall as interest rates rise and vice versa. Our interest rate risk is concentrated in the United States, United Kingdom and Europe and is highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political conditions. The estimated potential exposure of our total fixed income securities portfolio to a one percentage point increase of the corresponding government bond yield curves would be an after-tax reduction in net assets of USD 86.8 million, which represents approximately 4.7% of our total shareholders’ equity as of December 31, 2006. This reduction would be offset by higher investment income earned on newly invested funds.
	The Company manages interest rate risk by constructing bond portfolios in which the economic impact of a general interest rate shift is comparable to the impact on the related liabilities. To protect our balance sheet from a possible rise of the yield curves, we stabilized our modified duration of our bond portfolio, excluding held-to-maturity securities, to 3.3. Additionally, our portfolio of held-to-maturity government bonds reduced to USD 718.3 million (18.7% of our fixed maturities portfolio, excluding the Funds Withheld Asset) attributable to the sale of our discontinued operations and maturing fixed maturities securities. The duration of the held-to-maturity portfolio is 2.8. The Company believes that this matching process mitigates the overall interest rate risk on an economic basis.
	As of December 31, 2006, all of our debt outstanding was at fixed interest rates. Thus, an increase in interest rates would currently have no effect on our annual interest expense or reported shareholders’ equity, as we account for debt at amortized cost, not fair value.
•	Equity market risk — We hold approximately 11.5% (including our participation in PSP Swiss Property AG and Real Estate Equity Securities) of our invested assets in equity securities, which are subject to equity market risk. Our equity market risk is

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	predominantly in developed markets and concentrated in the United States, United Kingdom and Europe and is highly sensitive to general economic and stock market conditions. The equity investment portfolio is invested in broad market indices in order to achieve desired diversification and market performance. The estimated potential exposure of our consolidated net assets to a 10% decline in all stock markets as of December 31, 2006 would be an after-tax reduction in net assets of USD 62.4 million, which represents approximately 3.4% of our total shareholders’ equity as of December 31, 2006.
	Our strategic asset allocation combines a large percentage of investments in high-quality bonds with investments in equity securities. This allocation seeks to generate strong positive returns with acceptable risks over the long term, while protecting against excessive risks in periods of severe market distress.
	During a severe stock market correction associated with a weak economy, recession or depression, losses in the fair market value of equity securities tend to be partially offset by gains on high-quality bonds arising from falling interest rates. We seek to match our investments with our underlying liabilities in the countries and territories in which we operate. Consequently, we strive to keep our equity portfolio diversified so as to provide a broad exposure across major sectors of individual stock markets. We restrict our maximum investment in any one equity security or equity sector by reference to local benchmarks and insurance regulations.
•	Foreign exchange risk — Our general practice is to invest in assets that match the currency in which we expect related liabilities to be paid. We tend thus to invest our assets with the same currency allocation as our technical liabilities. This results in the same currency split for the assets backing our shareholders’ equity. This practice supports sound currency asset/liability management, but if not properly matched, there is a translation risk of currency rate changes against the US dollar that may adversely affect our reported shareholders’ equity when expressed in US dollars.
	Shareholders’ equity held in local insurance units is primarily kept in local currencies to the extent that shareholders’ equity is required to satisfy regulatory and self-imposed capital requirements. This facilitates our efforts to ensure that capital held in local insurance units will be able to support the local insurance business irrespective of currency movements. In line with our functional currency concept, the differences resulting from the currency rate changes are recorded in shareholders’ equity as cumulative currency translation adjustments.

Certain shortcomings are inherent in the method of analysis presented in the computation of the fair value of fixed rate instruments. Actual values may differ from those projections presented should market conditions vary from assumptions used in the calculation of the fair value of individual securities, including non-parallel shifts in the term structure of interest rates and changing individual issuer credit spreads.

The table below shows the approximate effect on shareholders’ equity of instantaneous adverse movements in currency exchange rates of 10% on our major currency exposures at December 31, 2006 against the US dollar.

	Adverse exchange rate movement against			Approximate decline
	the US dollar			in shareholders'equity
Euro		10	%	USD155.3 million
Swiss franc		10	%	USD15.0 million
UK pound		10	%	USD188.0 million

As of December 31, 2006 and 2005, we had unrealized cumulative translation gains of USD 191.9 million and USD 96.9 million, respectively.

Our reported premiums, losses and expenses are also affected by exchange rate fluctuations. Business written in currencies other than the US dollar is translated at average exchange rates for the period and therefore exchange rate movements from period to period can have a significant effect on our US dollar reported premiums, losses and expenses.

The table below shows the percentage of key income statement and balance sheet items, denominated by our main currencies as of and for the year ended December 31, 2006:

	US						U.K			Swiss			Japanese
	Dollar			Euro			Pound			franc			yen			Other			Total
Income statement
Net premiums written		20	%		34	%		26	%		2	%		3	%		15	%		100	%

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	US						U.K			Swiss			Japanese
	Dollar			Euro			Pound			franc			yen			Other			Total
Income statement
Net investment income		40	%		17	%		29	%		12	%		—			2	%		100	%
Losses, loss expenses and life benefits		15	%		28	%		27	%		3	%		4	%		23	%		100	%
Acquisition costs		23	%		38	%		21	%		1	%		3	%		14	%		100	%
Other operating and administration expenses		28	%		14	%		4	%		52	%		—			2	%		100	%
Interest expense		99	%		1	%		—			—			—			—			100	%
Balance sheet
Total invested assets		40	%		25	%		29	%		2	%		1	%		3	%		100	%
Reinsurance assets		54	%		6	%		37	%		2	%		—			1	%		100	%
Losses and loss expenses, gross		34	%		24	%		34	%		1	%		1	%		6	%		100	%
Unearned premiums, gross		33	%		14	%		42	%		1	%		1	%		9	%		100	%
Future life benefits, gross		32	%		68	%		—			—			—			—			100	%
Debt		100	%		—			—			—			—			—			100	%

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this annual report on Form 20-F. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the evaluation date, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

120

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company’s internal control over financial reporting was effective as of December 31, 2006.

The Company’s independent registered public accounting firm, PricewaterhouseCoopers Ltd., that has audited the financial statements included in this annual report on Form 20-F has issued a report on management’s assessment of the Company’s internal control over financial reporting as of December 31, 2006.

Report of the Registered Public Accounting Firm

The report of PricewaterhouseCoopers Ltd. on management’s assessment of the Company’s internal control over financial reporting as of December 31, 2006 is included on page F-2 of this annual report on Form 20-F.

Formerly Reported Material Weaknesses and Changes in Internal Control over Financial Reporting

As a foreign private issuer we are subject to Section 404 of the Sarbanes-Oxley Act (“SOX 404”). Therefore, in 2006 the processes and controls implemented in conjunction with our Sarbanes-Oxley project were tested by management and external auditors. For purposes of SOX 404, a “material weakness” is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

The first material weakness identified as of December 31, 2004 was the need to train or recruit suitably qualified individuals to fill the knowledge and experience gaps about US-GAAP caused by the departure of various key finance employees. The second material weakness identified was the failure in the operation of key internal controls over the initiation of reinsurance and financial accounting data. The third material weakness identified was the lack of controls to ensure that the underwriting and risk transfer analyses reflect all relevant elements of contractual relationships entered into by Converium. The fourth material weakness identified relates to internal controls over the determination, valuation, completeness and reporting of certain components of the income tax payables and deferred income tax balances (assets and liabilities). The material weaknesses two, three and four were identified in 2005.

Converium had remediated the first material weakness as of December 31, 2005. The second, third and fourth material weaknesses identified in previous years were also remediated as of December 31, 2006.

There were changes to enhance our internal controls over financial reporting during the period covered by this Form 20-F that have materially improved, or are reasonably likely to materially affect, our internal controls over financial reporting. Such changes included the following:

- Implementation of an accounting policy manual and additional US-GAAP training sessions,

- Improvement of controls over data quality by optimization of related applications, processes and organization,

- Revision of underwriting non-life guidelines and constitution of a FAS 113 expert team,

- Recruitment of tax specialists and revision of tax controls and processes,

As a result of the remedial actions taken, and based on management’s testing of Converium's Internal Controls over Financial Reporting, the Company’s management concludes that there are no material weaknesses.

Whistleblower Procedure

An anonymous “whistleblower” procedure has been established, allowing confidential reporting and evaluation of complaints regarding questionable accounting methods or fraudulent practices, as well as other risk-related operational hazards such as inadequate controls or organizational shortcomings. Through Group Internal Audit, such anonymous reporting goes directly to the Audit Committee of the Board of Directors.

ITEM 16. [RESERVED]

Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that Mr Harald Wiedmann is the audit committee financial expert and that he is independent under the rules of the New York Stock Exchange.

Item 16B. CODE OF ETHICS

The Board of Directors of Converium Holding AG approved the Code of Business Conduct and Ethics (the “Code”) for Converium on May 27, 2003, which is applicable to all of our management and employees.

The details of the Code are accessible on our Internet website at:

http://www.converium.com/

Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

121

Duration of the Mandate and Terms of Office of the Independent Auditors

PricewaterhouseCoopers Ltd, our principal independent group auditor, began serving as our auditor upon the formation of Converium in 2001. The audit partners responsible for our audit, Andrew Hill and Martin Frei, began serving in their roles in 2002 and 2003, respectively. As part of the normal audit partner rotation Lilla Runco and Wanda Eriksen will take over as responsible audit partners commencing with the 2007 audit engagement.

Policy on Pre-Approval and Non-Audit Services of Independent Auditors

Our Audit Committee comprises the Chairman of the Board of Directors and the Chairmen of the Finance, Nomination and Remuneration Committees and the independent financial expert of the Board. Only independent and financially literate Directors are eligible to serve on the Audit Committee. In order to qualify as independent, a member may not accept any consulting, advisory or compensatory fee from us. In addition, an Audit Committee member may not be a person affiliated with the Company or any of its subsidiaries. The Audit Committee approves and supervises the implementation of Converium’s Audit Charter, including the review of internal control systems and Converium’s risk management and auditing processes; reviews and assesses significant accounting and reporting issues; oversees external and internal auditors and the external and internal audit process; assesses the accuracy of the annual financial statements and determines that appropriate accounting principles have been applied; and liaises with Converium’s Risk Management functions to identify Converium’s areas of greatest risk and to assess management’s role in mitigating the risks. Standing invitees are the CEO, the Head of Internal Audit and the external auditor. In 2006, the Audit Committee met nine times physically and held one meeting by way of conference call.

The Audit Committee has the responsibility to pre-approve all audit fees, fees for audit related services, tax advisory fees provided by Converium’s external independent group auditors and all non-audit related fees. Converium implemented protocols and guidelines to ensure that only pre-approved services are provided by Converium’s external independent group auditors.

Independent Auditor Fees

We paid the following fees to PricewaterhouseCoopers Ltd for professional services rendered:

(USD thousands)	2006		Approved (1)			2005
Audit fees		7,994		100	%		11,130
Audit-related fees		398		100	%		666
Tax fees		138		100	%		96
All other fees		18		100	%		105
Total fees		8,548		100	%		11,997

(1) Represents percentage of fees approved by the Audit Committee.

Audit fees are defined as the standard audit work that needs to be performed each year in order to issue an opinion on the consolidated financial statements of the Company and to issue reports on the local statutory financial statements. It also includes services that can only be provided by the Group auditor such as auditing of non-recurring transactions and application of new accounting policies, audits of significant and newly implemented system controls, pre-issuance reviews of quarterly financial results, consents and comfort letters and any other audit services required for SEC or other regulatory filings.

Audit-related fees include those other assurance services provided by auditors but not restricted to those that can only be provided by the auditor signing the audit report. They comprise amounts for services such as consultation on the Sarbanes-Oxley project, systems reviews, US GAAP training, pension and benefit plan audits and other accounting consultations.

Tax fees represent tax compliance and fees related to transfer pricing analysis.

All other fees consist of fees related to a PricewaterhouseCoopers Ltd accounting and reporting database that Converium subscribes to, as well as advisory fees for the run-off of our former North American operations.

Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

122

      Not applicable.

Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

					Total Number of Shares		Maximum Number of
					Purchased as Part of		Shares that May Yet Be
	Total Number of				Publicly		Purchased Under Plans
	Shares		Average Price Paid		Announced Plans or		or
	Purchased		Per Share in USD (1)		Programs		Programs
January (repurchase on January 12, 2006)		100,000		11.5540		n/a		n/a
February (repurchases from February 1, 2006 through February 10, 2006)		600,000		10.7129		n/a		n/a
April (repurchase on April 5, 2006)		100,000		11.8641		n/a		n/a
November (repurchases from November 13, 2006 through November 20, 2006)		540,000		13.3734		n/a		n/a
Total		1,340,000		12.4273

(1) Converium does not have a formal repurchase plan or program in place. From time to time, however, Converium purchases shares on the open market in order to satisfy its obligation to deliver shares upon exercise held by employees of Converium.

PART III

ITEM 17. FINANCIAL STATEMENTS

      Not applicable.

ITEM 18. FINANCIAL STATEMENTS

      See the consolidated financial statements beginning on page F-1.

ITEM 19. EXHIBITS

123

Exhibit Number	Description
1.1	Articles of Incorporation of Converium Holding AG, adopted November 8, 2001.*
1.2	Bylaws of Converium Holding AG, adopted November 16, 2001, revised March 1, 2007.
1.3	Articles of Incorporation of Converium Holding AG, revised May 10, 2007
1.4	Bylaws of Converium Holding AG, revised April 11, 2005.\
2.1	Form of Deposit Agreement among Converium Holding AG, The Bank of New York, as Depositary, and all owners and beneficial owners from time to time of ADSs issued thereunder (including the form of ADS), incorporated by reference from the Registration Statement on Form F-6 of Converium Holding AG (File No. 333-14108), initially filed with the Commission on November 19, 2001.*
2.2	Form of Indenture between Converium Finance, S.A., as Issuer, Converium AG and Converium Holding AG as Guarantors and JPMorgan Chase Bank as Trustee, Calculation Agent and Paying Agent.+
2.3	Form of the USD 200,000,000 principal amount of 8.25% Guaranteed Subordinated Notes Due 2032 (included in Exhibit 2.4 hereto).+
2.4	Subordinated Guarantee by Converium Holding AG and Converium AG relating to USD 200,000,000 principal amount of 8.25% Guaranteed Subordinated Notes Due 2032. ^
2.5	Indenture, dated December 23, 2002 between Converium Finance S.A., Converium Holding AG, Converium AG and JP Morgan Chase Bank, as trustee, relating to USD 200,000,000 principal amount of 8.25% Guaranteed Subordinated Notes Due 2032. ^
4.1	Master Agreement by and among Zurich Financial Services and Converium Holding AG, dated December 1, 2001.*
4.2	Stock Purchase Agreement between Zurich Reinsurance Centre Holdings, Inc. and Converium Holdings (North America) Inc., dated as of October 1, 2001.*
4.3	Agreement for the Sale and Transfer of Shares in Zürich Rückversicherung (Köln) Aktiengesellschaft, dated September 28, 2001.*
4.4	Quota Share Retrocession Agreement between Zurich Insurance Company (including its Singapore, Labuan and Bermuda branches) and Converium AG, dated October 1, 2001.*
4.5	Quota Share Retrocession Agreement between Zurich International (Bermuda) Ltd. and Converium AG, dated October 1, (and effective as of July 1, 2001).*
4.6	Asset purchase and Assumption of Liability Agreement between Zurich Insurance Company and Converium AG, dated September 28, 2001.*
4.7	Indemnity Agreement (Unicover) between Zurich Reinsurance (North America), Inc. and Zurich Insurance Company, dated as of October 1, 2001.*
4.8	Indemnity Agreement (September 11th Cessions) between Zurich Reinsurance (North America), Inc. and Zurich Insurance Company, dated as of October 1, 2001.*
4.9	Indemnity Agreement (September 11th Losses) between Zürich Rückversicherung (Köln) Aktiengesellschaft and Zurich Insurance Company, dated as of October 1, 2001.*
4.10	Partial Commutation Agreement between Zurich Reinsurance (North America), Inc. and Zurich Insurance Company, dated as of October 1, 2001.*
4.11	Master Novation and Indemnity Reinsurance Agreement among Zurich Reinsurance (North America), Inc., Centre Insurance Company, Centre Solutions (U.S.) Limited and Zurich Insurance Company, Bermuda Branch, dated as of October 1, 2001.*
4.12	Group Reinsurance Business Master Novation and Indemnity Reinsurance Agreement by and among Zurich

124

Exhibit Number	Description
	Reinsurance (North America), Inc., Zurich Insurance Company and Zurich International (Bermuda) Ltd., dated as of October 1, 2001.*
4.13	Commutation Agreement (covering the Aggregate Excess of Loss Reinsurance Agreement effective January 1, 1991 through December 31, 1993) between Zurich Reinsurance (North America), Inc. and Centre Reinsurance Limited, dated as of October 1, 2001.*
4.14	Commutation Agreement (covering the Aggregate Excess of Loss Reinsurance Agreement effective January 1, 1994 through December 31, 1994) between Zurich Reinsurance (North America), Inc. and Centre Reinsurance International Company, dated as of October 1, 2001.*
4.15	Commutation Agreement (covering the Aggregate Excess of Loss Reinsurance Agreement effective January 1, 1995) between Zurich Reinsurance (North America), Inc. and Centre Reinsurance Limited, dated as of October 1, 2001.*
4.16	Commutation Agreement (covering the Obligatory Surplus Share Reinsurance Agreement effective October 1, 1995) between Zurich Reinsurance (North America), Inc. and Centre Reinsurance Limited, dated as of October 1, 2001.*
4.17	Commutation Agreement (covering the Obligatory Surplus Share Reinsurance Agreement effective November 6, 1992) between Zurich Reinsurance (North America), Inc. and Centre Reinsurance International Company, dated as of October 1, 2001.*
4.18	Agreement Amending and Terminating Centre Reinsurance Dublin Affiliated Group Tax Allocation Agreement among Orange Stone Delaware Holdings Limited, Orange Stone Reinsurance, Centre Reinsurance Holdings (Delaware) Limited, Centre Reinsurance (U.S.) Limited, Zurich Reinsurance Centre Holdings, Inc., Zurich Reinsurance (North America), Inc., ZC Insurance Company, ZC Specialty Insurance Company, Centre Risk Advisors, Inc., Constellation Reinsurance Company, Centre Re Services, Inc., Zurich Global Assets LLC, formerly known as BDA/US Services Limited, ZC Management Corporation, ZC Resource LLC, ZC Property Management, Inc. and Claims Solutions Group, dated October 1, 2001.*
4.19	Catastrophe Cover Retrocession Agreement by and between Converium AG and Zurich Insurance Company, dated December 1, 2001.*
4.20	Stock Purchase Agreement between Zurich Reinsurance (North America), Inc. and Centre Strategic Investments Holdings Limited, dated August 23, 2001.*
4.21	Run-off Services and Management Agreement between Zurich Insurance Company and Converium AG, dated December 3, 2001.*
4.22	Tax Sharing and Indemnification Agreement among Zurich Reinsurance Centre Holdings, Inc., Orange Stone Delaware Holdings Limited, Converium Holdings (North America) Inc., Zurich Reinsurance (North America), Inc. and Zurich Insurance Company, dated as of October 1, 2001. *
4.23	Tax Sharing and Indemnification Agreement between Zurich Financial Services, Zurich Insurance Company, Converium Holding AG and Converium AG dated December 3, 2001. *
4.24	Form of Converium Standard Stock Option Plan for Non-US Employees. *
4.25	Form of Converium Standard Stock Purchase Plan for Non-US Employees. *
4.26	Omnibus Share Plan for US Employees. *
4.27	Converium Employee Stock Purchase Plan for US Subsidiaries.*
4.28	Form of Converium Annual Incentive Deferral Plan.*
4.29	Lease, between Zurich Insurance Company and Converium AG, dated August 29, 2001.*
4.30	Sublease Support Agreement among Zurich Reinsurance (North America), Inc., Global Asset Holdings Limited and Centre Insurance Company, dated as of October 1, 2001.*
4.31	Sublease between ZC Resource LLC and Zurich Reinsurance (North America), Inc., dated as of June 20, 2001.*

125

Exhibit Number	Description
4.32	Form of Letter Agreement between Converium Holding AG and The Bank of New York, relating to the pre-release of the ADRs, incorporated by reference from the Registration Statement on Form F-6 of Converium Holding AG (File No. 333-14108), initially filed with the Commission on November 19, 2001.*
4.33	Agreement dated September 2, 2002, between Converium AG and MDU Investments Ltd, regarding subscription of up to 20 million shares at £1 each. ^
4.34	Share Purchase Agreement dated November 27, 2002, between Converium AG and Northern States Agency Inc., Munich Re, Aviva and Royal and Sun Alliance regarding Global Aerospace Underwriting Managers Limited (GAUM). ^
4.35	Shareholder’s Agreement dated March 12, 2003, between Converium AG and Northern States Agency Inc., Munich Re, Aviva and Royal and Sun Alliance regarding Global Aerospace Underwriting Managers Limited (GAUM). ^
4.36	Sale and Purchase Agreement and Assignment between Converium AG and Converium Finance S.A. regarding the transfer of a USD 150 million loan granted to Converium Holding AG. ^
4.37	Amendment to Share Purchase Agreement dated November 27, 2002 between Converium AG and Northern States Agency Inc., Munich Re, Aviva and Royal Sun Alliance regarding Global Aerospace Underwriting Managers Limited (GAUM). ^
4.38	Agreement dated December 30, 2003, for the sale and purchase of 5.1% of Royal and Sun Alliance Insurance PLC’s shareholding in Global Aerospace Underwriting Managers Limited (GAUM). #
4.39	Agreement dated July 24, 2003 USD 900,000,000 Credit Facility for Converium AG, Zurich arranged by ABN Amro Bank N.V., Barclay’s Capital and Commerzbank Aktiengesellschaft. #
4.40	Agreement dated November 29, 2004, USD 1,600,000,000 Credit Facility for Converium AG, arranged by ABN AMRO Bank N.V., Barclay’s Capital, BNP Paribas, Commerzbank Aktiengesellschaft, Credit Suisse First Boston and J.P. Morgan. \
4.41	Deed of Pledge, dated December 15, 2004, Converium Rückversicherung (Deutschland) AG as the Pledgor and ABN Amro Mellon Global Securities Services as the Account Bank and ABN Amro Bank N.V. as the Pledgee. \
4.42	Deed of Pledge, dated December 15, 2004, Converium AG, Zürich, as the Pledgor, and ABN Amro Bank N.V. as the Pledgee and ABN Amro Mello Global Securities Services as the Account Bank. \
4.43	Guarantee, dated October 21, 2004 between Converium AG, Zürich as the Guarantor, and Converium Insurance (UK) Limited. \
4.44	Guarantee, dated October 21, 2004 between Converium AG, Zürich as the Guarantor, and Converium Rückversicherung (Deutschland) AG. \
4.45	Fronting and Administration Agreement relating to the Global Aerospace Underwriters Pool, dated January 7, 2005, between Global Aerospace Underwriting Managers Limited, Global Aerospace, Inc., Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, National Indemnity Company and Converium AG. \
4.46	Amendment No. 1 to the Quota Share Retrocession Agreement between Zurich Insurance Company (Including its Bermuda Branch) and Converium AG, dated as of October 1, 2001 and effective as of July 1, 2001.
4.47	Stock Purchase Agreement by and between National Indemnity Company and Converium AG dated as of October 16, 2006.
4.48	Guarantee Request and Reimbursement Agreement between Converium AG, Zurich, Switzerland and Bayerische Hypo- und Vereinsbank Aktiengesellschaft, Munich, Germany
4.49	Fronting and Administration Agreement relating to the Global Aerospace Underwriters Pool, dated December 22, 2006, between Global Aerospace Underwriting Managers Limited, Global Aerospace, Inc., Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, National Indemnity Company and Converium AG.
4.50	Standard Stock Purchase Plan of Converium Holding AG, Zug, Switzerland December 2006

126

Exhibit Number	Description
4.51	Standard Stock Option Plan of Converium Holding AG, Zug, Switzerland December 2006
4.52	Transaction Agreement, dated as of May 9, 2007, by and between Converium Holding AG and SCOR S.A.
4.53	Fronting and Administration Agreement relating to the Global Aerospace Underwriters Pool, dated April 25, 2007, between Global Aerospace Underwriting Managers Limited, Global Aerospace, Inc., Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, National Indemnity Company and Converium AG.
7.1	Computation of ratio of earnings to fixed charges.
8.1	Subsidiaries of the Registrant.
12.1	302 Certification of Chief Executive Officer.
12.2	302 Certification of Chief Financial Officer.
13.0	906 Certification of Chief Executive Officer and Chief Financial Officer.

*	Incorporated by reference to the Company’s Registration Statement filed on Form F-1, on December 10, 2001.
+	Incorporated by reference to the Company’s Registration Statement filed on Form F-1, on December 18, 2002.
^	Incorporated by reference to the Company’s Annual Report on Form 20-F for the year ended December 31, 2002, filed on April 18, 2003.
#	Incorporated by reference to the Company’s Annual Report on Form 20-F for the year ended December 31, 2003, filed on April 5, 2003.
\	Incorporated by reference to the Company’s Annual Report on Form 20-F for the year ended December 31, 2004, filed on June 30, 2005.

127

CONVERIUM
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

	Page
Report of the Group Auditors	F-2
Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004	F-3
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004	F-6
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2006, 2005 and 2004	F-8
Notes to the Consolidated Financial Statements	F-9
Schedules	S-1
Report of the Group Auditors on the Financial Statement Schedules	S-1
I Summary of Investments Other than Investments in Related Parties as of December 31, 2006 and 2005	S-2
II Condensed Financial Information of the Registrant
Statements of Income for the years ended December 31, 2006, 2005 and 2004	S-3
Balance Sheets as of December 31, 2006 and 2005	S-4
Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004	S-5
IV Reinsurance for the years ended December 31, 2006, 2005 and 2004	S-6

Schedules other than those listed above are omitted for the reason that they are not applicable or the information is otherwise contained in the financial statements.

F-1

Converium Holding AG and Subsidiaries

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Converium Holding AG, Zurich

We have completed an integrated audit of Converium Holding AG and its subsidiaries (“the Converium Group’s”) 2006 consolidated financial statements and of its internal control over financial reporting as of December 31, 2006 and audits of its 2005 and 2004 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board of the United States of America. Our opinions, based on our audits, are presented below.

Consolidated financial statements

As auditors of the Converium Group, we have audited the consolidated financial statements (comprising consolidated balance sheet, income statement, statement of cash flows, statement of changes in equity and notes), set out on pages F- 3 to F-57 of the 2006 Annual Report on Form 20-F, of Converium Holding AG as of December 31, 2006 and 2005 and for each of the three years in the period ended December 31, 2006.

These consolidated financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

Our audits were conducted in accordance with Swiss Auditing Standards and with the Standards of the Public Company Accounting Oversight Board of the United States of America, which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used, and significant estimates made and evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements, after the restatement described in note 1(a), present fairly, in all material respects, the financial position of Converium Holding AG and its subsidiaries at December 31, 2006 and 2005 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in accordance with accounting principles generally accepted in the United States of America.

As discussed in Note 13, the Converium Group changed its accounting for pensions in accordance with SFAS 158.

Internal control over financial reporting

We have also audited Management’s assessment, included in “Management’s Annual Report on Internal Control Over Financial Reporting”, appearing in Item 15 of the 2006 Annual Report on Form 20-F, that the Converium Group maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Converium Holding AG’s Board of Directors and Management of the Converium Group are responsible for maintaining effective internal control over financial reporting and Management is responsible for the assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on Management’s assessment and on the effectiveness of the Converium Group’s internal control over financial reporting based on our audit.

We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board of the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating Management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of Management and Directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Management’s assessment, included in “Management’s Annual Report on Internal Control Over Financial Reporting”, appearing in Item 15 of the 2006 Annual Report on Form 20-F, that the Converium Group maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control - Integrated Framework issued by the COSO.

Also, in our opinion, the Converium Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control - Integrated Framework issued by the COSO.

PricewaterhouseCoopers Ltd

A. Hill                                                                                      M. Frei
Zurich, Switzerland, June 13, 2007

F-2

Converium Holding AG and Subsidiaries

Consolidated statements of income

(USD million, except per share information)
Year ended December 31	Notes		2006		2005		2004
Revenues
Gross premiums written				1,980.9		1,955.0		3,492.2
Less ceded premiums written				–128.9		–171.9		–236.3
Net premiums written		10		1,852.0		1,783.1		3,255.9
Net change in unearned premiums				–40.3		471.7		–157.4
Net premiums earned		10		1,811.7		2,254.8		3,098.5
Net investment income		6		260.4		257.8		227.5
Net realized capital gains (losses)		6		18.9		31.3		31.2
Total revenues from continuing operations				2,091.0		2,543.9		3,357.2
Benefits, losses and expenses
Losses, loss expenses and life benefits		8,10		–1,187.8		–1,720.1		–2,395.0
Acquisition costs		10		–482.1		–537.4		–753.9
Other operating and administration expenses				–148.6		–163.5		–153.8
Other loss				–0.5		–21.9		–4.7
Interest expense		11		–16.7		–17.2		–18.7
Amortization of intangible assets		7		—		–21.5		–9.9
Restructuring costs		3		0.2		–12.1		–0.2
Total benefits, losses and expenses from continuing operations				–1,835.5		–2,493.7		–3,336.2
Income from continuing operations before taxes				255.5		50.2		21.0
Income tax (expense) benefit		12		–40.5		–16.1		4.6
Income from continuing operations				215.0		34.1		25.6
(Loss) income from discontinued operations, net of tax		2		–157.9		34.6		–608.1
Net income (loss)				57.1		68.7		–582.5
Basic earnings (loss) per share:
from continuing operations		23		1.47		0.23		0.40
from discontinued operations		23		–1.08		0.24		–9.59
Total basic earnings (loss) per share		23		0.39		0.47		–9.19
Diluted earnings (loss) per share:
from continuing operations		23		1.45		0.23		0.40
from discontinued operations		23		–1.07		0.23		–9.49
Total diluted earnings (loss) per share		23		0.38		0.46		–9.09

The notes to the financial statements are an integral part of these financial statements.

F-3

Converium Holding AG and Subsidiaries

Consolidated balance sheets

(USD million, except per share information)					2005
As of December 31	Notes		2006		Restated
Assets
Invested assets
Held-to-maturity securities:
Fixed maturities		6		718.3		793.6
Available-for-sale securities:
Fixed maturities		6		3,122.5		4,169.8
Equity securities		6		734.7		362.6
Other investments				204.2		253.1
Short-term investments				44.9		35.1
Total investments				4,824.6		5,614.2
Funds Withheld Asset		6		940.7		1,020.1
Total invested assets				5,765.3		6,634.3
Other assets
Cash and cash equivalents				633.1		647.3
Premiums receivable:
Current				114.5		193.7
Accrued				766.4		865.6
Reserves for unearned premiums, retro				31.1		37.8
Reinsurance assets:
Underwriting reserves		10		647.2		805.1
Insurance and reinsurance balances receivable				34.1		37.6
Funds held by reinsureds				1,940.1		1,817.4
Deposit assets				2.5		183.4
Deferred policy acquisition costs				349.6		304.3
Deferred income taxes		12		5.6		1.0
Other assets		7		233.5		298.4
Total assets				10,523.0		11,825.9

F-4

Converium Holding AG and Subsidiaries

Consolidated balance sheets

(USD million, except per share information)					2005
As of December 31	Notes		2006		Restated
Liabilities and shareholders’ equity
Liabilities
Reinsurance liabilities
Unpaid losses and loss expenses		8		6,348.6		7,568.9
Future life benefits, gross		10		510.7		405.6
Insurance and reinsurance balances payable				177.6		226.3
Reserves for unearned premiums, gross		10		682.3		610.8
Other reinsurance liabilities				103.7		127.8
Funds held under reinsurance contracts				167.3		332.9
Deposit liabilities				250.2		300.6
Deferred income taxes		12		46.5		8.1
Accrued expenses and other liabilities				196.0		200.3
Debt		11		194.1		391.2
Total liabilities				8,677.0		10,172.5
Shareholders’ equity
Common stock CHF 5 nominal value, 146,689,462 and 146,689,462 shares issued, respectively (146,154,559 and 146,473,231 shares outstanding, respectively)		15		554.9		554.9
Additional paid-in capital				1,297.1		1,295.6
Treasury stock (534,903 and 216,231 shares, respectively)				–6.7		–1.5
Unearned stock compensation		14		0.9		–3.5
Total accumulated other comprehensive income:
Pension liabilities, net of taxes		13		–8.7		–4.9
Net unrealized gains on investments, net of taxes		6		98.0		42.7
Cumulative translation adjustments, net of taxes		4		191.9		96.9
Total accumulated other comprehensive income				281.2		134.7
Retained deficit				–281.4		–326.8
Total shareholders’ equity				1,846.0		1,653.4
Total liabilities and shareholders’ equity				10,523.0		11,825.9

The notes to the financial statements are an integral part of these financial statements.

F-5

Converium Holding AG and Subsidiaries

Consolidated statements of cash flows

(USD million)
Year ended December 31	2006		2005		2004
Cash flows from operating activities
Net income (loss)		57.1		68.7		–582.5
Adjustments for
Loss on disposal of investment in subsidiaries		190.1		—		—
Net realized capital losses (gains) on investments		–18.3		–25.5		–46.5
Amortization of premium/discount		37.2		50.7		59.1
Depreciation and amortization		7.4		39.6		34.2
Deferred tax, net		30.2		4.4		189.0
Other, net		7.9		—		—
Impairment of goodwill		—		—		94.0
Total adjustments		254.5		69.2		329.8
Changes in operational assets and liabilities
Premiums receivable		213.0		567.3		–106.7
Reserves for unearned premiums, retro		10.8		13.1		54.1
Reinsurance assets		53.7		200.2		129.6
Funds held by reinsureds		84.4		–180.2		–332.9
Funds Withheld Asset		148.8		197.5		283.8
Deferred policy acquisition costs		–14.8		149.3		–80.8
Unpaid losses and loss expenses		–621.6		–1,053.3		716.6
Future life benefits, gross		71.8		–4.9		41.2
Insurance and reinsurance balances payable		5.0		–104.8		378.9
Reserves for unearned premiums, gross		15.5		–596.3		–224.4
Other reinsurance liabilities		–25.6		50.2		–94.3
Funds held under reinsurance contracts		–152.3		161.8		–5.0
Income taxes, net		–1.8		11.2		44.6
Changes in all other operational assets and liabilities		–19.3		51.1		–193.3
Total net change in all other operational assets and liabilities		–232.4		–537.8		611.4
Cash provided by (used in) operating activities		79.2		–399.9		358.7

F-6

Converium Holding AG and Subsidiaries

Consolidated statements of cash flows

(USD million)
Year ended December 31	2006		2005		2004
Cash flows from investing activities
Purchases of fixed maturities held-to-maturity		—		–4.7		–228.2
Proceeds from sales and maturities of fixed maturities		2,002.7		4,301.4		4,116.0
Purchases of fixed maturities available-for-sale		–1,743.4		–4,063.6		–4,420.2
Cash flows fixed maturities securities		259.3		233.1		–532.4
Proceeds from sales of equity securities		160.1		186.7		983.1
Purchases of equity securities		–451.5		–125.8		–537.5
Cash flows equity securities		–291.4		60.9		445.6
Proceeds from disposal of investments in subsidiaries, net of cash		–273.8		—		—
Net (increase) decrease in short-term investments		13.7		73.4		–55.3
Proceeds from sales of other assets		173.4		52.8		82.3
Purchases of other assets		–57.0		–43.4		–144.0
Net decrease (increase) in deposit assets		133.0		–13.0		–111.6
Cash flows from other investing activities		263.1		69.8		–228.6
Net cash (used in) provided by investing activities		–42.8		363.8		–315.4
Cash flows from financing activities
Net purchases of common shares		–3.7		–1.5		–6.0
Dividends to shareholders		–11.7		—		–47.8
Proceeds from Rights Offering		—		—		428.4
Rights Offering issuance costs		—		—		–25.1
Net (decrease) increase in deposit liabilities		–76.2		–35.3		–1.7
Net cash (used in) provided by financing activities		–91.6		–36.8		347.8
Effect of exchange rate changes on cash and cash equivalents		41.0		39.3		9.0
Change in cash and cash equivalents		–14.2		–33.6		400.1
Cash and cash equivalents as of January 1		647.3		680.9		280.8
Cash and cash equivalents as of December 31		633.1		647.3		680.9

The notes to the financial statements are an integral part of these financial statements.

F-7

Converium Holding AG and Subsidiaries

Consolidated statements of changes in shareholders’ equity

									Accumulated
			Additional				Unearned		other		Retained
	Common		paid-in		Treasury		stock		comprehensive		deficit /		Total
(USD million)	stock		capital		stock		compensation		income		surplus		equity
Balance, December 31, 2003 as reported		253.0		1,256.6		–10.0		–6.1		254.4		180.1		1,928.0
Restatement adjustment (see Note 1)		—		–58.6		—		—		—		58.6		—
Balance, December 31, 2003 as restated		253.0		1,198.0		–10.0		–6.1		254.4		238.7		1,928.0
Net loss		—		—		—		—		—		–582.5		–582.5
Change in minimum pension liability, net of taxes		—		—		—		—		–6.5		—		–6.5
Change in net unrealized gains (losses) on investments, net of taxes		—		—		—		—		–40.6		—		–40.6
Translation adjustments		—		—		—		—		81.4		—		81.4
Other comprehensive income		—		—		—		—		34.3		—		34.3
Total comprehensive income (loss)		—		—		—		—		34.3		–582.5		–548.2
Dividends to shareholders		—		—		—		—		—		–47.8		–47.8
Transfer to general legal reserve		—		3.9		—		—		—		–3.9		—
Purchases of common shares		—		—		–6.0		—		—		—		–6.0
Releases of common shares from treasury		—		–8.2		8.3		—		—		—		0.1
Net amortization of stock compensation		—		11.0		—		–1.4		—		—		9.6
Increase in capital due to rights offering		428.4		—		—		—		—		—		428.4
Decrease of nominal value		–126.5		126.5		—		—		—		—		—
Rights offering issuance costs		—		–29.3		—		—		—		—		–29.3
Balance, December 31, 2004		554.9		1,301.9		–7.7		–7.5		288.7		–395.5		1,734.8
Net income		—		—		—		—		—		68.7		68.7
Change in minimum pension liability		—		—		—		—		2.8				2.8
Change in net unrealized gains (losses) on investments, net of taxes		—		—		—		—		–62.5		—		–62.5
Translation adjustments		—		—		—		—		–94.3		—		–94.3
Other comprehensive loss		—		—		—		—		–154.0		—		–154.0
Total comprehensive (loss) income		—		—		—		—		–154.0		68.7		–85.3
Purchases of common shares		—		—		–1.5		—		—		—		–1.5
Releases of common shares from treasury		—		–7.7		7.7		—		—		—		—
Net amortization of stock compensation		—		1.4		—		4.0		—		—		5.4
Balance, December 31, 2005		554.9		1,295.6		–1.5		–3.5		134.7		–326.8		1,653.4
Net income		—		—		—		—		—		57.1		57.1
Change in minimum pension liability, net of taxes		—		—		—		—		1.1		—		1.1
Change in net unrealized gains (losses) on investments, net of taxes		—		—		—		—		55.3		—		55.3
Translation adjustments		—		—		—		—		95.0		—		95.0
Other comprehensive income		—		—		—		—		151.4		—		151.4
Total comprehensive income		—		—		—		—		151.4		57.1		208.5
Recognition impact of SFAS 158, net of tax		—		—		—		—		–4.9		—		–4.9
Dividends to shareholders		—		—		—		—		—		–11.7		–11.7
Purchases of common shares		—		—		–16.1		—		—		—		–16.1
Releases of common shares from treasury		—		–10.9		10.9		—		—		—		—
Stock compensation, net		—		12.4		—		4.4		—		—		16.8
Balance, December 31, 2006		554.9		1,297.1		–6.7		0.9		281.2		–281.4		1,846.0

The notes to the financial statements are an integral part of these financial statements.

F-8

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Schedule of segment data

	Standard Property &																		Total
(USD million)	Casualty Reinsurance									Specialty Lines									Non-life consolidated
Year ended December 31	2006			2005			2004			2006			2005			2004			2006			2005			2004
Gross premiums written		890.6			803.1			1,509.0			777.0			833.1			1,655.3			1,667.6			1,636.2			3,164.3
Less ceded premiums written		–73.7			–64.1			–131.6			–47.6			–95.4			–90.0			–121.3			–159.5			–221.6
Net premiums written		816.9			739.0			1,377.4			729.4			737.7			1,565.3			1,546.3			1,476.7			2,942.7
Net change in unearned premiums		–41.3			141.8			14.8			–5.7			321.5			–177.7			–47.0			463.3			–162.9
Net premiums earned		775.6			880.8			1,392.2			723.7			1,059.2			1,387.6			1,499.3			1,940.0			2,779.8
Total investment results		109.6			119.9			104.4			140.5			140.5			135.1			250.1			260.4			239.5
Revenues		885.2			1,000.7			1,496.6			864.2			1,199.7			1,522.7			1,749.4			2,200.4			3,019.3
Losses, loss expenses and life benefits		–441.1			–729.6			–1,003.0			–534.3			–772.5			–1,154.7			–975.4			–1,502.1			–2,157.7
Acquisition costs		–195.6			–181.3			–353.3			–192.4			–263.8			–328.1			–388.0			–445.1			–681.4
Other operating and administration expenses		–43.9			–43.9			–52.0			–38.6			–54.5			–53.3			–82.5			–98.4			–105.3
Benefits, losses and expenses		–680.6			–954.8			–1,408.3			–765.3			–1,090.8			–1,536.1			–1,445.9			–2,045.6			–2,944.4
Segment income (loss)		204.6			45.9			88.3			98.9			108.9			–13.4			303.5			154.8			74.9
Other loss
Interest expense
Amortization of intangible assets
Restructuring costs
Income from continuing operations before taxes
Income tax (expense) benefit
Income from continuing operations
(Loss) income from discontinued operations, net of tax
Net income (loss)
As of December 31
Reinsurance assets – underwriting reserves		282.2			265.7			201.1			299.5			323.5			312.7			581.7			589.2			513.8
Losses and loss expenses, gross		2,565.5			2,441.7			2,881.4			3,498.3			3,371.7			3,193.8			6,063.8			5,813.4			6,075.2
Future life benefits, gross		—			—			—			—			—			—			—			—			—
Ratios
Loss ratio (Losses divided by net premiums earned)		56.9	%		82.8	%		72.0	%		73.8	%		72.9	%		83.2	%		65.1	%		77.4	%		77.6	%
Acquisition costs ratio (Aquisition costs divided by net premiums earned)		25.2	%		20.6	%		25.4	%		26.6	%		24.9	%		23.6	%		25.9	%		22.9	%		24.5	%
Administration expense ratio (Other operating and administration expenses divided by net premiums written)		5.4	%		5.9	%		3.8	%		5.3	%		7.4	%		3.4	%		5.3	%		6.7	%		3.6	%
Combined ratio (Sum of the loss, underwriting expense and administration expense ratios)		87.5	%		109.3	%		101.2	%		105.7	%		105.2	%		110.2	%		96.3	%		107.0	%		105.7	%

1	not included in the totals are USD 154.4 million and USD 384.7 million reflecting discontinued operations for the year ended December 31, 2005 and 2004, respectively
2	not included in the totals are USD 1,464.1 million and USD 2,560.8 million reflecting discontinued operations for the year ended December 31, 2005 and 2004, respectively

F-9

(USD million)	Life & Health Reinsurance									Corporate Center						Total consolidated
Year ended December 31	2006			2005			2004			2006		2005		2004		2006		2005			2004
Gross premiums written		313.3			318.8			327.9			—		—		—		1,980.9		1,955.0			3,492.2
Less ceded premiums written		–7.6			–12.4			–14.7			—		—		—		–128.9		–171.9			–236.3
Net premiums written		305.7			306.4			313.2			—		—		—		1,852.0		1,783.1			3,255.9
Net change in unearned premiums		6.7			8.4			5.5			—		—		—		–40.3		471.7			–157.4
Net premiums earned		312.4			314.8			318.7			—		—		—		1,811.7		2,254.8			3,098.5
Total investment results		29.2			28.7			19.2			—		—		—		279.3		289.1			258.7
Revenues		341.6			343.5			337.9			—		—		—		2,091.0		2,543.9			3,357.2
Losses, loss expenses and life benefits		–212.4			–218.0			–237.3			—		—		—		–1,187.8		–1,720.1			–2,395.0
Acquisition costs		–94.1			–92.3			–72.5			—		—		—		–482.1		–537.4			–753.9
Other operating and administration expenses		–11.6			–15.6			–11.7			–54.5		–49.5		–36.8		–148.6		–163.5			–153.8
Benefits, losses and expenses		–318.1			–325.9			–321.5			–54.5		–49.5		–36.8		–1,818.5		–2,421.0			–3,302.7
Segment income (loss)		23.5			17.6			16.4			–54.5		–49.5		–36.8		272.5		122.9			54.5
Other loss																	–0.5		–21.9			–4.7
Interest expense																	–16.7		–17.2			–18.7
Amortization of intangible assets																	—		–21.5			–9.9
Restructuring costs																	0.2		–12.1			–0.2
Income from continuing operations before taxes																	255.5		50.2			21.0
Income tax (expense) benefit																	–40.5		–16.1			4.6
Income from continuing operations																	215.0		34.1			25.6
(Loss) income from discontinued operations, net of tax																	–157.9		34.6			–608.1
Net income (loss)																	57.1		68.7			–582.5
As of December 31
Reinsurance assets – underwriting reserves		65.5			61.5			39.4			—		—		—		647.2		650.7	1		553.2	1
Losses and loss expenses, gross		284.8			291.4			272.3			—		—		—		6,348.6		6,104.8	2		6,347.5	2
Future life benefits, gross		510.7			405.6			407.1			—		—		—		510.7		405.6			407.1
Ratios
Loss ratio (Losses divided by net premiums earned)
Acquisition costs ratio (Acquisition costs divided by net premiums earned)		30.1	%		29.3	%		22.7	%
Administration expense ratio (Other operating and administration expenses divided by net premiums written)		3.8	%		5.1	%		3.7	%
Combined ratio (Sum of the loss, underwriting expense and administration expense ratios)

F-10

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

1. Basis of preparation and significant accounting policies

(a) Basis of preparation

Converium Holding AG and subsidiaries (“Converium” or the “Company”) is an international reinsurer whose business operations are recognized for innovation, professionalism and service. As a multi-line reinsurer, we pursue a strategy of profitable organic growth with a geographic emphasis on Europe, Asia-Pacific, Central and South America and the Middle East and a distinct focus on global specialty lines.

Converium’s financial statements have been prepared on the basis of accounting principles generally accepted in the United States (“US GAAP”) and comply with Swiss law and are stated in US dollars (“USD”).

The consolidated financial statements include all companies which Converium, directly or indirectly controls (more than 50% of voting rights). Investments in associated companies and joint ventures are accounted for by using the equity method with Converium recording its share of the associated company’s net income and shareholders’ equity.

Discontinued operations

On December 13, 2006, the Company sold all of its outstanding shares of capital stock in Converium Holdings (North America) Inc, to National Indemnity Company, a Berkshire Hathaway company, and accordingly, the operating results related to the North American operations including prior period amounts have been reclassified to discontinued operations. Prior year consolidated balance sheets and consolidated statements of cash flows have not been adjusted.

Restatement

An adjustment has been made to restate January 1, 2004 shareholders’ equity components related to a specific reinsurance transaction, such that retained earnings increased and additional paid-in capital decreased by USD 58.6 million as at December 31, 2002. There is no net effect on shareholders’ equity.

Segment presentation

Converium currently provides its services through three segments, Standard Property & Casualty Reinsurance, Specialty Lines and the Life & Health segment. Our North American operations were previously reported as the principal component of a separate segment, the Run-Off segment. In addition to the three segments’ financial results, the Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee and other corporate functions as well as expenses not allocated to the operating segments. Management also aggregates results for Standard Property & Casualty Reinsurance and Specialty Lines into non-life business, as management considers this aggregation meaningful in understanding the performance of Converium.

Certain reclassifications have been made to prior year financial information to conform to the current year presentation.

(b) Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Therefore, actual results could differ from those estimates.

The most significant estimates include those used in determining reserves for non-life loss and loss adjustment expenses, premium accruals and deferred policy acquisition costs, reinsurance recoverables, impairments, income taxes and commitments and contingencies.

(c) Foreign currency

Converium’s main functional currencies include the Euro, the UK pound, the Swiss franc, the US dollar and the Japanese yen. Assets and liabilities of all of Converium’s branches and subsidiaries expressed in currencies other than US dollars are translated at the end of period exchange rates, whereas statements of income and cash flows are translated at average exchange rates for the period. Translation differences on functional currencies are recorded directly in shareholders’ equity as cumulative translation adjustments, net of any related deferred taxes, if applicable.

Any outstanding balances in foreign currencies arising from foreign currency transactions other than the functional currencies are translated at end of period exchange rates. Revenues and expenses are translated using the exchange rate at the date of the transaction. The resulting exchange differences are recorded in the statements of income.

(d) Non-life insurance and reinsurance

Premiums: Premiums from short-duration insurance and reinsurance contracts are recorded as written and are earned primarily on a pro-rata basis over the period that the related insurance or reinsurance coverage is in effect. However, for those contracts for which the period of risk differs significantly from the contract period, premiums are earned over

F-11

the period of risk in proportion to the amount of insurance or reinsurance protection provided. The unearned premium reserve represents the portion of the premiums written relating to the unexpired terms of coverage. Such reserves are computed by pro-rata methods based on statistical data or reports received from ceding companies.

In a typical reporting period, Converium generally earns a portion of the premiums written during that period together with premiums that were written during earlier periods. Likewise, some part of Converium’s premiums written will not be earned until future periods. Converium allocates premiums written but not yet earned to an unearned premium reserve, which represents a liability on Converium’s balance sheet. As time passes, the unearned premium reserve is gradually reduced and the corresponding amount is released through the income statement as premiums earned. Converium’s premium earned and written estimates are regularly reviewed and enhanced as information is reported by clients and Converium is able to refine estimates and assumptions. Converium’s estimation procedures are also affected by the timeliness and comprehensiveness of the information its clients provide to us. Premium for a retroactive reinsurance contract is recognized as earned at the inception of the contract.

Deferred policy acquisition costs: Acquisition costs, principally representing commissions and brokerage expenses, premium taxes and other underwriting expenses, net of allowances from retrocessionaires, which vary with and are directly related to the production of new business, are deferred and amortized over the period in which the related written premiums are earned.

Losses: Losses and loss expenses are charged as incurred. Unpaid losses and loss expenses represent the accumulation of estimates for ultimate losses based on reports and individual case estimates received from ceding companies. An amount is included for losses and loss expenses incurred but not reported (the “IBNR”) on the basis of past experience of Converium and its ceding companies. Converium does not discount its loss reserves, other than for settled claims with fixed payment terms.

The methods of determining such loss and loss expense estimates and establishing the resulting reserves are continually reviewed and updated and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Resulting adjustments are reflected as current expense in the period in which they become known. Since the reserves are based on estimates, the ultimate settlement may vary from the amount provided.

Deferred charges reinsurance assumed: The excess of the estimated ultimate claims payable over the premiums received with respect to retroactive property and casualty reinsurance contracts is established as a deferred charge which is subsequently amortized over the expected claim payment period. The timing and amount of expected future losses are re-estimated periodically. Deferred charge balances are adjusted accordingly on a retrospective basis via a cumulative adjustment with the net effect included in the amortization expense in the period of change, which is reflected in losses and loss adjustment expenses. Deferred charge balances are included in other assets in the balance sheet.

Participations at Lloyd’s: Participations in syndicates operating at Lloyd’s of London are accounted for using the periodic method. Converium recognizes its proportionate share of the syndicates insurance and reinsurance premiums as revenue over the policy term, and claims, including an estimate of claims incurred but not reported, are recognized as they occur. On the closure of an underwriting year, typically three years after its inception, syndicates reinsure all remaining unsettled liabilities into the following underwriting year, a mechanism known as reinsurance to close (“RITC”). If Converium has increased its participation from one year of account to the next, RITC paid is eliminated, as a result of this offset, leaving an element of the RITC received. This reflects the fact that the Company has assumed a greater proportion of the business of the syndicates. If the Company has reduced its participation from one year of account to the next, the RITC received is eliminated, leaving an element of RITC paid. This reflects the reduction in the Company’s exposure to risks previously written by the syndicates.

(e) Life reinsurance

Recognition of reinsurance revenue and related expenses: Premiums from short-duration life reinsurance contracts are recognized as revenue over the remaining contract period in proportion to the amount of reinsurance protection provided. Premiums from long-duration life reinsurance contracts are recognized as revenue in a manner consistent with the underlying reinsured contracts. Benefits and commissions are provided against such revenue to recognize profits over the estimated life of the reinsurance contract.

Deferred policy acquisition costs: Acquisition and commission costs incurred in acquiring new business are deferred. Deferred policy acquisition costs are amortized over the expected life of the contracts as a constant percentage of expected premiums. Expected premiums are estimated at the effective date of the contract and are consistently applied throughout the life of the contract unless a premium deficiency occurs.

F-12

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Deferred policy acquisition costs are subject to recoverability testing at the time of contract issue and at the end of each reporting period.

Future life benefits reserves and contract deposits: Liabilities for future life benefit reserves and contract deposits are estimated on bases consistent with those used for the original policies issued and with the terms of the reinsurance contracts.

(f) Retrocessions

Converium cedes reinsurance to retrocessionaires in the normal course of business. The cost of short-duration retrocessional contracts is amortized over the contract period in proportion to the amount of reinsurance protection provided consistent with the underlying assumed contracts. The cost of long-duration retrocessional contracts is amortized over the estimated life of the underlying assumed contracts. The difference, if any, between the amounts paid for the retrocessional contract and the amount of the liability for contract benefits relating to the underlying reinsured contracts is part of the estimated cost to be amortized. Reinsurance is recorded gross in the balance sheet. Reinsurance assets include the balances due from retrocessionaires for paid and unpaid losses and loss expenses, ceded unearned premiums and ceded future life benefits. Amounts recoverable from retrocessionaires are estimated in a manner consistent with the liabilities associated with the reinsured contract.

As part of Converium’s risk management process Converium regularly evaluates the recoverability of its reinsurance assets taking into account all public domain information including the current rating of its retrocessionaires. Converium establishes an allowance for potentially uncollectible reinsurance recoverables from retrocessionaires. Converium immediately charges operations for any recoverable balances that are deemed to be uncollectible. Collateral and other offsets are considered in determining the size of the allowance or expense.

(g) Deposit accounting transactions

In accordance with SFAS 113 and SOP 98-7 reinsurance contracts are assessed to determine if underwriting risk, defined as the reasonable possibility of a significant variation in the amount of payments and the reasonable possibility that the reinsurer will realize a significant loss and timing risk, defined as the reasonable possibility of a significant variation in the timing of cash flows, is transferred by the ceding company. In the event that a transaction does not meet the risk transfer requirements, the transaction will be accounted for under deposit accounting. A deposit asset or liability is recognized based on the consideration paid or received less any explicitly identified fees to be retained by the ceding or assuming company. Deposits for contracts that transfer only significant underwriting risk are subsequently measured based on the period of coverage until a loss is incurred, after which the present value of expected future cash flows under the contract is also accrued. Deposits for contracts that transfer only timing risk, or deposits for contracts that transfer neither significant timing nor underwriting risk, are accounted for using the interest method. Future cash flows are estimated to calculate the effective yield and revenue and expense are recorded as interest income or expense. The effect of contracts with indeterminate risk is not included in the determination of net income until sufficient information becomes available to reasonably estimate the impact. Any fee is recognized as other income/expense over the coverage period of the policy and is not recorded as a deposit asset/liability. Changes in the deposit amount are recorded in the statement of income as a loss or loss expense.

(h) Invested assets

The majority of Converium’s fixed maturities and equity securities are classified as available-for-sale; these investments are carried at fair value. Fixed maturities for which Converium has the intent and ability to hold to maturity are classified as held-to-maturity. Held-to-maturity securities are carried at amortized cost, if purchased, or carrying value, if transferred from the available-for-sale category to the held-to-maturity category. The difference between the fair value and amortized cost at the date of transfer of such securities is amortized over the life of the respective securities. The carrying value of transferred securities is the fair value at the date of transfer less amortized net unrealized gains.

Investments in which the Company has significant influence over the operating and financial policies of the investee are accounted for under the equity method of accounting. Under this method, the Company records its proportionate share of income or loss from such investments in its results for the period. Any decline in value of equity method investments considered by management to be other than temporary is charged to income in the period in which it is determined.

Unrealized gains or losses on investments carried at fair value are recorded in other comprehensive income, net of deferred income taxes.

When declines in values of securities below cost or amortized cost are considered to be other than temporary, an impairment charge is recorded as a realized capital loss in the statement of income for the difference between cost or amortized cost and estimated fair value.

F-13

Realized gain or loss on disposals is based on the difference between the net proceeds received and the cost or amortized cost of the investment using the specific identification method. The amortization of premium and accretion of discount on investments in fixed maturities is computed using the effective interest method and is recorded in current period income. Dividends on equity securities are recorded as revenue on the ex-dividend date, the date that the dividends become payable to the holders of record.

Real estate held for investment, which is included in the balance sheet under the caption, “Other investments”, is recorded at depreciated cost and is depreciated on a straight-line basis over thirty years. The gain or loss on disposal is based on the difference between the proceeds received and the carrying value of the investment.

Converium has an interest in certain partnerships which are engaged exclusively in making investments in direct private equity, private equity funds and hedge funds. These investments are carried at fair value as determined by the fund manager, with changes in fair value being recorded as other income or loss. Investments in hedge funds are recorded at fair value with changes in net asset value flowing through other comprehensive income as a separate component in shareholders’ equity.

Short-term and other investments are recorded at cost which approximates fair value. Short-term investments are those with a maturity of greater than three months but less than one year from date of purchase.

The Funds Withheld Asset is carried at the principal balance plus accrued interest.

(i) Other-than-temporary impairments

Based on quantitative and qualitative factors, the Company reviews at least quarterly individual debt and equity securities classified as held-to-maturity or available-for-sale, of whether or not there is an indication that a decline in fair value below the investment security’s carrying value is considered other-than-temporary.

If the decline in fair value is judged to be other-than-temporary, and management does not have the intent and ability to hold the investment until recovery, impairment is deemed to have occurred and the cost basis of the security shall be written down to fair value as the new cost basis. The amount of this write-down should be recognized as impairment of securities in the statement of income.

For all marketable and non-marketable equity and debt securities where the cost basis has remained in excess of the fair value for twelve months consecutively and the fair value has declined by 20% or more of the cost basis, except in circumstances where potential recovery for equity securities can be conclusively demonstrated and documented, the declines will be presumed to be other-than-temporary and thus impaired and must be written down to the fair value. Furthermore, management believes that where there is a 50% or more magnitude of decline, an impairment provision should immediately be recognized.

For securities expected to be sold, an other-than-temporary charge will be recognized if the Company does not expect the fair value to recover prior to the expected date of sale.

Converium has outsourced investment management to recognized and experienced professional funds managers that also operate within the specific investment guidelines of the Company.

(j) Derivative instruments

Derivative financial instruments include swaps, futures, forwards and option contracts, which all derive their value from underlying interest, foreign exchange rates, commodity values or equity prices. Derivatives are subject to various risks similar to those related to the underlying financial instruments, including market, credit and liquidity risk.

Derivative instruments are recognized on the balance sheet at fair value with fair values based on quoted market prices or pricing models using current market rates. The recognition of changes in the fair value of a derivative depends on its intended use. Derivatives and other financial instruments are used to hedge exposures or modify exposures to interest rate and foreign currency risks. Changes in the fair value of derivatives used in hedging activities are, depending on the nature of the hedge, either recognized in earnings together with the change in fair value of the hedged item attributable to the risk being hedged, or recognized in other comprehensive income until the hedged item affects earnings. For all hedging activities, the ineffective portion of a derivative’s change in fair value is immediately recognized through earnings. Derivatives not used in hedging activities are adjusted to fair value through earnings.

Embedded derivatives in insurance contracts and investment contracts are separated from their host contracts and accounted for as derivative instruments under SFAS No.133, “Accounting for Derivative Instruments and Hedging Activities”.

F-14

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Converium utilizes foreign exchange swaps as part of its overall currency risk management. The objective is to manage the liquidity situation of Converium’s entities in various currencies.

(k) Obligation to repurchase securities

Sales of securities under agreements to repurchase are accounted for as collateralized transactions and are recorded at their contracted repurchase amount plus accrued interest. Converium minimizes the credit risk that counterparties to transactions might be unable to fulfill their contractual obligations by monitoring customer credit exposure and collateral value and generally requiring additional collateral to be deposited with Converium when deemed necessary.

(l) Cash and cash equivalents

Cash amounts represent cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments with original maturities of three months or less.

(m) Fixed assets

Fixed assets, which are included in the balance sheet under the caption “Other assets”, are carried at cost less accumulated depreciation and any necessary write-downs for impairment. The costs of fixed assets are depreciated principally on a straight-line basis over the following estimated useful economic lives: furniture and fixtures five to ten years; computer equipment and software three to five years. Maintenance and repair costs are charged to income as incurred; costs incurred for major improvements are capitalized and depreciated. Gains and losses on disposal of fixed assets are based upon their carrying volume.

(n) Goodwill and intangible assets

Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. The Company evaluates both the expected useful life and the recoverability of its intangible assets whenever changes in circumstances warrant. In accordance with SFAS 142, the Company reviews the carrying value of goodwill related to all of its investments for any impairment on at least an annual basis. If it is determined that an impairment exists, the excess of the unamortized balance over the fair value of the intangible asset will be charged to income at that time. If it has been determined that the estimated useful life of the intangible asset has changed the remaining unamortized balance of the intangible asset will be amortized on a straight-line basis over the newly determined expected useful life of the asset.

(o) Recognition and measurement of long-lived assets

Converium periodically reviews its long-lived assets to determine potential impairment. If the recoverable amount is less than the carrying amount of the asset, an impairment loss is recognized. The recoverable amount is measured using the sum of the asset’s undiscounted estimated future cash flows expected to arise from the use of the asset and from its disposal at the end of its useful life. The impairment loss is measured as the difference between the carrying amount of the asset and its fair value. Fair value is defined as the market price less cost of disposal. If the market price is not available, fair value is estimated based on the present value of future cash flows.

(p) Income taxes

Taxes on income are accrued in the same period as the revenues and expenses to which they relate. Deferred income taxes are provided for all temporary differences that are based on the difference between financial statement carrying amounts and the income tax bases of assets and liabilities, tax effected using the enacted local income tax rates. The income tax basis of an asset or liability is calculated in accordance with the rules for determining taxable income established by the local taxation authorities. For a particular asset or liability, this may result in a deferred tax asset in one country but a deferred tax liability in another. In addition, a deferred tax asset is established for net operating loss carryforwards.

As required under SFAS No.109, “Accounting for Income Taxes” (“SFAS No.109”) Converium is required to assess if it is more likely than not that some or all of the net deferred tax assets will not be realized. A valuation allowance is recorded to reduce net deferred tax assets to the amount that is expected to be realized. Historical losses are considered among other factors in making this assessment. As a result of significant historical losses, a full valuation allowance was established against Converium AG’s net deferred tax assets to reflect the continued net loss position of the Company. Converium AG may offset future taxable income against the existing net operating losses carried forward, resulting in no tax expense on such income until such time as the net operating losses are utilized or expire, or the valuation allowance is released.

The Company does not affirmatively apply the exception to the recognition of deferred taxes under Accounting Principles Board Opinions No.23 (APB23), “Accounting for Income Taxes – Special Areas” and therefore is required under SFAS No.109 to provide for taxes on the undistributed earnings of its foreign subsidiaries and foreign corporate joint ventures. However, due to various factors, including no positive undistributed earnings in any foreign subsidiaries or joint ventures and the availability of the participation exemption, no provision for taxes is made on earnings or other outside basis differences of the foreign subsidiaries and joint ventures.

F-15

Converium is subject to income taxes in Switzerland and various foreign jurisdictions. Significant judgment is required in determining the Company’s worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is uncertain. Accruals for tax contingencies are provided, if necessary, in accordance with the requirements of SFAS No. 5, “Accounting for Contingencies ”.

(q) Employee benefits

Converium provides defined benefit plans for its European employees. The assets of these plans are principally held separately from Converium’s general assets in trustee-administered funds.

In September 2006, the FASB issued SFAS 158 “Employers Accounting for Defined Benefit Pension and Other Post Retirement Plans ” (SFAS 158). The Company adopted SFAS 158 prospectively on December 31, 2006. In accordance with the requirements of SFAS 158, the funded status of plans was determined as of the end of the fiscal year. Any over-funded or under-funded status relating to defined benefit plans is recognized as an asset or liability respectively. Contributions to defined contribution pension plans are charged to income as they become due. See Note 13 for further information on the impact of SFAS 158 on the Company.

Converium recognizes the expense related to incentive plans over the relevant performance period.

(r) Stock option accounting

On January 1, 2006, Converium adopted SFAS 123 (revised 2004), “Share-Based Payment ” (SFAS 123(R)). In accordance with the requirements of SFAS 123(R), Converium uses the modified prospective method, and recognizes grants of employee stock options at the fair value of the award on the grant date. The fair values of all stock options granted by the Company are determined using the Black-Scholes-Merton model (B-S-M Model). The adoption of SFAS 123(R) did not have a material impact on the financial position or results of operations.

(s) Restructuring costs

Restructuring costs relating to employee service termination are measured initially at the communication date based on the fair value of the liability as of the termination date. Converium recognizes the liability ratably over the future service period of employees. Restructuring costs associated with changing the provisions of an existing lease are recognized and measured at fair value in the period in which the liability occurs.

(t) Contingencies

In accordance with SFAS No.5 “Accounting for Contingencies”, management evaluates each contingent matter separately. A loss is recorded if probable and reasonably estimable. Management establishes reserves for these contingencies at its “best estimate”, or, if no one number within the range of possible losses is more probable than any other, the Company records an estimated reserve at the low end of the range of losses.

(u) New accounting pronouncements

The following new standards have been or will be required to be adopted by Converium in the future:

SFAS 155, “Accounting for Certain Hybrid Instruments”

In February 2006, the FASB issued SFAS 155, “Accounting for Certain Hybrid Instruments” (SFAS 155). This statement amends SFAS 133, “Accounting for Derivative Instruments and Hedging Activities and SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. The standard allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host contract) if the holder elects to account for the investment on a fair value basis. SFAS 155 also clarifies and amends certain other provisions in SFAS 133 and SFAS 140. This statement is effective for all financial instruments acquired or issued in fiscal years beginning after September 15, 2006. This guidance is currently not expected to have a material impact on the Company’s results of operations and financial position.

SFAS 157 “Fair Value Measurements”

In September 2006, the FASB issued SFAS 157 “Fair Value Measurements” (SFAS 157). This standard provides enhanced guidance for using fair value to measure assets and liabilities. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently in the process of evaluating the effect that the adoption of SFAS 157 will have on its results of operations and financial position.

The Company adopted SFAS 158 on December 31, 2006. See (q) Employee benefits.

SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities ”

In February 2007, the FASB issued SFAS 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). The fair value option established by SFAS 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A company shall report unrealized

F-16

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option may generally be applied instrument by instrument, is irrevocable, and, is applied only to entire instruments and not to portions of instruments. SFAS 159 becomes effective for financial years beginning after November 15, 2007. Converium is in the process of determining the impact of SFAS 159.

FASB Interpretation No. FIN 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No.109”

In June 2006, the FASB issued FASB Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes”, which clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No.109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation requires that the impact of a tax position is recognized and measured in the consolidated financial statements, if that position is more likely than not of being sustained in an audit, based on the technical merits of the position. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure. The new guidance is applicable for periods beginning after December 15, 2006 and is not expected to have a material impact on the Company’s financial condition.

FASB Staff Position (“FSP”) FAS 123(R)-5 “Amendment of FASB Staff Position SFAS 123(R)-1”

In October 2006, the FASB issued FSB SFAS 123(R)-5, “Amendment of FASB Staff Position SFAS 123(R)-1”, which addresses whether a modification of an instrument in connection with an equity restructuring should be considered a modification for the purposes of applying SFAS 123(R)-1. This FSP becomes effective for fiscal years beginning after October 10, 2006 and is currently not expected to have a material impact on the Company’s results of operations and financial position.

FASB Staff Position (“FSP”) FIN 46(R)-6 “Determining the Variability to be Considered in Applying FASB Interpretation No. 46(R)”

In April 2006, the FASB issued FSP FIN 46(R)-6 “Determining the Variability to be Considered in Applying FASB Interpretation No. 46(R)”. This FSP addresses how an entity should determine the variability when applying FIN 46(R). The variability will determine if an entity is a variable interest entity as well as the amounts of any expected losses or residual returns. This FSP is effective for reporting periods commencing after July 15, 2006. The Company is currently in the process of evaluating the impact that this FSP will have on its results of operations and financial position.

SEC Staff Accounting Bulletin 108 (SAB 108) –“Considering the Effects of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial Statements”

In September 2006, the SEC staff issued SAB 108 –“Considering the Effects of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial Statements”. SAB 108 was issued to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. At December 31, 2006, the date of required adoption, this new guidance did not have a material impact on the results of operations and financial positions.

2. Discontinued operations

On December 13, 2006, the Company sold all of its outstanding shares of capital stock of Converium Holdings (North America) Inc. representing its North American operations to National Indemnity Company, a Berkshire Hathaway company for a total consideration of USD 295.0 million, including the Senior Note with a principal amount of USD 200.0 million and total cash proceeds of USD 95.0 million.

The Surplus Contribution Note between Converium Holding AG, Switzerland and Converium Reinsurance (North America) Inc. with a principal amount of USD 150.0 million and accrued interest amounting to USD 33.3 million has been sold and assigned to the buyer for a consideration of one US dollar.

As outlined in the transition service agreement, the Company will provide certain services to National Indemnity Company, however; estimated revenue is considered not material.

The Company reflects the sale of its North American operations as discontinued operations in accordance with Statement of Financial Accounting Standard No.144, “Accounting for the Impairment or Disposal of Long-lived Assets”. In the fourth quarter of 2006, a total loss on the transaction of USD 190.1 million, including transaction costs, was recognized.

F-17

Table 2.1 summarizes total discontinued operations as presented in the statements of income comprising of the following components:

Table 2.1

(USD million)

Year ended December 31	2006		2005		2004
Income (loss) from operations of discontinued business		32.2		34.6		–608.1
Loss on sale		–190.1		—		—
(Loss) income from discontinued operations, net of tax		–157.9		34.6		–608.1

Table 2.2 summarizes the components of the loss on sale:

Table 2.2

(USD million)

Year ended December 31	2006
Total consideration		295.0
Assumed Senior Note debt		–200.0
Proceeds from sale received in cash		95.0
Interest receivable on Senior Note		–21.0
Carrying value of North American operations		–51.2
Transaction cost, and other items		–11.0
Loss on sale of surplus note, including interest		–183.3
Loss before realization of other comprehensive income (OCI) positions, including taxes		–171.5
Realization of OCI items (foreign exchange, net unrealized losses on available-for-sale securities)		–2.6
Tax impact, net (OCI)		–16.0
Loss on sale		–190.1

Table 2.3 summarizes the results of operations from discontinued business:

Table 2.3

(USD million)

Year ended December 31	2006		2005		2004
Total revenue		69.6		198.2		880.7
Total expenses		–37.2		–164.1		–1,282.9
Income (loss) before taxes from discontinued operations		32.4		34.1		–402.2
Income tax (expense) benefit		–0.2		0.5		–205.9
Income (loss) from operations of discontinued business		32.2		34.6		–608.1

F-18

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

3. Restructuring costs

For the year ended December 31, 2006, Converium incurred a restructuring benefit of USD 0.2 million due to the release of restructuring accruals as compared with expenses of USD 12.1 million for the same period in 2005. In 2005, the reduction in overall business volume required organizational changes and an adjustment to Converium’s global cost base including employee terminations and closure of smaller offices. In 2004 Converium recorded restructuring costs of USD 0.2 million.

4. Foreign currency translation and transactions

Table 4.1 summarizes the principal exchange rates, which have been used for translation purposes (US dollar per foreign currency unit). Net realized (losses) gains on foreign currency transactions, which are included in the other (loss) income line of the consolidated statements of income (loss), were USD (1.7) million, USD (0.5) million and USD (5.8) million for the years ended December 31, 2006, 2005 and 2004, respectively.

Table 4.1

Exchange rates against USD	Balance Sheets				Statements of income (loss)
	2006		2005		2006		2005		2004
UK pound		1.9579		1.7167		1.8436		1.8195		1.8324
Euro		1.3198		1.1795		1.2564		1.2446		1.2439
100 Japanese yen		0.8399		0.8472		0.8601		0.9099		0.9254
Swiss franc		0.8205		0.7587		0.7986		0.8038		0.8059

5. Segment information

The primary measure of segment information, is segment income (loss), defined as income (loss) before other income (loss), interest expense, impairment of goodwill, amortization of intangible assets, restructuring costs and income taxes.

Converium currently manages its business around three operating segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life & Health Reinsurance, which are based principally on global lines of business. The lines of business by operating segment are as follows:

Standard Property & Casualty Reinsurance: General Third Party Liability, Motor, Personal Accident (assumed from non-life insurers) and Property.

Specialty Lines: Agribusiness, Aviation & Space, Credit & Surety, Engineering, Marine & Energy, Professional Liability and other Special Liability and Workers’ Compensation.

Life & Health Reinsurance: Life & Disability and Accident & Health.

In addition to the three segments’ financial results, the Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee and other corporate functions as well as other expenses not allocated to the operating segments.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Converium accounts for inter-segment revenues and transfers as if the transactions were with third parties at current market prices.

F-19

Table 5.1 below shows net premiums written by line of business.

Table 5.1

Net premiums written by line of business

(USD million)
Year ended December 31	2006		2005		2004
Standard Property & Casualty Reinsurance
General Third Party Liability		229.7		146.7		379.1
Motor		143.1		188.4		437.4
Personal Accident (assumed from non-life insurers)		12.4		13.3		34.5
Property		431.7		390.6		526.4
Total Standard Property & Casualty Reinsurance		816.9		739.0		1,377.4
Specialty Lines
Agribusiness		37.1		36.7		11.4
Aviation & Space		237.1		241.8		404.5
Credit & Surety		42.2		58.4		204.3
Engineering		61.7		65.5		112.2
Marine & Energy		58.1		64.0		82.5
Professional Liability and other Special Liability		297.6		282.8		436.5
Workers’ Compensation		–4.4		–11.5		313.9
Total Specialty Lines		729.4		737.7		1,565.3
Total non-life reinsurance		1,546.3		1,476.7		2,942.7
Life & Health Reinsurance
Life & Disability		247.5		235.2		234.9
Accident & Health		58.2		71.2		78.3
Total Life & Health Reinsurance		305.7		306.4		313.2
Total		1,852.0		1,783.1		3,255.9

Table 5.2 below shows gross premiums written by geographic area of ceding company. Gross premiums written reflect the markets where the business is originally produced.

Table 5.2
Gross premiums written by geographic area of ceding company

(USD million)
Year ended December 31	2006		2005		2004
United Kingdom 1		539.3		481.2		1,156.9
Germany		399.9		395.1		389.6
France		71.1		86.1		158.2
Italy		87.5		107.1		162.3
Rest of Europe		298.2		251.1		379.7
Far East		120.5		132.1		238.5
Near and Middle East		132.2		103.1		124.3
North America		235.7		306.7		752.7
Central and South America		96.5		92.5		130.0
Total		1,980.9		1,955.0		3,492.2

¹ Premiums from the United Kingdom include business assumed through GAUM and Lloyd’s syndicates for such lines of business as Aviation & Space as well as marine, where the exposures are worldwide in nature. Therefore, geographic location of the ceding company may not necessarily be indicative of the location of risk.

F-20

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

6. Invested assets and investment income

Table 6.1
Net investment income

(USD million)
Year ended December 31	2006		2005		2004
Investment income
Fixed maturities		152.5		153.8		112.9
Equity securities		5.6		5.8		13.2
Short-term investments and cash and cash equivalents		28.6		11.6		7.1
Real estate		6.7		8.4		9.4
Other investments		25.2		24.7		20.3
Funds Withheld Asset		52.1		62.6		75.1
Total investment income		270.7		266.9		238.0
Investment expenses		–8.2		–6.9		–8.8
Real estate expenses		–2.1		–2.2		–1.7
Net investment income		260.4		257.8		227.5

The Funds Withheld Asset (see Note 16) was USD 940.7 million and USD 1,020.1 million as of December 31, 2006 and 2005, respectively. Net investment income on the Funds Withheld Asset is based on a weighted average interest rate similar to that of a bond portfolio.

Table 6.2
Net realized capital gains (losses)

(USD million)
Year ended December 31	2006		2005		2004
Fixed maturities:
Realized capital gains		4.1		6.7		11.5
Realized capital losses		–14.4		–11.5		–9.5
Equity securities:
Realized capital gains		24.3		44.8		43.7
Realized capital losses		–0.1		–2.0		–6.0
Write-down of impaired investments		–11.7		–9.2		–6.2
Other		16.7		2.5		–2.3
Net realized capital gains (losses)		18.9		31.3		31.2

In 2006, Converium’s net realized capital gains decreased by USD 12.4 million to USD 18.9 million. Net realized gains from the sale of equity securities, largely related to the sale of PSP Swiss Property AG securities were largely offset by realized losses on fixed maturities securities and write-downs on impaired investments. Additionally, the sale of Swiss direct real estate holdings generated a USD 18.7 million realized gain and is reflected within the other realized gains line.

In 2005, Converium’s net realized capital gains increased by USD 0.1 million to USD 31.3 million, primarily resulting from higher realized capital gains on the sale of equity securities offset by higher realized losses on fixed maturity securities in connection with ordinary trading activity.

In 2004, Converium’s net realized capital gains were USD 31.2 million, primarily resulting from sales of equity securities to adjust its asset allocation to reduce investment portfolio risk.

F-21

Table 6.3
Unrealized investment gains (losses) (included in other comprehensive income)

	Net change for the year
	year ended December 31						Total as of December 31
(USD million)	2006		2005		2004		2006		2005
Fixed maturities held-to-maturity		–2.5		–3.0		–4.3		4.3		6.8
Fixed maturities available-for-sale		–21.8		–46.5		0.9		–41.6		–19.8
Equity securities available-for-sale		45.2		4.6		–24.2		120.1		74.9
Hedge funds and others		14.7		6.5		2.5		23.7		9.0
Less amounts of net unrealized investment gains (losses) attributable to:
Net deferred income taxes		19.7		–24.1		–15.3		–8.5		–28.2
Total		55.3		–62.5		–40.4		98.0		42.7

Table 6.4
Investments in fixed maturities and equity securities

	Cost or				Gross				Gross				Estimated
(USD million)	amortized cost				unrealized gains				unrealized losses				fair value
Year ended December 31	2006		2005		2006		2005		2006		2005		2006		2005
Held-to-maturity
Fixed maturities:
US government		288.5		389.1		17.1		—		–11.5		–16.7		294.1		372.4
Other governments		14.6		13.1		—		0.7		—		—		14.6		13.8
Newly invested:
US government		167.9		169.1		—		—		–22.6		–3.1		145.3		166.0
Other governments		247.3		222.3		0.1		4.3		–2.1		—		245.3		226.6
Total held-to-maturity		718.3		793.6		17.2		5.0		–36.2		–19.8		699.3		778.8
Available-for-sale
Fixed maturities:
US government		852.1		1,166.3		0.4		2.9		–12.3		–21.5		840.2		1,147.7
Other governments		1,548.0		1,566.6		0.7		14.6		–16.8		–6.0		1,531.9		1,575.2
Corporate and other debt securities		757.7		888.6		1.3		6.4		–14.8		–9.5		744.2		885.5
Mortgage and asset-backed securities		6.3		568.1		—		0.3		–0.1		–7.0		6.2		561.4
Total		3,164.1		4,189.6		2.4		24.2		–44.0		–44.0		3,122.5		4,169.8
Equity securities		614.6		287.7		121.8		76.0		–1.7		–1.1		734.7		362.6
Total available-for-sale		3,778.7		4,477.3		124.2		100.2		–45.7		–45.1		3,857.2		4,532.4

F-22

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

The following table presents the continuous periods during which investment positions were carried at an unrealized loss as of December 31, 2006:

Table 6.5
Maturities of unrealized investment losses on fixed maturities and equity securities

			Gross unrealized losses
							Total gross
(USD million)	Estimated fair		Less than		Greater		unrealized
As of December 31	value		one year		than one year		losses
Held-to-maturity
Fixed maturities		620.2		34.7		1.5		36.2
Available-for-sale
Fixed maturities		2,916.5		23.1		20.9		44.0
Equity securities		58.3		1.4		0.3		1.7
Total available-for-sale		2,974.8		24.5		21.2		45.7

The estimated fair values and carrying values of fixed maturities are shown by contractual maturity below. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.

If the decline in fair value is judged to be other-than-temporary, and management has the intent and ability to hold the investments until recovery, no write-down is recognized.

Table 6.6
Fixed maturity schedule by maturity

					Carrying value
(USD million)	Estimated fair value		% of total		Held-to-maturity		% of total
As of December 31	Available-for-sale (AFS)		AFS		(HTM)		HTM
Less than one year		249.9		8.0		—		—
One year through five years		1,931.6		61.8		599.4		83.4
Five years through ten years		689.6		22.1		118.9		16.6
Over ten years		53.1		1.7		—		—
Subtotal		2,924.2		93.6		718.3		100.0
Mortgage and asset-backed securities		6.2		0.2		—		—
Unit trust bonds		192.1		6.2		—		—
Total		3,122.5		100.0		718.3		100.0

At December 31, 2005 real estate held for investment of USD 144.6 million, net of accumulated depreciation of USD 9.7 million, consisted primarily of investments in residential and commercial rental properties located in Switzerland, acquired in late 2001 from subsidiaries of Zurich Financial Services (“ZFS”). These properties were sold in the second half of 2006. The fire insurance value of Converium’s fixed assets totaled USD 35.6 million at December 31, 2006 as compared with USD 128.2 million at December 31, 2005, which also included fire insurance values of real estate held for investments.

There are no investments in any entity in excess of 10% of shareholders’ equity at December 31, 2006 and 2005, other than investments issued or guaranteed by the US or sovereign governments or their agencies.

Converium utilizes foreign exchange swaps as part of its overall currency risk management. The objective is to manage the liquidity situation of Converium’s entities in various currencies. There were no foreign exchange swaps outstanding at December 31, 2006 or 2005.

F-23

7. Goodwill and other intangible assets

Included in other assets was goodwill of USD 49.2 million and USD 49.5 million at December 31, 2006, and 2005, respectively. At December 31, 2006 and 2005 the value of the amortizable intangible asset was nil.

Investment in GAUM

In March 2003, upon receipt of all regulatory approvals, Converium finalized an agreement to acquire a 25% stake in GAUM, a leading international commercial and general aviation underwriting agency, as a part of its strategy to strengthen its long-term position in the aviation and space line of business. Under the terms of the sale and purchase agreement, Converium paid an initial consideration of GBP 14.2 million (USD 22.4 million) and is additionally obligated to pay deferred consideration associated with the underlying performance of GAUM’s in force business. In view of a capped limit on deferred consideration, the maximum amount payable by Converium for the 25% stake in GAUM is GBP 20.8 million (USD 32.7 million). In February 2004, Converium AG finalized a Sale and Purchase Agreement with Royal and Sun Alliance (“RSA”) to acquire a further 5.1% stake in GAUM, which increased its overall stake in GAUM to 30.1%.

An annual goodwill impairment test was carried out at December 31, 2006, and 2005 in respect of the 30.1% investment in GAUM and no impairment was required. At December 31, 2006 and 2005, the carrying value of goodwill associated with the 30.1% stake in GAUM was GBP 13.1 million (USD 23.4 million) and GBP 13.2 million (USD 23.6 million), respectively.

Converium will continue to reassess whether any impairment of goodwill is warranted as and when there is a change in current business circumstances, including termination and extension of the current fronting arrangements with Munich Re and National Indemnity which is due in 2007.

In the light of the S & P rating downgrade in 2004 and the need for subsequent fronting agreements with Munich Re and National Indemnity in order to sustain the aviation business from GAUM, Converium’s management reassessed the remaining useful life of the other intangible asset. The remaining useful life was determined to be less than one year, and the other intangible asset balance as at December 31, 2004 of GBP 11.2 million (USD 20.6 million) was fully amortized in 2005 giving rise to a USD 21.5 million charge for the year ended December 31, 2005. The intangible asset related to established customer relationships of GAUM and was initially intended to be amortized over a useful life of ten years.

MDUSL Investment

As of December 31, 2006 and December 31, 2005, goodwill was USD 20.0 million related to Converium AG’s 49.9% strategic investment in the Medical Defence Union Services Ltd (“MDUSL”). Converium conducts a yearly impairment test of the MDUSL investment. This business continues to perform in line with management’s expectations. No impairment was recognized for the years ended December 31, 2006 and 2005.

See Note 17 and 25 for additional information on GAUM and the Medical Defence Union (the “MDU”).

F-24

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

8. Losses and loss expenses

Significant delays occur in the notification of claims and a substantial measure of experience and judgment is involved in assessing outstanding liabilities, the ultimate cost of which cannot be known with certainty as of the balance sheet date. The reserve for losses and loss expenses is determined on the basis of information currently available; however, it is inherent to the nature of the business written that the ultimate liabilities may vary as a result of subsequent developments.

Table 8.1
Reserves for losses and loss expenses

(USD million)
Year ended December 31	2006		2005		2004
As of January 1
Gross reserves for losses and loss expenses		7,568.9		8,908.3		7,879.7
Less reinsurance recoverable		–761.0		–914.5		–1,041.3
Less net reserves for losses and loss expenses for discontinued operations		–1,309.7		—		—
Net reserves for losses and loss expenses		5,498.2		7,993.8		6,838.4
Loss and loss expenses incurred 1, 2
Current year		1,234.2		1,922.3		2,881.9
Prior years		–145.2		–186.1		350.2
Total		1,089.0		1,736.2		3,232.1
Losses and loss expenses paid 2
Current year		229.8		451.0		541.4
Prior years		1,016.7		1,995.3		1,938.9
Total		1,246.5		2,446.3		2,480.3
Foreign currency translation effects		403.0		–475.8		403.6
As of December 31
Net reserves for losses and loss expenses		5,743.7		6,807.9		7,993.8
Reinsurance recoverable		604.9		761.0		914.5
Gross reserves for losses and loss expenses		6,348.6		7,568.9		8,908.3

1	The loss and loss expenses incurred includes USD 114.2 million, USD 178.3 million and USD 128.0 million of loss and loss expenses included in the Life & Health Reinsurance segment for the years ended December 31, 2006, 2005 and 2004, respectively.
2	Figures for 2005 and 2004 are as originally reported. Loss and loss expenses incurred and loss and loss expenses paid from discontinued operations were USD 55.8 million and USD 924.1 million and USD 948.1 million and USD 1,066.3 million for 2005 and 2004, respectively.

Prior years’ favorable net loss expenses incurred in 2006 of USD 145.2 million were primarily driven by net favorable development of prior years’ loss reserves of USD 102.8 million, and the reversal of reserves relating to prior years’ premium accruals in the amount of USD 42.4 million.

For the year ended December 31, 2006, Converium reported net favorable development of prior years’ loss reserves of USD 102.8 million. The Standard Property & Casualty Reinsurance segment was positively impacted by net favorable development of prior years’ loss reserves of USD 54.1 million primarily related to the Property and General Third Party Liability lines of business of USD 45.1 million and USD 24.6 million, respectively, partially offset by net adverse development of prior years’ loss reserves related to the Motor line of business of USD 16.5 million. The Specialty Lines segment was positively impacted by net favorable development of prior years’ loss reserves of USD 48.7 million primarily related to the lines of business: Aviation & Space and Engineering of USD 34.9 million and USD 16.2 million, respectively, partially offset by net adverse development of prior years’ loss reserves related to the Professional Liability and other Special Liability line of business of USD 17.6 million.

For the year ended December 31, 2005, Converium recorded net favorable development of prior years’ loss reserves of USD 86.0 million. The Standard Property & Casualty Reinsurance segment was positively impacted by net favorable

F-25

development of prior years’ loss reserves of USD 30.7 million primarily related to the Property line of business of USD 73.3 million, partially offset by net adverse development of prior years’ loss reserves within the Motor and General Third Party Liability lines of business of USD 25.0 million and USD 23.4 million, respectively. The Specialty Lines segment was positively impacted by net favorable development of prior years’ loss reserves of USD 55.3 million primarily related to the Aviation & Space line of business of USD 57.5 million.

For the year ended December 31, 2004, Converium recorded net adverse development of prior years’ loss reserves of USD 72.8 million. The Standard Property & Casualty Reinsurance segment was negatively impacted by net adverse development of prior years’ loss reserves of USD 11.3 million primarily related to adverse development within the Motor line of business of USD 78.7 million, which was partially offset by net favorable development of prior years’ loss reserves related to the Property line of business of USD 77.8 million. The Specialty Lines segment was negatively impacted by net adverse development of prior years’ loss reserves of USD 61.5 million primarily related to adverse developments of the Professional Liability and other Special Liability and Engineering lines of business of USD 116.1 million and USD 13.7 million, respectively, partially offset by net favorable development of prior years’ loss reserves related to: Credit & Surety (USD 30.2 million), Aviation & Space (USD 24.6 million) and Workers’ Compensation (USD 16.4 million) lines of business.

The reserves for certain losses and loss expenses, such as those for settled claims with fixed payment terms, represent the present value estimates of the ultimate cost of all losses incurred but not paid through December 31 of each year. Deferred charges relating to retrospective reinsurance and structured settlements totaling USD 24.8 million, USD 31.2 million and USD 38.0 million as of December 31, 2006, 2005 and 2004, respectively, are as a result included in other assets.

Impact of property catastrophe losses

The year ended December 31, 2006 exhibited insignificant natural catastrophe activity with total incurred losses of USD 10.5 million. There were no individual large losses, defined as those in excess of USD 10.0 million or more of net incurred losses to Converium.

This was in contrast to the year ended December 31, 2005, which exhibited significant natural catastrophe large losses totaling USD 149.2 million: Winter Storm Erwin (USD 32.5 million), Continental European Floods (USD 24.8 million), Hurricane Katrina (USD 33.2 million), Hurricane Rita (USD 14.1 million) and Hurricane Wilma (USD 44.6 million). In 2004, Converium’s large natural catastrophe losses included hurricanes in the US and the Caribbean, the Japanese typhoons and the tsunami in the Indian Ocean, with a total net impact of USD 98.4 million.

September 11^th terrorist attacks

The September 11^th terrorist attacks in the United States represented one of the largest loss events in the insurance industry’s history. In 2001, Converium recorded gross losses and loss expenses of USD 692.9 million arising out of the terrorist attacks (including losses from our subsequently sold North American operations). These losses are capped through an agreement with ZFS. Converium recorded losses and loss expenses, net of retrocessional recoveries and the cap from ZFS through its subsidiaries, were reduced from USD 289.2 million to USD 231.0 million, following the sale of its North American operations. Converium will be exposed to the risk of non-payment of ZFS’ units and Converium is exposed to credit risk from these subsidiaries of ZFS. Converium is not exposed to potential non-payments by retrocessionaires for these events in excess of the cap. In 2006, 2005 and 2004, there was no additional development in net reserves for the September 11^th terrorist attacks.

As of December 31, 2006, Converium recorded gross and net incurred losses and loss expenses related to the September 11^th terrorist attacks as follows:

Table 8.2
September 11^th incurred losses and loss expenses by segment

			Retrocessional
			Reinsurance
(USD million)	Gross losses		recoveries		Net losses
Standard Property & Casualty Reinsurance		159.8		112.4		47.4
Specialty Lines		299.2		127.6		171.6
Life & Health Reinsurance		28.3		16.3		12.0
Total		487.3		256.3		231.0

F-26

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Included in the reinsurance recoveries above are USD 23.4 million due from ZFS and subsidiaries.

Certain arrangements with ZFS as described herein provide protection against potential adverse loss development on the September 11^th terrorist attacks for Converium AG and Converium Rückversicherung (Deutschland) AG above the initial loss amounts recorded of USD 231.0 million, net of retrocessional reinsurance recoveries.

Converium AG’s exposure under the Quota Share Retrocession Agreement (see Note 16) is limited for “Extraordinary Events”. The agreement limits Converium AG’s losses arising out of any “Extraordinary Event” to USD 220.0 million and the parties have agreed that the September 11^th terrorist attacks are an “Extraordinary Event” and that the USD 220.0 million limit applies to losses arising out of the September 11^th terrorist attacks. Because Zurich Insurance Company (“ZIC”) and Zurich International Bermuda Ltd (“ZIB”), wholly owned subsidiaries of ZFS, retain losses in excess of the limit, ZFS will be responsible for non-payment, if any, by the retrocessionaires with regard to losses arising out of the September 11^th terrorist attacks in excess of the USD 220.0 million limit.

ZIC will indemnify Converium Rückversicherung (Deutschland) AG for losses arising out of the September 11^th terrorist attacks in excess of USD 11.0 million, net of retrocessional reinsurance recoveries.

Asbestos and environmental exposures

As of December 31, 2006 and 2005, Converium had reserves for environmental impairment liability and asbestos-related claims of USD 49.2 million, respectively, for each year. Converium’s survival ratio (calculated as the ratio of reserves held, including IBNR, over claims paid over the average of the last three years) for asbestos and environmental reserves was 13.8 years at December 31, 2006 and 14.1 years at December 31, 2005.

9. Guaranteed Minimum Death Benefit (GMDB)

Converium assumed certain retrocession liability with regard to Guaranteed Minimum Death Benefit (GMDB) features attached to variable annuity policies written in the United States. These treaties are all in run-off and cover in total 1.1 million policies that were issued mainly in the late 1990’s and that incorporate various benefit types originating from different primary insurers. Claims occur in the event of death if a policy is in-the-money, which means that the GMDB exceeds the account balance. Under these circumstances, the difference between the GMDB and the account balance or the GMDB and the cash surrender value becomes due, depending on the definition of the underlying reinsurance agreements.

The following types of Guaranteed Minimum Death Benefits are covered:

– Return of premium: The GMDB is the amount of total deposits adjusted for partial withdrawals, if any.

– Ratchet: After a given number of years, the GMDB is adjusted to the current account balance, if greater. Most common is a 1-year ratchet, meaning that the GMDB is adjusted annually on the policy’s anniversary date.

– Rollup: The GMDB increases each year from the initial premium adjusted for later deposits and partial withdrawals by a fixed percentage. Rollup guarantees reinsured under Converium’s agreements grant an annual accumulation percentage between 3% and 7%. In many products, especially for higher rollup percentages, an upper limit applies (e.g. 200% of the paid policyholder premium adjusted for later deposits and partial withdrawals).

– Reset: After a given number of years, the GMDB is adjusted to the current account balance. This means that the GMDB can be reduced but often not below the paid-up premium (adjusted for later deposits and partial withdrawals).

– Combinations of the above.

Guarantees that increase over the time are, for a majority of the assumed business, only applied up to a certain age (e.g. 85). For the majority of the portfolio, a maximum death benefit age exists and as a consequence, Converium will be off the risk afterwards.

Converium does not hold any contract holder funds. These assets remain with the originating ceding companies.

The GMDB liability is determined each period based on the information provided by Converium’s ceding companies. The current account value, the guaranteed death benefit and details of the covered benefit types are taken into consideration for the evaluation of the net amount at risk (NAR) and the expected future liability. The liability according to SOP 03-1 is estimated at the end of the reporting period.

For the evaluation of the liabilities, Converium uses an actuarial model that considers 1,000 stochastically generated investment performance scenarios. The mean performance assumed for equities is 9.6% and the mean performance for other investment types such as bonds and cash deposits varies between 4.8% and 5.7%. The corresponding volatility assumptions are 18.3% and 1.5% to 2.2%, respectively. The discount rate used in the model is stochastically generated in

F-27

line with the other investment scenarios and takes into consideration the current yield level. It is assumed to be an average of 5.7% over the long run. The mortality assumption is 100% of the Annuity 2000 table. Lapse rates vary by duration and range from 6.5% to 20%. Partial withdrawals, either applied pro-rata or on a dollar-for-dollar basis according to the policy conditions, are also considered in the modeling.

The corresponding parameter, reflecting the on-average withdrawn amount of the account value, varies by duration and is assumed to range from 2.4% to 7.5% per annum.

As of December 31, 2006, the following values were estimated as described above:

Table 9.1

									Gross
(USD million)					Account				SOP 03-1
Guarantee type	Average age		GMDB		value		NAR		Reserve
Ratchet		67.4		1,520.4		1,398.1		193.3		26.3
Rollup		72.3		497.8		357.2		145.5		28.0
Rollup & ratchet		67.9		17.7		14.6		4.6		0.6
Return of premium		64.2		16.1		19.0		1.0		0.1
Reset		61.3		231.4		280.1		7.7		1.2
Reset & return of premium		63.1		95.9		112.4		1.8		0.3
Total		69.2		2,379.3		2,181.4		353.9		56.5

The table below shows the cash flow and claim reserves balances for the periods shown:

Table 9.2

(USD million)
Year ended December 31	2006		2005		2004
Received reinsurance premium, net of commission and brokerage		4.0		3.3		5.1
Paid losses		10.4		12.1		13.3
As of December 31		2006		2005
Claim reserves (including case reserves and IBNR)		4.0		5.4

10. Retrocessional reinsurance and catastrophe protection

Retrocessional reinsurance

Retrocessional reinsurance arrangements generally do not relieve Converium from its direct obligations to its reinsureds. Thus, a credit exposure exists with respect to reinsurance ceded to the extent that any retrocessionaire is unable or unwilling to meet the obligations assumed under the retrocessional agreements. At December 31, 2006 and 2005, Converium held USD 210.4 million and USD 470.6 million, respectively, in collateral as security under related retrocessional agreements in the form of deposits, securities and /or letters of credit. Converium is able to access outside capacity for both traditional and non-traditional coverage and therefore is not dependent upon any single retrocessional market.

As of December 31, 2006 recoverables, including insurance and reinsurance balances receivable, from subsidiaries of ZFS totaled USD 12.5 million, or 0.7% of shareholders’ equity. There were no recoverables from any retrocessionaire that exceeded 10% of shareholders’ equity as at December 31, 2006 or 2005. Bad debt provisions of USD 11.3 million have been recorded for estimated uncollectible premiums receivable and reinsurance recoverables at December 31, 2006, compared with USD 28.1 million at December 31, 2005.

F-28

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

National Indemnity Cover

In 2004, Converium acquired a retroactive high level stop-loss retrocession cover from National Indemnity Company, a Standard & Poor’s AAA-rated member of the Berkshire Hathaway group. This contract provided excess of loss coverage protecting Converium AG and our North American operations against potential adverse reserve development on the underwriting years 1987 through 2003. In preparation for the sale of our North American operations and after a review of coverage requirements in December 2006, it was decided to commute this contract. This released USD 131.8 million of cash to Converium and due to a timing discount resulted in a charge of USD 11.5 million both of which were incurred 63% for Converium AG and 37% for our former North American operations.

Table 10.1
Underwriting reserves and reserves for unearned premium

(USD million)	Gross				Reinsurance assets				Net of reinsurance
Year ended December 31	2006		2005		2006		2005		2006		2005
Non-life loss reserves		6,348.6		7,568.9		604.9		761.0		5,743.7		6,807.9
Future life benefits		510.7		405.6		42.3		44.1		468.4		361.5
Total loss reserves		6,859.3		7,974.5		647.2		805.1		6,212.1		7,169.4
Unearned premiums		682.3		610.8		31.1		37.8		651.2		573.0

Table 10.2
Net premiums written and earned

(USD million)	Net premiums written						Net premiums earned
Year ended December 31	2006		2005		2004		2006		2005		2004
Direct premiums		520.8		497.3		476.4		486.3		544.2		494.6
Assumed premiums		1,460.1		1,457.7		3,015.8		1,465.4		1,895.2		2,896.1
Ceded premiums		–128.9		–171.9		–236.3		–140.0		–184.6		–292.2
Total		1,852.0		1,783.1		3,255.9		1,811.7		2,254.8		3,098.5

Table 10.3
Benefits, losses and expenses

(USD million)
Year ended December 31	2006		2005		2004
Losses, loss expenses and life benefits
Direct		-427.0		-451.5		-419.2
Assumed		-837.7		-1,432.4		-2,110.4
Ceded		76.9		163.8		134.6
Total		–1,187.8		–1,720.1		–2,395.0
Acquisition costs
Direct		-81.1		-71.4		-45.5
Assumed		-405.5		-477.6		-753.7
Ceded		4.5		11.6		45.3
Total		–482.1		–537.4		–753.9

F-29

Catastrophe protection

On June 15, 2004, Converium AG announced the successful private placement of USD 100.0 million of floating rate notes issued by Helix 04 Limited (“Helix 04”), a Bermuda special purpose exempted company. By means of a counter-party contract with the issuer, the transaction provides Converium with fully collateralized second and subsequent event protection for North Atlantic hurricane, US earthquake, Japanese earthquake and European windstorm property catastrophe exposures. The notes are triggered only by second and subsequent events in any of the four peril regions during the five-year term of the transaction.

Payments from Helix 04 to Converium AG are based on modeled reinsurance losses on a notional portfolio. In a modeled loss contract, the covered party’s aggregate exposure to each geographical region and type of catastrophe, by line of business, is compared to industry-wide data in order to produce the covered party’s market share of particular loss events by line of business using commercially available natural catastrophe loss simulation modeling software. The software simulates a catastrophe, at various levels of severity, by generating certain probabilistic loss distributions, in order to calculate industry-wide losses and the corresponding losses for the covered party on a “ground-up basis”, by line of business. These losses are then compared to the modeled loss contracts to determine the amount of the covered party’s recovery in respect of such an event.

Converium exercised its right to reset the notional portfolio by notice on April 24, 2006 with an effective date of June 30, 2006 to realign the notional portfolio with Converium’s anticipated portfolio for the remaining three year term of the contract.

The Helix 04 contract is first triggered when notional losses reach USD 154.8 million (USD 150.0 million before reset). The second trigger is hit when notional losses reach USD 176.2 million (USD 175.0 million before reset). It then pays out according to a sliding scale of notional losses up to USD 276.2 million (USD 275.0 million before reset). The amount of losses that must be incurred before coverage applies relates to the type of loss event (e.g. earthquake, hurricane or windstorm).

Converium estimates its gross loss for each of the 2006 catastrophe events to be significantly less than the Helix 04 activation threshold of USD 154.8 million for each such event, and therefore; Converium will not file a trigger event request in respect of these losses.

The annual cost of Helix 04 to Converium is USD 6.1 million for the year ended December 31, 2006. The annual charge to Converium is not impacted by the occurrence of a loss event that is protected by Helix 04, unlike the prior contract in respect of Trinom, where Converium was required to pay higher amounts for the remainder of the term of the contract. The Helix 04 counter-party contract is not treated as reinsurance and accordingly the charge is reflected through other income (loss) although the cost of the counter-party contract is amortized over the term of the contract in a manner similar to reinsurance.

11. Debt

In December 2002, Converium Finance S.A. issued USD 200.0 million principal amount of non-convertible, unsecured, guaranteed subordinated notes (the “Guaranteed Subordinated Notes”). The Guaranteed Subordinated Notes are irrevocably and unconditionally guaranteed on a subordinated basis by both Converium Holding AG and Converium AG. The Guaranteed Subordinated Notes mature in full on December 23, 2032 and bear interest at the rate of 8.25% paid quarterly in arrears on March 15, June 15, September 15 and December 15. As of December 31, 2006, the carrying value of the Guaranteed Subordinated Notes was USD 194.1 million. The first call date is December 24, 2007.

Converium Holdings (North America) Inc. assumed USD 200.0 million principal amount of non-convertible, unsecured, unsub-ordinated Senior Notes (“the Senior Notes”) originally issued during October 1993 with a maturity date of October 15, 2023 and bearing an interest rate of 7.125%. The semi-annual interest payments were funded by Converium AG due to dividend restrictions of Converium Reinsurance (North America) Inc. The Senior Note was transferred to the National Indemnity company upon the sale of the North American operations (see Note 2).

Debt issuance costs and discounts were USD 5.9 million and USD 6.2 million at December 31, 2006 and 2005, respectively. Such costs are being amortized over the term of the related debt.

F-30

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

12. Income taxes

Table 12.1 below illustrates the current and deferred income tax expense (benefit) for Converium.

Table 12.1

Current and deferred income tax expense (benefit)

(USD million)
Year ended December 31	2006		2005		2004
Current
Switzerland		3.1		–1.1		–1.8
Non-Switzerland		7.2		13.1		13.0
Total current		10.3		12.0		11.2
Deferred
Switzerland		0.6		0.1		–20.1
Non-Switzerland		29.6		4.0		4.3
Total deferred		30.2		4.1		–15.8
Total income tax expense (benefit)		40.5		16.1		–4.6

Table 12.2 below provides a summary of items accounting for the difference between the Swiss federal income tax expense (benefit) computed at the statutory rate and the provision for income taxes reported in the consolidated financial statements. The statutory tax rate reflects the Swiss income tax rate for Converium AG before any income allocation to its branches.

Table 12.2

Expected and actual income tax expense (benefit)

(USD million)
Year ended December 31	2006			2005			2004
Income from continuing operations before tax		255.5			50.2			21.0
Statutory average tax rate		21.4	%		21.4	%		21.4	%
Expected income tax expense (benefit)		54.7			10.7			4.5
Increase (reduction) in taxes resulting from:
Change in valuation allowance		–49.4			0.6			137.3
Foreign tax-rate differential		13.3			21.0			–150.0
Tax exempt realized gains (losses) from equity securities		–1.5			–5.2			–3.3
Changes in applicable tax rate		—			—			1.2
Prior year adjustments		3.1			–2.7			3.0
Change in net operating loss		—			—			–6.0
Hedge agreement (permanent difference due to ruling with tax authorities)		4.8			–6.1			–2.3
Forgiveness of debt		12.3			—			—
Other reconciling items		3.2			–2.2			11.0
Actual income tax expense (benefit)		40.5			16.1			–4.6
Effective tax rate		15.9	%		32.1	%		–21.9	%

For the year ended December 31, 2006, Converium’s consolidated income tax expense of USD 40.5 million is comprised of USD 10.3 million of current income tax expense and USD 30.2 million of deferred income tax expense. The current portion reflects the net tax paying position of some affiliates and the financial statement benefit recognized for net operating loss utilization. Due to the establishment of a full valuation allowance on the net deferred tax position for certain

F-31

other affiliates, no deferred income tax expense has been reported for these entities.

Due to the reorganization of the Company the profit allocation from Switzerland to Bermuda had to be reduced. This change resulted in an increase of net deferred tax assets and the valuation allowance on net deferred tax assets respectively. Both developments have been presented in the table prior as changes in applicable tax rate and change in valuation allowance. In addition to the described development, the change in valuation allowance was impacted by movements in temporary differences and net operating losses in all jurisdictions.

Converium’s consolidated income tax expense for the year ended December 31, 2004 reflects an expense of USD 126.1 million related to the establishment of a valuation allowance against the net deferred tax assets at Converium AG. The effect was partially offset by an increase in deferred tax assets due to additional net operating losses related to the impairment of the carrying value of Converium AG’s participation in the former North American operations and general reserve strengthening.

As of December 31, 2006, Converium had total net operating losses carried forward of USD 1,040.5 million available to offset future taxable income of certain branches and subsidiaries. All of these net operating losses carried forward relate to Converium Rückversicherung (Deutschland) AG and Converium AG. Converium AG’s net operating losses expire in the years 2011 through 2013. The benefits of these carry-forwards are dependent on the generation of taxable income in those jurisdictions in which they arose and accordingly, a valuation allowance has been provided where management has determined that it is more likely than not that the carry-forwards will not be utilized.

Converium will continue to monitor its tax position and reassess the need for a full valuation allowance on its net deferred tax assets at each reporting period. Realization of the deferred tax asset related to net operating losses carried forward is dependent upon generating sufficient taxable income within specified future periods.

Converium’s deferred income tax assets and liabilities are reflected in table 12.3 below:

Table 12.3

Deferred income taxes

(USD million)
As of December 31, 2006	2006		2005
Deferred income tax assets
Loss reserve discount		3.1		3.4
Other technical adjustments		8.6		27.0
Accruals not currently deductible		14.2		0.7
Loss and benefits reserves		8.9		23.2
Net operating loss carryforwards		235.3		219.7
Goodwill		—		4.9
Investments		12.5		—
Unrealized currency losses		17.6		33.1
Other		0.1		7.3
Total deferred income tax assets		300.3		319.3
Valuation allowance		–120.2		–157.0
Net deferred income tax assets		180.1		162.3
Deferred income tax liabilities
Equalization reserves		89.2		59.4
Deferred policy acquisition costs		53.1		38.6
Unrealized appreciation of investments		24.3		35.1
Unrealized currency gains		45.1		10.7
Investments		—		8.8
Other technical adjustments		—		10.5
Other		9.3		6.3
Total deferred income tax liabilities		221.0		169.4
Net deferred income taxes as of December 31		–40.9		–7.1

F-32

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Included in the change in valuation allowance as of December 31, 2006 is a decrease of USD 8.8 million as a result of the fluctuation in foreign currency rates.

The current net income tax payable as of December 31, 2006 was USD 7.3 million. The current net income tax payable as of December 31, 2005 was USD 9.1 million as compared with a current net income tax receivable of USD 1.0 million at December 31, 2004.

13. Employee benefits

Personnel costs incurred for 2006, 2005 and 2004 were USD 82.8 million, USD 89.9 million and USD 87.4 million, respectively. The 2005 and 2004 amount includes costs related to the retention plans rolled out in September 2004 (see Note 14).

Defined benefit pension plans

Converium has defined benefit plans for its European employees. The employees of the North American operations which were sold in December 2006 participated in defined contribution plans which provided benefits equal solely to contributions paid plus investment returns. As at December 31, 2006 Converium no longer has defined contribution plans.

Employees of certain of Converium’s entities are covered under various defined benefit pension plans. Eligibility for participation in these plans is either based on completion of a specified period of continuous service or date of hire. Benefits are generally based on the employees’ years of credited service and average compensation in the years preceding retirement. Annual funding requirements are determined based on actuarial cost methods. The transition obligation (asset) was fully amortized at the end of 2003.

The Pension Fund of Converium AG (the “Fund”) is a foundation whose objective is to insure the personnel of Converium AG against the economic consequences of retirement, disability and death as provided by the statutory provisions of the plan rules. The Fund is a pension fund providing mandatory insurance as required by Swiss Federal Law and is supervised by the Canton of Zurich. The Fund’s pension plan is a “defined contribution plan” in accordance with Swiss Federal Law, but it does not meet the definition of a defined contribution plan pursuant to SFAS No. 87, “Employers’ Accounting for Pensions”, because of certain defined benefit elements required by Swiss Federal Law.

The overall goal of the plan is to maximize total investment returns to provide sufficient funding for present and anticipated future benefit obligations within the constraints of a prudent level of portfolio risk and diversification. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. The investment portfolio contains primarily a diversified blend of equity and fixed income investments together with other asset classes, including real estate which are used to enhance long-term returns, while improving portfolio diversification. Investment risk is measured and monitored on a regular basis.

The assumptions about long-term rates of return on plan assets are based on the historical difference in performance between equities and government bonds. Historical markets are studied and long-term historical relationships between equities and fixed income securities are observed, consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return is established via a building block approach with proper consideration of diversification and rebalancing. Peer data and historical performance reviews are conducted as part of this process. See Table 13.7 for more information on the asset allocation mix in respect of the years ended December 31, 2006 and 2005.

The participants’ contributions to the Fund typically amount to between 7% and 11.5% of the coordinated annual salary (defined as base salary minus coordination amount of 30%) depending on the insured participant’s age and 7% of the annual incentive-based salary. By law, the employer’s contribution must at least equal the contribution of the participant. Converium AG’s contribution typically amounts to between 9% and 16% of the coordinated annual salary and 9% of the incentive-based salary. Converium AG’s contributions to the Fund amounted to CHF 4.2 million (USD 3.4 million) in 2006 and CHF 6.3 million (USD 5.1 million) in 2005.

In addition, Converium’s German operations Converium Rückversicherung (Deutschland) AG have a defined benefit scheme which is fully unfunded in accordance with German statutory law.

Converium uses a December 31 measurement date for all of its defined benefit plans.

Based on the funded status of defined benefit and other post retirement benefit plans as of December 31, 2006, the Company reported an increase in pension liability of USD 6.6 million, a reduction in other comprehensive income, net of tax of USD 4.9 million and a decrease of deferred income taxes of USD 1.7 million.

F-33

Participants may purchase pension benefits at their own cost at any time within certain limits defined by the plan rules or pre-finance their pension benefits reductions in case of early retirement.

The principal actuarial weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, 2006, 2005 and 2004 are as follows:

Table 13.1
Weighted average assumptions

	2006			2005			2004
Discount rate		3.26	%		3.02	%		3.46	%
Expected long-term rate of return on assets		5.00	%		5.50	%		5.50	%
Future salary increases		2.00	%		2.00	%		2.00	%
Future pension increases		0.70	%		0.65	%		0.89	%

The amounts recognized in the balance sheet were as follows:

Table 13.2

(USD million)	2006		2005		2004
Change in projected benefit obligation
Projected benefit obligation as of January 1		89.0		109.4		80.3
Service cost		7.3		7.3		7.4
Interest cost		2.8		3.1		3.2
Settlements/curtailments		—		–19.7		—
Actuarial losses (gains)		–4.6		5.2		10.1
Benefits paid		–1.7		–2.3		–0.9
Foreign currency translation effects		7.2		–14.0		9.3
Projected benefit obligation as of December 31		100.0		89.0		109.4
Change in fair value of plan assets
Fair value of plan assets as of January 1		55.5		68.2		50.6
Actual return on plan assets		2.0		4.4		2.5
Employee contributions		2.4		2.6		3.1
Employer contributions		3.8		5.6		7.1
Settlements/curtailments		—		–13.8		—
Benefits paid		–1.7		–2.3		–0.9
Foreign currency translation effects		4.7		–9.2		5.8
Fair value of plan assets as of December 31		66.7		55.5		68.2
Reconciliation of funded status
Projected benefit obligation		100.0		89.0		109.4
Fair value of plan assets as of December 31		66.7		55.5		68.2
Funded status		–33.3		–33.5		–41.2

F-34

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Table 13.3

(USD million)	2006		2005		2004
Amounts recognized in the consolidated balance sheets
Accrued benefit liability		–33.3		–26.3		–31.7
Amounts recognized in Accumulated Other Comprehensive Income (AOCI)
Actuarial loss(gain)		9.0		—		—
Past service cost		–0.8		—		—
Additional minimum pension liability		—		3.8		7.7
Total pension asset/liability recognized		8.2		3.8		7.7
Assets/liabilities recognized in the consolidated balance sheets
Current liabilities		–0.6
Non-current liabilities		–32.7
Total assets/liabilities recognized		–33.3

At December 31, 2006, 2005 and 2004 the accumulated benefit obligation with respect to all of the Company’s defined benefit plans is USD 91.4 million, USD 82.4 million and USD 100.7 million, respectively.

Service costs include participant contributions of USD 2.4 million, USD 2.6 million and USD 3.1 million for the years ended December 31, 2006, 2005 and 2004, respectively.

The net periodic benefit expense in the income statement consists of the following components:

Table 13.4
Net periodic benefit expense

(USD million)
Year ended December 31	2006		2005		2004
Service cost		7.3		7.3		7.4
Interest cost		2.8		3.1		3.2
Expected return on plan assets		–3.0		–3.6		–3.1
Employee contributions		–2.4		–2.6		–3.1
Amortization of transition obligation		—		—		—
Amortization of actuarial (gains) losses		0.2		0.7		—
Amortization of past service cost		–0.2		–0.2		–0.2
Loss on settlements/curtailments		—		2.2		—
Net periodic benefit expense		4.7		6.9		4.2

The movement in the accrued benefit liability was as follows:

Table 13.5
Accrued benefit liability

(USD million)
As of December 31	2006		2005		2004
Balance at January 1		–26.3		–31.7		–26.0
Current year expense		–4.7		–6.9		–4.2
Contributions paid		3.8		5.6		7.1
Change in additional liabilities		–4.1		2.8		–6.5
Foreign currency translation effects		–2.0		3.9		–2.1
Balance at December 31		–33.3		–26.3		–31.7

F-35

The expected future cash flows to be paid by Converium in respect of pension plans at December 31, 2006 was as follows:

Table 13.6
Expected future cash flows

(USD million)
Employer contributions
2007 (estimate)	4.9
Expected future benefit payments
2007	3.7
2008	3.8
2009	3.8
2010	3.9
2011	3.9
2012–2016	21.6

The weighted average assets allocation of funded defined benefit plans at December 31, 2006 was as follows:

Table 13.7
Weighted average assets allocation of defined benefit plans

Year ended December 31	Long-term target			2006			2005
Equity securities		19%–33	%		32	%		24	%
Debt securities		46%–70	%		51	%		55	%
Real estate		14%–20	%		16	%		17	%
Cash and other investments		0%–8	%		1	%		4	%
Total					100	%		100	%

The following table summarizes the effect of required changes in the additional minimum pension liabilities (“AML”) as of December 31, 2006, prior to adoption of FAS 158 as well as the impact of the initial adoption of FAS 158.

Table 13.8
Initial adoption impact of SFAS 158

	Pre-FAS 158 with		Adjustment to		Post AML and FAS
(USD million)	AML adjustments		initially apply FAS 158		158 Adjustments
Other liabilities		–26.7		–6.6		–33.3
Accumulated other comprehensive income		1.6		6.6		8.2
Accumulated other comprehensive income, net of tax		1.0		4.9		5.9

14. Share compensation and incentive plans

Converium has various incentive- and share-based compensation plans to attract, retain and motivate management and employees, to reward them for their contributions to Converium’s performance and to encourage employee share ownership.

(a) Cash-based incentive plans

Converium operates a short-term incentive program (“Annual Incentive Plan” or “AIP”) for all employees. Awards are made in cash based on the accomplishment of both organizational and individual performance objectives. The compensation expense incurred in 2006, 2005 and 2004 in connection with these plans was USD 8.7 million, USD 12.1 million and USD 0.9 million, respectively.

F-36

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Employee retention plan

In September 2004, Converium adopted a retention plan for certain of its key employees in order to ensure the successful continuation of business operations and the orderly run-off of its formerly owned North American operations. The total cost of the program was USD 28.8 million, over a three year period with the last installment paid in January 2006. The continuing operations portion was USD 7.1 million and USD 11.6 million for 2005 and 2004, respectively. Included in the results for discontinued operations for 2006 is an accrual of USD 0.8 million for payments to certain North American employees following the finalization of the sale of the North American operations in December 2006. No further amounts are expected to arise.

(b) Share-based incentive plans

Share-based compensation plans include all plans under which shares or options to purchase shares are awarded. The grant of shares and options to purchase shares in Converium Holding AG is at the discretion of the Nomination and Remuneration Committee of the Board of Directors. The most significant of these are described in the following plans.

Employee Stock Purchase Plan

Converium adopted an Employee Stock Purchase Plan (the “ESPP”) on January 1, 2002. The ESPP has two offering periods beginning January 1 and July 1 of each year. Substantially all employees meeting specified service requirements are eligible to participate in the ESPP. Participants may contribute between 1% and 15% of base salary towards the purchase of Converium Holding AG shares, up to certain limits. Employees who enroll in the ESPP purchase Converium Holding AG shares at 85% of the lower of the stock’s fair market value on the first or last day of the offering period.

Annual Incentive Share Plan

Certain executives receive a minimum of 25% of their Annual Incentive Plan in the form of Converium shares. All employees may elect to receive up to 50% of their AIP in Converium shares. If these AIP shares are held for a three-year period, employees receive an additional share award equal to 25% of their AIP shares.

Table 14.1 summarizes the status of Converium’s share plans for 2006, 2005 and 2004.

Table 14.1
Status of unvested shares

	2006		2005		2004
Unvested shares at beginning of year		427,376		457,182		160,859
Shares granted		385,827		262,158		438,795
Shares vested		–216,104		–220,109		–30,288
Shares forfeited		–68,637		–71,855		–112,185
Unvested shares at end of year		528,462		427,376		457,181

The total fair value of shares vested during the years ended December 31, 2006 and 2005, was USD 2.6 million and USD 2.8 million, respectively.

Long-Term Incentive Plan (LTIP)

The LTIP is designed to align the interests of management closely with those of shareholders and to encourage share ownership. LTIP awards are made to senior employees and are awarded in a combination of 50% Converium shares and 50% options to purchase shares in Converium Holding AG. Shares vest ratably over three years.

(c) Option-based incentive plans

Options are issued with an exercise price equal to the market value of the shares or ADSs on the grant date. 25% of the options vest immediately on the grant date and 25% vest each year thereafter or upon retirement. The options expire 10.5 years after the date of grant. Due to the sale of the North American operations as of December 13, 2006, un-vested grants for active North American employees forfeited as of the sale date. Any unexercised options will forfeit as of March 13, 2007.

Executive IPO option plan

In connection with the Transactions, Converium granted certain executives options to purchase shares in Converium Holding AG (the “Executive IPO Option Plan”). Under the Executive IPO Option Plan, 420,000 options to purchase shares in Converium Holding AG were awarded. The exercise prices were equal to the market value of the shares or ADSs on the grant date. Executive IPO Options are now fully vested and expire 10.5 years after the date of grant.

Table 14.2 summarizes the status of Converium’s outstanding stock options for 2006, 2005 and 2004.

F-37

Table 14.2
Outstanding stock options

	2006				2005				2004
			Weighted				Weighted				Weighted
			average				average				average
			exercise				exercise				exercise
	Options		price		Options		price		Options		price
Outstanding at beginning of year		2,607,792	CHF 14.95			2,359,954	CHF 45.88			1,728,744	CHF 71.17
Granted		786,495		15.38		760,325		12.87		1,238,640		17.75
Exercised		–541,296		10.31		–123,637		9.59		–39,806		68.64
Forfeited		–409,539		19.63		–388,850		14.59		–567,624		59.90
Outstanding at end of year		2,443,452		14.71		2,607,792		14.95		2,359,954		45.88
Options exercisable at end of year		1,432,933		15.40		1,709,400		16.73		1,311,491		61.38

On December 31, 2006, the aggregate intrinsic value of the options outstanding and options exercisable was USD 5.9 million and USD 3.5 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2006 and 2005 was USD 2.4 million and USD 0.4 million, respectively.

The fair value of options granted was estimated on the date of grant using the Black-Scholes-Merton option pricing model. The expected dividend yield reflects Converium’s long-term dividend policy. Expected volatilities are based on implied volatilities from publicly traded options on Converium shares. The expected life of the options is based on the longest vesting period of the grants made. The risk-free rate for periods within the contractual life of the option is based on Swiss franc interest rates of Swiss Government bonds at the time of grant.

Table 14.3 shows the weighted average assumptions for employee options with an exercise price equal to the market price of the stock on the grant date.

Table 14.3
Weighted average

	2006			2005			2004
Risk-free rate		2.44	%		2.21	%		2.11	%
Expected life	3 years			3 years			3 years
Expected volatility		28.66	%		31.08	%		31.79	%
Dividend yield		1.50	%		1.50	%		2.05	%
Fair value of options granted	USD 2.48			USD 3.19			USD 3.33

Table 14.4 shows the weighted average assumptions for Board of Director options whose exercise price is less than the market price of the stock on the grant date.

Table 14.4
Weighted average

	2006			2005		2004
Risk-free rate		2.50	%		n/a		n/a
Expected life	3 years				n/a		n/a
Expected volatility		28.00	%		n/a		n/a
Dividend yield		1.50	%		n/a		n/a
Fair value of options granted	USD 4.19				n/a		n/a

F-38

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Table 14.5 shows the weighted average assumptions for Board of Director options with an exercise price higher than the market price of the stock on the grant date.

Table 14.5
Weighted average

	2006		2005			2004
Risk-free rate		n/a		2.00	%		1.17	%
Expected life		n/a	3 years			3 years
Expected volatility		n/a		32.00	%		21.84	%
Dividend yield		n/a		1.50	%		2.21	%
Fair value of options granted		n/a	USD 0.10			USD 9.65

Table 14.6 summarizes information about stock options outstanding at December 31, 2006:

Table 14.6
Weighted average of options outstanding/exercisable

	Options outstanding					Options exercisable
			Weighted		Weighted			Weighted
Range of	Number		average remaining		average	Number		average
exercise prices	outstanding		contractual life		exercise price	exercisable		exercise price
CHF 8.64 –13.94		1,116,708		8.23	CHF 11.36		676,105	CHF 11.40
CHF 14.80 –18.60		1,151,946		8.56	CHF 16.00		582,030	CHF 16.37
CHF 26.50 –33.22		174,798		4.54	CHF 27.61		174,798	CHF 27.61
CHF 8.64 –33.22		2,443,452		8.12	CHF 14.71		1,432,933	CHF 15.40

(d) Compensation expense

The compensation expense charged to income under the share-based incentive plans was USD 4.2 million, USD 5.0 million and USD 5.7 million in 2006, 2005 and 2004, respectively. As of December 31, 2006, there was USD 4.9 million of total unrecognized compensation cost related to non-vested shares and options; that cost is expected to be recognized over a period of 1.3 years.

(e) Cash used / received

Cash received from option exercise under all share-based payment arrangements for the years ended December 31, 2006 and 2005 was USD 4.5 million and USD 0.9 million, respectively. In order to fulfill its obligations under the various employee share plans Converium has repurchased shares on the open market. In 2007, Converium plans to continue repurchasing its own shares on the open market with an expected number between 500,000 and 700,000 shares. Cash used for this activity in years ended December 31, 2006, 2005 and 2004 amounts to USD 16.7 million, USD 1.5 million, and USD 6.5 million, respectively.

15. Shareholders’ equity

(a) Issued share capital

Upon incorporation on June 19, 2001, Converium Holding AG had share capital of CHF 100,000 divided into 10,000 fully paid registered shares with a nominal value of CHF 10 each, all of which were entitled to receive dividends. On September 24, 2001, the Extraordinary General Meeting of the shareholders passed two resolutions to increase the share capital to CHF 400 million, divided into 40 million fully paid registered shares with a nominal value of CHF 10 each, all of which were entitled to receive dividends.

In October 2004, Converium’s share capital was increased by CHF 533,416,225 by issuing 106,683,245 shares at CHF 5 each. The additional shares were issued and Converium’s corresponding capital increase (and reduction of the nominal value) were recorded, in the Commercial Register of the Canton of Zug, Switzerland on October 12, 2004. After the registration of the shares in the Commercial Register of the Canton of Zug, Converium’s issued, outstanding share capital was CHF 733,447,310, divided into 146,689,462 shares with a nominal value of CHF 5.

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(b) Authorized share capital

At the Annual General Meeting on April 27, 2004, the shareholders resolved to create authorized share capital and amended the Articles of Incorporation, which provides that the Board of Directors is authorized, on or before April 27, 2006, to increase the share capital by the issuance of up to a maximum of four million fully paid-up registered shares each of CHF 10 nominal value amounting to a maximum of CHF 40 million. Subsequent to the reduction of the nominal value of each of Converium’s shares from CHF 10 to CHF 5 as a result of the resolution by the shareholders at the EGM of September 28, 2004, Converium’s authorized capital is now CHF 20,000,000 with the Board being authorized to issue up to four million shares.

At the Annual General Meeting on April 11, 2006 the shareholders resolved to extend the authority of the Board of Directors to increase the share capital until April 11, 2008.

At December 31, 2006, no shares were issued from the authorized share capital.

(c) Contingent share capital

At the Annual General Meeting on April 27, 2004, Converium Holding AG amended its Articles of Incorporation to state that the previously available conditional share capital for use in conjunction with the employee participation plans has been replaced by a conditional share capital for option rights and/or conversion rights for a number of four million shares or CHF 40,000,000 in nominal share capital.

Subsequent to the reduction of the nominal value of each of Converium’s shares in October 2004, its conditional capital is now for a number of four million shares of CHF 5 nominal value each, amounting to a maximum of CHF 20,000,000 pursuant to which up to four million shares can be issued upon exercise of conversion or option rights allotted in connection with bonds and other financial market instruments.

At December 31, 2006, no shares were issued from the contingent share capital.

(d) Dividend restrictions, reductions in the registered shares’ nominal value and capital and solvency requirements

Converium Holding AG is subject to legal restrictions on the amount of dividends it may pay to its shareholders under the Swiss Code of Obligations. The Swiss Code of Obligations provides that 5% of the annual profit must be allocated to the general reserve until such reserve in the aggregate has reached 20% of the paid-in share capital. Similarly, the Company laws of countries in which Converium entities operate may restrict the amount of dividends payable by such entities to their parent companies.

As of December 31, 2006, Converium Holding AG had 146,689,462 registered shares with a nominal value of CHF 5 each issued. Based on Swiss company law, Converium Holding AG is entitled to reduce the nominal value of its registered shares down to CHF 0.01 by a respective payment per share to its shareholders. Other than by operation of the restrictions mentioned above, the ability of Converium entities to pay dividends may be restricted or, while dividend payments per se may be legally permitted, may be indirectly influenced by minimum capital and solvency requirements that are imposed by insurance, bank and other regulators in the countries in which the entities operate as well as by other limitations existing in certain of these countries (e.g. foreign exchange control restrictions).

In Switzerland, insurance supervisory regulations require entities to fund their statutory reserves at a minimum level of 20% of net profits until the statutory reserve fund reaches an amount equal to 50% of the statutory share capital, including freely disposable reserves, if any. In the United States, restrictions on payment of dividends are imposed by the Insurance Commissioner of the state of domicile. In Germany, the minimum amount of statutory capital reserves required is 10% of the nominal value of the common stock. If the 10% criterion is met, dividends of up to 100% of current years’ surplus can be paid. If the 10% criterion is not met, dividends are limited to a maximum of 95% of current years’ surplus less the prior year loss carryover. Under German law, an entity’s executive board in consent with the supervisory board establishes the annual accounts and proposes on the distribution of the profits. The shareholders meeting (AGM) decides on this proposal.

16. Transactions with Zurich Financial Services

Quota Share Retrocession Agreement

In connection with the Transactions, the transfer of certain historical reinsurance business to Converium AG by ZIC and ZIB was affected by means of the Quota Share Retrocession Agreement effective July 1, 2001. The covered business consists of the business historically managed by Converium, which has an inception or renewal date on or after January 1, 1987 and consists of substantially all of the third party assumed reinsurance business written by ZIC and ZIB, under the “Zurich Re” brand name. The liabilities Converium AG assumed include all net unearned premiums, net losses and loss expenses and experience account balances relating to this business.

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Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

The Quota Share Retrocession Agreement provides for the payment of premiums to Converium AG by ZIC as consideration for assuming the covered liabilities. The Quota Share Retrocession Agreement provides that these premiums are on a “funds withheld” basis, whereby the premium is not immediately paid, but is rather retained by ZIC and credited to a funds withheld account, which is referred to as the Funds Withheld Asset.

Because the business subject to the Quota Share Retrocession Agreement consists of business that was historically managed by Converium, this business is already reflected in the financial statements. Any reinsurance business written by ZIC or ZIB that is not part of the historically managed and operated third-party reinsurance business of Converium is not covered by the Quota Share Retrocession Agreement and all related legal rights and obligations of this business have been retained by ZIC and ZIB. Accordingly, this business is excluded from the financial statements. Therefore, execution of the Quota Share Retrocession Agreement has no impact on results of operations as reported.

Converium AG will receive the surplus remaining with respect to the Funds Withheld Asset, if any, after all liabilities have been discharged. In case the Funds Withheld Asset is not sufficient to cover the respective liabilities under the Funds Withheld Quota Share Retrocession Agreement with ZFS, Converium would have to meet those liabilities. Any surplus or any additional cash flows will be recorded in the financial statements in the period when realized. Any additional liabilities will be recorded in the financial statements when probable and reasonably estimatable. Additionally, ZFS has the right to prepay to Converium AG the full amount or a portion thereof of the Funds Withheld Asset prior to the termination of the agreement.

On December 23, 2005, an Amendment was agreed by the parties to the Quota Share Retrocession Agreements by way of which Section 7.01 – FW Cash Calls – was amended, with immediate effect, to provide, that Converium has the right, by giving sixty days prior written notice to ZFS, to ask for payment in cash on January 1 and July 1 of each calendar year, for the first time on July 1, 2006, of up to 25% of the total funds withheld sub-account balances, as per the most recent quarterly statements, under the respective agreements with ZFS. Furthermore, Converium has the right, at any time upon giving sixty days prior written notice, to ask for the residual balance of the funds withheld account falling below USD 100.0 million, to be paid in cash and in case Converium’s insurers financial strength rating as assigned by Standard & Poor’s is A or higher the latter amount is increased to USD 200.0 million.

Converium AG continues to administer the transferred business on behalf of ZIC and ZIB, which remain liable to the original cedents of the business. Additionally, Converium AG manages third-party retrocessions related to the business transferred. Converium bears the credit risk for uncollectible reinsurance balances excluding those related to the September 11^th terrorist attacks. Converium AG has a broad right of offset under the Quota Share Retrocession Agreement so that reinsurance balances owed to ZIC and ZIB may be offset against the Funds Withheld Asset account directly.

The Quota Share Retrocession Agreement provides for commutation and termination for special reasons, such as insolvency of a party or loss of its authorization to do business or a change of control of Converium AG or Converium Holding AG. Each of the parties agrees to indemnify the other against liability or expense incurred by reason of its conduct or failure to act in appropriate circumstances. The Quota Share Retrocession Agreement contains other provisions that are customary for an agreement of this nature.

See Notes 6, 8, 17 and 20 for other transactions with ZFS and Note 25 for additional information.

17. Related party transactions

GAUM

In 2003, Converium finalized an agreement to acquire a 25% stake in GAUM, a leading international commercial and general aviation underwriting agency, as a part of its strategy to strengthen its long-term position in the Aviation & Space line of business. At that same time, Converium entered into a pool members’ agreement under which it became a member of the aviation and aerospace pools run by GAUM and its subsidiary, Associated Aviation Underwriters Inc.

In February 2004, Converium AG acquired a further 5.1% stake in GAUM from RSA increasing its overall stake to 30.1%.

For the 2006, 2005 and 2004 underwriting years, Converium has committed 27.25% of the overall pool’s capacity of the aviation risks managed by GAUM. Gross premiums assumed through the pools managed by GAUM were USD 230.8 million, USD 206.2 million and USD 289.0 million for 2006, 2005 and 2004 respectively.

In the light of changing business circumstances associated with Converium’s S & P rating downgrade in the third quarter of 2004, Converium entered into fronting agreements with Munich Re and National Indemnity in order to support and sustain the aviation business from GAUM. These fronting

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agreements initially extended to September 30, 2005, however Converium has subsequently entered into a further series of fronting agreements with National Indemnity Company and Munich Re under similar terms and conditions which ensured Converium’s continued participation in the pool of GAUM through December 31, 2006. Converium also entered into a further agreement to extend the fronting agreement with the two counterparties until December 31, 2007 in respect of United States and Canadian sourced business and until June 30, 2007 in respect of business sourced from the rest of the world.

The pool members’ agreement with respect to GAUM provides that if a member of the pool has its financial strength rating downgraded below BBB+ by Standard & Poor’s Rating Service it may be served with a notice terminating its membership in the pool upon approval by the committee of representatives of the pool. Converium expects that continuation of its membership at its current rating is likely to be conditional upon its entering fronting arrangements acceptable to other pool members in a timely fashion and thereafter maintaining such arrangements. If Converium’s membership were to be reduced to less than a 5% share, it would not be permitted to participate in future pool business and would have to collateralize by way of a letter of credit its obligations under the business written by the pool in its name prior to its termination. If Converium’s pool membership were terminated, it may also be required to sell its 30.1% stake in GAUM.

At December 31, 2006 and December 31, 2005, the current carried value of goodwill associated with the 30.1% stake in GAUM was GBP 13.1 million (USD 23.4 million) and GBP 13.2 million (USD 23.6 million).

See Note 7 for additional information on GAUM goodwill and intangible assets.

At December 31, 2006 and December 31, 2005 Converium had an outstanding shareholder loan to GAUM of GBP 15.2 million (USD 29.8 million) and GBP 15.2 million (USD 26.1 million) at the respective balance sheet dates.

MDU

Converium entered into a strategic alliance with the MDU that resulted in a 49.9% participation in MDUSL. MDUSL distributes medical malpractice insurance policies to the members of the MDU. As a result of the initial FSA approval in respect of general liability business, insurance policies underwritten by Converium Insurance (UK) Ltd were issued to members of the MDU beginning July 1, 2003. These insurance policies replaced policies formerly issued in the United Kingdom by ZFS’ entities, the majority of which were reinsured by Converium. Gross premiums written from MDU were USD 187.6 million, USD 178.6 million and USD 170.9 million for 2006, 2005 and 2004, respectively.

The MDU Shareholders’ Agreement provides that if Converium’s credit rating is lowered by more than seven points, from its initial “A+” rating, by a recognized credit ratings agency, the MDU may serve Converium with a Termination Notice. Within sixty days after service of such termination notice, MDU has the right to purchase Converium’s 49.9% shareholding in MDU Services Ltd. at a price to be mutually agreed upon by the parties, or to be determined by a valuation expert. See Note 7 for additional information on MDU.

The current terms of the MDU Shareholders’ Agreement require that Converium will provide a price concession, starting in 2010 and annually thereafter based upon a predetermined formula under which a price concession, which will be equal to 50% of the amount by which the present value profit, of a particular underwriting year, as calculated 10 years after that underwriting year has expired, exceeds a pre-agreed target expected present value profit. Converium has recognized a charge of USD 7.7 million and USD 9.0 million for 2006 and 2005 respectively in other (loss) income reflect-ing the current view of how the Company will settle this obligation.

At December 31, 2006 and December 31, 2005, the balance sheet obligation included in other liabilities was USD 16.7 million and USD 9.0 million respectively.

See Note 25 for additional information.

18. Supplemental cash flow disclosures

Table 18.1
Supplemental cash flow disclosures

(USD million)
Year ended December 31	2006		2005		2004
Income taxes paid		13.2		6.2		9.7
Interest expense paid		–16.7		–17.2		–18.7

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Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

19. Fair value of financial instruments

The methods and assumptions used by Converium in estimating the fair value of financial instruments are:

– Fixed maturities securities: fair values are generally based upon quoted market prices. Where market prices are not readily available, fair values are estimated using either values obtained from independent pricing services or quoted market prices of comparable investments.

– Equity securities: fair values are based on quoted market prices.

– Funds Withheld Asset: carrying value of the Funds Withheld Asset approximates fair value.

– Other investments: for which quoted market prices are not readily available are not fair valued or are not significant to Converium.

– Cash and short-term investments: carrying amounts approximate fair value.

– Debt: fair values are generally based upon quoted market prices.

Table 19.1 lists the estimated fair values and carrying values of Converium’s financial instruments as of December 31, 2006 and 2005.

Table 19.1
Fair value of financial instruments

	Total		Total		Total		Total
(USD million)	fair value		carrying value		fair value		carrying value
As of December 31	2006		2006		2005		2005
Fixed maturities		3,821.8		3,840.8		4,948.6		4,963.4
Equity securities		734.7		734.7		362.6		362.6
Other investments (excluding direct real estate)		173.3		173.3		108.5		108.5
Short-term investments		44.9		44.9		35.1		35.1
Funds Withheld Asset		940.7		940.7		1,020.1		1,020.1
Cash and cash equivalents		633.1		633.1		647.3		647.3
Debt		–202.9		–194.1		–377.0		–391.2

20. Commitments and contingencies

Letters of credit

As of December 31, 2006, Converium had total letters of credit outstanding of USD 1,974.5 million, which included USD 1,898.0 million secured and USD 76.5 million unsecured.

Table 20.1
Letters of credit

	Date of						Assets
(USD million)	agreement	Duration	Capacity		Utilized		pledged
Syndicated Letter of Credit Facility	Nov 29, 2004	3 years		1,600.0		1,053.2		1,074.7
Bilateral letters of credit	various	various		1,120.0		844.8		898.8
Unsecured letters of credit	Aug 11, 2006	1 year		250.0		76.5		—
Total letters of credit				2,970.0		1,974.5		1,973.5
Other pledges:
Deposit account for cedents								282.5
Internal trust								486.6
Total other pledges								769.1

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There are financial covenants attached to the syndicated letter of credit facility including restrictions on total borrowing up to 35% of tangible net worth (shareholders’ equity less goodwill) and tangible net worth must remain greater than USD 1,237.5 million at all times. Converium pays commission fees on outstanding letters of credit, which are distributed to the facility banks and can only be impacted by a change in the Company’s credit rating. The maximum amount of this fee is 0.50%.

On August 11, 2006, Converium has secured an uncollateralized USD 250.0 million letter of credit facility from a leading European banking group, at market conditions. It will be primarily used to support third party claims related to the underwriting business. As of December 31, 2006, the total outstanding letter of credit under this facility was USD 76.5 million.

As of December 31, 2006, Converium reported total investments including cash and cash equivalents and excluding the Funds Withheld Asset of USD 5,457.7 million. Of this total, USD 1,973.5 million was pledged as collateral relating to outstanding letters of credit.

Operating leases

Converium has entered into various operating leases as lessee for office space and certain computer and other equipment. Rental expenses for these items totaled USD 10.6 million, USD 10.3 million and USD 11.3 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Table 20.2 lists minimum future payments under operating leases with terms in excess of one year.

Table 20.2
Minimum future payments under operating leases

	Rental
(USD million)	payments
2007		10.1
2008		10.0
2009		8.8
2010		8.3
2011		7.8
2012 and thereafter		—
Total		45.0

Converium AG leases office space from ZFS. The lease term is fixed until 2011, with two renewal options for three-year terms each. The lease payments are fixed with annual rent escalations based on a cost of living index.

Converium Rückversicherung (Deutschland) AG leases office space from Oppenheim Immobilien Kapitalanlagegesellschaft mbH (Zürich Lebensversicherung Aktiengesellschaft (Deutschland) before the sale of the building). The lease term is for a period of ten years ending in 2008, with an option to renew for up to two additional ten-year terms. Lease payments have bi-annual rent escalations based on changes in local real estate price indices.

Parental Guarantees

In August of 2004, in order to retain certain US business, Converium AG endorsed for a number of selected cedents of Converium Reinsurance (North America) Inc. a parental guarantee with an option to novate business written for the 2003 and 2004 underwriting years. Some of these options to novate the business to Converium AG’s balance sheet were executed in the fourth quarter 2004. The remaining cedents did not execute the option and the business remained on Converium Reinsurance (North America) Inc.’s balance sheet. Due to the disposal of Converium’s North American operations to National Indemnity Company, Converium AG as the guarantor received from National Indemnity Company full indemnification of the potential outstanding liabilities. As of December 31, 2006, 2005 and 2004 these liabilities were USD 146.1 million, USD 95.7 million and USD 121.4 million, respectively.

MDU Put Option

On September 2, 2002, Converium AG granted MDU Investment Ltd (“MDUIL”) a put option which allows MDUIL, within the framework of the contractual agreement, to request that Converium AG subscribe to up to GPB 20 million preferred shares of MDUIL. The transaction would occur in tranches of one million shares at GBP 1 per share. At the same time, Converium AG granted the Medical Defence Union a call option that allows MDU to acquire in whole or in part the MDUIL shares held by Converium AG (or one of its subsidiaries).

Converium legal proceedings, claims and litigation

Converium Holding AG and its subsidiaries are continuously involved in legal proceedings, claims and litigation arising, for the most part, in the ordinary course of its business operations as a reinsurer. The outcome of such current legal proceedings, claims and litigation could have a material effect on operating results or cash flows when resolved in a future period. However, in the opinion of management, these matters are not material to Converium’s financial position, with the exception of the matters described below:

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Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Canada Life

On December 21, 2001, The Canada Life Assurance Company (“Canada Life”), brought an action against Converium Rück-versicherung (Deutschland) AG (“Converium Germany”) in the United States District Court of the Southern District of New York. Canada Life alleged that Converium Germany breached certain quota share retrocession agreements with Canada Life by failing to indemnify its full percentage of Canada Life’s September 11^th losses and by failing to post an USD 82.4 million letter of credit for its alleged liability pursuant to the ISA facilities’ underlying agreements. Converium Germany disputed this claim on the grounds that its liability under the pertinent contracts is limited and also raised other contract defenses. After litigation in the federal courts concerning jurisdictional issues, which Canada Life lost, Canada Life agreed to arbitration. The organizational meeting of the arbitrators took place on October 8, 2003. Since then, pursuant to an order by the arbitration panel, Converium Germany obtained a letter of credit of USD 65.97 million to be drawn down upon, if at all, should two of the three arbitrators issue an award in favor of Canada Life. A two-week hearing was conducted in July 2005. The arbitration panel since has rendered a final award in favor of Converium Germany. On May 9, 2006 (and later amended twice), Canada Life brought an action against the umpire of the arbitration panel and Converium Germany in the Ontario, Canada Superior Court of Justice seeking to set aside the final award. Canada Life alleges that the umpire was biased and unable to perform his duties. Canada Life also filed a Verified Petition against Converium Germany in the United States District Court of the District of New Jersey seeking, among other relief, to vacate the final award. Converium Germany recently filed a motion to dismiss the New Jersey action. On December 31, 2006 the letter of credit expired. The trial in the Canadian proceeding is scheduled to commence in September 2007.

Converium Germany disagrees with the factual and legal arguments of both lawsuits and contends that the final award is valid and binding. However, due to the uncertainties inherent in proceedings of this nature, Converium was unable to evaluate the likelihood of an unfavorable outcome or to estimate the amount or range of any potential loss resulting from these lawsuits.

Converium Germany has fully reserved this claim. However, arrangements entered into with ZFS provide for the claim to be covered by the agreed-to cap for September 11^th related losses provided to Converium by ZFS in conjunction with Converium’s Initial Public Offering.

Review of certain of Converium’s reinsurance transactions

Ongoing investigations of the insurance and reinsurance industry and non-traditional insurance and reinsurance products are being conducted by U.S. and international regulators and governmental authorities, including the U.S. Securities and Exchange Commission and the New York Attorney General.

On March 8, 2005, MBIA issued a press release stating that MBIA’s audit committee undertook an investigation to determine whether there was an oral agreement with MBIA under which MBIA would replace Axa Re Finance as a reinsurer to Converium Reinsurance (North America) Inc. (CRNA), one of our former North American subsidiaries, by no later than October 2005. The press release stated that it appeared likely that MBIA made such an agreement or understanding with Axa Re Finance in 1998. Thereafter, on April 19, 2005, CRNA received subpoenas from the U.S. Securities and Exchange Commission and the Office of the New York Attorney General seeking documents related to certain transactions between CRNA and MBIA. Converium has also received additional inquiries from the Securities and Exchange Commission and other governmental authorities in Europe regarding non-traditional insurance and reinsurance products and/or the restatement of its financial statements. The inquiries are ongoing and Converium is fully cooperating with the governmental authorities.

In view of the industry investigations and the events relating to MBIA described above, Converium engaged independent outside counsel to assist it in a review and analysis of certain of its reinsurance transactions, including the MBIA transactions. The internal review, which was overseen by the Audit Committee, addressed issues arising from the ongoing governmental inquiries and Converium’s own decision to review certain additional items. The internal review involved the assessment of numerous assumed and ceded transactions including structured/finite risk and other reinsurance transactions and encompassed all business units of Converium, a review of hundreds of thousands of e-mails, attachments to e-mails and other documents and interviews of all current members of the Global Executive Committee and the Board of Directors, as well as certain former members of senior management and other employees of Converium. The Audit Committee believes that the scope and process of the internal review has been sufficient to determine whether Converium’s assumed and ceded transactions were improperly accounted for as reinsurance, rather than as deposits. After discussing the findings of Converium’s extensive internal review with independent outside counsel, the Audit Committee determined that certain accounting corrections were appropriate

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and authorized the Restatement of Converium’s financial statements as of and for the years ended December 31, 2004 through 1998. As part of this process, the Audit Committee has involved its independent group auditors, PricewaterhouseCoopers Ltd. Financial information for each of the quarters ended March 31, 2003 through June 30, 2005 have also been restated. For further information regarding these accounting adjustments, please refer to Converium’s 2005 Annual Report (Note 3 to the 2005 consolidated financial statements for additional information on the Restatement). Previously published financial statements regarding any of the above periods should no longer be relied upon.

As noted above, Converium is fully cooperating with the governmental authorities and has shared the results of its internal review with the relevant authorities. Although the internal review was extensive, the ongoing governmental inquiries, or other developments, could result in further restatements of Converium’s financial results in the future and could have a material adverse effect on Converium.

Class action lawsuits

Following the Company’s announcement on July 20, 2004, that second quarter 2004 results would fall short of expectations due to higher than modeled U.S. casualty loss emergence primarily related to the underwriting years 1996 to 2001, six securities law class action lawsuits were brought against the Company and several of its officers and directors in the United States District Court for the Southern District of New York between October 4, 2004 and December 2, 2004 (collectively, the “Federal Actions”).

On December 9, 2004, another securities law class action lawsuit, Rubin v. Converium Holding AG, et al., Index No. 04-117332, was brought against the Company and certain of its officers and directors in the Supreme Court of the State of New York for the County of New York (the “Rubin Action”). The Rubin Action was removed to the United States District Court for the Southern District of New York. Rubin moved to remand his action to state court.

On July 14, 2005, the Court signed an order in the Federal Actions appointing Public Employees’ Retirement System of Mississippi and Avalon Holdings Inc. lead plaintiffs. On September 23, 2005, the lead plaintiffs filed a consolidated amended class action complaint (the “Complaint”) setting forth their claims. The Complaint includes the Louisiana State Employees’ Retirement System as an additional named plaintiff.

The Complaint names as defendants the Company; former directors Terry G. Clarke, Peter C. Colombo, Georg F. Mehl, George G.C. Parker, Derrell J. Hendrix and Anton K. Schnyder; former officers Dirk Lohmann, Martin Kauer and Richard Smith; former director Jürgen Förterer; ZFS; UBS AG; and Merrill Lynch International. The Complaint asserts claims for violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12 and 15 of the Securities Act of 1933 and alleges, among other things, that the Company misrepresented and omitted material information in various public disclosures during the period from December 11, 2001, through September 2, 2004 because the Company did not establish adequate loss reserves to cover claims by policyholders; that the Company’s announced reserve increases prior to July 20, 2004 were insufficient; and that, as a result of the foregoing, the Company’s earnings and assets were materially overstated. The putative class of plaintiffs on whose behalf these lawsuits have been asserted consists of all buyers of the Company’s stock from December 11, 2001, through and including September 2, 2004. Plaintiffs are seeking unspecified compensatory damages, attorney’s fees, witness fees and expert fees.

On December 23, 2005, the defendants moved to dismiss the Complaint. On February 17, 2006 the lead plaintiffs submitted a memorandum of law in opposition to all defendants’ motions to dismiss the Complaint.

On April 21, 2006, plaintiffs moved for leave of Court to file a proposed Consolidated Second Amended Class Action Complaint, to amend their Complaint to add, among other things, Securities Act claims based on Converium’s March 1, 2006, restatement of its financial accounts from 1998 through 2005.

On November 16, 2006, the Court consolidated all of the actions, including the Rubin action. On November 27, 2006, Rubin’s motion to remand his action to state court was withdrawn. On December 1, 2006, Plaintiffs submitted a proposed Consolidated Second Amended Class Action Complaint as a substitute for the previously proposed Second Amended Class Action Complaint, which made certain changes to the previously proposed Consolidated Second Amended Class Action Complaint.

On December 28, 2006, the Court issued an Opinion and Order granting in part and denying in part defendants’ motions to dismiss the Complaint. The Court dismissed the claims against all defendants alleging violations of Sections 11, 12 and 15 of the Securities Act of 1933 as well as claims asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) based upon allegations that the Company misrepresented and omitted material information in its December 11, 2001, initial public offering prospectus and registration statement. The Court denied the motion to dismiss those claims against the Company and

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Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

three of its former officers alleging that those defendants violated Section 10(b) and Section 20(a) of the Exchange Act by misrepresenting and omitting material information in various public disclosures following the Company’s initial public offering. Also on December 28, 2006, the Court denied plaintiffs’ motion to amend their complaint. The Court further ordered that the parties who remain in the actions, including the Company, engage in settlement discussions before a Magistrate Judge. A settlement conference took place before a Magistrate Judge on February 15, 2007 but did not result in a settlement.

On January 12, 2007, plaintiffs filed a motion for reconsideration of the Court’s December 28, 2006 order. The defendants filed an opposition to that motion on February 5, 2007, and plaintiffs filed a reply brief in further support of their motion on February 20, 2007. On April 9, 2007, the Court granted Plaintiffs’ motion for reconsideration in part and denied it in part. The Court granted Plaintiffs’ motion to reconsider its dismissal of Exchange Act claims arising out of the initial public offering. The Court indicated that it will address the other arguments Defendants made to support dismissal of those claims in a forthcoming opinion. The Court denied Plaintiffs’ motion to reconsider the dismissal of the Securities Act claims, as well as denial of their motion to file a Consolidated Second Amended Class Action Complaint.

The consolidated actions are in the discovery phases; thus, the timing and outcome of these matters are not currently predictable. The costs of defending the class action may have a material impact on our operating results in future reporting periods and an unfavorable outcome could have a materially adverse effect on the Company’s financial condition, results of operations and cash flows.

Business Insurance Sector Inquiry by European Commission

Converium Rückversicherung (Deutschland) AG was selected by the European Commission as part of a sample of reinsurers for the purpose of a sector inquiry. The information request by the European Commission relates to business insurance, including reinsurance aspects, in the 25 member states of the European Union. The purpose of the inquiry is to determine whether competition in the business insurance sector works well.

21. Regulation

As a result of the developments in the latter part of 2004, various regulatory actions have occurred, the most significant of which are set forth below:

Switzerland

Converium AG has received an operating license from the Federal Office of Private Insurance (Bundesamt für Privatver-sicherungen) (the “FOPI”), an administrative unit of the Swiss Ministry of Finance (Eidgenössisches Finanzdepartment) and is subject to the continued supervision by the FOPI pursuant to the Swiss Insurance Supervisory Act of December 17, 2004 (Versicherungsaufsichtsgesetz) (“ISA”). The FOPI has supervisory authority as well as the authority to make decisions to the extent that the Swiss Ministry of Finance is not explicitly designated by law. On January 1, 2006 a completely revised ISA together with an Implementing Ordinance entered into force. The main changes are an amended definition of solvency (Art. 9) which includes consideration of financial and operational risks, an emphasis on the control of corporate governance elements by the FOPI and an increased transparency and consumer protection. The most important new feature is the introduction of the Swiss Solvency Test (“SST”), a risk-based capital model which preempts the forthcoming changes in the EU based upon the EU Solvency II Directive. Insurance undertakings are allowed to use their internal models if they comply with certain conditions of a qualitative, quantitative and organizational nature defined and accepted by the FOPI.

By letter dated September 27, 2004 the FOPI has requested that Converium AG provide notice on certain inter-group transactions between Converium AG and its subsidiaries including loans, guarantees, cost-sharing agreements, capital injections and investments in subsidiaries. Furthermore the FOPI requested by letter dated October 14, 2004 certain additional information including Converium’s business strategy, planning, reserves, solvency and collateral issues. Converium is cooperating with the FOPI and is providing all required information and documentation.

In December 2004, per the FOPI’s request, Converium AG agreed to submit for approval the following inter-group transactions: inter-group loans and capital increases to subsidiaries exceeding USD 100.0 million; guarantees exceeding USD 10.0 million; transfer of portfolios or novations involving changes in reserves exceeding USD 25.0 million, dividends to Converium Holding AG and all inter-group reinsurance transactions that are not at arm’s length. Absent consent of the FOPI, the inter-group transactions exceeding the thresholds could not be executed, which may in turn have an impact on the funding in conjunction with inter-group transactions.

Germany

On November 16, 2005, the European parliament adopted new European Union (“EU”) reinsurance guidance, which has to be transferred into national law by the end of 2007. This guidance basically deals with items such as solvency requirements, jurisdiction of the supervisory authorities within the EU, European passports for reinsurers, licenses and financial reinsurance.

Many of those items have already been implemented in Germany, foremost into the newly released German Insurance Supervision Act as of January 1, 2005. This law now includes solvency requirements for reinsurers based on the Solvency I standard as well as license and many jurisdictional items in great detail. The remaining items have been prepared for a white paper, which is expected to pass the German parliament in spring 2007 and to be released by end of 2007.

In addition, extensive work has been initiated by the local German supervisory authority and the German insurance association in order to prepare for a risk based solvency system

F-47

(Solvency II), which should be similar to the Basel II requirements enacted for the banking industry. Solvency II is not expected to be released prior to 2008/2009. There are some ambitious efforts to try to harmonize those requirements with the non-EU country Switzerland, which is preparing the Swiss Solvency Test (SST) in parallel.

22. Consolidated entities

A list of operating entities and other important holdings, together with the country of incorporation, Converium’s ownership interest and the share capital of each entity, is set out below.

		% of equity
	Country of incorporation	shares held		Currency	Share capital
Converium AG	Switzerland/Zurich		100	CHF		400,000,000
Converium IP Management AG	Switzerland/Zurich		100	CHF		100,000
Converium Rückversicherung (Deutschland) AG	Germany/Cologne		100	EUR		4,601,627
Converium Holding (UK) Ltd	United Kingdom/London		100	GBP		101
Converium Insurance (UK) Ltd	United Kingdom/London		100	GBP		60,000,000
Converium London Management Ltd	United Kingdom/London		100	GBP		1,000
Converium Underwriting Ltd	United Kingdom/London		100	GBP		2
Converium Finance S.A.	Luxembourg/Luxembourg		100	EUR		31,000
Converium Finance (Bermuda) Ltd	Bermuda/Hamilton		100	USD		12,000

23. Earnings (loss) per share

Converium Holding AG purchased 1,340,000 shares and 200,000 shares during 2006 and 2005, respectively related to share-based compensation plans.

The following table shows the average shares outstanding and basic/diluted earnings per share:

Table 23.1

(in USD million, except per share information)
For the years ended December 31	2006		2005		2004
Income (loss) from continuing operations		215.0		34.1		25.6
(Loss) income from discontinued operations		–157.9		34.6		–608.1
Average basic shares outstanding (millions)		146.2		146.4		63.4
Average diluted shares outstanding (millions)		148.5		148.4		64.1
Basic earnings (loss) per share:
from continuing operations		1.47		0.23		0.40
from discontinued operations		–1.08		0.24		–9.59
Total basic earnings (loss) per share		0.39		0.47		–9.19
Diluted earnings (loss) per share:
from continuing operations		1.45		0.23		0.40
from discontinued operations		–1.07		0.23		–9.49
Total diluted earnings (loss) per share		0.38		0.46		–9.09

Earnings (loss) per share and average shares outstanding for 2004 reflect the addition of the 106,683,245 new shares issued in the Rights Offering that occurred in October 2004. The earnings (loss) per share calculation is based on an adjusted number of average shares outstanding.

Diluted earnings (loss) per share is computed similar to basic earnings per share except that the weighted average shares outstanding is increased to include potential common shares, such as shares from non-vested stock grants and the assumed exercise of stock options, if dilutive.

F-48

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

24. Subsidiary issuer information

Presented below are the consolidating balance sheets of Converium Holding AG (the “parent guarantor”), Converium AG (the “subsidiary guarantor”) (together the “guarantor companies”) and Converium Finance S.A. (the “subsidiary issuer”), for whom the Guaranteed Subordinated Notes are guaranteed, as of December 31, 2006 and 2005 and the related condensed consolidating statements of income and condensed consolidating statements of cash flows for each of the three years in the period ended December 31, 2006. The guarantor companies have jointly and severally guaranteed payments by the subsidiary issuer on these notes. The subsidiary issuer and subsidiary guarantor are wholly owned subsidiaries of the parent guarantor.

Investments in subsidiaries are accounted for by the guarantor companies under the equity method for purposes of supplemental consolidating presentation as of the effective date of the acquisition. Earnings of subsidiaries are reflected in the investment accounts of the guarantor companies as of the effective date of the acquisition.

Information for the parent guarantor and the subsidiary issuer is only included from the date of formation.

Condensed consolidating statements of income

							Non-
(USD million)	Converium		Converium		Converium		Guarantor		Consolidating
Year ended December 31, 2006	Holding AG		AG		Finance S.A.		Entities		Adjustments		Consolidated
Revenues
Net premiums written		—		1,436.1		—		415.9		—		1,852.0
Net premiums earned		—		1,398.4		—		413.3		—		1,811.7
Net investment income		12.8		213.9		13.5		49.1		–28.9		260.4
Net realized capital gains (losses)		—		16.1		—		2.8		—		18.9
Total revenues		12.8		1,628.4		13.5		465.2		–28.9		2,091.0
Benefits, losses and expenses
Losses, loss expenses and life benefits		—		–773.0		—		–414.8		—		–1,187.8
Acquisition costs		—		–482.4		—		0.8		–0.5		–482.1
Other operating and administration expenses		–13.4		–103.8		–0.1		–31.3		—		–148.6
Other (loss) income		–10.0		–96.8		25.8		70.1		10.4		–0.5
Interest expense		–12.4		–0.4		–16.5		–6.2		18.8		–16.7
Restructuring costs		—		—		—		0.2		—		0.2
Total benefits, losses and expenses		–35.8		–1,456.4		9.2		–381.2		28.7		–1,835.5
(Loss) income before taxes		–23.0		172.0		22.7		84.0		–0.2		255.5
Income tax expense		—		–7.3		–0.1		–33.1		—		–40.5
(Loss) income from continuing operations		–23.0		164.7		22.6		50.9		–0.2		215.0
(Loss) income from discontinued operations		–190.8		32.9		—		—		—		–157.9
(Loss) income before equity in income (loss) of subsidiaries		–213.8		197.6		22.6		50.9		–0.2		57.1
Equity in income (loss) of subsidiaries		270.9		66.1		—		—		–337.0		—
Net income (loss)		57.1		263.7		22.6		50.9		–337.2		57.1

F-49

Consolidating balance sheets

							Non-
(USD million)	Converium		Converium		Converium		Guarantor		Consolidating
As of December 31, 2006	Holding AG		AG		Finance S.A.		Entities		Adjustments		Consolidated
Assets
Invested assets
Fixed maturities		—		2,750.2		14.1		1,076.5		—		3,840.8
Equity securities		—		578.9		—		155.8		—		734.7
Investment in subsidiaries		2,053.6		583.6		—		—		–2,637.2		—
Notes receivable		—		—		175.0		—		–175.0		—
Short-term and other investments		—		222.9		—		130.5		–104.3		249.1
Total investments		2,053.6		4,135.6		189.1		1,362.8		–2,916.5		4,824.6
Funds Withheld Asset		—		940.7		—		—		—		940.7
Total invested assets		2,053.6		5,076.3		189.1		1,362.8		–2,916.5		5,765.3
Other assets
Cash and cash equivalents		18.4		550.0		4.5		126.3		–66.1		633.1
Premiums receivable		—		638.8		—		550.1		–308.0		880.9
Reserves for unearned premiums, retro		—		12.7		—		266.1		–247.7		31.1
Reinsurance assets		—		449.9		—		1,527.8		–1,296.4		681.3
Other reinsurance receivable		—		—				1.9		–1.9		—
Funds held by reinsureds		—		1,550.0		—		1,053.3		–663.2		1,940.1
Deposit assets		—		—		—		2.5		—		2.5
Deferred policy acquisition costs		—		281.8		—		67.8		—		349.6
Deferred income taxes		—		1.4		—		4.2		—		5.6
Other assets		4.4		147.7		57.8		129.6		–106.0		233.5
Total assets		2,076.4		8,708.6		251.4		5,092.4		–5,605.8		10,523.0
Liabilities and equity
Liabilities
Reinsurance liabilities		—		5,359.0		—		2,974.3		–1,296.4		7,036.9
Reserves for unearned premiums, gross		—		559.7		—		370.3		–247.7		682.3
Other reinsurance liabilities		—		128.5		—		280.9		–305.7		103.7
Funds held under reinsurance contracts		—		224.5		—		606.1		–663.3		167.3
Deposit liabilities		—		239.3		—		10.9		—		250.2
Deferred Income taxes		—		1.1		—		45.4		—		46.5
Accrued expenses and other liabilities		76.0		227.5		0.9		167.7		–276.1		196.0
Notes payable		150.0		—		—		25.0		–175.0		—
Debt		—		—		194.1		—		—		194.1
Total liabilities		226.0		6,739.6		195.0		4,480.6		–2,964.2		8,677.0
Shareholders’ equity
Common stock and additional paid-in capital		1,849.6		1,873.8		—		478.7		–2,356.8		1,845.3
Unearned stock compensation		0.9		—		—		—		—		0.9
Total accumulated other comprehensive income (loss)		281.3		262.6		6.5		44.9		–314.1		281.2
Retained (deficit) earnings		–281.4		–167.4		49.9		88.2		29.3		–281.4
Total shareholders’ equity		1,850.4		1,969.0		56.4		611.8		–2.641.6		1,846.0
Total liabilities and shareholders’ equity		2,076.4		8,708.6		251.4		5,092.4		–5,605.8		10,523.0

F-50

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Condensed consolidating statements of cash flows

							Non-
(USD million)	Converium		Converium		Converium		Guarantor		Consolidating
Year ended December 31, 2006	Holding AG		AG		Finance S.A.		Entities		Adjustments		Consolidated
Cash (used in) provided by operating activities		–9.3		–16.5		1.2		–262.6		366.4		79.2
Cash flows from investing activities
Proceeds from sales and maturities of fixed maturities available-for-sale		—		1,178.7		—		824.0		—		2,002.7
Purchases of fixed maturities available-for-sale		—		–1,047.9		—		–695.5		—		–1,743.4
Proceeds from sales of equity securities		—		48.6		—		111.5		—		160.1
Purchases of equity securities		—		–395.3		—		–56.2		—		–451.5
Net increase (decrease) in short-term investments		—		2.2		—		–2.7		14.2		13.7
Proceeds from sales of other assets		—		176.0		—		–2.6		—		173.4
Purchase of other assets		—		–56.8		—		–0.2		—		–57.0
Net decrease in deposit assets		—		133.0		—		—		—		133.0
Proceeds from disposal of investment in subsidiaries		–1.7		74.0		—		—		–346.1		–273.8
Net cash (used in) provided by investing activities		–1.7		112.5		—		178.3		–331.9		–42.8
Cash flows from financing activities
Net purchases of common shares		–3.7		—		—		—		—		–3.7
Dividends paid to shareholders		–11.7		—		—		—		—		–11.7
Net decrease in deposit liabilities				–76.2		—		—		—		–76.2
Net cash used in financing activities		–15.4		–76.2		—		—		—		–91.6
Effect of exchange rate changes on cash and cash equivalents		2.9		50.9		0.1		12.5		–25.4		41.0
Change in cash and cash equivalents		–23.5		70.7		1.3		–71.8		9.1		–14.2
Cash and cash equivalents as of January 1		41.9		479.3		3.2		198.1		–75.2		647.3
Cash and cash equivalents as of December 31		18.4		550.0		4.5		126.3		–66.1		633.1

F-51

Condensed consolidating statements of income

											Adjustment
							Non-		Consoli-		for dis-
(USD million)	Converium		Converium		Converium		Guarantor		dating		continued		Consoli-
Year ended December 31, 2005	Holding AG		AG		Finance S.A.		Entities		Adjustments		operations		dated
Revenues
Net premiums written		—		1,195.7		—		620.0		—		–32.6		1,783.1
Net premiums earned		—		1,700.3		—		682.9		—		–128.4		2,254.8
Net investment income		13.3		217.3		13.4		111.8		–30.9		–67.1		257.8
Net realized capital gains (losses)		—		–42.6		—		10.2		57.9		5.8		31.3
Total revenues		13.3		1,875.0		13.4		804.9		27.0		–189.7		2,543.9
Benefits, losses and expenses
Losses, loss expenses and life benefits		—		–1,323.4		—		–452.5		—		55.8		–1,720.1
Acquisition costs		—		–398.1		—		–177.5		—		38.2		–537.4
Other operating and administration expenses		–19.2		–112.0		–0.1		–79.5		—		47.3		–163.5
Other income (loss)		57.2		8.7		–24.7		3.3		–57.9		–8.5		–21.9
Interest expense		–11.2		–0.5		–16.5		–34.4		31.0		14.4		–17.2
Amortization/impairment of intangible assets		—		–21.5		—		—		—		—		–21.5
Restructuring costs		—		–9.3		—		–11.2		—		8.4		–12.1
Total benefits, losses and expenses		26.8		–1,856.1		–41.3		–751.8		–26.9		155.6		–2,493.7
Income (loss) before taxes		40.1		18.9		–27.9		53.1		0.1		–34.1		50.2
Income tax benefit (expense)		1.5		–2.5		–0.1		–14.5		—		–0.5		–16.1
Income (loss) from continuing operations		41.6		16.4		–28.0		38.6		0.1		–34.6		34.1
Income from discontinued operations		—		—		—		—		—		34.6		34.6
Income (loss) before equity in income (loss) of subsidiaries		41.6		16.4		–28.0		38.6		0.1		—		68.7
Equity in income (loss) of subsidiaries		27.1		10.6		—		—		–37.7		—		—
Net income (loss)		68.7		27.0		–28.0		38.6		–37.6		—		68.7

F-52

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Consolidating balance sheets

							Non-
(USD million)	Converium		Converium		Converium		Guarantor		Consolidating
As of December 31, 2005	Holding AG		AG		Finance S.A.		Entities		Adjustments		Consolidated
Assets
Invested assets
Fixed maturities		—		2,773.7		14.4		2,175.3		—		4,963.4
Equity securities		—		178.8		—		183.8		—		362.6
Investment in subsidiaries		1,624.5		542.0		—		—		–2,166.5		—
Notes receivable		150.0		—		175.0		—		–325.0		—
Short-term and other investments		—		280.3		—		110.6		–102.7		288.2
Total investments		1,774.5		3,774.8		189.4		2,469.7		–2,594.2		5,614.2
Funds Withheld Asset		—		1,020.1		—		—		—		1,020.1
Total invested assets		1,774.5		4,794.9		189.4		2,469.7		–2,594.2		6,634.3
Other assets
Cash and cash equivalents		41.9		479.3		3.2		198.1		–75.2		647.3
Premiums receivable		—		707.8		—		576.3		–224.8		1,059.3
Reserves for unearned premiums, retro		—		12.7		—		201.3		–176.2		37.8
Reinsurance assets		—		551.7		—		1,695.7		–1,404.7		842.7
Funds held by reinsureds		—		1,400.5		—		956.5		–539.6		1,817.4
Deposit assets		—		132.8		—		50.6		—		183.4
Deferred policy acquisition costs		—		251.3		—		53.0		—		304.3
Deferred income taxes		—		1.1		—		–0.1		—		1.0
Other assets		43.0		107.0		31.6		204.5		–87.7		298.4
Total assets		1,859.4		8,439.1		224.2		6,405.6		–5,102.4		11,825.9
Liabilities and equity
Liabilities
Reinsurance liabilities		—		5,683.7		—		3,921.9		–1,404.8		8,200.8
Reserves for unearned premiums, gross		—		487.5		—		299.3		–176.0		610.8
Other reinsurance liabilities		—		96.6		—		257.9		–226.7		127.8
Funds held under reinsurance contracts		—		162.0		—		710.5		–539.6		332.9
Deposit liabilities		—		276.6		—		24.0		—		300.6
Deferred income taxes		—		0.2		—		7.9		—		8.1
Accrued expenses and other liabilities		51.9		178.0		1.0		229.1		–259.7		200.3
Notes payable		150.0		—		—		175.0		–325.0		—
Debt		—		—		193.8		197.4		—		391.2
Total liabilities		201.9		6,884.6		194.8		5,823.0		–2,931.8		10,172.5
Shareholders’ equity
Common stock and additional paid-in capital		1,854.6		1,874.0		—		1,372.7		–3,250.8		1,850.5
Treasury stock		–1.5		—		—		—		—		–1.5
Unearned stock compensation		–3.5		—		—		—		—		–3.5
Total accumulated other comprehensive income (loss)		134.7		111.6		2.1		–22.8		–90.9		134.7
Retained (deficit) earnings		–326.8		–431.1		27.3		–767.3		1,171.1		–326.8
Total shareholders’ equity		1,657.5		1,554.5		29.4		582.6		–2,170.6		1,653.4
Total liabilities and shareholders’ equity		1,859.4		8,439.1		224.2		6,405.6		–5,102.4		11,825.9

F-53

Condensed consolidating statements of cash flows

							Non-
(USD million)	Converium		Converium		Converium		Guarantor		Consolidating
Year ended December 31, 2005	Holding AG		AG		Finance S.A.		Entities		Adjustments		Consolidated
Cash provided by (used in) operating activities		68.7		415.0		–1.3		–761.1		–121.2		–399.9
Cash flows from investing activities
Purchases of fixed maturities held-to-maturity		—		—		—		–4.7		—		–4.7
Proceeds from sales and maturities of fixed maturities		—		929.3		—		3,372.1		—		4,301.4
Purchases of fixed maturities available-for-sale		—		–999.3		—		–3,064.3		—		–4,063.6
Proceeds from sales of equity securities		—		96.1		—		90.6		—		186.7
Purchases of equity securities		—		–8.2		—		–117.6		—		–125.8
Net increase in short-term investments		41.5		–292.5		—		127.2		197.2		73.4
Proceeds from sales of other assets		—		48.2		—		154.0		–149.4		52.8
Purchase of other assets		—		–13.1		—		–30.3		—		–43.4
Net increase in deposit assets		—		–10.6		—		–2.4		—		–13.0
Investment in subsidiaries		–70.0		–14.2		—		—		84.2		—
Net cash (used in) provided by investing activities		–28.5		–264.3		—		524.6		132.0		363.8
Cash flows from financing activities
Capital contribution		—		—		—		77.1		–77.1		—
Net purchases of common shares		–1.5		—		—		—		—		–1.5
Net (increase) decrease in deposit liabilities		—		–37.7		—		2.4		—		–35.3
Net cash (used in) provided by financing activities		–1.5		–37.7		—		79.5		–77.1		–36.8
Effect of exchange rate changes on cash and cash equivalents		1.1		21.2		0.3		25.6		–8.9		39.3
Change in cash and cash equivalents		39.8		134.2		–1.0		–131.4		–75.2		–33.6
Cash and cash equivalents as of January 1		2.1		345.1		4.2		329.5		—		680.9
Cash and cash equivalents as of December 31		41.9		479.3		3.2		198.1		–75.2		647.3

F-54

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

Condensed consolidating statements of income

											Adjustment
							Non-		Consoli-		for dis-
(USD million)	Converium		Converium		Converium		Guarantor		dating		continued		Consoli-
Year ended December 31, 2004	Holding AG		AG		Finance S.A.		Entities		Adjustments		operations		dated
Revenues
Net premiums written		—		2,683.4		—		1,042.7		—		–470.2		3,255.9
Net premiums earned		—		2,599.8		—		1,282.4		—		–783.7		3,098.5
Net investment income		13.4		189.4		13.4		123.2		–26.7		–85.2		227.5
Net realized capital gains (losses)		—		12.6		—		33.9		—		–15.3		31.2
Total revenues		13.4		2,801.8		13.4		1,439.5		–26.7		–884.2		3,357.2
Benefits, losses and expenses
Losses, loss expenses and life benefits		—		–1,988.2		—		–1,354.3		—		947.5		–2,395.0
Acquisition costs		—		–651.0		—		–261.4		—		158.5		–753.9
Other operating and administration expenses		–11.7		–105.0		–0.1		–103.0		—		66.0		–153.8
Other income (loss)		23.7		–29.5		19.0		–21.4		—		3.5		–4.7
Interest expense		–10.6		–0.4		–16.5		–32.3		26.7		14.4		–18.7
Impairment of goodwill		—		—		—		–94.0		—		94.0		—
Amortization/impairment of intangible assets		—		–9.9		—		—		—		—		–9.9
Restructuring costs		—		–0.2		—		–2.5		—		2.5		–0.2
Total benefits, losses and expenses		1.4		–2,784.2		2.4		–1,868.9		26.7		1,286.4		–3,336.2
Income (loss) before taxes		14.8		17.6		15.8		–429.4		—		402.2		21.0
Income tax benefit (expense)		2.5		6.6		–0.1		–210.3		—		205.9		4.6
Income (loss) from continuing operations		17.3		24.2		15.7		–639.7		—		608.1		25.6
Loss from discontinued operations		—		—		—		—		—		–608.1		–608.1
Income (loss) before equity in (loss) income of subsidiaries		17.3		24.2		15.7		–639.7		—		—		–582.5
Equity in (loss) income of subsidiaries		–599.8		–624.1		—		—		1,223.9		—		—
Net (loss) income		–582.5		–599.9		15.7		–639.7		1,223.9		—		–582.5

F-55

Condensed consolidating statements of cash flows

							Non-
(USD million)	Converium		Converium		Converium		Guarantor		Consolidating
Year ended December 31, 2004	Holding AG		AG		Finance S.A.		Entities		Adjustments		Consolidated
Cash provided by (used in) operating activities		41.6		698.9		2.1		–383.9		—		358.7
Cash flows from investing activities
Purchases of fixed maturities held-to-maturity		—		–214.9		—		–13.3		—		–228.2
Proceeds from sales and maturities of fixed maturities		—		936.3		—		3,179.7		—		4,116.0
Purchases of fixed maturities available-for-sale		—		–1,663.5		—		–2,756.7		—		–4,420.2
Proceeds from sales of equity securities		—		279.6		—		703.5		—		983.1
Purchases of equity securities		—		–67.0		—		–470.5		—		–537.5
Net increase in short-term investments		—		—		—		–55.3		—		–55.3
Proceeds from sales of other assets		—		54.2		—		28.1		—		82.3
Purchase of other assets		—		–152.0		—		8.0		—		–144.0
Net increase in deposit assets		—		–73.3		—		–38.3		—		–111.6
Notes receivable		–46.7		–49.2		—		–135.9		231.8		—
Investment in subsidiaries		–355.1		–108.7		—		—		463.8		—
Net cash (used in) provided by investing activities		–401.8		–1,058.5		—		449.3		695.6		–315.4
Cash flows from financing activities
Capital contribution		—		402.9		—		108.7		–511.6		—
Issuance of notes payable		22.0		182.6		—		27.2		–231.8		—
Net purchases of common shares		–6.0		—		—		—		—		–6.0
Dividends to shareholders		–47.8		–47.8		—		—		47.8		–47.8
Proceeds from Rights Offering		428.4		—		—		—		—		428.4
Rights Offering issuance costs		–25.1		—		—		—		—		–25.1
Net decrease (increase) in deposit liabilities		—		29.7		—		–31.4		—		–1.7
Net cash provided by (used in) financing activities		371.5		567.4		—		104.5		–695.6		347.8
Effect of exchange rate changes on cash and cash equivalents		–10.4		15.4		—		4.0		—		9.0
Change in cash and cash equivalents		0.9		223.2		2.1		173.9		—		400.1
Cash and cash equivalents as of January 1		1.2		121.9		2.1		155.6		—		280.8
Cash and cash equivalents as of December 31		2.1		345.1		4.2		329.5		—		680.9

F-56

Converium Holding AG and Subsidiaries

Notes to the consolidated financial statements

25. Subsequent events

SCOR ownership

On February 26, 2007, Converium’s Board of Directors publicly noted the announcement by SCOR, for a public tender offer of Converium shares at price of 0.5 SCOR share for each Converium share plus a cash payment of CHF 4 in order to purchase the remaining publicly owned share capital of Converium. After a series of discussions, on May 9, 2007, Converium and SCOR entered into a transaction agreement pursuant to which SCOR agreed to increase the consideration payable to holders of Converium's registered shares to 0.5 new SCOR shares and CHF 5.50 in cash in exchange for each Converium registered share tendered and Converium agreed that its Board of Directors would recommend SCOR's improved tender offer to Converium shareholders.

As a general practice, contracts, including contracts of reinsurance, may include change in control provisions which may allow termination of a particular contract upon a change of control situation occurring, Such clauses are subject to the law and jurisdiction of the individual contract. If exercised, such a clause could have a material adverse impact on the Company’s financial condition. Material contracts which could potentially be impacted in a change of control situation include the aviation pool membership and shareholding in GAUM, the MDU business and Converium’s shareholding in MDUSL as well as the ZIC and ZIB Quota Share Retrocession Agreements (see Notes 7, 16 and 17). A certain number of employment contracts as well as certain of Converium’s compensation plans also have provisions governing this event.

“A–” rating up grade

Converium announced that Standard & Poor’s has raised the Company’s long-term financial strength rating to “A–” (“strong”) with a stable outlook. According to Standard & Poor’s the ratings decision reflects the Group’s strengthened management team and sound infrastructure, strong competitive position, and strong capitalization.

GAUM sales agreement

In May 2007, the Company signed a sales agreement to sell a 2.6% stake in GAUM to Münchner Rückversicherungs-Gesellschaft Aktiengesellschaft in München (“Munich Re”) for a purchase price of USD 2.6 million (at a fixed exchange rate of 1.86 against GBP), the right to part of the RSA Loan for GBP 1.3 million and additional Deferred Consideration of 2.6%. The transaction is subject to approval of the European antitrust authorities.

F-57

Converium Holding AG

Report of Independent Registered Public Accounting Firm
on the financial statement schedules

To the Board of Directors and Shareholders of Converium Holding AG, Zurich

Our audits of the consolidated financial statements, of management’s assessment of the effectiveness of internal control over financial reporting and of the effectiveness of internal control over financial reporting referred to in our report dated June 13, 2007 appearing in this Annual Report on Form 20-F, also included an audit of the financial statement schedules listed in the index on page F-1 of this Form 20-F.

In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers Ltd

Andrew Hill                                                             Martin Frei

Zurich, Switzerland,
June 13, 2007

S-1

Schedule I

Converium Holding AG and Subsidiaries

Summary of investments other than investments in related parties as of December 31, 2006

					Amount at which
	Cost or				shown in the
	amortized cost		Fair value		balance sheet
	(USD millions)
Fixed maturities:
Bonds held-to-maturity:
US government		456.4		439.4		456.4
Other government		261.9		259.9		261.9
Total fixed maturities held-to-maturity		718.3		699.3		718.3
Bonds available-for-sale:
US government		852.1		840.2		840.2
Other government		1,548.1		1,531.9		1,531.9
Public utilities		21.0		20.6		20.6
Other corporate debt securities		540.6		531.5		531.5
Unit trust		196.1		192.1		192.1
Mortgage and asset-backed securities		6.3		6.2		6.2
Total fixed maturities available-for-sale		3,164.2		3,122.5		3,122.5
Total fixed maturities		3,882.5		3,821.8		3,840.8
Equity securities:
Common stocks: Public utilities		12.7		16.7		16.7
Banks, trusts, and insurance companies		99.8		118.3		118.3
Industrial, miscellaneous and all other		285.8		359.1		359.1
Unit trust		216.0		240.1		240.1
Non-redeemable preferred stocks		0.3		0.5		0.5
Total equity securities		614.6		734.7		734.7
Real estate		39.5		44.7		44.7
Policyholder, collateral and other loans		0.3		0.3		0.3
Other investments		150.6		169.0		169.0
Short-term investments		44.9		44.9		44.9
Total investments		4,732.4		4,815.4		4,834.4
Funds Withheld Asset		940.7		940.7		940.7
Total invested assets		5,673.1		5,756.1		5,775.1

S-2

Schedule II

Converium Holding AG

Statements of income

	Year ended December 31,
(USD millions)	2006		2005		2004
Income
Net investment income		12.8		13.3		13.4
Total revenues		12.8		13.3		13.4
Expenses
Other operating and administration expenses		-13.4		-19.2		-11.7
Other (loss) income		-10.0		57.2		23.7
Interest expense		-12.4		-11.2		-10.6
Total expenses		-35.8		26.8		1.4
(Loss) income before taxes		-23.0		40.1		14.8
Income tax benefit		—		1.5		2.5
(Loss) income from continuing operations		-23.0		41.6		17.3
(Loss) from discontinued operations		-190.8		—		—
(Loss) income before equity in income (loss) of subsidiaries		-213.8		41.6		17.3
Equity in income (loss) of subsidiaries		270.9		27.1		-599.8
Net income (loss)		57.1		68.7		-582.5

See the notes to our 2006 consolidated financial statements.

S-3

Converium Holding AG

Balance sheets

	December 31,
(USD millions)	2006		2005
Assets
Invested assets
Investment in subsidiaries		2,053.6		1,624.5
Notes receivable		—		150.0
Short-term and other investments		—		—
Total invested assets		2,053.6		1,774.5
Other assets
Cash and cash equivalents		18.4		41.9
Other assets		4.4		43.0
Total assets		2,076.4		1,859.4
Liabilities and shareholders’ equity
Liabilities
Accrued expenses and other liabilities		76.0		51.9
Notes payable		150.0		150.0
Total liabilities		226.0		201.9
Shareholders’ equity
Common stock and additional paid-in capital		1,849.6		1,853.1
Unearned stock compensation		0.9		-3.5
Total accumulated other comprehensive income		281.3		134.7
Retained deficit		-281.4		-326.8
Total shareholders’ equity		1,850.4		1,657.5
Total liabilities and shareholders’ equity		2,076.4		1,859.4

See the notes to our 2006 consolidated financial statements.

S-4

Schedule II

Converium Holding AG

Statements of cash flows

	Year ended December 31,
(USD millions)	2006		2005		2004
Cash flows from operating activities
Cash (used in) provided by operating activities		-9.3		68.7		41.6
Cash flows from investing activities
Notes receivable		—		—		-46.7
Investment in subsidiaries		—		-70.0		-355.1
Proceeds from disposal of investments in subsidiaries		-1.7		—		—
Net increase in short-term investments		—		41.5		—
Net cash used in investing activities		-1.7		-28.5		-401.8
Cash flows from financing activities
Issuance of note payable		—		—		22.0
Net purchases of common shares		-3.7		-1.5		-6.0
Dividends paid to shareholders		-11.7		—		-47.8
Proceeds from 2004 Rights Offering		—		—		428.4
2004 Rights Offering issuance costs		—		—		-25.1
Net cash (used in) provided by financing activities		-15.4		-1.5		371.5
Effect of exchange rate changes in cash and cash equivalents		2.9		1.1		-10.4
Change in cash and cash equivalents		-23.5		39.8		0.9
Cash and cash equivalents as of January 1		41.9		2.1		1.2
Cash and cash equivalents as of December 31		18.4		41.9		2.1

See the notes to our 2006 consolidated financial statements.

S-5

Schedule IV

Converium Holding AG and subsidiaries

reinsurance and insurance premiums and other considerations

	Gross		Ceded to other		Assumed from other				% of amount
(USD millions)	amount		companies		companies		Net amount		assumed to net
2006		544.9		-128.9		1,436.0		1,852.0		77.5	%
2005		518.8		-171.9		1,436.2		1,783.1		80.5	%
2004		478.5		-236.3		3,013.7		3,255.9		92.6	%

S-6

Glossary

Accident and Health: All types of covers that provide benefits related to an accident or to medical treatments. Accident covers provide indemnification for damages caused by an accident such as accidental death and dismemberment, disability, medical expenses and the accumulation of accident-related benefits. Medical benefits may cover hospitalization expenses and outpatient expenses caused by any reason, dental treatments or medical expenses arising while traveling abroad. Also certain types of short-term income replacements such as hospital cash benefits are considered as health business.

Agribusiness: Agribusiness (re)insurance provides comprehensive coverage against crop yield shortfalls from natural perils in the form of Multi Peril Crop Insurance (MPCI) and Named Peril Covers for specialist crops. Other main products include insurance solutions for livestock portfolios, timber plantations, aquaculture risks, algae blooms and diseases and comprehensive coverage for greenhouse portfolios including crop content. Converium also develops innovative risk solutions for target markets and has recently introduced MPCI to the Brazilian and Italian market through its global experience in all major lines of agribusiness.

Annuity: A contract that pays a periodic income benefit for the life of a person (the annuitant) or for a specified number of years, or a combination of the two, in return for a single premium payment. Immediate annuities provide income from the date the policy is taken out and deferred annuities provide income at a future specified date.

Aviation & Space: Aviation insurance covers property and liability risks related to aircraft, airlines, aviation product manufacturers, airports, and related businesses. Space insurance covers losses during the pre-launch, launch, and in-orbit phases of satellites.

Branch Office: A branch office is part of the legal entity under which it operates and has its own organization and administration. It underwrites business for its assigned territory, has its own balance sheet and is subject to local regulations. Converium Ltd has branch offices in Singapore, Labuan, Bermuda and Australia. Converium Rückversicherung (Deutschland) AG has branch offices in Paris and Milan.

Cede, Ceding Insurer, Cession: When an insurer reinsures its risk with another insurer (“cession”), it “cedes” business and is referred to as the “ceding insurer.”

Combined Ratio: The sum of the loss ratio and the expense ratio for a non-life insurance or a reinsurance company. A combined ratio below 100 generally indicates profitable underwriting. A combined ratio over 100 indicates unprofitable underwriting. An insurance company with a combined ratio over 100 may be profitable to the extent that net investment results exceed underwriting losses.

Credit & Surety: Credit insurance, the insurance of commercial receivables, covers financial losses to insureds arising from debts which are uncollectible due to their customers’ insolvency. Surety insurance provides a guarantee to a third party, the beneficiary, that the principal — a construction company, for example — will fulfill an obligation to the beneficiary, who receives an indemnification if the principal fails to fulfill the obligation.

Cycle Management: Cycle Management is a process of dynamic and proactive assessment of the industry underwriting cycles, and our deployment of appropriate strategies to maximize Converium’s positioning and profitability throughout the cycles.

Engineering: Insurance covering building projects and the insurance of machinery in operation in industrial facilities.

Expense Ratio: The ratio of non-life insurance or reinsurance operating expenses (i.e. acquisition costs and profit participation net of reinsurance commissions) to net premiums earned plus administration expenses to net premiums written.

Facultative Reinsurance: The reinsurance of part or all of the insurance provided by a single policy negotiated on a contract-by-contract basis.

Fronting: Most commonly refers to the practice of a non-admitted insurer contracting with a licensed insurer to issue an insurance policy for regulatory or certification purposes. Subsequently, the risk is transferred to a reinsurance company by way of a reinsurance contract also known as a fronting agreement. The insured receives a policy written by the licensed commercial insurer, but the economic risk of that policy resides in the reinsurance company, although the ultimate liability remains with the fronting insurer.

In some jurisdictions, it is a legal requirement for either all, or certain classes' of business, to be written by a local insurer. Hence, if the reinsurer is established in a domicile other than that where the risk resides, then fronting arrangements are mandatory.

General Third Party Liability / Casualty: General liability business covers the (re)insurance of risks arising from commercial, product, business and personal liability.

Global Business Segments: Converium’s structure comprises three global business segments, based upon which Converium pursues its financial reporting and manages its business. The three global business segments are the following: Standard Property & Casualty Reinsurance, Specialty Lines, and Life & Health Reinsurance.

Gross Premiums Written: Total premiums (whether or not earned) for insurance contracts written or assumed (including deposits for contracts with an insignificant amount of mortality or morbidity risk) during a specific period, without deduction for premiums ceded.

G-1

Incurred But Not Reported (IBNR) Reserves: Reserves for estimated losses and loss adjustment expenses which have been incurred but not reported to the insurer or reinsurer, including future development of claims which have been reported to the insurer or reinsurer but where the established reserves may ultimately prove to be inadequate.

Liability: Liability insurance includes many classes of cover which provide indemnification for monetary amounts that an insured becomes legally obliged to pay to a third party.

Life and Disability: This includes all traditional and universal life covers, annuities, long-term care benefits, critical illness covers as well as all insurance types covering disability (long-term, short-term, permanent total, permanent partial, any/own occupation, etc.) caused by illness or accident.

Life & Health Reinsurance: Life & Health Reinsurance is one of the three global business segments Converium is based upon. This segment includes the following lines of business: Life and Disability, and Accident and Health.

Loss: An insured event that is the basis for submission or payment of a benefit under an insurance policy. Losses may be covered, limited or excluded from coverage, depending on the terms of the policy.

Loss Adjustment Expenses (LAE): The expenses of investigating and settling claims, including certain legal and other fees, and the expenses of administering the claims adjustment process.

Loss Ratio: Ratio of non-life insurance or reinsurance company’s net incurred losses and loss adjustment expenses to net premiums earned.

Loss Reserves: Reserves established by an insurer or reinsurer and recorded on its balance sheet to reflect the estimated cost of future payments for claims for which the insurer or reinsurer ultimately will be required to indemnify insureds or reinsureds in the future. Reserves are held in respect of losses occurred on or prior to the balance sheet date on insurance or reinsurance written and earned. Loss reserves are generally composed of individual case reserves for reported claims and IBNR reserves.

Marine & Energy: Marine insurance includes physical damage insurance for ships, shipping, oil rigs and related activities, cargo (while being transported by land, sea or air) and related liabilities.

Motor: Motor insurance covers claims for bodily injury and property damage arising from automobile accidents.

Net Premiums Written: Gross premiums less premiums ceded for reinsurance.

Non-Proportional Reinsurance: Reinsurance under which the reinsurer’s participation in a claim depends on the size of the claim. Also known as ”excess reinsurance”.

Personal Accident: All types of benefits insured on a stand-alone basis that provide indemnification related to an accident. The covered risks include accidental death and dismemberment, disability due to an accident (short-term, permanent total, permanent partial), medical expenses caused by an accident and the accumulation of accident-related benefits.

Premiums Earned: That portion of gross premiums written in current and past periods applying to the expired portion of the policy period.

Professional Liability and other Special Liability: Insurance to protect the insured against the consequences of its liability to pay damages in respect of a breach of professional duty in the practicing of its profession.

Property: Property insurance covers the physical assets of an insured against fire, extended coverages or all risks and consequential business interruption arising therefrom.

Proportional Reinsurance: Arrangement whereby the insurer cedes to the reinsurer an agreed fixed percentage of premiums, claims and other liabilities for each policy covered on a pro rata basis.

Reinsurance: The practice whereby one insurer, called the reinsurer, in consideration for premiums received, agrees to indemnify the ceding insurer for all or a portion of the risk under a policy or policies of insurance issued by the ceding insurer. The legal rights of the insured generally are not affected by the reinsurance transaction, and the insurance enterprise issuing the insurance contract remains liable to the insured for payment of policy benefits.

Representative Office: Representative offices provide Converium’s business segments with local bases for marketing, liaison and client service. They are restricted in their activities and may not underwrite reinsurance business. Converium has representative offices in Argentina, Brazil and Japan.

G-2

Reserves: Liabilities established by insurers and reinsurers to reflect the estimated cost of claims payments, benefits payments and the related expenses that the insurer or reinsurer will ultimately be required to pay in accordance with the insurance or reinsurance it has written.

Retention: The amount or portion of risk which a ceding insurer retains for its own account. Losses and loss expenses paid by the ceding insurer in excess of the retention level are then reimbursed to the insurer by the reinsurer. In proportional insurance, the retention may be a percentage of the original policy’s limit. In non-proportional insurance, the retention is an amount of loss, a loss ratio or a percentage.

Retrocessional Reinsurance: An arrangement under which a reinsurer cedes to another reinsurer (the “retrocessionaire”) all or a portion of the insurance risks reinsured by the first reinsurer. Retrocessional reinsurance generally does not legally discharge the ceding reinsurer from its liability to the original ceding company.

Specialty Lines: Specialty Lines is one of the three global business segments Converium is based upon. This segment includes the following lines of business: Agribusiness, Aviation & Space, Credit & Surety, Engineering, Marine & Energy, Professional Liability and other Special Liability, Excess and Surplus Lines, and Workers’ Compensation.

Standard Property & Casualty Reinsurance: Standard Property & Casualty Reinsurance is one of the three global business segments Converium is based upon. This segment includes the following lines of business: General Third Party Liability / Casualty, Motor, Property, and Personal Accident (assumed from non-life insurers).

Survival Ratio: An industry measure of the number of years it would take a company to exhaust its asbestos and environmental reserves for losses and loss expenses based on that company’s current level of asbestos and environmental claims payments. The ratio is derived by dividing the current ending losses and loss expense reserves by the average annual payments for the prior three years. The ratio is computed based on the ending reserves for losses and loss expenses over the respective claims settlements during the fiscal year.

Tail: The period of time that elapses between the incurrence and settlement of losses under a policy. A “short-tail” insurance product is one where ultimate losses are known and settled comparatively quickly; ultimate losses under a “long-tail” insurance product are sometimes not known and settled for many years.

Term Life Insurance: Life insurance protection for a limited period which expires without maturity value if the insured survives the period specified in the policy.

Treaty Reinsurance: A type of reinsurance whereby the ceding company automatically cedes and the reinsurer automatically assumes a predetermined portion or category of specified risks underwritten by the ceding company.

Underwriting: The process whereby an insurer or reinsurer reviews applications submitted for insurance or reinsurance coverage and determines whether it will provide all or part of the coverage being requested for an agreed premium.

Underwriting Results: The pre-tax profit or loss experienced by a non-life insurance company or reinsurance company after deducting incurred losses and loss expenses and operating expenses from premiums earned. This profit and loss calculation includes reinsurance assumed and ceded but excludes investment income.

Universal Life Insurance: A life insurance product under which premiums are generally flexible, the level of death benefits may be adjusted and expenses and other charges are specifically disclosed to the policyholder and deducted from their account balance.

Whole Life Insurance: A permanent life insurance product offering guaranteed death benefits and guaranteed cash values.

Workers’ Compensation: Workers’ compensation insurance provides payments required by law to be made to an employee who is injured or disabled in connection with work, including payments for both medical treatment and lost wages.

G-3

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for the filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Converium Holding AG

By:	/s/ Inga K. Beale
	Name: Inga K. Beale
	Title: Chief Executive Officer, Converium Holding AG
By:	/s/ Paolo De Martin
	Name: Paolo De Martin
	Title: Chief Financial Officer, Converium Holding AG

Date: June 13, 2007

Sig-1

INDEX TO EXHIBITS

Exhibit Number	Description
1.1	Articles of Incorporation of Converium Holding AG, adopted November 8, 2001.*
1.2	Bylaws of Converium Holding AG, adopted November 16, 2001, revised March 1, 2007.
1.3	Articles of Incorporation of Converium Holding AG, revised May 10, 2007
1.4	Bylaws of Converium Holding AG, revised April 11, 2005.\
2.1	Form of Deposit Agreement among Converium Holding AG, The Bank of New York, as Depositary, and all owners and beneficial owners from time to time of ADSs issued thereunder (including the form of ADS), incorporated by reference from the Registration Statement on Form F-6 of Converium Holding AG (File No. 333-14108), initially filed with the Commission on November 19, 2001.*
2.2	Form of Indenture between Converium Finance, S.A., as Issuer, Converium AG and Converium Holding AG as Guarantors and JPMorgan Chase Bank as Trustee, Calculation Agent and Paying Agent.+
2.3	Form of the USD 200,000,000 principal amount of 8.25% Guaranteed Subordinated Notes Due 2032 (included in Exhibit 2.4 hereto).+
2.4	Subordinated Guarantee by Converium Holding AG and Converium AG relating to USD 200,000,000 principal amount of 8.25% Guaranteed Subordinated Notes Due 2032. ^
2.5	Indenture, dated December 23, 2002 between Converium Finance S.A., Converium Holding AG, Converium AG and JP Morgan Chase Bank, as trustee, relating to USD 200,000,000 principal amount of 8.25% Guaranteed Subordinated Notes Due 2032. ^
4.1	Master Agreement by and among Zurich Financial Services and Converium Holding AG, dated December 1, 2001.*
4.2	Stock Purchase Agreement between Zurich Reinsurance Centre Holdings, Inc. and Converium Holdings (North America) Inc., dated as of October 1, 2001.*
4.3	Agreement for the Sale and Transfer of Shares in Zürich Rückversicherung (Köln) Aktiengesellschaft, dated September 28, 2001.*
4.4	Quota Share Retrocession Agreement between Zurich Insurance Company (including its Singapore, Labuan and Bermuda branches) and Converium AG, dated October 1, 2001.*
4.5	Quota Share Retrocession Agreement between Zurich International (Bermuda) Ltd. and Converium AG, dated October 1, (and effective as of July 1, 2001).*
4.6	Asset purchase and Assumption of Liability Agreement between Zurich Insurance Company and Converium AG, dated September 28, 2001.*
4.7	Indemnity Agreement (Unicover) between Zurich Reinsurance (North America), Inc. and Zurich Insurance Company, dated as of October 1, 2001.*
4.8	Indemnity Agreement (September 11th Cessions) between Zurich Reinsurance (North America), Inc. and Zurich Insurance Company, dated as of October 1, 2001.*
4.9	Indemnity Agreement (September 11th Losses) between Zürich Rückversicherung (Köln) Aktiengesellschaft and Zurich Insurance Company, dated as of October 1, 2001.*
4.10	Partial Commutation Agreement between Zurich Reinsurance (North America), Inc. and Zurich Insurance Company, dated as of October 1, 2001.*
4.11	Master Novation and Indemnity Reinsurance Agreement among Zurich Reinsurance (North America), Inc., Centre Insurance Company, Centre Solutions (U.S.) Limited and Zurich Insurance Company, Bermuda Branch, dated as of October 1, 2001.*

Exhibit Number	Description
4.12	Group Reinsurance Business Master Novation and Indemnity Reinsurance Agreement by and among Zurich Reinsurance (North America), Inc., Zurich Insurance Company and Zurich International (Bermuda) Ltd., dated as of October 1, 2001.*
4.13	Commutation Agreement (covering the Aggregate Excess of Loss Reinsurance Agreement effective January 1, 1991 through December 31, 1993) between Zurich Reinsurance (North America), Inc. and Centre Reinsurance Limited, dated as of October 1, 2001.*
4.14	Commutation Agreement (covering the Aggregate Excess of Loss Reinsurance Agreement effective January 1, 1994 through December 31, 1994) between Zurich Reinsurance (North America), Inc. and Centre Reinsurance International Company, dated as of October 1, 2001.*
4.15	Commutation Agreement (covering the Aggregate Excess of Loss Reinsurance Agreement effective January 1, 1995) between Zurich Reinsurance (North America), Inc. and Centre Reinsurance Limited, dated as of October 1, 2001.*
4.16	Commutation Agreement (covering the Obligatory Surplus Share Reinsurance Agreement effective October 1, 1995) between Zurich Reinsurance (North America), Inc. and Centre Reinsurance Limited, dated as of October 1, 2001.*
4.17	Commutation Agreement (covering the Obligatory Surplus Share Reinsurance Agreement effective November 6, 1992) between Zurich Reinsurance (North America), Inc. and Centre Reinsurance International Company, dated as of October 1, 2001.*
4.18	Agreement Amending and Terminating Centre Reinsurance Dublin Affiliated Group Tax Allocation Agreement among Orange Stone Delaware Holdings Limited, Orange Stone Reinsurance, Centre Reinsurance Holdings (Delaware) Limited, Centre Reinsurance (U.S.) Limited, Zurich Reinsurance Centre Holdings, Inc., Zurich Reinsurance (North America), Inc., ZC Insurance Company, ZC Specialty Insurance Company, Centre Risk Advisors, Inc., Constellation Reinsurance Company, Centre Re Services, Inc., Zurich Global Assets LLC, formerly known as BDA/US Services Limited, ZC Management Corporation, ZC Resource LLC, ZC Property Management, Inc. and Claims Solutions Group, dated October 1, 2001.*
4.19	Catastrophe Cover Retrocession Agreement by and between Converium AG and Zurich Insurance Company, dated December 1, 2001.*
4.20	Stock Purchase Agreement between Zurich Reinsurance (North America), Inc. and Centre Strategic Investments Holdings Limited, dated August 23, 2001.*
4.21	Run-off Services and Management Agreement between Zurich Insurance Company and Converium AG, dated December 3, 2001.*
4.22	Tax Sharing and Indemnification Agreement among Zurich Reinsurance Centre Holdings, Inc., Orange Stone Delaware Holdings Limited, Converium Holdings (North America) Inc., Zurich Reinsurance (North America), Inc. and Zurich Insurance Company, dated as of October 1, 2001. *
4.23	Tax Sharing and Indemnification Agreement between Zurich Financial Services, Zurich Insurance Company, Converium Holding AG and Converium AG dated December 3, 2001. *
4.24	Form of Converium Standard Stock Option Plan for Non-US Employees. *
4.25	Form of Converium Standard Stock Purchase Plan for Non-US Employees. *
4.26	Omnibus Share Plan for US Employees. *
4.27	Converium Employee Stock Purchase Plan for US Subsidiaries.*
4.28	Form of Converium Annual Incentive Deferral Plan.*
4.29	Lease, between Zurich Insurance Company and Converium AG, dated August 29, 2001.*

Exhibit Number	Description
4.30	Sublease Support Agreement among Zurich Reinsurance (North America), Inc., Global Asset Holdings Limited and Centre Insurance Company, dated as of October 1, 2001.*
4.31	Sublease between ZC Resource LLC and Zurich Reinsurance (North America), Inc., dated as of June 20, 2001.*
4.32	Form of Letter Agreement between Converium Holding AG and The Bank of New York, relating to the pre-release of the ADRs, incorporated by reference from the Registration Statement on Form F-6 of Converium Holding AG (File No. 333-14108), initially filed with the Commission on November 19, 2001.*
4.33	Agreement dated September 2, 2002, between Converium AG and MDU Investments Ltd, regarding subscription of up to 20 million shares at £1 each. ^
4.34	Share Purchase Agreement dated November 27, 2002, between Converium AG and Northern States Agency Inc., Munich Re, Aviva and Royal and Sun Alliance regarding Global Aerospace Underwriting Managers Limited (GAUM). ^
4.35	Shareholder’s Agreement dated March 12, 2003, between Converium AG and Northern States Agency Inc., Munich Re, Aviva and Royal and Sun Alliance regarding Global Aerospace Underwriting Managers Limited (GAUM). ^
4.36	Sale and Purchase Agreement and Assignment between Converium AG and Converium Finance S.A. regarding the transfer of a USD150 million loan granted to Converium Holding AG. ^
4.37	Amendment to Share Purchase Agreement dated November 27, 2002 between Converium AG and Northern States Agency Inc., Munich Re, Aviva and Royal Sun Alliance regarding Global Aerospace Underwriting Managers Limited (GAUM). ^
4.38	Agreement dated December 30, 2003, for the sale and purchase of 5.1% of Royal and Sun Alliance Insurance PLC’s shareholding in Global Aerospace Underwriting Managers Limited (GAUM). #
4.39	Agreement dated July 24, 2003 USD900,000,000 Credit Facility for Converium AG, Zurich arranged by ABN Amro Bank N.V., Barclay’s Capital and Commerzbank Aktiengesellschaft. #
4.40	Agreement dated November 29, 2004, USD 1,600,000,000 Credit Facility for Converium AG, arranged by ABN AMRO Bank N.V., Barclay’s Capital, BNP Paribas, Commerzbank Aktiengesellschaft, Credit Suisse First Boston and J.P. Morgan. \
4.41	Deed of Pledge, dated December 15, 2004, Converium Rückversicherung (Deutschland) AG as the Pledgor and ABN Amro Mellon Global Securities Services as the Account Bank and ABN Amro Bank N.V. as the Pledgee. \
4.42	Deed of Pledge, dated December 15, 2004, Converium AG, Zürich, as the Pledgor, and ABN Amro Bank N.V. as the Pledgee and ABN Amro Mello Global Securities Services as the Account Bank. .\
4.43	Guarantee, dated October 21, 2004 between Converium AG, Zürich as the Guarantor, and Converium Insurance (UK) Limited. \
4.44	Guarantee, dated October 21, 2004 between Converium AG, Zürich as the Guarantor, and Converium Rückversicherung (Deutschland) AG. \
4.45	Fronting and Administration Agreement relating to the Global Aerospace Underwriters Pool, dated January 7, 2005, between Global Aerospace Underwriting Managers Limited, Global Aerospace, Inc., Münchener Rückversicherungs Gesellschaft Aktiengesellschaft in München, National Indemnity Company and Converium AG.\
4.46	Amendment No. 1 to the Quota Share Retrocession Agreement between Zurich Insurance Company (Including its Bermuda Branch) and Converium AG, dated as of October 1, 2001 and effective as of July 1, 2001.
4.47	Stock Purchase Agreement by and between National Indemnity Company and Converium AG dated as of October 16, 2006.

Exhibit Number	Description
4.48	Guarantee Request and Reimbursement Agreement between Converium AG, Zurich, Switzerland and Bayerische Hypo- und Vereinsbank Aktiengesellschaft, Munich, Germany
4.49	Fronting and Administration Agreement relating to the Global Aerospace Underwriters Pool, dated December 22, 2006, between Global Aerospace Underwriting Managers Limited, Global Aerospace, Inc., Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, National Indemnity Company and Converium AG.
4.50	Standard Stock Purchase Plan of Converium Holding AG, Zug, Switzerland December 2006
4.51	Standard Stock Option Plan of Converium Holding AG, Zug, Switzerland December 2006
4.52	Transaction Agreement, dated as of May 9, 2007, by and between Converium Holding AG and SCOR S.A.
4.53	Fronting and Administration Agreement relating to the Global Aerospace Underwriters Pool, dated April 25, 2007, between Global Aerospace Underwriting Managers Limited, Global Aerospace, Inc., Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, National Indemnity Company and Converium AG.
7.1	Computation of ratio of earnings to fixed charges.
8.1	Subsidiaries of the Registrant.
12.1	302 Certification of Chief Executive Officer.
12.2	302 Certification of Chief Financial Officer.
13.0	906 Certification of Chief Executive Officer and Chief Financial Officer.

*	Incorporated by reference to the Company’s Registration Statement filed on Form F-1, on December 10, 2001.
+	Incorporated by reference to the Company’s Registration Statement filed on Form F-1, on December 18, 2002.
^	Incorporated by reference to the Company’s Annual Report on Form 20-F for the year ended December 31, 2002, filed on April 18, 2003.
#	Incorporated by reference to the Company’s Annual Report on Form 20-F for the year ended December 31, 2003, filed on April 5, 2004.
\	Incorporated by reference to the Company’s Annual Report on Form 20-F for the year ended December 31, 2004, filed on June 30, 2005.

EX-1.2

Exhibit 1.2

Organizational By-laws
of Converium Holding AG

Note:

The respective dates of any revisions to the Organizational By-laws are indicated at the end of the document.

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Table of Contents

Basis and Overview		4
1	Board of Directors	4
1.1	Main Duties and Responsibilities	4
1.2	Appointments and Dismissals	6
1.3	Approvals	7
1.4	Delegation of Duties and Responsibilities	8
1.5	Meetings and Resolutions of the Board of Directors	8
1.6	Constitution and Signing Authorities	9
1.7	Information and Reporting, Confidentiality	9
1.8	Remuneration	10
2.	Committees of the Board of Directors	10
2.1	General	10
2.2	Nomination and Remuneration Committee	12
2.3	Finance and Risk Committee	13
2.4	Audit Committee	15
3.	Chairman and Vice-Chairman of the Board of Directors	16
3.1	Appointment	16
3.2	Duties and Responsibilities	16
3.3	Urgent Resolutions	17
4.	(deleted)5	17
5.	Global Executive Committee (GEC)	17
5.1	Members6	17
	• Chief Executive Officer (“CEO”),	17
	• Head of Standard Property & Casualty Reinsurance (“Head of Standard P&C Reinsurance”)	17
	• Head of the Specialty Lines Segment and the Life and Health Segment (“Head of [Specialty Lines and Head of Life & Health]”),	17
	• Chief Risk Officer (“CRO”)8,	17
	• Chief Financial Officer (“CFO”),	17
	• Chief Operating Officer (“COO”)8, and	17

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	• General Counsel (“General Legal Counsel”)	17
5.2	Main Duties and Responsibilities	18
5.3	Approvals and Decisions	20
5.4	Meetings	23
5.5	Quorum, Voting, Abstention from Voting, Minutes, Reporting	23
6.	Chief Executive Officer (CEO)	24
6.1	Main Duties and Responsibilities	24
6.2	Approvals and Decisions	25
6.3	Reporting, Delegation	26
7.	Business Segments	26
7.1	Organization	26
7.2	Duties and Responsibilities	26
7.3	Reporting	28
7.4	Management Principles (Structures)	28
8.	Corporate Center	28
8.1	Organization	28
8.2	Duties and Responsibilities	29
8.3	Reporting	29
9.	Internal Audit	29
9.1	Organization	29
9.2	Duties and Responsibilities	29
9.3	Reporting	29
10.	Adoption and Amendment	30

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Basis and Overview

Converium Holding AG (the “Company”) is the parent holding company of the Converium group of companies (“Converium”). In this capacity, it is responsible for performing the duties of management, organization and financing not only in respect of itself but also in respect of all companies directly or indirectly controlled by it (the “Converium Companies”). In exercising this function, the Company’s corporate bodies shall not only adopt decisions which are binding on the Company itself but shall also define under the present Organizational By-laws standards for Converium Companies, at all times respecting the legally prescribed rights of said Converium Companies’ corporate bodies in respect of their independence and powers.

The Company builds on strong corporate governance. The Board of Directors is committed to comply with Swiss and international corporate governance policies and standards.¹

The board of directors of Converium Holding AG (the “Board of Directors”) has issued these Organizational By-laws based on Article 716b of the Swiss Code of Obligations (“CO”) and Article 16 of the Articles of Incorporation of the Company.

The Organizational By-laws set out the competencies, duties and responsibilities of the Board of Directors, the Committees of the Board of Directors (the “Committees of the Board of Directors”), the Chairman of the Board of Directors (the “Chairman”), the Vice-Chairman of the Board of Directors (the “Vice-Chairman”)⁵, Converium’s Global Executive Committee (the “Global Executive Committee”), the Chief Executive Officer of Converium (the “CEO”) as well as Converium’s global Business Segments (the “Business Segments”), the Converium Corporate Center (the “Corporate Center”), including Converium’s Internal Audit (the “Internal Audit”), each of them a “Functional Level”⁴.

The competencies, duties and responsibilities of each Functional Level are subject to the competencies, duties and responsibilities of the other Functional Levels described in these Organizational By-laws.

1	Board of Directors
1.1	Main Duties and Responsibilities
1.1.1	Strategic direction and configuration of the business of Converium, including but not limited to:
1.1.1.1	Decision on the strategy, the execution of the strategy as outlined in the strategic business plan and the strategic planning.
1.1.1.2	Decision on Converium’s underwriting principles.
1.1.1.3	Establishment of new lines of business activities outside the reinsurance business, discontinuation of lines of business activities outside the reinsurance business.
1.1.1.4	Approval of Converium’s strategic business plan.1

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1.1.2	Principles of the organization of the Company and of Converium, including but not limited to the following items:
1.1.2.1	Decision on the major aspects of the corporate structure of the Company and of Converium.
1.1.2.2	Determination of the principles of corporate governance and of Converium’s code of business conduct and ethics.1
1.1.2.3	Decision on the principles of compensation, incentive schemes and bonus payments for the employees.8
1.1.2.4	Assessment of the performance of the CEO6 and decision on the overall compensation of the CEO.5
1.1.2.5	Creation and elimination of Functional Levels.
1.1.2.6	Change of company names and business logos other than changes to the Company name and business logo of Converium.
1.1.2.7	Transfer of the business domiciles of the Company, Converium AG, Converium Rückversicherung (Deutschland) AG and Converium Insurance (UK) Ltd or any other Converium Company whose formation requires the approval of the Board of Directors (1.3.1.1).1
1.1.2.8	Appointment, dismissal and supervision of the Global Executive Committee.
1.1.3	Principles of financial planning and control, including but not limited to the following items:
1.1.3.1	Determination of the accounting standards and approval of material changes to the accounting principles.
1.1.3.2	Approval of Converium’s financial plans and administration expense budget and forecast.1
1.1.3.3	Determination of Converium’s risk management policy, reserve policy, investment policy, treasury policy, solvency and liquidity planning.
1.1.3.4	Approval of the strategic asset allocation of Converium’s investment portfolio.
1.1.3.5	Determination of Converium’s tax planning policy.
1.1.3.6	Determination of the allocation of any Converium expenses to be charged to the Corporate Center.1, 4
1.1.3.7	Carrying out capital increases of the Company, subject to a decision by the shareholders’ meeting, and use of contingent and/or authorized share capital of the Company and any capital increases in subsidiaries in excess of USD 20 million.
1.1.3.8	Determination of Converium’s year-end results and reserve policy and determination of the Company’s year-end results and dividend policy, subject to a decision by the shareholders’ meeting.
1.1.3.9	Listing and de-listing of the Company on a stock exchange.
1.1.4	Determination of the principles of internal audit.
1.1.5	Additional duties which are non-transferable and inalienable by mandatory law (Article 716a para. 1 CO):

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1.1.5.1	Preparation of the business report (Art. 663d CO) as well as of the annual shareholders’ meeting (Art. 698 et seq. CO) and implementation of its resolutions.
1.1.5.2	Notification of the judge in case of over-indebtedness of the Company (Arts. 725-725a CO).
1.1.5.3	Instruction of a specially qualified auditor to examine, after the conclusion of each business year, whether the issue of new shares within the frame of a conditional capital increase has been made in conformity with the law and with the Articles of Incorporation and, if required, with the prospectus (Art 653f CO).
1.1.5.4	(A) Establishment, upon receipt of the examination referred to in the preceding paragraph, in the form of a notarized deed of (i) the number, par value and type of the newly issued shares, (ii) the preferential rights of individual classes of shares and (iii) of the amount of the share capital at the end of the business year, (B) amendment of the Articles of Incorporation and (C) filing of the amendment of the Articles of Incorporation with the Commercial Register not later than three months after the conclusion of the relevant business year (Arts. 653g and 653h CO).
1.1.5.5	Examination of the professional skills of the specially qualified auditors where their appointment is provided for by the law.
1.1.5.6	Passing of resolutions regarding the subsequent payment of capital with respect to non-fully paid-in shares.
1.1.5.7	The Board of Directors may assign the preparation and the implementation of its resolutions as well as the supervision of individual business transactions to committees, individual members of the Board of Directors, to the Global Executive Committee, to the CEO or to the management of the Company or of any Converium Company. It shall provide for adequate reporting to the Board of Directors.
1.2	Appointments and Dismissals

The Board of Directors shall make the appointments and dismissals of the following functions:

1.2.1	Members of the Committees of the Board of Directors and their chairpersons.
1.2.2	Chairman and Vice-Chairman of the Board of Directors.
1.2.3	Global Executive Committee.
1.2.4	External auditors based on the recommendation of the Audit Committee, subject to approval by the shareholders’ meeting.1
1.2.5	Board members shall be eligible for a maximum of 4 terms of office, unless extended by the Board of directors beyond the 4 terms.4

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1.3 Approvals

The following transactions and actions require the final approval of the Board of Directors in order to become effective:

1.3.1	Formation of any insurance/reinsurance company, merger, full or partial acquisition or sale or other divestiture of a company or of another participation involving the Company or any Converium Company, including the entering into a joint venture.1
1.3.2	Other than as provided for in the preceding paragraph, full or partial acquisition or sale or other divestiture of a business (other than intra-Converium).
1.3.3	Any transaction involving a portfolio transfer by a Converium Company (understood to be a transfer of the original liabilities and obligations to the original policyholders) transferring a substantial part of a Business Segment’s portfolio to a third party or the establishment of new lines of business or discontinuation of existing lines of business representing a substantial part of a Business Segment’s business (such part representing, in either case, more than 25% of the portfolio of the relevant Business Segment).
1.3.4	Investments by the Company or any Converium Company not made at arms’ length market conditions.
1.3.5	Entering into contracts or contractual arrangements with unusual terms or which may have a material impact upon the strategic position of the Company or Converium.
1.3.6	Acquisition, disposal, hypothecation of real estate unless such acquisition, disposal or hypothecation is based upon prior general approval by the Board of Directors.
1.3.7	Other than in connection with reinsurance arrangements of any type, issuing or guaranteeing public bonds, whether or not listed on a stock exchange, through a guarantee, keep well agreement or similar arrangement.1
1.3.8	Other than in connection with reinsurance arrangements of any type or inter-company loans as defined in the Treasury Policy, taking up loans, and entering into similar transactions exceeding the amount of USD10 millions per transaction or series of transactions.5
1.3.9	Other than in connection with reinsurance arrangements of any type, granting loans, guarantees and entering into similar transactions exceeding the amount of USD10 millions per transaction.
1.3.10	Expenses and capital expenditures beyond the approved budget exceeding the amount of USD10 millions per transaction.
1.3.11	Entering into law-suits and settlements (a) if the case involved is likely to have a major impact on the reputation of Converium or (b) if the case involved is outside the ordinary course of the reinsurance business and the amount involved exceeds USD10 millions per case.

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1.4 Delegation of Duties and Responsibilities

In all respects other than those set forth in Sections 1.1 – 1.3, the Board of Directors hereby fully delegates the management of the Company and of Converium to the CEO, subject to the powers and duties delegated to the Committees of the Board of Directors, the Chairman and the Vice-Chairman⁵, the Global Executive Committee, the Business Segments and the Corporate Center, all as set forth in these Organizational By-laws.⁴

1.5	Meetings and Resolutions of the Board of Directors
1.5.1	Meetings, Convocation and Agenda
1.5.1.1	The meetings of the Board of Directors are called by the Chairman or the Vice-Chairman, or, if one of them is prevented from doing so, by another member of the Board of Directors. Meetings of the Board of Directors may also be held by way of a telephone conference or a video conference.
1.5.1.2	The Board of Directors shall meet as often as circumstances call for, at least four times a year. Moreover, a meeting of the Board of Directors shall immediately be called upon the request of any of its members. Such a request (by letter, telephone, telefax, telex or e-mail) should be addressed to the Chairman or the Vice-Chairman by indicating the items to be submitted to the Board of Directors.1
	Additionally, the members of the Board shall meet at regularly scheduled sessions without management.1
1.5.1.3	Meetings shall be called with ten days’ written or telefax or e-mail notice (if the sender can be identified as the relevant member of the Board of Directors) specifying the agenda. The Chairman or the Vice-Chairman sets the agenda for the meeting of the Board of Directors.
1.5.1.4	If a member of the Board of Directors wishes to put an item on the agenda, such member needs to notify the Chairman or the Vice-Chairman at least five days in advance of the date of the meeting. All members of the Board of Directors have to be notified immediately of amendments to the agenda by the Chairman or the Vice-Chairman or the Secretary of the Board of Directors.
1.5.1.5	If all members of the Board of Directors agree or are present and no objection is raised, the meeting may be held without observing the aforementioned formal requirements. At such a meeting, discussions may be held and resolutions passed on all business matters within the scope of authority of the Board of Directors.
1.5.1.6	Absent members of the Board of Directors may not be represented.
1.5.1.7	The Chairman or the Vice-Chairman or, if either of them is prevented from doing so, another member of the Board of Directors to be designated by the members present, shall preside at the meeting.4, 5
1.5.1.8	Other individuals may be invited to meetings of the Board of Directors to discuss specific agenda items.

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1.5.2	Quorum, Voting, Abstention from Voting, Minutes.
1.5.2.1	The Board of Directors constitutes a quorum if the majority of its members is present. To pass resolutions requiring the establishment of a notarized deed, confirming increases in share capital and regarding the changes of the Articles of Incorporation entailed thereby, only one member of the Board of Directors needs to be present.
1.5.2.2	As far as these Organizational By-laws do not provide otherwise, the Board of Directors passes its resolutions by simple majority of votes cast, the member presiding over the meeting having a casting vote.
1.5.2.3	In the event of a vote on matters liable to give rise to a conflict of interest, the member involved in such conflict shall abstain from any discussions and from voting on the subject matter giving raise to such conflict.
1.5.2.4	Resolutions may be adopted by way of circular letter, including telefax and e-mail if the sender can be identified as the relevant member of the Board of Directors. Circular resolutions may also take the form of a meeting (including telephone conference or video conference) and a voting in the form of a circular letter (including telefax and e-mail) for those members of the Board of Directors who did not participate in the meeting. Each member of the Board of Directors may, however, request within ten days from the receipt of the respective motion that an item be discussed and a resolution thereon be taken at a meeting of the Board of Directors. Circular resolutions are passed by simple majority of all votes of the Board of Directors.4
1.5.2.5	The Board of Directors shall keep minutes. The minutes shall be signed by the member presiding over the relevant meeting as well as by the secretary of the meeting. The minutes must be approved by the Board of Directors at its next meeting.
1.6	Constitution and Signing Authorities
1.6.1	The Board of Directors constitutes itself. In particular, it appoints its Chairman and its Vice-Chairman. The Board of Directors also appoints a secretary (the “Secretary”) who does not need to be a member of the Board of Directors.
1.6.2	The signing authority of the members of the Board of Directors shall be determined by the Board of Directors. Its respective decisions are to be entered into the commercial register.
1.7	Information and Reporting, Confidentiality
1.7.1	Each member of the Board of Directors will receive appropriate information with respect to any matter to be considered by the Board of Directors which will include for financial reporting purposes quarterly an appropriate reporting package including a consolidated balance sheet and a profit and loss account of the Company and its Business Segments.
1.7.2	At each of its meetings, the Board of Directors must be informed, by way of a formal report, by the CEO and the Heads of the Business Segments about the course of the business of the Segments and the activity of the Global Executive Committee. In case of important business incidents the Board of Directors shall be informed without delay.1, 4, 5

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1.7.3	Apart from the meetings and the periodical information by the CEO, any member of the Board of Directors may request from the Chairman or the Vice-Chairman information concerning the course of the business and, with the authorization of the Chairman or the Vice-Chairman, also information concerning specific matters of the business.4, 5
1.7.4	To the extent necessary for the fulfillment of a duty, any member of the Board of Directors may apply to the Chairman or the Vice-Chairman to be shown the books and the files of the Company and of Converium. If the Chairman or the Vice-Chairman declines a request for information, the Board of Directors shall decide on the request.
1.7.5	The members of the Board of Directors, the Secretary and any further persons invited to attend meetings of the Board of Directors shall treat confidential all information on facts which come to their attention in the execution of their office and which are not otherwise public knowledge. All persons shall remain under the obligation to observe confidentiality even after termination of their mandates/employment.
1.7.6	When withdrawing from the respective function, a member of the Board of Directors or the Secretary must return all documents in any form which concern the affairs of the Company and Converium to the Chairman or the Vice-Chairman or the Secretary by no later than the end of their term of office.
1.8	Remuneration
1.8.1	The Board of Directors decides on the remuneration for its members according to their demand and responsibility and based on the proposals of the Remuneration Committee.
1.8.2	Expenses and disbursements shall be compensated in addition to this remuneration in accordance with the applicable expense guidelines of the Company. Extraordinary work beyond the normal activities of members of the Board of Directors shall be compensated in addition thereto according to customary rates.1
1.8.3	The remuneration of any employee of a Converium Company who agreed to serve as member of the board of directors of a Converium Company is considered a part of the normal compensation of such employee except if the by-laws of a Converium Company state otherwise.1
2.	Committees of the Board of Directors 7
2.1	General
2.1.1	Appointment, Meetings
2.1.1.1	The members of the Committees of the Board of Directors and their chairpersons shall be appointed for a term of office of one year by the Board of Directors.8 Each chairperson shall designate his deputy from among the members of the respective

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	Committee of the Board of Directors. The Chairman of the Board of Directors may not be elected as Chairman of a Committee of the Board of Directors.8
2.1.1.2	Meetings of the Committees of the Board of Directors shall be chaired by the respective chairperson or deputy. The Committees of the Board of Directors shall meet as and when the need arises or if a member thereof so requests.
2.1.1.3	Each Committee of the Board of Directors may decide to invite persons, from time to time or on a regular basis, not being regular members of that Committee of the Board of Directors, to attend meetings of such Committee of the Board of Directors and to be involved in any project work of that Committee of the Board of Directors.
2.1.2	Quorum, Voting, Abstention from Voting, Minutes, Reporting
2.1.2.1	As far as these Organizational By-laws do not provide otherwise, a Committee of the Board of Directors constitutes a quorum if the majority of its members is present and resolutions are by simple majority of votes cast, the member presiding over the meeting having a casting vote.
2.1.2.2	In the event of a vote on matters liable to give rise to a conflict of interest, the member involved in such conflict shall abstain from voting on the subject matter giving raise to such conflict and abstain from any discussions if personally involved in the subject matter.
2.1.2.3	Resolutions may be adopted by way of circular letter, including telefax and e-mail if the sender can be identified as the relevant member of the respective Committee of the Board of Directors. Each member of a Committee of the Board of Directors may, however, request within ten days from the receipt of the respective motion that an item be discussed and a resolution thereon be taken at a meeting of the relevant Committee of the Board of Directors. Circular resolutions are passed by simple majority of all votes of the respective Committee of the Board of Directors.
2.1.2.4	Absent members of a Committee of the Board of Directors may not be represented.
2.1.2.5	The secretary appointed by the respective Committee of the Board of Directors shall keep the minutes of the meetings of that Committee of the Board of Directors.
2.1.2.6	The Committees of the Board of Directors report on a regular basis to the Board of Directors.

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2.2	Nomination and Remuneration Committee
2.2.1	The Nomination and Remuneration Committee shall consist of any number of members of the Board of Directors, as defined by the Board of Directors from time to time, but at least a minimum of three members. Only independent Directors are eligible to serve on the Nomination and Remuneration Committee. In order to qualify as independent, a member may not accept any consulting, advisory or compensatory fee, other than his/her Board compensation, from the Company.8 In addition, a Nomination and Remuneration Committee member may not be a person affiliated with the Company or any of its subsidiaries.
2.2.2	The Nomination and Remuneration Committee has the following tasks and responsibilities:
2.2.2.1	Assessment and submission to the Board of Directors for approval of its proposal for the appointment and dismissal of the following persons:8

§	Members of the Board of Directors, of the Committees of the Board of Directors and of their chairpersons.
§	Chairman and Vice-Chairman of the Board of Directors.
§	The CEO and the members of the Global Executive Committee.

2.2.2.2	(deleted)8
2.2.2.3	Appointment and dismissal of the following persons:8

§	General Legal Counsel if not a member of the Global Executive Committee.5
§	Head of Internal Audit.
§	Outside directors of Converium Companies unless such appointment or dismissal is required by regulatory law or order, in which case such appointment or dismissal is the responsibility of the CEO.2

2.2.2.4 Definition and implementation of procedures for the following activities:¹

§	Annual self-evaluation of the performance of the Board of Directors, and its committees.1
§	Annual statement of independence of the Board of Directors, disclosure of any conflict of interests and any agreements concluded with the Company or any of its subsidiaries.1
§	Orientation program for new Board Members.1

2.2.2.5 Assessment and submission to the Board of Directors for approval of its proposal for the following items:⁸

§	Overall compensation to be received by each of the members of the Board of Directors.
§	Principle of compensation, of the incentive schemes, of bonus payments for the employees, of pension fund benefits and any other pension plans.1, 4

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§	(deleted)5
§	Overall compensation of the CEO.
§	Terms and conditions for D&O insurance and adequate self retention, if any, for Board members. 8

2.2.2.6 Assessment and decision upon the following items:

§	Overall compensation of each of the members of the Global Executive Committee, other than the CEO.
§	Overall compensation of the Head of Internal Audit.1
§	Review of overall compensation above USD 750,000 or any other amount determined by the Nomination and Remuneration Committee from time to time.8
§	Acceptance of Executive and Board memberships in third companies by GEC members.8
§	Contracts between Converium and any GEC members or any of their family members, not at arms length.8
§	Any guidelines relating to the granting of loans by Converium to Converium employees.8

2.2.2.7	(deleted)8
2.3	Finance and Risk Committee
2.3.1	The Finance and Risk Committee shall consist of any number of members of the Board of Directors, as defined by the Board of Directors from time to time, but at least a minimum of three members. A majority of the members has to be financially literate.8
2.3.2	The Finance and Risk Committee has the following tasks and responsibilities:
2.3.2.1	Regarding Finance, Taxes and Investment

§	Approval of any external providers for asset management services on behalf of Converium and main banks of Converium.
§	Approval of any capital increases in subsidiaries between USD5 millions and USD20 millions.1
§	Initiate and review the Credit Rating strategy of Converium.8
§	Review of the following items:1, 8

• The planned tactical asset allocation.⁸

• The group wide cash management.⁸

• The financial performance of the asset management operations in absolute terms and measured against benchmarks.⁸

• The use of derivatives.⁸

• (deleted)⁸

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Assessment and submission to the Board of Directors for approval of its proposal for the following items:

§	The accounting standards framework to be applied by the Company and the selection of the material options allowed by such framework as well as any change of the accounting standards framework or the respective material options.
§	Yearly Converium’s budget and financial plans.1
§	Converium’s investment policy, treasury policy (including but not limited to the applicable principles for interest rate, currency and maturity risks), issuance of securities in any form and solvency and liquidity planning.1, 8
§	Strategic asset allocation of Converium’s investment portfolio.
§	Converium’s tax planning policy.
§	Determine the allocation of any Converium expenses to be charged to the Corporate Center.
§	Carrying out of capital increases of the Company and use of contingent and/or authorized share capital of the Company.
§	Purchase and sale of Converium shares by the Company itself, other than for the operation of Converium’s compensation plans.8
§	(deleted)5
§	Listing and de-listing of the Company on a stock exchange.
§	Other than in connection with reinsurance arrangements of any type, granting loans, guarantees and entering into similar transactions exceeding the amount of USD10 millions per transaction.8

2.3.2.2 Regarding Risk Management¹

§	Liaising with the risk management functions in identifying and reviewing Converium’s areas of greatest financial risk, the underwriting, credit, liquidity, model and operational risk and their efficient management and supervision of the framework or Converium’s auditing process.1, 8
§	Assess and submit to the Board of Directors for approval Converium’s Risk Management Policy.1
§	Assess and submit to the Board of Directors annually for approval the overall risk appetite or the most significant risk activities.8
§	Review and approve the yearly risk management report, Converium’s risk assessment catalogue and action plans.1,
§	Review, annually, the ALM approach and model used.8
§	Review the Converium’s overall assessment conducted by rating agencies.8
§	Gaining an independent understanding of Converium’s involvement in complex and/or unusual transactions with a major impact upon its financial, market position or its position towards regulatory bodies.

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2.4	Audit Committee
2.4.1	The Audit Committee shall consist of any number of members of the Board of Directors, as defined by the Board of Directors from time to time, but at least a minimum of three members. Only independent Directors are eligible to serve on the Audit Committee. In order to qualify as independent, a member may not accept any consulting, advisory or compensatory fee from the Company. In addition, an Audit Committee member may not be a person affiliated with the Company or any of its subsidiaries.
	A majority of the members has to be financially literate.1
2.4.2	The Audit Committee shall carry out the following functions and submit to the Board of Directors regular reports on its activities and findings:
2.4.2.1	Regarding Internal and External Auditors:

§	Recommend the appointment and dismissal of the External Auditors to the Board of Directors and overview the External Auditors.1
§	Determination and review of the scope and general extent of the internal and external audit.8
§	Determination and approval of audit fees.8
§	Review of the independence and objectivity of the external auditors, including the evaluation of their professional qualifications and performance.8
§	Review of the nature and extent of non-audit services provided by the external auditors.
§	Establish procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (b) confidential, anonymous submissions by employees of concerns regarding questionable accounting and auditing matters or information regarding violation of securities or any other applicable laws.1
§	Supervision and review of effectiveness of compliance policy, compliance procedures and compliance matters with material financial/reputational consequences.8
§	Approve any public disclosure in conjunction with Converium’s periodic disclosure of financial results or any other disclosure with for significant impact for Converium’s business.8
§	Cooperation with the internal and external auditors in order to identifying any possible deficiencies in the internal control mechanisms of Converium, such as review of the audit objectives, strategies and plans and the evaluation of the organization and effectiveness of the audit.8

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§ Discussion of the annual audit report with the external and internal auditors as well as with management.⁸

2.4.2.2 Regarding Financial Reporting:

§	Review of any financial statements and determine whether they are complete and consistent with the information known to the members of the Board of Directors and assess whether such statements reflect the appropriate accounting principles.
§	Approve quarterly and half-year results (except 4th quarter).3
§	Review of significant accounting and reporting issues and assess their impact upon Converium’s financial statements.
§	Converium’s year-end results and reserve policy and for the Company’s year-end results and dividend policy.5

2.4.2.3 Regarding Communication of Financial Results:

§	Being briefed on how the Company’s management is developing preliminary external announcements and interim financial information.
§	Assessing the fairness of such preliminary and interim statements on the basis of Converium’s applicable accounting principles.

3. Chairman and Vice-Chairman of the Board of Directors

3.1         Appointment

The Chairman and the Vice-Chairman are appointed by the Board of Directors.

3.2	Duties and Responsibilities
3.2.1	In addition to his function as a member of the Board of Directors, the powers and duties of the Chairman are in particular the following:
3.2.1.1	Organization and preparation of the meetings and resolutions of the shareholders as well as calling, organization and preparation of the meetings and the resolutions of the Board of Directors.
3.2.1.2	Presiding over the shareholders’ meetings as well as over the meetings of the Board of Directors.
3.2.1.3	Immediate information of the Board of Directors on all incidents, questions and developments of extraordinary importance for the Company and for Converium.
3.2.1.4	Appropriate information of the Board of Directors on reports, proposals, information and other communication received from the CEO.

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3.2.1.5	Ensuring the close cooperation between the Board of Directors and the Committees of the Board of Directors.
3.2.1.6	Representation of the overall interests of Converium towards the authorities, business organizations and other third parties, in conjunction with the CEO.
3.2.2	The Chairman is at any time entitled, but not obliged, to attend meetings of any Committee of the Board of Directors in an advisory function, and to inspect the files of the Committees of the Board of Directors.
3.2.3	The Vice-Chairman shall support the Chairman in his functions and may, in the absence of the Chairman or if otherwise deemed useful, temporarily assume the functions of the Chairman.
3.3	Urgent Resolutions

If the urgency of a matter does not allow the convening of a meeting of the Board of Directors in presence or by way of a telephone conference or a video conference, the resolutions listed in Section 1.3 may be taken by the Chairman or in the absence of the Chairman or if otherwise deemed useful, by the Vice-Chairman.

4. (deleted)⁵

5. Global Executive Committee (GEC)

5.1      Members⁶

The Global Executive Committee shall consist of the following members representing the Company and/or Converium:

• Chief Executive Officer (“CEO”),

• Head of Standard Property & Casualty Reinsurance (“Head of Standard P&C Reinsurance”)

• Head of the Specialty Lines Segment and the Life and Health Segment (“Head of [Specialty Lines and Head of Life & Health]”),

• Chief Risk Officer (“CRO”)⁸,

• Chief Financial Officer (“CFO”),

• Chief Operating Officer (“COO”)⁸, and

• General Counsel (“General Legal Counsel”)

who are appointed by the Board of Directors.

The CEO shall be the President (“President”) and each of the Members shall be an Executive Vice-President (“Executive Vice-President”).⁸

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5.2	Main Duties and Responsibilities
5.2.1	The Global Executive Committee is responsible for the management of the Company and Converium, in accordance with these Organizational By-laws, in particular it shall be confined by the powers and duties of the Board of Directors, the Committees of the Board of Directors, the Chairman and the Vice-Chairman, the Business Segments and the Corporate Center.4, 5
5.2.2	The following shall be the main duties and responsibilities of the members of the GEC with respect to the Company and/or Converium as the case may be:
5.2.2.1	Chief Executive Officer 5

§	Responsibility for the overall management
§	CEO Office
§	Global Human Resources & Succession Planning
§	Corporate Communication
§	Corporate Development
§	Strategic planning of reinsurance business including market cycle management

5.2.2.2 Head of Standard Property & Casualty Reinsurance

§	Responsibility for all business generated in the assigned lines, including responsibility for profit and loss and operational cash flows for the respective lines of business,
§	Responsibility for the Business Segment income including reserves set in accordance with Converium’s reserve policy and operational cash flows of the assigned Business Segment
§	(deleted)8
§	(deleted)8
§	Responsibility for assigned clients
§	Responsibility for statutory and regulatory issues concerning any assigned legal entities

5.2.2.3 Head Specialty Lines and Life & Health

§	Responsibilities for all business generated in the Specialty Lines Segment and the Life & Health Segment, including responsibility for profit and loss and operational cash flows for the respective lines of business
§	Responsibility for the Segment income including reserves set in accordance with Converium’s reserve policy and operational cash flows of the assigned Business Segment

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§	(deleted)8
§	(deleted)8
§	(deleted)8
§	Responsibility for assigned clients
§	Responsibility for statutory and regulatory issues concerning any assigned legal entities8
§	(deleted)8
§	(deleted)8

5.2.2.4 Chief Risk Officer⁵

§	Responsibility for all actuarial support and services functions for Converium’s life and non-life business; and the tasks of Chief or Appointed Actuary where appropriate, including responsibility for the following
§	Pricing
§	Reserving
§	Risk Modeling/Asset Liability Management (ALM)
§	Risk Management
§	Capital Allocation
§	Planning, budgeting and execution of global retention management strategy including retrocessions and Global Risk Pooling

5.2.2.5 Chief Financial Officer

§	Financial Controlling
§	Financial Accounting, incl. Consolidation
§	(deleted)8
§	Investment & Treasury
§	(deleted)8
§	Tax
§	Investor Relations
§	Responsibility regarding any reporting issues concerning the Corporate Center9

5.2.2.6 Chief Operating Officer⁸

§	Technical Reinsurance Accounting9
§	Information Technology (IT)
§	Claims handling management and technical cedent claims and underwriting audits9

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§	(deleted) 9
§	Run-off and commutations and related cedent audits9
§	Sarbanes Oxley compliance and internal control issue management and coordination9
§	Process management9
§	(deleted)9

5.2.2.7 General Legal Counsel

§	Board of Directors and Company Secretary
§	GEC legal affairs
§	Corporate Governance and Compliance8
§	General and Corporate Legal
§	Regulatory matters
§	Share Register
§	Transactional Legal & Contracts
§	Responsibility for statutory and regulatory issues concerning any assigned legal entities6

5.2.3	In case that any of the above duties have to be carried out at a location which is different from the one where the Executive Vice-President is residing, the Executive Vice-President may delegate any of his duties stipulated above (except for the responsibility for the legal entity) to any person present at such other location (e.g. in underwriting matters). In this case the responsible Head of the Business Segment remains, however, responsible for any decisions taken in respect of such Business Segment.6
5.2.4	Subject to the powers and authorities as defined in these Organizational By-Laws the Global Executive Committee may change any of these duties and responsibilities as shall become necessary from time to time.
5.3	Approvals and Decisions

The following transactions and actions require the final approval of the Global Executive Committee in order to become effective:

5.3.1 Strategic Planning and Business Development

a)	Strategic planning submitted by the Business Segments, the CRO, CFO and the COO and submission of the strategic planning as well as Converium’s overall global strategy to the Board of Directors for approval.6, 8
b)	Portfolio transfer or establishment of new lines of business or discontinuation of existing lines of business not subject to the approval of the Board of Directors as per paragraph 1.3.3.

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c)	Geographical expansion into new regions, withdrawal from regions.
d)	Opening and closing of branch offices and representative offices.

5.3.2 Underwriting

a) Underwriting guidelines submitted by the Heads of the Business Segments. ⁶

5.3.3 Pricing and Reserving

a)	Pricing guidelines, methodologies and profitability thresholds to be applied in pricing as submitted by the CRO.8
b)	Risk measures, safety level and the corresponding Risk Based Capital allocation according to the risk model submitted by the CRO.8
c)	Reserving guidelines, methodologies and reporting standards to be applied as submitted by the CRO.8

5.3.4 Finance

a)	Other than in connection with reinsurance arrangements of any type, taking up loans and entering into similar transactions exceeding the amount of USD2.5 millions but not more than USD10 millions per transaction or series of transactions.
b)	Other than in connection with reinsurance arrangements of any type, granting loans, guarantees and entering into similar transactions exceeding the amount of USD2.5 millions but not USD10 millions per transaction or series of transactions.
c)	Expenses and capital expenditures beyond the approved budget exceeding the amount of USD2.5 millions but not USD10 millions per transaction or series of transactions.
d)	Change of the accounting policies or principles (other than with respect to changes which are within the competence of the Board of Directors).
e)	External providers for asset management services, and mandates to external asset managers to manage assets on behalf of Converium out of the list of providers approved by the Board of Directors.
f)	Appointment and dismissal of main banks of Converium as per the list of banks approved by the Board of Directors.
g)	Acquisition or disposal of direct alternative investments within the approved strategic asset allocation. Alternative investments include private equity and hedge funds, as well as cat bonds, commodities and equity tranches of collateralized bond portfolios.
h)	Securities lending and any confirmation thereof, which shall be performed at least once a year, as per the approved strategic asset allocation.
i)	Review of statutory financial accounts of the main legal entities of Converium.

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5.3.5 Business Organization

a) Approval of the organizational structures of the Business Segments as well as the offices led by the CEO, CRO, CFO, COO and the General Legal Counsel.^{6, 8}

5.3.6 Risk Retention

a)	Strategy and budget for the global retention management including retrocessions and Global Risk Pooling.
b)	Issuing or guaranteeing public bonds in connection with reinsurance arrangements of any type, whether or not listed on a stock exchange, through a guarantee, keep well arrangement or similar arrangement.

5.3.7 Human Resources

a)	Appointment of or prior authorization of appointment of any corporate function required by legal and/or regulatory requirements, such as corporate actuary, chief financial, risk or compliance officers.
b)	Global and Segment (incl. Corporate Center) human resources strategy, including for the Services Layer and the Business Support Layer.
c)	Global promotion policy.
d)	Principles of and budget for global training and development programs.

5.3.8 Marketing and Communication Strategy

a) Converium’s Investor Relations (IR) and its marketing and communication strategies.

5.3.9 Legal and Governance

a)	Long-term lease, leasing, consultant, co-operation and agency agreements exceeding the amount of USD10 millions per transaction or series of transactions.
b)	Entering into law-suits and settlements (a) if the case involved is within the ordinary course of the reinsurance business and the amount involved is more than USD2.5 millions per case or (b) if the case involved is outside the ordinary course of the reinsurance business and the amount involved is not more than USD10 millions per case (in each case other than with respect to cases which are likely to have a major impact on the reputation of Converium which are within the competence of the Board of Directors).
c)	Decision on the exercise of voting rights in shareholders’ meetings of the Converium Companies and joint ventures of Converium which are key subsidiaries or key joint ventures.

5.3.10 Global IT strategy

a) Converium’s global IT strategy as well as any key deliverables for its implementation.

5.3.11 Matters requiring approval by Board of Directors or its Committees

a) Preparation of any matters which require the approval of the Board of Directors or any of the Committees of the Board of Directors in accordance

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with Converium’s Organizational By-laws (such as quarterly, semi-annual and annual financial accounts, budget, investment, compensation matters and succession plans etc.).

5.4 Meetings

5.4.1	Meetings of the Global Executive Committee shall be chaired by the CEO, in his absence by any other member of the Global Executive Committee appointed by the CEO.8 The Global Executive Committee shall meet monthly or more frequently if and when the need arises or if a member thereof so requests. Meetings of the Global Executive Committee may also be held by way of a telephone conference or a video conference.
5.4.2	The Global Executive Committee5 may decide to invite other persons, from time to time or on a regular basis, not being regular members of the Global Executive Committee, to attend meetings of the Global Executive Committee and to be involved in any project work of the Global Executive Committee.4
5.5	Quorum, Voting, Abstention from Voting, Minutes, Reporting
5.5.1	As far as these Organizational By-laws do not provide otherwise, the Global Executive Committee constitutes a quorum if the majority of its members is present and resolutions are by simple majority of votes cast, the member presiding over the meeting having a casting vote.5
5.5.2	In the event of a vote on matters liable to give rise to a conflict of interest, the member involved in such conflict shall abstain from any discussions and from voting on the subject matter giving raise to such conflict and abstain from any discussions if personally involved in the subject matter.
5.5.3	Resolutions may be adopted by way of circular letter, including telefax and e-mail if the sender can be identified as the relevant member of the Global Executive Committee. Each member of the Global Executive Committee may, however, request as soon as possible from the receipt of the respective motion that an item be discussed and a resolution thereon be taken at a meeting of the Global Executive Committee. Circular resolutions are passed by simple majority of all votes of the Global Executive Committee.
5.5.4	Absent members of the Global Executive Committee may not be represented.
5.5.5	The secretary appointed by the Global Executive Committee shall keep the minutes of the meetings of the Global Executive Committee.
5.5.6	The Global Executive Committee reports on a regular basis to the Board of Directors.
5.5.7	(deleted)5

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6.           Chief Executive Officer (CEO)

6.1           Main Duties and Responsibilities

6.1.1	The CEO is responsible for the management of the Company and Converium, in accordance with these Organizational By-laws, in particular she shall be confined by the powers and duties of the Board of Directors, the Committees of the Board of Directors, the Chairman and the Vice-Chairman5, the Global Executive Committee, the Business Segments and the Corporate Center.4
6.1.2	The management responsibilities of the CEO include, in particular, the following items:
6.1.2.1	Conducting and management of the entire operational activities of the Company and of Converium and imposition of the measures which the organization of the Company and the Converium Companies require.
6.1.2.2	Execution of the resolutions taken by the Board of Directors and by the Global Executive Committee.
6.1.2.3	Issuance of the necessary instructions to and supervision of the Business Segments, the members of the management and the other employees.
6.1.2.4	Organization of and presiding at the meetings of the Global Executive Committee.
6.1.2.5	Representation of the overall interests of Converium towards the authorities, business organizations and other third parties, in conjunction with the Chairman.
6.1.2.6	Ensure establishment of6 a Disclosure Committee with responsibility for considering the materiality of information and determining disclosure obligations on a timely basis. The Disclosure Committee reports to the Audit Committee. It creates a charter that defines its purpose, role, responsibilities and authority. This charter has to be approved by the Audit Committee.5
6.1.2.7	Representation of Converium towards employees and their organizations as well as the pension funds.
6.1.2.8	Regular reporting to5 the Board of Directors and immediate information of5the Board of Directors of all incidents, questions and developments of extraordinary importance for the Company and for Converium.4
6.1.2.9	Quarterly submission to the Board of Directors of an appropriate reporting package including consolidated balance sheets and profit and loss accounts.
6.1.2.10	Submission to the Board of Directors of a yearly Converium business plan and a yearly Converium budget for the upcoming year by the end of the fourth quarter of each business year.
6.1.2.11	Preparation and continuous control of the budgets as compared to the actual figures.
6.1.2.12	Submission to5 the Board of Directors of proposals regarding the objectives and the principles of Converium’s human resources policy, which include, but are not limited to, strategies on salaries and incentives, employee participation, training and internal communication and personnel planning.4

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6.1.2.13	Submission to5 the Board of Directors of proposals regarding the long-term policy and strategy with regard to management, development and organizational structure of the Company and of Converium.4
6.1.2.14	Informing the Global Executive Committee5 and the Board of Directors without delay of any irregularities or inadequacies concerning the management of Converium or individual members thereof.
6.1.2.15	Submission of proposals to5 the Board of Directors or the Global Executive Committee concerning items, which are within their duties and responsibilities or subject to their approval or decision as provided for in these Organizational By-laws.4
6.1.2.16	Sign the documents to be filed with the SEC (i.e.20F) together with the CFO.6

6.2      Approvals and Decisions

The following transactions and actions require the final approval of the CEO in order to become effective:

6.2.1	Other than in connection with reinsurance arrangements of any type, taking up loans and entering into similar transactions up to an amount of USD2.5 millions per transaction or series of transactions.
6.2.2	Other than in connection with reinsurance arrangements of any type, granting loans, guarantees and entering into similar transactions up to an amount of USD2.5 millions per transaction or series of transactions.
6.2.3	Expenses and capital expenditures beyond the approved budget exceeding the amount of USD1 million but not more than USD2.5 millions per transaction or series of transactions.
6.2.4	Long-term lease, leasing, consultant, co-operation and agency agreements exceeding the amount of USD1 million but not more than USD10 millions per transaction.
6.2.5	Entering into law-suits and settlements if the case involved is within the ordinary course of business and if the amount involved is more than USD1 million but not more than USD2.5millions per case (in each case other than with respect to cases which are likely to have a major impact on the reputation of Converium which are within the competence of the Board of Directors).
6.2.6	Appointment of any employee with a base salary in excess of USD350,000 per year.
6.2.7	Taking of all necessary action in view of the ad hoc publicity requirements vis-à-vis the SWX Swiss Exchange or any other relevant stock exchange.
6.2.8	Appointment and dismissal of the members of the board of directors (or any equivalent administrative and/or supervisory bodies) of the Converium Companies provided such appointment or dismissal is required by any supervisory law or order2, or the members of the board of directors of the strategic participations as well as the heads of the Corporate Center (other than the members of the Global Executive Committee and the Head of Internal Audit).

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6.2.9	Decision on the exercise of voting rights in shareholders’ meetings of the Converium Companies and joint ventures of Converium other than key subsidiaries and joint ventures.
6.2.10	Appointments and dismissals or promotions of any of the GEC members’ direct reporting management staff.

6.3      Reporting, Delegation

6.3.1	The CEO reports on a regular basis to5 the Board of Directors, in accordance with the instructions issued by the Board of Directors.4
6.3.2	Unless provided for differently in these Organizational By-laws, the CEO shall submit reports, proposals, information and other communication addressed to the Board of Directors to the Chairman and the Vice-Chairman.5
6.3.3	The CEO may delegate some of its powers and duties set forth herein, or assign the preparation and the implementation of any of its obligations, to the management of Converium, or to any member thereof, or to any other subordinates. In such event, the CEO shall provide for adequate instructions, supervision, reporting and controlling of those persons.

7.    Business Segments

7.1   Organization

7.1.1 The business activities of Converium shall be organized in three global Business Segments consisting of

a)	Standard Property & Casualty Reinsurance
b)	Specialty Lines
c)	Life & Health Reinsurance
Additionally, the organization shall comprise the Corporate Center (cf. para. 8), which shall provide services to Converium and the Company.

7.1.2 The Business Segments shall be supported in their activities by the Business Support Layer which shall comprise the areas assigned to the CEO, CFO, CRO, COO and the General Legal Counsel.

7.2     Duties and Responsibilities

7.2.1 The management responsibility for the respective functions of the Business Support Layer shall be with the respective GEC member, i.e. the CEO, the CFO, the CRO, the COO and the General Legal Counsel to whom such function is allocated.^{6, 8}

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7.2.2	The Heads of the Business Segments are responsible for the management of the assigned Business Segment and/or assigned legal entity, in accordance with these Organizational By-laws, in particular they shall be confined by the powers and duties of the Board of Directors, the Committees of the Board of Directors, the Chairman and the Vice-Chairman5, the Global Executive Committee, the CEO and the Business Support Layer.4, 6
7.2.3	The Heads of the Business Segments establish a process in order to ensure that in all legal entities and markets consistent underwriting principles for all lines of business are applied and business is transacted in a manner commensurate with Converium’s overall interests.5, 6
7.2.4	Subject to the instructions issued from time to time by the CEO, the Heads of the Business Segments, as well as the CFO, the CRO, the COO and the General Legal Counsel, as the case may be, have the following main duties, responsibilities and competencies with respect to their assigned Business Segment and/or the assigned areas of responsibility and/or assigned legal entity:4, 6, 8
7.2.4.1	Provide strategic guidance and management to and execute Converium’s strategy in the assigned Business Segment.4
7.2.4.2	Responsibility for the assigned Business Segment’s financial results, the segment income, including reserves set in accordance with Converium’s reserve policy and operational cash flows.
7.2.4.3	Building a diversified and balanced portfolio of risks in the assigned geographical area of responsibility.
7.2.4.4	Ensure availability and prudent management of all necessary financial, technical, human and other resources for the assigned area of responsibility.
7.2.4.5	Ensure availability and application of all necessary underwriting guidelines, standards and principles as well as any other relevant regulations and guidelines.
7.2.4.6	Ensure application of all relevant pricing and reserving guidelines, standards and principles.
7.2.4.7	Preparation of the strategic planning and submission of the strategic planning to the Global Executive Committee for review.
7.2.4.8	Appointments and dismissals or promotions of any staff for the assigned Business Segment, unless reserved to any other corporate body of Converium.
7.2.4.9	Represent any assigned Converium Company in respect of all local statutory matters such as regulatory, tax, corporate legal and administrative matters and managing all administrative matters of any assigned Converium Company, provided such function is not reserved to any other corporate body by law or otherwise.
7.2.4.10	Expenses and capital expenditures beyond the approved budget of the respective Business Segment up to an amount of USD1 million per transaction or series of transactions.
7.2.4.11	Long-term lease, leasing, consultant, co-operation and agency agreements up to an amount of USD1 million per transaction or series of transactions.

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7.2.4.12 Upon prior approval by the General Legal Counsel, entering into law-suits and settlements if the case involved is within the ordinary course of business and if the amount involved is not more than USD1 million per case (in each case other than with respect to cases which are likely to have a major impact on the reputation of Converium which are within the competence of the Board of Directors).

7.3      Reporting

The Heads of the Business Segments, the CRO, the CFO, the COO and the General Legal Counsel report on a regular basis to the CEO⁵ in accordance with the instructions issued by the CEO.^{5, 6, 8}

7.4      Management Principles (Structures)

Each Business Segment and for the Corporate Center the offices led by the CEO, the CRO, the CFO, the COO and the General Legal Counsel shall define their management structure, to be approved by the Global Executive Committee, based upon Converium’s organizational principles, and Converium’s business and customer strategy as well as any other guiding management and corporate governance principles.^{6, 8}

8.      Corporate Center

8.1      Organization

8.1.1	Converium’s Corporate Center shall comprise the following Functional Levels, which shall be responsible for the respective functions globally and which shall procure services to the Company and/or the Business Segments and/or any Converium Companies:
8.1.1.1	Offices of the members of the Global Executive Committee
8.1.1.2	Global Human Resources
8.1.1.3	Corporate Communication and Investor Relations
8.1.1.4	Corporate Development
8.1.1.5	Global Risk Management
8.1.1.6	Global Consolidation
8.1.1.7	Global Investment and Treasury
8.1.1.8	Global Tax
8.1.1.9	General Legal Counsel, incl. Share Register and Compliance
8.1.1.10	Internal Audit (which, however, has a direct reporting line to the Audit Committee)
8.1.1.11	Global Claims Services
8.1.1.12	Technical Accounting

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8.1.1.13	Any other global function designated by the Global Executive Committee from time to time.
8.1.2	The Corporate Center shall be under the responsibility of the CEO.
8.1.3	The heads of the Functional Levels, other than the members of the Global Executive Committee and the Head of Internal Audit shall be appointed by the CEO5, upon proposal by the responsible member of the Global Executive Committee to whom such Functional Level is allocated. The Head of Internal Audit shall be appointed by the Nomination Committee and any member of the Global Executive Committee by the Board of Directors.4

8.2       Duties and Responsibilities

The heads of the Functional Levels shall have the duties and responsibilities defined by the CEO⁵ or the responsible GEC members to whom such Functional Level is allocated, from time to time, subject to the provisions of these By-laws.⁴

8.3       Reporting

The heads of the Functional Levels report on a regular basis to the CEO⁵ or the designated member of the Global Executive Committee to whom such Functional Level is allocated, in accordance with the instructions issued by the CEO⁵ or the respective member of the Global Executive Committee.

9.       Internal Audit

9.1       Organization

The Head of Internal Audit shall be appointed by the Nomination Committee.

9.2       Duties and Responsibilities

Internal Audit shall have the duties and responsibilities defined by the Audit Committee from time to time.

9.3       Reporting

The Head of Internal Audit report on a regular basis to the Audit Committee, in accordance with the instructions issued by the Audit Committee.

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10.      Adoption and Amendment

These Organizational By-laws were adopted by the Board of Directors on 16 November 2001. They include revisions adopted by the Board of Directors on October 25, 2002, February 5, 2003, September 23, 2003, February 13, 2004, September 7, 2004, April 11, 2005⁵ September 1, 2005⁶, April 11, 2006⁷, June 14, 2006⁸ and March 1, 2007⁹.

Amendments and additions to these Organizational By-laws must be resolved upon by the Board of Directors.

Every three years, or if necessary earlier, these Organizational By-laws are to be reviewed and, if necessary, revised by the Board of Directors.

Zug, March 1, 2007

/s/ Markus Dennler	/s/ Christian Felderer
Markus Dennler	Christian Felderer
[Chairman]	[Secretary]

1	Amendments as per BOD meeting dd. Oct. 25, 2002
2	Amendments as per BOD meeting dd. Feb. 5, 2003
3	Amendment as per BOD meeting dd. February 13, 2004 (previously responsibility of Finance Committee)
4	Amendments as per BOD meeting dd. September 7, 2004
5	Amendments as per BOD meeting dd. April 11, 2005
6	Amendments as per BOD meeting dd. September 1, 2005
7	Amendments as per BOD meeting dd. April 11, 2006 (Structure and responsibilities of the Committees completely revised)
8	Amendments as per BOD meeting dd. June 14, 2006
9	Amendments as per BOD meeting dd. March 1, 2007

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EX-1.3

Exhibit 1.3

Articles of Incorporation of
Converium Holding AG

with registered office in Zurich

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I. Name, Registered Office, Duration and Purpose

Art. 1 – Name, Registered Office and Duration

Under the name

Converium Holding AG

Converium Holding SA

Converium Holding Ltd.

there exists a corporation with registered office in Zurich. The duration of the Company is unlimited.

Art. 2 – Purpose

The main purpose of the Company is to acquire, hold and to manage participations. Furthermore, it may, in Switzerland and abroad, carry out finance and management transactions and render related services of any kind and set up branches and subsidiaries in Switzerland and abroad.

The Company may acquire, hold and sell real estate in Switzerland and abroad.

The Company may grant, sell and acquire licenses and intellectual property rights.

The Company may do any other business and take any steps that seem to be suitable to support the purpose of the Company or that are in a context with the purpose of the Company.

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II. Share Capital

Art. 3 – Share Capital

The share capital of the Company amounts to CHF 733’447’310 and is divided into 146’689’462 registered shares with a par value of CHF 5 each. Each share is fully paid up.

Art. 3a – Contingent Share Capital for Option Rights and/or Conversion Rights

The share capital will be increased by the issue up to 4’000’000 fully paid-up registered shares each of CHF 5 nominal value amounting to a maximum of CHF 20’000’000 by exercising option and/or conversion rights which were granted on a stand-alone basis or in connection with bond issues or other debt financing of the Company or any of its subsidiaries. The subscription right of the shareholders with respect to these shares is excluded.

The placing of the option and/or conversion rights may be made either by the Company or any of its subsidiaries or through one or more banks which subscribe for these rights as trustees. The Board of Directors is authorized to exclude the advance subscription right of the shareholders if the option and/or conversion rights are used in connection with the financing of a take-over of a business, parts of a business or participations. In this case the structure, the term, the amount of the bond issuer or other debt financing, if any, as well as the terms and conditions of the option and/or conversion rights are to be determined by the Board of Directors on the basis of the market conditions prevailing at the time of the issue of the rights. Option and/or conversion rights shall be exercisable for a maximum period of 10 years.

Art. 3b – Authorized Share Capital

The Board of Directors is authorized, on or before April 11, 2008, to increase the share capital by the issue up to a maximum of 4’000’000 fully paid-up registered shares each of CHF 5 nominal value amounting to a maximum of CHF 20’000’000. An increase in partial amounts is permitted. The date of issue of new shares, their issue price, the type of payment, the date of the entitlement to dividends and the details of a contribution in kind or an acquisition of assets, if any, will be determined by the Board of Directors.

The new shares are to be placed with the existing shareholders. The placing can be made through one or more banks, which subscribe for the shares as trustees. Furthermore, the Board of Directors is authorized to exclude the subscription rights of the shareholders and to allot them to third parties in case the new shares are used for a take-over of a business, parts of a business or participations or for the financing of such transactions or for the enlargement of the shareholder base in connection with the listing of shares on a stock exchange. Shares in respect of which subscription rights have been allotted, but which were not exercised,

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are at the disposal of the Board of Directors who shall use them in the interest of the Company. The increase by conversion of freely disposable capital surplus in accordance with Art. 652d of the Swiss Code of Obligations is permitted.

Art. 4 – Membership Rights, Book-entry Shares, Conversion

The share capital is neither represented by a global certificate nor by other certificates, individual shares or documented in any other form. The shareholders are not entitled to demand the issue of any share certificate.

The membership rights are transferred by way of assignment. The same shall apply to the establishment of a usufructuary. Such an assignment shall not be valid unless notified to the Company. If shares are kept in book-entry form by a bank on behalf of a shareholder, such shares may be transferred through such bank only and may only be pledged to such bank by way of a written pledge agreement. A notification of the Company is not required.

Registered Shares may be converted into bearer shares and bearer shares may be converted into registered shares at any time by an amendment of the Articles of Incorporation resolved upon by the General Meeting of Shareholders. Furthermore, shares may be combined into shares of a greater nominal value or divided into shares of a smaller nominal value by an amendment of the Articles of Incorporation.

Art. 5 – Share Register

The Company shall maintain a share register showing the name, first name, residence, address and nationality (in case of legal entities the registered office) of the holders and usufructuaries of the shares. The Company will recognize shareholders and usufructuaries of shares only if they are registered in the share register. The Company accepts only one representative per share.

Upon request, acquirers of shares are registered in the share register as shareholders with the right to vote provided they declare explicitly to have acquired the shares in their own name and for their own account.

Persons not explicitly declaring themselves to be holding the shares in their own name and for their own account (“nominees”) are registered in the share register as shareholders with voting rights without further inquiry up to a maximum of 5% of the nominal share capital of the Company. Over this limit of 5% the Board of Directors is authorized to register nominees as shareholders with voting rights only if the respective nominee discloses the name, address and the shareholdings of the persons for their account he holds 0.5% or more of the nominal share capital of the Company. The Board of Directors may enter into agreements with such nominees with regard to disclosure requirements, the representation of such shares, and the exercise of the respective voting rights.

After having heard the party concerned, the Company may cancel entries in the share register in case these entries result from incorrect information of the acquirer. The acquirer must be informed immediately about the cancellation of the registration.

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III. Organization of the Company

Art. 6 – Corporate Bodies

The Corporate Bodies of the Company are:

A.	The General Meeting of Shareholders
B.	The Board of Directors
C.	The Auditors

A. The General Meeting of Shareholders

Art. 7 – Competencies

The General Meeting of Shareholders is the supreme body of the Company.

The following powers shall be vested exclusively to the General Meeting of Shareholders:

a)	to adopt and to amend the Articles of Incorporation;
b)	to elect and to dismiss the members of the Board of Directors and the auditors, as well as the additional auditors in accordance with this Article 20;
c)	to approve the annual report, the consolidated financial statements and the annual financial statements as well as to decide on the allocation of the balance sheet profit, in particular with regard to dividends and to sharing of profits by the directors;
d)	to discharge the members of the Board of Directors and the persons entrusted with the management;
e)	to pass resolutions concerning matters which by law or by the Articles of Incorporation are reserved to the authority of the General Meeting of Shareholders.

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Art. 8 – Ordinary and Extraordinary General Meetings of Shareholders

The ordinary General Meeting of Shareholders shall be held each year within six months after the close of the business year of the Company. It shall take place at the registered office of the Company or at any other place in Switzerland or abroad as determined by the corporate body convening the meeting.

Extraordinary General Meetings of Shareholders shall be convened if deemed necessary by the Board of Directors or the auditors, upon resolution of a General Meeting of Shareholders or upon written request by one or more shareholders, holding in the aggregate not less than one tenth of the share capital, to the Board of Directors specifying the items of the agenda and the motions.

Art. 9 – Convening of General Meetings of Shareholders

The General Meeting of Shareholders shall be convened by the Board of Directors or, if necessary, by the auditors.

The General Meeting of Shareholders shall be convened at least twenty days before the date of the meeting in accordance with Article 25 of the Articles of Incorporation.

The notice of a meeting shall state the place and time of the meeting, the items on the agenda and the motions of the Board of Directors and of the shareholders who requested the convening of a General Meeting of Shareholders. In case of elections the names of the nominated candidates shall be specified.

No resolution shall be passed at a General Meeting of Shareholders on matters for which no notice as aforesaid was given. This shall not apply to the resolution to convene an Extraordinary General Meeting of Shareholders and to initiate a special audit. Motions within the limits of the items on the agenda and negotiations without passing a resolution do not require such an announcement.

Not later than twenty days before the Ordinary General Meeting of Shareholders the business report and the report of the auditors shall be made available for inspection by the shareholders at the registered office of the Company. This shall be announced in the invitation for the General Meeting of Shareholders.

Art. 10 – Agenda

One or more shareholders whose combined share holdings represent an aggregate nominal amount of at least CHF 1 million may demand that an item be included in the agenda of a General Meeting of Shareholders. Such a demand must be made in writing not less than 45 days before the meeting and shall specify the items and the motions of such a shareholder.

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Art. 11 – Chairperson, Scrutineers

The President of the Board of Directors, or the Vice-President or any other member of the Board of Directors takes the chair in General Meetings of Shareholders. In case of absence of any member of the Board of Directors the General Meeting of Shareholders elects the Chairperson.

The Chairperson shall appoint the scrutineers and the secretary who do not need not be shareholders of the Company.

Art. 12 – Voting Rights, Rules of Procedure and Representation

In the General Meeting of Shareholders each share entitles to one vote. Only the shareholders registered in the share register as shareholders with voting rights on a cut-off day fixed by the Board of Directors before the General Meeting of Shareholders are authorized to take part in the General Meeting of Shareholders and to vote. The shares are not dividable.

The Board of Directors shall provide for the rules regarding the participation and the representation at the General Meeting of Shareholders as well as the determination of voting rights.

A shareholder may be represented by his legal representative, another person who need not be a shareholder of the Company, authorized in writing, by corporate bodies, by independent proxies or by depositaries.

Art. 13 – Resolutions

Unless provided for differently in the law or in the Articles of Incorporation, the General Meeting of Shareholders passes resolutions and holds elections with the majority of votes cast, excluding abstentions and void and blank votes. If no election has taken place at the first ballot and if there is more than one candidate, the Chairperson shall order a second ballot in which the candidate with the most votes shall be elected.

If the capability exists to vote on resolutions and elections electronically at the General Meeting of Shareholders it shall be done so. Otherwise, resolutions and elections shall be voted on a show of hands, unless the Chairperson orders or the General Meeting of Shareholders, by request of shareholders representing in the aggregate a share capital of at least CHF 1 million, resolves on a secret ballot.

The Chairperson may at any time order to repeat an election or a resolution taken on a show of hands with a written ballot, if he has doubts on the results of the vote or the resolution. In this case, the preceding election or resolution taken on a show of hands is deemed not to have occurred.

The approval of both at least two thirds of votes represented and the absolute majority of the nominal values of the shares represented is required for resolutions of the General Meeting of Shareholders on:

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1.	an alteration of the purpose of the Company;
2.	the creation of super-voting shares;
3.	restrictions on the transfer of registered shares and the removal of such restrictions as well as restrictions to vote and the removal of such restrictions;
4.	an authorized or contingent increase of share capital;
5.	an increase of share capital by conversion of capital surplus, by contribution in kind or for the purpose of an acquisition of assets and the grant of special rights;
6.	a restriction or exclusion of the subscription right or advance subscription right;
7.	a change of the Company’s registered office;
8.	the dissolution of the Company without liquidation.

Art. 14 – Minutes

The Board of Directors is responsible for keeping the minutes concerning the represented shares in the General Meeting of Shareholders as well as any motions, statements to the minutes and resolutions of the shareholders. The minutes shall be signed by the Chairperson and the secretary.

B. The Board of Directors

Art. 15 – Constitution, Term of Office

The Board of Directors shall consist of a minimum of four and a maximum of nine members.

The Board of Directors shall constitute itself. The Board of Directors shall appoint its President, one or two Vice-Presidents, if any, and the secretary who does not need to be a member of the Board of Directors.

The Board of Directors shall determine the remuneration of its members.

The members of the Board of Directors shall be elected for a term of office of not more than three years; they are re-eligible. A year in the meaning of this provision is the period between two Ordinary General Meetings of Shareholders. In case of an election of a substitute, the new member of the Board of Directors finishes the term of office of its predecessor.

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Art. 16 – Powers of the Board of Directors

The Board of Directors is responsible for the ultimate direction of the Company. The Board of Directors represents the Company and manages the affairs of the Company that are not allotted to any other corporate body by law, by the Articles of Incorporation or by regulations.

The Board of Directors has in particular the following non-transferable and inalienable duties:

1.	the ultimate direction of the Company and the issuance of the necessary instructions;
2.	the determination of the organization;
3.	the determination of the principles of accounting, financial control and financial planning;
4.	the appointment and removal of the persons entrusted with the management and the representation of the Company;
5.	the ultimate supervision of the persons entrusted with the management of the Company, especially in view of their compliance with the law, the Articles of Incorporation, regulations and instructions;
6.	the preparation of the business report and the General Meetings of Shareholders and the implementation of its resolutions;
7.	the notification of the judge in case of over-indebtedness;
8.	the issue of option rights and conversion rights in respect of shares of the Company, the increase of the share capital out of authorized capital as well as resolutions concerning capital increases and respective amendments to the Articles of Incorporation;
9.	the examination of the professional skills of qualified auditors.

For the rest, the Board of Directors may, by adoption of Organizational By-laws, delegate the management of the Company within the limits of the law to an individual member of the Board of Directors, to a group of members of the Board of Directors or to a third party.

Art. 17 Signing Authority

The Board of Directors determines those of its members as well as those third parties who shall have signing authority for the Company. The Board of Directors shall further determine the manner in which such persons may sign on behalf of the Company.

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Art. 18 – Convocation of Meetings

The President or any of the Vice-Presidents of the Board of Directors shall call meetings of the Board as often as circumstances call for or if a member so requires and specifies the reasons. The convening shall take place within two weeks. The convocation shall be made not less than ten days before the meeting is held in writing (or by telefax or e-mail if the sender can be identified as the relevant member of the Board of Directors) and by announcing the agenda.

Art. 19 – Resolutions

In order to pass resolutions, the majority of the members of the Board of Directors must be present. Telephone conferences and video conferences are permitted if the participants can be identified unequivocally and clearly. No quorum of present members shall be necessary for resolutions of the Board of Directors providing for the confirmation of capital increases or for the amendment of the Articles of Incorporation in connection with capital increases.

The resolutions and elections by the Board of Directors require a majority of the votes cast. The Chairperson shall have a casting vote.

Resolutions may be adopted by way of circular letter, including telegram, telefax and e-mail (if the sender can be identified as the relevant member of the Board of Directors), provided that no member requests a verbal discussion. In case of circular resolutions, the absolute majority of all votes is required.

The negotiations and the resolutions of the Board of Directors shall be kept in the minutes, which shall be signed by the Chairperson and the secretary.

C. Auditors and Group Auditors

Art. 20 – Term, Powers and Duties

The auditors and the Group auditors shall be elected by the General Meeting of Shareholders for a term of one year; they shall have the powers and duties vested in them by law.

The General Meeting of Shareholders may elect one or more further auditors who shall carry out the reviews to be made in connection with increases of the share capital (Art. 652f, Art. 653f and Art. 653i of the Swiss Code of Obligations).

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IV. Business Year, Annual Financial Statement, Consolidated Financial Statement and Allocation of Profit

Art. 21 – Business Year

The Board of Directors shall determine the business year.

Art. 22 – Annual Financial Statement, Consolidated Financial Statement

The annual financial statement, consisting of the profit and loss statement, balance sheet and annex, and the consolidated financial statement shall be established in accordance with the provisions of the Swiss Code of Obligations, particularly Art. 662 et seq., and with generally accepted commercial principles and principles of the business segment.

Art. 23 – Allocation of Profit

Subject to the provisions on the allocation of profit provided for in the law, especially Art. 671 et seq. of the Swiss Code of Obligations, the General Meeting of Shareholders decides on the allocation of profit.

The General Meeting of Shareholders is authorized to create capital reserves other than the legally required reserves that shall be used to fulfill the Company’s purpose.

V. Dissolution and Liquidation

Art. 24

The General Meeting of Shareholders may at any time decide the dissolution and liquidation of the Company in accordance with the relevant provisions of the law and the Articles of Incorporation.

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VI. Communications

Art. 25

Notifications of the Company to shareholders and to third parties shall be made by one publication in the Swiss Official Gazette of Commerce. The Board of Directors may determine additional means of communication.

Other communications to shareholders can be made in writing if the Company knows the relevant addresses.

VII. Contributions in Kind

Art. 26

In connection with the capital increase of the Company dated September 24, 2001, and according to the contribution in kind agreement dated September 24, 2001, the Company assumes as a contribution in kind (a) 1,000,000 fully paid registered shares of Converium AG, Zurich, representing an aggregate value of CHF 12,000,000, and (b) 100 fully paid shares of Converium Holdings (North America) Inc, Delaware, U.S.A., representing an aggregate value of USD 1. In consideration for the contribution in kind, Zurich Financial Services, Zurich, c/o Zurich Insurance Company, Mythenquai 2, 8002 Zürich, shall receive 1,200,000 newly issued registered shares at a par value of CHF 10 each. The amount of the issue price exceeding the aggregate par value of the new shares of CHF 1.60 (corresponding to USD 1) shall be kept by the Company as capital surplus.

Art. 27

In connection with the capital increase of the Company dated September 24, 2001, the Company assumes as a contribution in kind a note, dated September 21, 2001, of Zurich Insurance Company, Mythenquai 2, 8002 Zurich, in the aggregate amount of CHF 900,000,000. In consideration for the contribution in kind, Zurich Financial Services, Mythenquai 2, 8002 Zurich, shall receive 38,790,000 newly issued registered shares at a par value of CHF 10. The amount of the issue price exceeding the aggregate par value of the new shares of CHF 512,100,000 shall be kept by the Company as capital surplus. The Company intends to contribute this note to Converium AG in the course of an increase of the share capital of Converium AG as a contribution in kind against issue of 39,000,000 new registered shares in Converium AG at a par value of CHF 10 each at a maximum issue price of CHF 900,000,000.

Zurich, May 10, 2007

12/12

EX-4.47

Exhibit 4.47

Execution Copy

STOCK PURCHASE AGREEMENT

by and between

NATIONAL INDEMNITY COMPANY

and

CONVERIUM AG

dated as of October 16, 2006

TABLE OF CONTENTS

	Page
ARTICLE I. DEFINITIONS		2
1.1. Definitions		2
ARTICLE II. PURCHASE AND SALE OF THE SHARES		11
2.1. Purchase and Sale of the Shares		11
2.2. The Closing		11
2.3. Deliveries at the Closing		11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER		12
3.1. Organization and Qualification of the Seller		12
3.2. Authorization, Validity and Enforceability		12
3.3. No Conflicts		12
3.4. Consents and Approvals		13
3.5. Organization and Qualification of the Company and its Subsidiaries		13
3.6. Capitalization of Company		13
3.7. Capitalization of CRNA and CINA		14
3.8. Title to Shares		14
3.9. Financial Statements		14
3.10. Absence of Changes		15
3.11. Legal Proceedings		15
3.12. Compliance with Laws; Permits		15
3.13. Contracts		15
3.14. Property and Assets		17
3.15. Intellectual Property		17
3.16. Employee Benefit Plans		17
3.17. Employee Relations		18
3.18. Insurance Policies		18
3.19. Tax Matters		18
3.20. Bank Accounts		18
3.21. Material Services Provided by Seller		19
3.22. No Brokers		19
3.23. No Other Representations or Warranties		19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER		19
4.1. Organization of the Purchaser		19
4.2. Authorization, Validity and Enforceability		20
4.3. No Conflicts		20
4.4. Purchaser Consents and Approvals		20
4.5. Investment Intent		20
4.6. Financing		21
4.7. No Brokers		21
4.8. No Knowledge of Misrepresentations or Omissions		21

	Page
4.9. No Other Representations or Warranties		21
ARTICLE V. COVENANTS		21
5.1. Conduct of Business		21
5.2. Access; Confidentiality		23
5.3. Intercompany Accounts; Intercompany Agreements		24
5.4. Cooperation and Reasonable Best Efforts		24
5.5. Director and Officer Indemnification		24
5.6. Consents and Approvals		25
5.7. Press Releases		26
5.8. Records Retention, Accounting and Tax Support		26
5.9. Tax Matters		26
5.10. Transfer Taxes		27
5.11. No Section 338 Election		27
5.12. Employee Benefits Matters		27
5.13. Guaranteed Reinsurance Contracts		28
5.14. Litigation Cooperation		29
5.15. Rights to the Converium Name and Converium Marks		32
5.16. Proprietary and Third Party Software		33
ARTICLE VI. CONDITIONS TO CLOSING		34
6.1. Conditions to the Obligation of the Purchaser to Close		34
6.2. Conditions to the Obligation of the Seller to Close		35
6.3. Waiver of Closing Conditions		36
6.4. Frustration of Closing Conditions		36
ARTICLE VII. INDEMNIFICATION		37
7.1. No Survival of Representations and Warranties		37
7.2. Indemnification of the Purchaser		37
7.3. Indemnification of the Seller		37
7.4. Matters Involving Third Parties Other Than Tax Claims		37
7.5. Matters Involving Tax Claims		38
7.6. Matters Not Involving Third-Party Claims		39
7.7. Collateral Source Recoveries		39
7.8. Cooperation		39
7.9. Termination of Indemnification		39
7.10. Exclusive Remedy		39
ARTICLE VIII. TERMINATION		40
8.1. Termination of Agreement		40
8.2. Effect of Termination		40
ARTICLE IX. MISCELLANEOUS		41
9.1. Notices		41
9.2. Fees and Expenses		42
9.3. Entire Agreement; Waivers and Amendments		42
9.4. Assignment; Binding Effect		42

	Page
9.5. No Third-Party Beneficiaries		42
9.6. Governing Law		42
9.7. Consent to Jurisdiction		42
9.8. Waiver of Jury Trial and Pre-Answer Security		43
9.9. Interpretation		43
9.10. Variation in Pronouns		44
9.11. Captions		44
9.12. Counterparts		44
9.13. Extension; Waiver		44
9.14. No Representation Regarding Reserves		44

SCHEDULE
NUMBER	SCHEDULE NAME
1.1(a)	ReCap Employees Obligations
1.1(b)	Restructuring Transactions
3.3	No Conflicts
3.4	Consents and Approvals
3.5	Organization and Qualification of the Company and its Subsidiaries
3.6	Capitalization of Company
3.7	Capitalization of CRNA and CINA
3.10	Absence of Changes
3.11	Legal Proceedings
3.12	Compliance with Laws; Permits
3.13(a)	Contracts
3.13(b)	Guaranteed Reinsurance Contracts
3.13(c)	Breaches, Violation or Defaults of Material Contracts
3.14	Property and Assets
3.16	Employee Benefit Plans
3.17	Employee Relations
3.18	Insurance Policies
3.19	Tax Matters
3.20	Bank Accounts
3.21	Material Services Provided by Seller
4.4	Purchaser Consents and Approvals
5.1	Conduct of Business
5.3	Intercompany Accounts; Affiliate Agreements
5.6	Consents and Approvals
5.16(a)	Proprietary Software
6.1(b)	Consents
6.1(h)	Permitted Commutations
6.2(b)	Consents

ANNEX A	Form of CRNA Transition Services Agreement
ANNEX B	Form of Transitional Trademark License Agreement
ANNEX C	Form of NICO Commutation Agreement
ANNEX D	Form of Quota Share Agreement
ANNEX E	Employee Payments Budget

STOCK PURCHASE AGREEMENT

               THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of October 16, 2006 by and between National Indemnity Company, a corporation organized under the laws of the State of Nebraska, United States of America (the “Purchaser” or “NICO”), and Converium AG, a corporation organized under the laws of Switzerland (the “Seller”).

RECITALS

               WHEREAS, the Seller owns 100 shares (the “Shares”) of the common stock, par value $0.01 per share, of Converium Holdings (North America) Inc., a corporation organized under the laws of the State of Delaware (the “Company”), which Shares constitute all of the outstanding capital stock of the Company; and

               WHEREAS, the Company owns 100 shares (the “CRNA Shares”) of the common stock, par value $35,000 per share, of Converium Reinsurance (North America) Inc., a corporation organized under the laws of the State of Connecticut (“CRNA”), which CRNA Shares constitute all of the outstanding capital stock of CRNA; and

               WHEREAS, CRNA owns 5,000 shares (the “CINA Shares”) of the common stock, par value $1,000 per share, of Converium Insurance (North America) Inc., a corporation organized under the laws of the State of New Jersey (“CINA”), which CINA Shares constitute all of the outstanding capital stock of CINA; and

               WHEREAS, CRNA has previously issued the Surplus Note (as defined below) to Converium Holding AG (the “Parent”); and

               WHEREAS, prior to, or contemporaneously with, the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements (as defined below), the Seller intends to complete the Restructuring Transactions (as defined below); and

               WHEREAS, it is the intention of the parties that prior to the consummation of the transactions contemplated by this Agreement, the Surplus Note will be assigned to the Company or, at the Purchaser’s direction, to any other Person (as defined below) designated by the Purchaser so long as such assignment to a Person other than the Company does not result in any Adverse Consequences (as defined below) to the Parent, the Seller or the Company (if such Adverse Consequences to the Company would have Adverse Consequences to the Parent or the Seller by operation of the indemnity for Pre-6/30 Taxes contemplated by Section 7.2(b) below or otherwise result in Adverse Consequences to the Seller).

               NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I.

DEFINITIONS

               1.1. Definitions. The following terms when used in this Agreement (including the Schedules and Exhibits hereto) shall have the following meanings:

               “Action” means any action, suit, threatened suit, litigation, threatened litigation, proceeding, investigation or inquiry (whether formal or informal, including by any Governmental Entity), claim, demand, arbitration demand or arbitration.

               “Adverse Consequences” has the meaning set forth in Section 7.2.

               “Affiliate” means with respect to any Person, any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. A Person will be deemed to control a Person if such Person possesses, directly or indirectly, 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.

               “Agribusiness IP Rights” means any and all intellectual property rights held by CRNA or CINA associated with the provision of crop production insurance, including any (i) patents and applications therefor, including continuations, divisionals, continuations-in-part, or reissues of patent applications and patents issuing thereon, inventions (whether patentable or unpatentable or reduced to practice), designs, formulae, algorithms, methods, techniques, know-how, technical data, programs, specifications, processes, improvements, drawings, technology; (ii) trade secrets and all other rights in or to confidential business or technical information; (iii) works of authorship, copyrights, copyright registrations and applications therefor and all other rights corresponding thereto; (iv) software, whether in source code or object code, databases and compilations, including any and all data and collections of data, whether machine readable or otherwise and (v) trademarks, trade names, service marks, service names, trade dress rights and similar design of origin and rights therein, and all goodwill symbolized thereby or associated therewith.

               “Agreement” has the meaning set forth in the first paragraph of this Agreement.

               “Ancillary Agreements” means the CRNA Transition Services, the NICO Commutation Agreement and the Transitional Trademark License Agreement.

               “Applicable Insurance Code(s)” means the insurance laws to which CRNA and CINA are subject, including the insurance laws of the States of Connecticut, New Jersey, California and Florida. In all cases, Applicable Insurance Code shall include the rules and regulations promulgated under any of the foregoing laws.

               “Applicable Insurance Department(s)” means the insurance regulatory agencies by which CRNA and CINA are subject to supervision, including the Connecticut Department of Insurance, the New Jersey Department of Insurance and Banking, the California Department of Insurance and the Florida Office of Insurance Regulation.

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               “Books and Records” has the meaning set forth in Section 5.8.

               “Budget” has the meaning set forth in Section 5.1(b)(xvi).

               “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in Omaha, Nebraska, or Zurich are required or authorized by law to be closed.

               “CHNA” means Converium Holdings (North America) Inc., a Delaware corporation.

               “CHNA Intercompany Loans” means the principal amount of the intercompany loans payable by CHNA to Converium AG or any of its Affiliates, plus accrued interest thereon.

               “CINA” means Converium Insurance (North America) Inc., a New Jersey corporation.

               “CINA Domiciliary Insurance Department” means the insurance department of the State of New Jersey.

               “CINA Shares” has the meaning ascribed to it in the third Recital of this Agreement.

               “Closing” has the meaning set forth in Section 2.2.

               “Closing Date” has the meaning set forth in Section 2.2.

               “Code” means the Internal Revenue Code of 1986, as amended.

               “Common Interest Matters” has the meaning set forth in Section 5.14(g).

               “Commutation” means, with respect to a Reinsurance Contract, the termination and mutual release of all past, present and future obligations and the estimation and payment of a final cash settlement of all obligations either as required by its terms or effected by mutual agreement of the parties thereto.

               “Commutation Payment” has the meaning set forth in Section 6.1(h).

               “Company” has the meaning set forth in the first Recital of this Agreement.

               “Company Claim” means any Action brought against the Company or any of its Subsidiaries relating to or arising from the conduct or operations of the Company or its Subsidiaries that occurred prior to the Closing Date.

               “Company Insurance Policies” has the meaning set forth in Section 3.18.

               “Company Materials” means (i) all previously prepared memoranda of law and all analyses and materials related to a Company Claim, (ii) all agreements, contracts and other memoranda, including preparatory materials, drafts and all oral and written communications

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pertaining to a Company Claim, and (iii) any documents or other information relating to a Company Claim that would otherwise be protected by any applicable privilege or work product protection from disclosure to third parties other than the parties hereto. For the avoidance of doubt, Company Materials shall not include any information relating to a party which is or becomes publicly available other than through a breach of this Agreement by the disclosing party.

               “Confidentiality Agreement” means the Confidentiality Agreement between the Parent and the Purchaser dated June 16, 2006.

               “Consents” has the meaning set forth in Section 3.4.

               “Contracts” means all written contracts, agreements, undertakings, indentures, notes, debentures, bonds, loans, instruments, leases, mortgages, commitments or binding arrangements.

               “Converium Name and Converium Marks” has the meaning set forth in Section 5.15(a).

               “Converium Third Party Claim” means any Action brought against the Seller relating to or arising from the conduct or operations of the Company or its Subsidiaries that occurred prior to the Closing Date.

               “CRNA” means Converium Reinsurance (North America) Inc., a corporation organized under the laws of the State of Connecticut.

               “CRNA Domiciliary Insurance Department” means the insurance department of the State of Connecticut.

               “CRNA Shares” has the meaning ascribed to it in the second Recital of this Agreement.

               “CRNA Transition Services Agreement” means the transition services agreement in the form attached hereto as Annex A pursuant to which Converium AG agrees to provide CRNA certain services on a transitional basis.

               “Director and Officer Indemnified Parties” has the meaning set forth in Section 5.5(a).

               “Debt” shall mean any liability in respect of borrowed money or guarantees of the foregoing, provided that Debt shall not include any Reinsurance Contracts.

               “Domiciliary Insurance Departments” means the CINA Domiciliary Insurance Department and the CRNA Domiciliary Insurance Department.

               “Employee” means each current full-time or part-time employee of the Company or any of its Subsidiaries, including any such employee who is on disability or leave of absence.

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               “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

               “ERISA Affiliate” means each entity that is, or has been, treated as a single employer with Seller, CRNA or CINA during the 5-year period preceding the date hereof for purposes of Code Section 414.

               “GAAP” means generally accepted accounting principles in the United States.

               “Governmental Entity” means any federal, state, local or foreign government, political subdivision, legislature, court, agency, department, bureau, commission or other governmental or regulatory authority, body or instrumentality, including any insurance or securities regulatory authority.

               “Guarantee Claim” has the meaning set forth in Section 5.13(d).

               “Guaranteed Reinsurance Contracts” means any assumed Reinsurance Contracts issued by CRNA and guaranteed for the benefit of the cedants of such Reinsurance Contracts by Converium AG and/or any Reinsurance Contracts in respect of which Converium AG is obligated to assume such Reinsurance Contract by way of novation or other mechanic upon request of any such cedant.

               “Guaranteed Reinsurance Novation Contract” means any Guaranteed Reinsurance Contract in respect of which Converium AG is obligated to assume such Reinsurance Contract by way of novation or other mechanic upon request of any such cedant.

               “Guarantees” means the obligations (including any obligations to assume such Reinsurance Contracts by way of a novation or other mechanic) of Converium AG in respect of the Guaranteed Reinsurance Contracts.

               “Guarantor” means Converium AG in its capacity as guarantor under or in conjunction with any Guaranteed Reinsurance Contract(s).

               “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

               “Incentive Plans” has the meaning set forth in Section 5.12.

               “Indemnified Party” and “Indemnifying Party” have the respective meanings set forth in Section 7.4.

               “Insurance Approvals” means the Purchaser Insurance Approvals and the Seller Insurance Approvals.

               “Investment Broker” has the meaning set forth in Section 3.22.

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               “Intercompany Agreement” shall mean any agreement between (x) the Company or any of its Subsidiaries, on the one hand, and (y) the Seller or any of its Affiliates (other than the Company or any of its Subsidiaries).

               “IRS” means the Internal Revenue Service.

               “Knowledge of Seller” or words of other similar import means the actual knowledge of any of Paul Dassenko, Corcoran Byrne, Ray Dowling, Barbara Contreras, Jeff Jarman, Mary Rauscher, Joanne Spalla, Paolo De Martin, Christian Felderer and Irene Lueling.

               “Leased Real Property” has the meaning set forth in Section 3.14.

               “Lien” means any lien, pledge, mortgage, security interest, charge, adverse claim or other encumbrance of any kind.

               “Material Adverse Effect” means any material adverse effect on the business, operations, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, other than effects arising out of, resulting from, caused by or attributable to (a) changes in conditions in the United States or global economy or capital or financial markets generally, including changes in interest or exchange rates, (b) changes in law or in legal, regulatory, political, economic or business trends or conditions, (c) changes in GAAP or regulatory accounting principles, including SAP, after the date of this Agreement, (d) the announcement of this Agreement and the Ancillary Agreements and the identity of the Purchaser or the consummation of the transactions contemplated hereby or thereby, (e) actions required or permitted to be taken pursuant to this Agreement or taken with the Purchaser’s consent, (f) any action taken by the Purchaser or its Affiliates with respect to the transactions contemplated hereby or by the Ancillary Agreements, (g) any increase in the Reserves, (h) claims made under Reinsurance Contracts, (i) any Commutations which occur prior to the Closing Date, (j) any Converium Third Party Claim and (k) Regulatory Body Matters.

               “Material Contract” means any Contract required to be set forth on Schedule 3.13.

               “Material Permit” has the meaning set forth in Section 3.12.

               “Materials” means (i) all previously prepared memoranda of law and all analyses and materials related to a Converium Third Party Claim, (ii) all agreements, contracts and other memoranda, including preparatory materials, drafts and all oral and written communications pertaining to a Converium Third Party Claim, and (iii) any documents or other information relating to a Converium Third Party Claim that would otherwise be protected by any applicable privilege or work product protection from disclosure to third parties other than the parties hereto. For the avoidance of doubt, Materials shall not include any information relating to a party which is or becomes publicly available other than through a breach of this Agreement by the disclosing party.

               “NICO” has the meaning ascribed to it in the first paragraph of this Agreement.

               “NICO Commutation Agreement” has the meaning set forth in Section 6.2(d).

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               “Ordinary Course of Business” means the manner in which the Company and any of its Subsidiaries, as the case may be, have conducted their business and operations since CRNA was placed into run-off in August 2004, which includes the Commutation of Reinsurance Contracts.

               “Parent” has the meaning ascribed to it in the fourth Recital.

               “Permits” means all licenses, certificates of authority, permits, orders, consents, approvals, registrations, authorizations, qualifications and filings under any applicable federal, state, local or foreign laws or with any Governmental Entities.

               “Permitted Commutations” means the Commutations of the Reinsurance Contracts identified as Permitted Commutations on Schedule 5.1.

               “Permitted Liens” means any Lien that (a) is disclosed in the Statutory Statements of CRNA, including, if applicable, in the notes thereto, (b) is disclosed in the Statutory Statements of CINA, including, if applicable, in the notes thereto, (c) is a mechanic’s, repairman’s, materialman’s or other like Lien in respect of liabilities that are not yet due or that are being contested in good faith, (d) constitutes a statutory Lien or other Lien not securing a monetary obligation arising in the Ordinary Course of Business, (e) is a Lien for current Taxes not yet delinquent, or (f) does not materially adversely affect the value of the asset, property or right subject thereto or materially interfere with the present use of such asset, property or right.

               “Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint stock company, trust, unincorporated organization, Governmental Entity or other entity or organization.

               “Plan” means any “employee benefit plan” (as such term is defined in section 3(3) of ERISA), and any other retirement, pension, profit-sharing, thrift, savings, target benefit, employee stock ownership, cash or deferred, deferred or incentive compensation, bonus, stay bonus, stock option, employee stock purchase, phantom stock, stock appreciation, change in control, medical, dental, vision, psychiatric counseling, vacation, sick pay, disability or fringe benefit plan, program or arrangement in which any current or former officer or Employee of the Company or any of its Subsidiaries have participated, or as to which the Company or any of its Subsidiaries have any present or contingent liability.

               “Pre-6/30 Taxes” means (i) all liability for Taxes of the Company and its Subsidiaries for Pre-6/30 Tax Periods if, and to the extent that, such Taxes exceed the provision for Taxes on the June 30, 2006 balance sheet of the Company and its Subsidiaries (other than deferred Taxes that reflect timing differences between book and Tax income) and (ii) all liability resulting by reason of the several liability of the Company and its Subsidiaries pursuant to Treasury Regulations § 1.1502-6(a); provided however, that for purposes of this definition the following shall be considered a liability for Taxes: (x) any payments that the Company or any of its Subsidiaries is required to make pursuant to the ZFS Tax Sharing Agreement in respect of Pre-6/30 Tax Periods and (y) the amount of any incremental cash Tax liability actually incurred by Purchaser, the Company or any of its Subsidiaries after the Closing Date as a result of a reduction in the net operating losses of the Company and its Subsidiaries for U.S. federal income

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tax purposes for any Pre-6/30 Tax Period such that the amount of available net operating losses for U.S. federal income tax purposes as of June 30, 2006 is less than the maximum amount usable under Section 382 of the Code as applied to the transactions contemplated by this Agreement. Except as provided in the previous sentence, for purposes of this definition any reduction in a net operating loss or other Tax attribute shall not be considered a liability for Taxes. For purposes of this definition, in the case of any Taxable Period that begins before and ends after June 30, 2006, (i) real, personal and intangible property Taxes (“Property Taxes”) of the Company or any of its Subsidiaries for the Pre-6/30 Tax Period shall be equal to the amount of such Property Taxes for the entire Taxable Period multiplied by a fraction, the numerator of which is the number of days during the Taxable Period that are in the Pre-6/30 Tax Period and the denominator of which is the number of days in the Taxable Period; and (ii) the Taxes of the Company or any of its Subsidiaries (other than Property Taxes) for the portion of the Taxable Period that constitutes a Pre-6/30 Tax Period shall be computed as if such taxable period ended as of the close of business on June 30, 2006.

               “Pre-6/30 Tax Period” means any Taxable Period ending on or before June 30, 2006 and, with respect to a Taxable Period that begins on or before June 30, 2006 and ends thereafter, the portion of such Taxable Period ending on and including June 30, 2006.

               “Property” means any real, personal or mixed property, whether tangible or intangible.

               “Property Taxes” has the meaning set forth in the definition of Pre-6/30 Taxes.

               “Proprietary Software” has the meaning set forth in Section 5.16

               “Purchase Price” has the meaning set forth in Section 2.1(a).

               “Purchaser” has the meaning set forth in the first paragraph of this Agreement.

               “Purchaser Indemnitees” has the meaning set forth in Section 7.2.

               “Purchaser Insurance Approvals” means all Consents required to be obtained, made or given by the Purchaser pursuant to the Applicable Insurance Codes.

               “PwC” means PricewaterhouseCoopers Ltd.

               “ReCap Employees Obligations” shall mean all of the liabilities arising out of or relating to the matters set forth on Schedule 1.1(a).

               “Regulatory Body Matters” means any proceeding, investigation or inquiry, whether formal or informal, or Action involving or undertaken by any governmental or regulatory agency, body or representative (including without limitation the United States Securities and Exchange Commission, any State attorneys general office or any State insurance department).

               “Reinsurance Contracts” means all Contracts, treaties, facultative certificates, policies or other arrangements, other than Company Insurance Policies, to which the Company

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or any of its Subsidiaries is a party or by which any of them are bound or subject, providing for insurance, ceding or assumption of reinsurance, excess insurance or retrocessions, including, without limitation, all insurance policies, reinsurance policies, and retrocession agreements, in each case as such Contract, treaty, facultative, policy or other arrangement may have been amended, modified or supplemented, other than the Company Insurance Policies, irrespective of how such arrangement is accounted for.

               “Representatives” has the meaning set forth in Section 5.2(a).

               “Reserves” means the reserves, funds, accruals and provisions held by CRNA and CINA for insurance, reinsurance and retrocessional loss and loss adjustment expenses, including incurred but not reported loss and loss adjustment expenses, reserves with respect to uncollectible reinsurance and retrocession and reserves for unearned premiums and accrued premiums.

               “Restructuring Transactions” means those transactions set forth on Schedule 1.1(b).

               “SAP” means the applicable statutory accounting practices prescribed or permitted by the applicable Domiciliary Insurance Department.

               “Securities Act” means the Securities Act of 1933, as amended.

               “Seller” has the meaning set forth in the first paragraph of this Agreement.

               “Seller Indemnitees” has the meaning set forth in Section 7.3.

               “Seller Insurance Approvals” means all Consents required to be obtained, made or given by the Seller, the Company or any of its Subsidiaries pursuant to the Applicable Insurance Codes.

               “Senior Notes” means the 7 1/8% 200,000,000 Senior Notes due 2023 issued pursuant to the Senior Notes Indenture.

               “Senior Notes Indenture” means the Indenture, dated as of October 20, 1993, between ZRCH and The Bank of New York, as Trustee, as supplemented by the First Supplemental Indenture thereto, dated as of November 20, 2001, by and among ZRCH, CHNA and the Trustee.

               “SETP” has the meaning set forth in Section 5.9(a).

               “Shares” has the meaning ascribed to it in the first Recital of this Agreement.

               “Statutory Statements of CINA” means the Annual Statements of CINA, as filed with its Domiciliary Insurance Department, for the year ended December 31, 2005 and the Quarterly Statements of the condition and affairs of CINA, as filed with its Domiciliary Insurance Department, for the quarterly periods ended March 31, 2006 and June 30, 2006.

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               “Statutory Statements of CRNA” means the Annual Statements of CRNA, as filed with its Domiciliary Insurance Department, for the year ended December 31, 2005 and the Quarterly Statements of the condition and affairs of CRNA, as filed with its Domiciliary Insurance Department, for the quarterly periods ended March 31, 2006 and June 30, 2006.

               “Subsidiary” and “Subsidiaries” means, with respect to any Person, any corporation, partnership, limited liability company, joint venture or other entity in which such Person (i) owns, directly or indirectly, 50% or more of the outstanding voting securities, equity interests, profits interest or capital interest, (ii) is entitled to elect at least a majority of the board of directors or similar governing body, or (iii) in the case of a limited partnership or limited liability company, is a general partner or managing member, respectively.

               “Surplus Note” means the 8.75% $150,000,000 Surplus Note issued by CRNA in favor of the Parent.

               “Target Cash Payment” has the meaning set forth in Section 6.1(h).

               “Tax” and “Taxes” mean all income, profits, gains, gross receipts, net worth, premium, value added, ad valorem, sales, use, excise, stamp, transfer, franchise, withholding, payroll, employment, occupation, workers’ compensation, disability, severance, unemployment insurance, social security and property taxes, and all other taxes, levies, fees, imposts, duties and charges of any kind whatsoever, together with any interest, penalties and additions thereto imposed by any Governmental Entity (“Taxing Authority”), including all amounts imposed as a result of being a member of an affiliated or combined group.

               “Tax Claim” means any claim related to Taxes.

               “Tax Return” means all returns, reports, elections, estimates, declarations, information statements and other forms and documents (including all schedules, exhibits, and other attachments thereto) relating to, and required to be filed or maintained in connection with the calculation, determination, assessment or collection of, any Taxes (including estimated Taxes).

               “Taxing Authority” has the meaning set forth in the definition of Taxes.

               “Taxable Period” means any taxable year or any other period that is treated as a taxable year with respect to which any Tax may be imposed under any statute, rule, or regulation.

               “Third-Party Claim” has the meaning set forth in Section 7.4.

               “Tillinghast Report” means the report titled “CRNA Review of Loss and Loss Adjustment Expense Liabilities as of June 30, 2006” dated August 30, 2006 prepared by the Tillinghast business of Towers, Perrin Forster & Crosby, Inc, trading as Towers Perrin relating to the adequacy of the Reserves of CRNA as of June 30, 2006 excluding business subject to the Restructuring Transactions and the Permitted Commutations.

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               “Transitional Trademark License Agreement” means the transitional trademark license agreement in the form attached hereto as Annex B.

               “WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988.

               “ZFS Tax Sharing Agreement” means the Tax Sharing and Indemnification Agreement, dated October 1, 2001, by and among ZRCH, ZGA US Limited, a Delaware Corporation, CHNA, CRNA and, solely for purposes of Section 5.05 thereof, Zurich Insurance Company, a Swiss corporation, and the Parent.

               “ZRCH” means Zurich Reinsurance Centre Holdings, Inc., a Delaware corporation.

ARTICLE II.

PURCHASE AND SALE OF THE SHARES

          2.1. Purchase and Sale of the Shares. (a) Upon the terms and subject to the conditions set forth in this Agreement, the Purchaser agrees to purchase, and the Seller agrees to sell, assign, transfer and deliver to the Purchaser, the Shares, free and clear of all Liens (other than any restrictions on transferability of the Shares expressly provided in the Applicable Insurance Codes, the Securities Act and any applicable state securities laws) for a purchase price (the “Purchase Price”) equal to the sum of (x) $74,000,000, plus (y) the principal amount of the CHNA Intercompany Loans, including accrued and unpaid interest through the Closing Date; provided that the amount payable pursuant to clause (y) of this Section 2.1(a) in full satisfaction of the CHNA Intercompany Loans shall be $21,000,000 unless the Closing occurs after April 14, 2007, in which case the amount payable under clause (y) of this Section 2.1(a) shall be no more than $28,125,000.

          2.2. The Closing. Subject to the satisfaction or waiver of all of the conditions to closing set forth in Article VI, the closing (the “Closing”) of the purchase and sale of the Shares hereunder shall take place at the offices of Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York at 10:00 a.m., New York City time, on the third Business Day following the date on which all of the conditions set forth in Article VI (other than those conditions that are contemplated to be satisfied by the respective parties at the Closing itself) have been satisfied or waived, or at such other time or place as may be mutually agreed upon by the parties hereto. The date on which the Closing occurs is referred to herein as the “Closing Date.”

          2.3. Deliveries at the Closing. At the Closing:

          (a) the Seller shall deliver to the Purchaser (i) certificates representing the Shares free and clear of all Liens, duly endorsed in blank for transfer or accompanied by stock powers duly endorsed in blank, (ii) the written resignation of any directors of the Company or its Subsidiaries who are designated by the Purchaser for replacement, effective upon the Closing, (iii) the instruments evidencing the CHNA Intercompany Loans for cancellation, (iv) instruments evidencing the assignment of the Surplus Note as contemplated by Section 6.1(g) and (v) all

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other documents and instruments required hereunder to be delivered by the Seller to the Purchaser at the Closing; and

          (b) the Purchaser shall (i) pay to the Seller the Purchase Price by wire transfer of immediately available funds to an account or accounts designated by the Seller in a written notice delivered to the Purchaser not later than two (2) Business Days prior to the Closing Date, and (ii) deliver to the Seller all other documents and instruments required hereunder to be delivered by the Purchaser to the Seller at the Closing.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE SELLER

          The Seller hereby represents and warrants to the Purchaser, except as disclosed in any of the Schedules hereto, or the documents or other materials included in the online data room or otherwise made available to the Purchaser, as follows:

          3.1. Organization and Qualification of the Seller. The Seller is a corporation duly organized, validly existing and in good standing under the laws of Switzerland.

          3.2. Authorization, Validity and Enforceability. The Seller has all requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby, including, without limitation, the sale of the Shares. The execution, delivery and performance by the Seller of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby by the Seller have been duly and validly authorized by all necessary corporate action on the part of the Seller and no other corporate proceedings on the part of the Seller is necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is party or the consummation of any of the transactions contemplated hereby or thereby. This Agreement has been duly executed and delivered by the Seller and constitutes the legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms.

          3.3. No Conflicts. Assuming compliance with the matters referred to in Section 3.4 below, except as set forth in Schedule 3.3, the execution, delivery and performance by the Seller of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby do not and will not conflict with, result in any breach or violation of, constitute a default under (or an event that with the giving of notice or the lapse of time or both would constitute a default under), or give rise to any right of termination or acceleration of any right or obligation of the Seller, the Company or any of its Subsidiaries under, or result in the creation or imposition of any Lien upon any assets or Properties (including, without limitation, the Shares) of the Seller, the Company or any of its Subsidiaries by reason of the terms of (a) the certificate or articles of incorporation or bylaws of the Seller, the Company or any of its Subsidiaries, (b) any material Contract to which the Seller, the Company or any of its Subsidiaries are a party or by or to which any of them or their assets or Properties (including, without limitation, the Shares)

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may be bound or subject, (c) any applicable order, writ, judgment, injunction, award, decree, law, statute, ordinance, rule or regulation or (d) any other Permit of the Seller, the Company or any of its Subsidiaries other than, in the case of each of (b), (c) and (d), any such items that would not be reasonably likely to have a Material Adverse Effect or a material adverse effect on the ability of the Seller to execute and deliver this Agreement or the Ancillary Agreements, to perform its obligations hereunder and thereunder or to consummate the transactions contemplated hereby and thereby.

          3.4. Consents and Approvals. Except as required under the HSR Act or as set forth in Schedule 3.4, no consent, approval, authorization, license or order of, registration or filing with, or notice to, any Governmental Entity or any other Person (collectively, “Consents”) is necessary to be obtained, made or given by the Seller, the Company or any of its Subsidiaries in connection with the execution and delivery by the Seller of this Agreement or Ancillary Agreements, the performance by the Seller of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby, other than such Consents which, if not obtained or made, would not be reasonably likely to have a Material Adverse Effect or a material adverse effect on the ability of the Seller to execute and deliver this Agreement or the Ancillary Agreements, to perform its obligations hereunder or to consummate the transactions contemplated hereby and thereby.

          3.5. Organization and Qualification of the Company and its Subsidiaries. Schedule 3.5 lists each of the Company’s directly and indirectly owned Subsidiaries. The Company and each of its Subsidiaries are corporations duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation and have all requisite corporate power and authority to own their Properties and to conduct their respective businesses as currently being conducted, in each case with such exceptions as have not had a Material Adverse Effect. The Company and each of its Subsidiaries are duly qualified and in good standing as a foreign corporation in all jurisdictions in which the nature of their respective businesses or the ownership of their respective Properties makes such qualification necessary, in each case except where the failure to be so qualified has not had a Material Adverse Effect.

          3.6. Capitalization of Company. (a) Schedule 3.6 sets forth the designation, par value and the number of authorized, issued and outstanding shares of capital stock of the Company. The issued and outstanding capital stock of the Company consists solely of the Shares. Except as set forth in Schedule 3.6, no other class of equity securities, preferred stock, bonds, debentures, notes, other evidences of indebtedness for borrowed money or other securities of any kind of the Company (except for the Shares) is authorized, issued or outstanding. All of the Shares are duly authorized, validly issued, fully paid and non-assessable.

          (b) Except for this Agreement and except as set forth in Schedule 3.6, there are no subscriptions, options, warrants, calls, preemptive rights or other rights to purchase or otherwise receive, nor are there any securities or instruments of any kind convertible into or exchangeable for, any capital stock of the Company. Except as set forth in Schedule 3.6, neither the Company nor the Seller is a party to any agreement with a third party which places any

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restriction upon, or which creates any voting trust, proxy, or other agreement with respect to, the voting, purchase, redemption, acquisition or transfer of the Shares.

          3.7. Capitalization of CRNA and CINA. (a) Schedule 3.7 sets forth the designation, par value and the number and authorized, issued and outstanding shares of capital stock of each of CRNA and CINA and the number and percentage ownership interest of the Company in CRNA and CRNA in CINA. Except as set forth in Schedule 3.7, no other class of equity securities, preferred stock, bonds, debentures, notes, other evidences of indebtedness for borrowed money or other securities of any kind of CRNA or CINA is authorized, issued or outstanding. All of the outstanding shares of capital stock of CRNA and CINA are duly authorized, validly issued, fully paid and non-assessable. Except as set forth in Schedule 3.7, all of the outstanding shares of capital stock of CRNA and CINA are owned of record and beneficially by the Company and CRNA, respectively, free and clear of any Lien (other than restrictions on transferability of such shares provided in Applicable Insurance Codes, the Securities Act and any applicable state securities laws), in each case with such exceptions as have not had a Material Adverse Effect.

          (b) Except as set forth in Schedule 3.7, there are no subscriptions, options, warrants, calls, preemptive rights or other rights to purchase or otherwise receive, nor are there any securities or instruments of any kind convertible into or exchangeable for, any capital stock of CRNA or CINA. Except as set forth in Schedule 3.7, neither the Company nor any of its Subsidiaries are a party to any agreement with a third party which places any restriction upon, or which creates any voting trust, proxy, or other agreement with respect to, the voting, purchase, redemption, acquisition or transfer of any shares of any of CRNA or CINA’s capital stock.

          3.8. Title to Shares. Seller has good and valid title to each of the Shares, free and clear of any Lien (other than any restrictions on transferability of the Shares expressly provided in the Applicable Insurance Codes, the Securities Act and any applicable state securities laws).

          3.9. Financial Statements. (a) The Seller has heretofore delivered to the Purchaser true and complete copies of the Statutory Statements of CINA and the Statutory Statements of CRNA.

          (b) The Statutory Statements of CRNA were prepared in accordance with SAP of the CRNA Domiciliary Insurance Department, consistently applied throughout the periods involved (except as may be indicated in the notes thereto regarding the adoption of new accounting policies), have been audited by PwC and present fairly, in accordance with SAP of the CRNA Domiciliary Insurance Department, the statutory financial position of CRNA at the respective dates thereof and the results of operations of CRNA, for the respective periods then ended, except that the quarterly Statutory Statements of CRNA have not been audited and are subject to normal recurring year-end audit adjustments. The Statutory Statements of CRNA complied in all material respects with SAP of the CRNA Domiciliary Insurance Department, and were complete and correct in all material respects when filed, and no material deficiency has been asserted in writing with respect to any of the Statutory Statements of CRNA by any Applicable Insurance Department.

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          (c) The Statutory Statements of CINA were prepared in accordance with SAP of the CINA Domiciliary Insurance Department, consistently applied throughout the periods involved (except as may be indicated in the notes thereto regarding the adoption of new accounting policies), have been audited by PwC and present fairly, in accordance with SAP of the CINA Domiciliary Insurance Department, the statutory financial position of CINA at the respective dates thereof and the results of operations of CINA, for the respective periods then ended, except that the quarterly Statutory Statements of CINA have not been audited and are subject to normal recurring year-end audit adjustments. The Statutory Statements of CINA complied in all material respects with SAP of the CINA Domiciliary Insurance Department, and were complete and correct in all material respects when filed, and no material deficiency has been asserted in writing with respect to any of the Statutory Statements of CINA by any Applicable Insurance Department.

          3.10. Absence of Changes. (a) Except as set forth in Schedule 3.10 or any other Schedule hereto and except for the transactions contemplated hereby, since June 30, 2006, no change or event has occurred or condition exists that has had a Material Adverse Effect.

          (b) Except as set forth in Schedule 3.10 or any other Schedule hereto and except for the transactions contemplated by this Agreement and the Ancillary Agreements, between June 30, 2006 through the date hereof, the Company and each of its Subsidiaries have operated their businesses in the Ordinary Course of Business.

          3.11. Legal Proceedings. Except as set forth in Schedule 3.11, there is no action, suit, claim, arbitration, proceeding, inquiry or investigation pending or, to the Knowledge of Seller, threatened against the Seller, the Company or any of its Subsidiaries or any of their respective assets or Properties, by or before any court, other Governmental Entity or arbitrator, other than actions, suits, claims or proceedings which, if adversely determined, would not have a Material Adverse Effect. Except as set forth in Schedule 3.11, there is no outstanding order, writ, judgment, injunction, fine, award, determination or decree of any court, other Governmental Entity or arbitrator against the Company or any of its Subsidiaries or any of their respective assets or Properties which has had a Material Adverse Effect.

          3.12. Compliance with Laws; Permits. Except as set forth in Schedule 3.12, each of the Company and its Subsidiaries are in compliance with (a) all applicable laws, statutes, ordinances, rules, regulations or other legal requirements, whether federal, state, local or foreign, (b) all applicable orders, writs, judgments, injunctions, awards, determinations and decrees of any court, other Governmental Entity or arbitrator and (c) its Permits, except where the failure to comply has not had a Material Adverse Effect. Each of the Company and its Subsidiaries have all Permits necessary for the ownership of its assets and Properties and to the conduct of their business which if violated or not obtained would have a Material Adverse Effect (a “Material Permit”), and all such Material Permits are valid and in full force and effect.

          3.13. Contracts. (a) Schedule 3.13(a) contains a true and complete list of all of the following Contracts (excluding Plans and Insurance and Reinsurance Contracts

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which are the subject of Section 3.16(a), respectively) to which any of the Company or any of its Subsidiaries are a party:

     (i) material partnership or joint venture Contracts;

     (ii) Contracts containing any covenant of the Company or any of its Subsidiaries not to compete that materially impairs the operation of the business of the Company or any of its Subsidiaries as conducted on the date of this Agreement;

     (iii) Contracts, involving amounts in excess of $1,000,000, relating to the borrowing of money, or the direct or indirect guaranty of any obligation for borrowed money by the Company or any of its Subsidiaries, or Contracts to service the repayment of borrowed money or any other liability in respect of indebtedness for borrowed money of any other Person;

     (iv) lease, sublease, rental, licensing, use or similar Contracts with respect to personal Property providing for annual rental, license, or use payments in excess of $250,000 or the guaranty of any such lease, sublease, rental or other Contracts;

     (v) Contracts (A) outside the Ordinary Course of Business for the purchase, acquisition, sale or disposition of any assets or Properties or (B) outside the Ordinary Course of Business for the grant to any Person (excluding the Company or its Subsidiaries) of any option or preferential rights to purchase any assets or Properties of CRNA;

     (vi) employment Contracts with any current officer, director or Employee providing for compensation of $250,000 or more per annum that is not terminable by the Company or its Subsidiaries by notice of not more than 90 days; and

     (vii) Contracts pursuant to which there is either a current or future obligation of the Company or its Subsidiaries to make payments in excess of $1,000,000 in any twelve-month period and that is not terminable by the Company or its Subsidiaries by notice of not more than 90 days for a cost of less than $250,000 (other than Contracts relating to investments in the Ordinary Course of Business and other than leases of real Property).

          (b) Schedule 3.13(b) sets forth a list of the Guaranteed Reinsurance Contracts, identifying those which are Guaranteed Reinsurance Novation Contracts. As of the date hereof, the Seller has not received notice of any claim under any Guarantee.

          (c) The Seller has heretofore delivered or made available to the Purchaser true and complete copies of all of the Material Contracts set forth in Schedule 3.13(a). Each of the Material Contracts is a valid and binding obligation of the Company and the applicable Subsidiary party thereto and, to the Knowledge of Seller, is a valid and binding obligation of any other Person party thereto, and is in full force and effect enforceable against the parties thereto in accordance with its terms subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ right generally, general principles of equity and the discretion of courts in granting equitable remedies. Except as specified in Schedule 3.13(c), none of the Company or any of its Subsidiaries are in breach or violation of, or

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default under, any of the Material Contracts, except for such breaches, violations and defaults that have not had a Material Adverse Effect.

          3.14. Property and Assets. Schedule 3.14 contains a true and complete list of (i) all real Property owned by the Company or any of its Subsidiaries and (ii) all real Property leased by the Company or any of its Subsidiaries for an annual lease amount in excess of $250,000 (the “Leased Real Property”). As of the date hereof, the Company or any of its Subsidiaries have a valid leasehold interest in the applicable Leased Real Property as provided in the applicable lease, in each case free and clear of any Lien except (A) as set forth in Schedule 3.14, (B) Liens which do not materially interfere with the current use of the Leased Real Property and (C) Permitted Liens.

          3.15. Intellectual Property. The Company and/or its Subsidiaries owns, licenses or otherwise possesses rights to use, all patents, trademarks, trade names, service marks, copyrights, technology, know-how, computer software programs or applications, and tangible or intangible proprietary information or materials that are used in the business of the Company and each of its Subsidiaries as currently conducted, except for any such failures to own, be licensed or possess that have not had a Material Adverse Effect.

          3.16. Employee Benefit Plans. (a) Schedule 3.16 contains a true and complete list, as of the date hereof, of all material Plans. The Seller has delivered or made available to the Purchaser true and complete copies of the following documents: (i) each of the Plans listed in Schedule 3.16, including all amendments thereto, or a written description if there is no formal Plan document, any related trust agreements, group annuity contracts, insurance policies or other funding agreements or arrangements; (ii) the most recent determination letter, if any, from the IRS with respect to each of the Plans that is intended to be qualified under section 401(a) of the Code or section 403(a) of the Code; (iii) the current summary plan description, if any, for each of the Plans; and (iv) the annual return/report on Form 5500, 5500-C or 5500-R, if any, for each of the Plans for the most recent plan year.

          (b) Except as set forth in Schedule 3.16, (i) each of the Plans has been administered in material compliance with the applicable requirements of ERISA and the Code and in accordance with its terms; (ii) no “disqualified person” or “party in interest” (as defined in section 4975 of the Code and section 3(14) of ERISA, respectively) with respect to any Plan has engaged in any “prohibited transaction,” as such term is defined in section 4975 of the Code or section 406 of ERISA, for which there was not available an exemption or which could subject the Company or its Subsidiaries to any material excise tax or penalty under section 4975 of the Code or section 502(i) of ERISA; (iii) each of the Plans that is intended to be qualified under section 401(a) of the Code has received a favorable determination letter from the IRS as to the tax qualification of such Plan and no event has occurred with respect to the operation of the Plans that would reasonably be expected to cause the loss of such qualification under section 401(a) of the Code; (iv) no Plan is a “defined benefit plan,” as defined in Section 3(35) of ERISA, that is subject to Title IV of ERISA, and none of the Company, its Subsidiaries or any ERISA Affiliate has ever maintained or contributed to, or ever been obligated to contribute to, any such defined benefit plan; and (v) no Plan is a “multiemployer plan” as defined in section 3(37) of ERISA.

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          (c) Except as set forth in Schedule 3.16, none of the Plans provides retiree life or retiree health benefits except as may be required under section 4980B of the Code or section 601 through 608 of ERISA.

          (d) Except as set forth in Schedule 3.16, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will: (i) increase any benefits otherwise payable under any Plan; (ii) result in the acceleration of the time of payment or vesting of any benefits under any Plan or (iii) result in any payment, under any agreement or arrangement in which the Company or any of its Subsidiaries are a party, becoming due to any individual that would constitute an “excess parachute payment” under section 280G of the Code.

          3.17. Employee Relations. (a) Except as set forth in Schedule 3.17, (i) there is no labor strike, dispute, slowdown, stoppage or lockout pending or, to the Knowledge of Seller, threatened against the Company or any of its Subsidiaries, and during the past twelve months there has not been any such action; (ii) neither the Company nor any of its Subsidiaries are a party to or bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association applicable to Employees; and (iii) within the last twelve months there has been no “mass layoff” or “plant closing” as defined by the WARN Act or any similar state or local “plant closing” law with respect to the Employees.

          3.18. Insurance Policies. Schedule 3.18 contains a list of all material policies of insurance (excluding Reinsurance Contracts assumed or ceded by the Company or any of its Subsidiaries in connection with the conduct of their insurance and reinsurance business) maintained by the Company or its Subsidiaries as of the date hereof with respect to their respective Properties and the conduct of their respective businesses (the “Company Insurance Policies”).

          3.19. Tax Matters. Except as otherwise stated or disclosed in Schedule 3.19, (i) the Company and its Subsidiaries have filed (or joined in the filing of) when due (after taking into account all properly requested extensions) all material Tax Returns required by applicable law to be filed with respect to the Company or any of its Subsidiaries and all Taxes shown to be due on such Tax Returns have been paid; (ii) there is no action, suit, proceeding, investigation, audit or claim now pending against, or with respect to, the Company or any of its Subsidiaries in respect of any material Tax or assessment, nor is any written claim for additional Tax or assessment being asserted by any Taxing Authority; (iii) there has been no waiver or extension of any applicable statute of limitations for the assessment or collection of any Taxes of the Company or any of its Subsidiaries; and (iv) neither the Company nor any of its Subsidiaries is a party to any agreement other than with the Seller, whether written or unwritten, providing for the payment of Taxes, payment for Tax losses, entitlement to refunds or similar Tax matters.

          3.20. Bank Accounts. Schedule 3.20 contains a true and complete list of the names and locations of all banks, trust companies, securities brokers and other financial institutions at which the Company or its Subsidiaries has an account or safe deposit box or maintains a banking, custodial, trading or other similar relationship.

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          3.21. Material Services Provided by Seller. Except as set forth any of in Schedule 3.21, neither the Seller, nor its Affiliates (other than the Company or any of its Subsidiaries) provide any material services to the Company or its any of Subsidiaries.

          3.22. No Brokers. Except for Credit Suisse LLC, J.P. Morgan plc and Goldman Sachs International, no broker, finder or investment banker (an “Investment Broker”) acting on behalf of the Seller, the Company or any of its Subsidiaries is or will be entitled to any brokerage, finder’s or other fee, compensation or commission from the Seller. No person is or will be entitled to any brokerage, finder’s or other fee, compensation or commission from the Company or any of its Subsidiaries in connection with the transactions contemplated by this Agreement.

          3.23. No Other Representations or Warranties. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE III (AS QUALIFIED BY THE SCHEDULES) OR THE ANCILLARY AGREEMENTS, NEITHER THE SELLER NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO THE SELLER, THE SELLER’S AFFILIATES, THE COMPANY, ITS SUBSIDIARIES OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE ANCILLARY AGREEMENTS, AND THE SELLER DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, WHETHER MADE BY THE SELLER, THE SELLER’S AFFILIATES, THE COMPANY, ITS SUBSIDIARIES OR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE III HEREOF (AS QUALIFIED BY THE SCHEDULES) OR THE ANCILLARY AGREEMENTS, THE SELLER HEREBY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, PROJECTION, FORECAST, STATEMENT, OR INFORMATION MADE, COMMUNICATED, OR FURNISHED (ORALLY OR IN WRITING) TO THE PURCHASER OR ANY OF ITS AFFILIATES OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION, OR ADVICE THAT MAY HAVE BEEN OR MAY BE PROVIDED TO THE PURCHASER OR ANY OF ITS AFFILIATES BY ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT OR REPRESENTATIVE OF THE SELLER, THE COMPANY, ITS SUBSIDIARIES OR ANY OF THEIR RESPECTIVE AFFILIATES).

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

          The Purchaser hereby represents and warrants to the Seller except as disclosed in any of the Schedules hereto as follows:

          4.1. Organization of the Purchaser. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of Nebraska, United States of America.

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          4.2. Authorization, Validity and Enforceability. The Purchaser has all requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Purchaser of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby by the Purchaser have been duly and validly authorized by all necessary corporate action on the part of the Purchaser and no other corporate proceedings on the part of the Purchaser is necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Agreements or the consummation of any of the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Purchaser and constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms.

          4.3. No Conflicts. Assuming compliance with the matters referred to in Section 4.4 below, the execution, delivery and performance by the Purchaser of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby do not and will not conflict with, result in any breach or violation of, or constitute a default under (or an event which with the giving of notice or the lapse of time or both would constitute a default under), or give rise to any right of termination or acceleration of any right or obligation of the Purchaser, or result in the creation or imposition of any Lien upon any assets or Properties of the Purchaser by reason of the terms of (a) the certificate of incorporation, bylaws or other charter or organization documents of the Purchaser, (b) any material Contract to which the Purchaser is a party or by or to which it or its assets or Properties may be bound or subject, (c) any applicable order, writ, judgment, injunction, award, decree, law, statute, ordinance, rule or regulation or (d) any other Permit of the Purchaser other than, in the case of each of (b), (c) and (d), any such terms that would not be reasonably likely to have a material adverse effect on the ability of the Purchaser to execute and deliver this Agreement and the Ancillary Agreements, to perform its obligations hereunder and thereunder or to consummate the transactions contemplated hereby and thereby.

          4.4. Purchaser Consents and Approvals. Except as required under the HSR Act and as set forth in Schedule 3.4 or 4.4, no Consent of any Governmental Entity or other Person is necessary to be obtained, made or given by the Purchaser in connection with the execution and delivery by the Purchaser of this Agreement or the Ancillary Agreements, the performance by the Purchaser of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby, except for consents which if not obtained or made would not be reasonably likely to have a material adverse effect on the ability of the Purchaser to execute and deliver this Agreement or the Ancillary Agreements, to perform its obligations hereunder and thereunder or to consummate the transactions contemplated hereby and thereby.

          4.5. Investment Intent. The Shares will be acquired by the Purchaser for its own account without a view to a distribution or resale thereof, it being understood that the Purchaser shall have the right to sell or otherwise dispose of any of the Shares pursuant to a registration or an exemption therefrom under the Securities Act, and any applicable state securities laws.

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          4.6. Financing. The Purchaser has cash available or has existing borrowing facilities which together are sufficient to enable it to consummate the transactions contemplated by this Agreement.

          4.7. No Brokers. No Investment Broker acting on behalf of the Purchaser is entitled to any brokerage, finder’s or other fee, compensation or commission from the Purchaser in connection with the transactions contemplated by this Agreement.

          4.8. No Knowledge of Misrepresentations or Omissions. The Purchaser has no knowledge that the representations and warranties of the Seller made in this Agreement are not true and correct and the Purchaser has no knowledge of any material errors in, or material omissions from, the Schedules to this Agreement.

          4.9. No Other Representations or Warranties. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE IV (AS QUALIFIED BY THE SCHEDULES) OR THE ANCILLARY AGREEMENTS, NEITHER THE PURCHASER NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO THE PURCHASER, THE PURCHASER’S AFFILIATES OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE ANCILLARY AGREEMENTS, AND THE PURCHASER DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, WHETHER MADE BY THE PURCHASER OR THE PURCHASER’S AFFILIATES OR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES.

ARTICLE V.

COVENANTS

          5.1. Conduct of Business. (a) Except for the Restructuring Transactions, or as set forth on Schedule 5.1 or any of the other Schedules hereto, or as otherwise contemplated by this Agreement or the Ancillary Agreements, or as consented to in writing (such consent not to be unreasonably withheld or delayed) by the Purchaser, from the date hereof to and including the Closing Date, the Seller will cause the Company and each of its Subsidiaries to conduct their operations in the Ordinary Course of Business.

          (b) Except for the Restructuring Transactions, or as set forth in Schedule 5.1 or any of the other Schedules hereto, or as otherwise contemplated by this Agreement or the Ancillary Agreements from the date hereof to and including the Closing Date, the Seller will not, without the prior written consent of the Purchaser (such consent not to be unreasonably withheld or delayed), permit the Company or any of its Subsidiaries to directly or indirectly:

     (i) amend or modify its certificate or articles of incorporation, bylaws or other charter or organization documents;

     (ii) merge or consolidate with or acquire the business of any other corporation or other business organization or, except in the Ordinary Course of Business or pursuant

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to any Material Contract, acquire any material property or material assets of any other Person;

     (iii) except in the Ordinary Course of Business, sell, pledge, lease, license or dispose of a material portion of any of its assets;

     (iv) enter into, amend, terminate or otherwise restructure any Intercompany Agreements in a manner that would have an impact on the Company or any of its Subsidiaries (other than as contemplated by the Restructuring Transactions, the Permitted Commutations or Section 5.3 hereof); provided, however, that the Purchaser acknowledges and agrees that all services provided by the Seller and its Affiliates (other than the Company and its Subsidiaries) shall cease as of the Closing except as provided in the CRNA Transition Services Agreement;

     (v) except as set forth in Schedule 5.1, enter into any Commutations of (x) ceded Reinsurance Contracts or (y) material assumed Reinsurance Contracts;

     (vi) split, combine or reclassify any shares of its capital stock, or declare, pay or set aside any sum for any dividend or other distribution (whether in cash, stock or Property, any combination thereof or otherwise) in respect of its capital stock, or redeem, purchase or otherwise acquire (or agree to redeem, purchase or otherwise acquire) any of its capital stock or any of its other securities or any securities of the Company or any of its Subsidiaries;

     (vii) adopt a plan of complete or partial liquidation, dissolution, rehabilitation, merger, consolidation, restructuring, recapitalization, redomestication or other reorganization;

     (viii) except as required by applicable law or by any Governmental Entity, adopt a new Plan, amend any Plan or permit any Plan to enter into any material Contract, insurance arrangement or funding obligation to increase present or future benefits or the present or future cost of providing benefits;

     (ix) terminate any Employee or Plan (other than Plan terminations resulting from the expiration of Plans in accordance with their terms) where such termination would reasonably be expected to result in a liability in excess of $50,000;

     (x) adopt or amend any Plan or employment agreement or employment contract where such adoption or amendment would reasonably be expected to result in a liability in excess of $50,000, except to the extent required by applicable law;

     (xi) other than in the Ordinary Course of Business, enter into any commitment, contractual obligation or transaction which calls for aggregate payments in excess of $100,000 and which does not expire or is not terminable without cost or penalty at the Company’s option within a 90-day period;

     (xii) incur any Debt (excluding for this purpose (A) any interest, fees or premiums accruing on Debt outstanding on the date hereof and (B) any Debt incurred to

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service interest, fees or premiums accruing on the Senior Notes; provided that such Debt is not paid by the Company or its Subsidiaries);

     (xiii) make, authorize or commit to any capital expenditures in excess of $100,000;

     (xiv) settle or compromise any Action, other than (A) any claims or litigation for which the sole remedy is monetary damages in an amount less than $500,000 or, (B) claims or litigation arising out of any Reinsurance Contracts in an amount less than $500,000, (C) as required by a final or non-appealable judgment of an arbitration panel or court, or (D) Regulatory Body Matters; provided, however, that if the settlement or compromise of any Regulatory Body Matter would require the Purchaser, the Company or any of its Subsidiaries to admit any liability or pay damages or other amounts in settlement, the Seller may not effect such settlement without the Purchaser’s written consent (which consent shall not be unreasonably withheld or delayed);

     (xv) make or change any material Tax election, enter into, amend, terminate or otherwise restructure any Intercompany Agreements relating to Taxes (other than with respect to the Restructuring Transactions, Permitted Commutations or the ZFS Tax Sharing Agreement) change an annual accounting period, adopt or change any material accounting method, consent to any extension or waiver of the limitation period applicable to any material Tax Claim or assessment relating to the Company or any of its Subsidiaries, if such election, adoption, change, consent or other action would have the effect of increasing the Tax liability of the Company or any of its Subsidiaries for any period ending after the Closing Date or decreasing any Tax attribute of the Company or any of its Subsidiaries existing on the Closing Date;

     (xvi) take any actions (other than those contemplated by this Agreement or the Schedules hereto), which would cause the payments for salaries and obligations under all Plans to exceed the amounts set forth on the employee payments budget attached hereto as Annex E (the “Budget”) for the periods set forth in the Budget (other than payments required by law or by the terms of any Plans); or

     (xvii) agree in writing to do any of the foregoing.

          5.2. Access; Confidentiality. (a) From the date hereof until the Closing, the Seller will, and will cause the Company and each of its Subsidiaries to, (i) allow the Purchaser and its officers, employees, counsel, accountants, actuaries, consultants and other authorized representatives (“Representatives”) to have reasonable access to the books, records, Contracts, Properties, facilities, management and personnel of the Company and each of its Subsidiaries at all reasonable times, upon reasonable notice and in a manner so as not to interfere with the normal operation of the business of the Company and each of its Subsidiaries and (ii) cause the respective officers, employees and Representatives of the Seller, the Company and each of its Subsidiaries to cooperate in good faith with the Purchaser and its Representatives in connection with all such access.

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          (b) The Purchaser and its Representatives shall keep confidential all information and documents provided under this Section 5.2 in accordance with the terms of the Confidentiality Agreement, the terms of which are incorporated herein by reference and shall continue in full force and effect until the Closing, at which time the confidentiality obligations under the Confidentiality Agreement shall terminate with respect to information relating exclusively to the Company and its Subsidiaries. For the avoidance of doubt, the Confidentiality Agreement shall continue in full force and effect with respect to all other information. If, for any reason, the transactions contemplated by this Agreement or the Ancillary Agreements are not consummated, the Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with its terms.

          5.3. Intercompany Accounts; Intercompany Agreements. Except as set forth in Schedule 5.3 and except for the Surplus Note, the CHNA Intercompany Loans, the Restructuring Transactions and the Permitted Commutations, the Seller shall cause all intercompany accounts receivable or payable (whether or not currently due or payable) between (x) the Company or any of its Subsidiaries, on the one hand, and (y) the Seller or any of its Affiliates (other than the Company or any of its Subsidiaries), or any of the officers or directors of any of the Seller and any of its Affiliates (other than the Company and its Subsidiaries, or any of the officers or directors of the Company or its Subsidiaries), on the other hand, to be settled in full (without any premium or penalty), at or prior to the Closing.

          5.4. Cooperation and Reasonable Best Efforts. Subject to the terms and conditions hereof, (a) each of the parties hereto shall cooperate with each other, and the Seller shall cause the Company and each of its Subsidiaries to cooperate with the Purchaser, in connection with consummating the transactions contemplated by this Agreement, and (b) each of the parties hereto agrees to, and the Seller shall cause the Company and each of its Subsidiaries to, use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement.

          5.5. Director and Officer Indemnification. (a) From and after the Closing Date, Purchaser shall, and shall cause the Company and each of its Subsidiaries to, maintain all rights to indemnification or exculpation now existing in favor of current and former directors, officers, employees and agents of the Company or its Subsidiaries (collectively, the “Director and Officer Indemnified Parties”) as provided in their respective certificates of incorporation or bylaws (or other governing documents) or otherwise in effect as of the date hereof with respect to matters occurring prior to the Closing Date, which shall survive and shall continue in full force and effect after the Closing Date for a period of six years. Any rights to indemnification or exculpation pursuant to this Section 5.5 shall not be amended, repealed or otherwise modified for a period of six years from the Closing Date in a manner that would adversely affect the rights thereunder of individuals who were directors, officers, employees or agents of the Company or its Subsidiaries prior to the Closing Date.

          (b) If, after the Closing Date, the Company or its Subsidiaries, as the case may be, or any of their successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity after such consolidation or merger,

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or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Company or its Subsidiaries, as the case may be, shall assume the obligations of the Company and its Subsidiaries set forth in this Section 5.5.

          (c) The rights of each Director and Officer Indemnified Party under this Section 5.5 shall be in addition to any rights such individual may have under the certificate of incorporation or bylaws (or other governing documents) of the Company or its Subsidiaries, under any applicable laws or under any agreement of any Director and Officer Indemnified Party with the Company or its Subsidiaries. These rights shall survive consummation of the Closing and are intended to benefit, and shall be enforceable by, each Director and Officer Indemnified Party.

          5.6. Consents and Approvals. (a) As soon as practicable after the date hereof, each of the parties hereto shall use its reasonable best efforts to obtain any necessary Consents of, and make any filing with or give any notice to, any Governmental Entities and other Persons (including, without limitation, (i) Insurance Approvals and (ii) pursuant to the HSR Act, the Federal Trade Commission and the United States Department of Justice) as are required to be obtained, made or given by such party to consummate the transactions contemplated by this Agreement and the Ancillary Agreements. Each party shall pay all amounts required to be paid by it in connection with obtaining any Consents that it is required to obtain, including those set forth in Schedule 5.6. In furtherance of the foregoing, each party shall use its reasonable best efforts to obtain the necessary Consents of any Governmental Entities prior to December 31, 2006. The Seller and the Purchaser shall provide each other with a reasonable opportunity to review and comment upon submissions made to the Applicable Insurance Departments in connection with the Seller Insurance Approvals and the Purchaser Insurance Approvals, respectively, and shall keep one another reasonably informed of developments relating to their efforts to obtain such Insurance Approvals. Prior to the Closing, the Seller will not, and will not permit any of its Subsidiaries to, enter into or agree to any regulatory restrictions or arrangements which, as a result, would materially alter CRNA’s or CINA’s licensing or regulatory status in any state or Canada without first using its reasonable best efforts to consult with the Purchaser with respect thereto, it being understood that nothing in this Agreement shall give the Purchaser any right to prior consent to any such restriction or limitation.

          (b) Neither Purchaser nor Seller shall agree to participate in any meeting with any Governmental Entity in respect of any such filings, investigation or other inquiry unless it consults with the other party in advance and, to the extent permitted by such Governmental Entity, gives the other party the opportunity to attend and participate at such meeting. Subject to the Confidentiality Agreement and Section 5.2 hereof, Purchaser and Seller will coordinate and cooperate fully with each other in exchanging such information and providing such assistance as the other party may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods or other approval under the HSR Act and any other antitrust laws.

          (c) In furtherance and not in limitation of the covenants of the parties contained in this Section 5.6, each of the parties hereto shall use its reasonable best efforts to

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resolve such objections, if any, as may be asserted by any Governmental Entity with respect to the transactions contemplated by this Agreement or the Ancillary Agreements.

          5.7. Press Releases. Prior to the Closing, each party hereto shall consult with the other party hereto prior to issuing, and shall provide the other party with a reasonable opportunity to review and comment upon, any press release pertaining to this Agreement or the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue any such press release prior to such consultation.

          5.8. Records Retention, Accounting and Tax Support. From and after the Closing Date, upon reasonable notice, Purchaser and Seller agree to furnish or cause to be furnished to each other and their Representatives, employees, counsel and accountants access, during normal business hours, to such information in a readily readable and accessible form (including Materials or other records pertinent to the Company and any of its Subsidiaries); assistance and cooperation relating to the Company and any of its Subsidiaries as is reasonably necessary for financial reporting, loss reporting and accounting matters, the preparation and filing of any Tax Returns, or the defense of any Tax Claim, Converium Third Party Claim or assessment and to meet reporting requirements to any retrocessionaires or any Governmental Entities; provided, however, that such access and cooperation does not unreasonably disrupt the normal operations of Purchaser, Seller or the Company or any of its Subsidiaries. Such cooperation shall include, without limitation, making Employees (and, to the extent reasonably feasible, former Employees) reasonably available on a mutually convenient basis to provide information and explanations of such records and materials. From and after the Closing Date, Purchaser shall cause the Company and each of its Subsidiaries to preserve, maintain and keep, or cause to be preserved, maintained and kept, in a readily readable and accessible form, all Materials and all other original books and records of the Company and each of its Subsidiaries, including all books and records necessary and pertinent to the Company and its Subsidiaries for financial reporting and accounting purposes, the preparation and filing of any Tax Returns, or the defense of any Tax Claim, Converium Third Party Claim or assessment (the “Books and Records”) for the longer of any statute of limitations applicable to any such matters and a period of six (6) years from the Closing Date. During such six-year or longer period, Seller and its Representatives shall, upon reasonable notice and for any reasonable business purpose, have access during normal business hours to examine, inspect and copy such Books and Records. After such six-year or longer period, before the Company or its Subsidiaries shall dispose of any of such Books and Records, the Company or any of its Subsidiaries shall give Seller at least ninety (90) days’ prior written notice of its intention to dispose of such Books and Records and Seller shall be given an opportunity, at its cost and expense, to remove and retain all or any part of such Books and Records as Seller may elect.

          5.9. Tax Matters. (a) Any refund of Taxes with respect to the Company or any of its Subsidiaries that is received with respect to any Pre-6/30 Tax Period shall be for the account of the Seller (other than amounts received in respect of (i) a $919,182 refund receivable from the IRS for utilization of capital loss carryback from 1997 to 1995 or (ii) a $339,472 refund receivable for an overpaid tax balance to the Canadian tax authority). To the extent that the Purchaser or the Company or any of its Subsidiaries receives any such refund of Taxes after the Closing Date with respect to any such Pre-6/30 Tax Period (other than amounts

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received in respect of (i) a $919,182 refund receivable from the IRS for utilization of capital loss carryback from 1997 to 1995 or (ii) a $339,472 refund receivable for an overpaid tax balance to the Canadian tax authority) the amount of such refund of Taxes shall be promptly paid to the Seller. For purposes of this Section 5.9(a) the following shall be considered a refund of Taxes: (i) any payments that the Company or any of its Subsidiaries is entitled to receive pursuant to the ZFS Tax Sharing Agreement and (ii) any reduction in the Tax accrual reflected on the books of the Company and its Subsidiaries with respect to the ZFS Tax Sharing Agreement. For the avoidance of doubt, any special estimated tax payment, as described in Section 847 of the Code (“SETP”), made prior to the Closing by Seller or any refund of SETPs that may be received by Purchaser or the Company or any of its Subsidiaries shall not be considered a refund of Taxes for the purposes of this Agreement.

          (b) Notwithstanding anything else in this Agreement to the contrary, none of the provisions of Article VII shall be interpreted as providing any indemnification with respect to any SETP made prior to the Closing by Seller or any refund of SETPs that may be received by Purchaser, the Company or any of its Subsidiaries.

          (c) Seller shall cooperate with Purchaser in making such elections and taking such other actions as may be requested by Purchaser to allow the Purchaser or the Company or its Subsidiaries to reduce their tax obligations in connection with this Agreement, provided that such requested elections or actions have no Adverse Consequences to the Parent or the Seller or any of its Subsidiaries.

          5.10. Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with the consummation of the transactions contemplated by this Agreement shall be shared equally by Purchaser and Seller when due. Purchaser and Seller will, to the extent require by applicable law, file all necessary Tax Returns and other documentation with respect to all such Taxes, fees and charges.

          5.11. No Section 338 Election. No election under Section 338(g) or Section 338(h)(10) of the Code or similar provision under state, local or foreign law shall be made with regard to the stock of the Company or any of its Subsidiaries.

          5.12. Employee Benefits Matters. From and after the Closing, the Purchaser shall be solely responsible for and shall honor and satisfy all liabilities with respect to (i) the Plans as set forth on Schedule 3.16 and applicable law and (ii) the Recap Employees Obligations. For the avoidance of doubt, and without limiting the generality of the foregoing, such liabilities to be honored and satisfied with respect to the Plans include any amounts due to any Employee or former employee of the Company or any of its Subsidiaries pursuant to the terms of the Annual Incentive Plan, the CRNA Long-Term Incentive Plan and the CRNA Severance Benefits, and any letter agreements received by such Employees or former employees that provide for enhanced benefits under such plans (together, the “Incentive Plans”). In addition, it is understood that any Employees and former employees of the Company or any of its Subsidiaries who hold, on the Closing Date, outstanding equity-based awards under any Plan shall be entitled to exercise such option or receive shares in accordance

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with the terms of the Plans. Any amounts payable pursuant to the terms of the Incentive Plans as a consequence of the transactions described in this Agreement shall be paid by the Purchaser to the eligible Employees and former employees under the Incentive Plans promptly following the Closing Date. Subject to the foregoing, the Purchaser may amend or terminate any of the Plans after the Closing Date in accordance with their terms and applicable law.

          5.13. Guaranteed Reinsurance Contracts. (a) The Purchaser shall indemnify, defend and hold harmless the Guarantor against, and reimburse the Guarantor for, any and all amounts paid, including all Adverse Consequences (as defined below), including punitive, or bad faith damages, arising out of, or in connection with, such Guaranteed Reinsurance Contracts, and shall in any event promptly (and in any event within 10 Business Days following notice from the Guarantor of a claim or payment) reimburse the Guarantor to the extent that (i) any Guarantees are called upon and the Guarantor or its Affiliates make any payment under any Guarantee, (ii) the Guarantor is required to defend or investigate any claims arising out of a Guarantee or (iii) the provisions of Section 5.13(e) are applicable and the Guarantor settles or compromises a Guarantee Claim (as defined below) in accordance with the terms thereof.

          (b) To the extent that any beneficiary under a Guaranteed Reinsurance Novation Contract exercises their right to cause the Guarantor to assume the obligations under any such contract via a novation, in addition to the rights of the Guarantor under Section 5.13(a) above, the Guarantor shall have the option to require the Purchaser to provide a 100% quota share reinsurance cover to the Guarantor substantially in the form of Annex D hereto at no cost to the Guarantor pursuant to which the Purchaser will assume all of the obligations of the Guarantor under any such Guaranteed Reinsurance Novation Contract.

          (c) From and after the Closing Date and until the obligations of the Guarantor in respect of the Guaranteed Reinsurance Contracts have been satisfied or expired, the Purchaser will, and will cause the Company and each of its Subsidiaries to, (i) allow the Seller and its Representatives to have reasonable access to the books, records, Contracts, management and personnel of the Company and each of its Subsidiaries relating to the Guaranteed Reinsurance Contracts and the Reserves related thereto at all reasonable times, upon reasonable notice and in a manner so as not to interfere with the normal operation of the business of the Company and each of its Subsidiaries and (ii) cause the respective officers, employees and Representatives of the Purchaser, the Company and each of its Subsidiaries to cooperate in good faith with the Seller and its Representatives in order to facilitate access to information regarding the Guaranteed Reinsurance Contracts.

          (d) If any beneficiary of a Guarantee shall notify the Guarantor of a claim under a Guarantee (each, a “Guarantee Claim”), then the Guarantor shall promptly and in any event within 10 Business days of receipt thereof notify the Purchaser; provided, however, that failure to provide such written notice on a timely basis shall not release the Purchaser from any of its obligations under this Section 5.13 except to the extent the Purchaser is actually materially prejudiced by such failure. The Purchaser shall, upon receipt of such notice of a Guarantee Claim and upon its irrevocably and unconditionally notifying the Guarantor in writing that it shall indemnify the Guarantor in respect of such matter for all Adverse Consequences, including any punitive or bad faith damages related thereto, be entitled to participate in or, at the

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Purchaser’s option, assume at its own expense the defense, appeal or settlement of such Guarantee Claim with respect to which the indemnity under this Section 5.13 has been invoked with counsel of its own choosing (who shall be reasonably satisfactory to the Guarantor); provided, however, that if the Purchaser assumes the defense, appeal or settlement of such Guarantee Claim, (i) the Guarantor shall cooperate at the expense of the Purchaser with the Purchaser in connection with the defense, appeal or settlement of any such Guarantee Claim including contesting such Guarantee Claim or making any counterclaim against the Person asserting such Guarantee Claim and (ii) the Purchaser shall reimburse the Guarantor for such expenses as they are incurred (within 30 days of invoicing therefor) and provided, further, that the Guarantor is hereby authorized prior to the date on which its receives written notice from the Purchaser that it intends to assume the defense, appeal or settlement of such Guarantee Claim, to file any motion, answer or other pleading and take such other action which it shall reasonably deem necessary to protect its interest until the date on which the Guarantor receives such notice from the Purchaser.

          (e) In the event that (i) the Purchaser fails to assume the defense, appeal or settlement of such Guarantee Claim within twenty (20) days after receipt of notice thereof from the Guarantor or (ii) the Purchaser fails to make any reimbursement payment to the Guarantor due hereunder on the date such payment is due, the Guarantor shall have the right to undertake the defense or appeal of or settle or compromise such Guarantee Claim on behalf of, and at the expense and risk of, the Purchaser.

          (f) Except as set forth in Section 5.13(e) or as required by a final non-appealable order of an arbitration panel or court, no claim or demand under a Guarantee may be settled by the Guarantor without the consent of the Purchaser, which consent shall not be unreasonably delayed or withheld. No Guarantee Claim or demand under any Guarantee may be settled by the Purchaser without the consent of the Guarantor, unless such settlement (i) includes an unconditional release of the Guarantor from all liability on claims that are the subject of the Guarantee and (ii) does not include any statement as to admission of fault, culpability or a failure to act by or on behalf of the Guarantor or any Affiliates thereof.

          5.14. Litigation Cooperation. (a) From and after the Closing Date, the Purchaser shall cause the Company and each of its Subsidiaries to actively and fully cooperate, engage in communications and share, exchange and jointly create documents, information, and analyses in connection with, and in order to enable Seller to respond to, Converium Third Party Claims. Such cooperation shall include, without limitation, (i) the provision to the Seller of all records and information relating to the Company or its Subsidiaries, as the case may be, concerning Converium Third Party Claims as requested by the Seller, (ii) making Employees (and, to the extent reasonably feasible, former Employees) reasonably available on a mutually convenient basis to provide information concerning Converium Third Party Claims and explanation of any Materials provided hereunder, regardless of whether any conflict of interest exists between or among the parties hereto with respect to any Converium Third Party Claim, (iii) making Employees (and, to the extent reasonably feasible, former Employees) reasonably available on a mutually convenient basis for purposes of investigating any Converium Third Party Claim, as well as the preparation of any work in connection with any Converium Third Party Claims (iv) making Employees (and, to the extent reasonably feasible, former Employees) available to provide testimony at a

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deposition, trial or other proceeding concerning any Converium Third Party Claim, (v) providing Seller with access to Materials, documents, emails and data residing with or in the possession, custody or control of the Company, its Subsidiaries or Employees (and to the extent reasonably feasible, former Employees) relating to any Converium Third Party Claim and (vi) consultation and coordination regarding Seller’s defense or prosecution of any Converium Third Party Claim. To the extent that the Seller, the Company and any of its Subsidiaries are parties to the same Converium Third Party Claim, the appropriate parties shall consult as to strategy and seek to coordinate their actions.

          (b) From and after the Closing Date, the Seller and each of its Subsidiaries shall actively and fully cooperate, engage in communications and share, exchange and jointly create documents, information, and analyses in connection with, and in order to enable Company or any of its Subsidiaries to respond to any Company Claim. Such cooperation shall include, without limitation, (i) the provision to the Company of all records and information relating to the Company or its Subsidiaries in the possession of the Seller or any of its Subsidiaries (other than the Company and its Subsidiaries) concerning a Company Claim as requested by the Company, (ii) making employees (and, to the extent reasonably feasible, former employees) of the Seller reasonably available on a mutually convenient basis to provide information concerning a Company Claim and explanation of any Company Materials provided hereunder, regardless of whether any conflict of interest exists between or among the parties hereto with respect to any Company Claim, (iii) making employees (and, to the extent reasonably feasible, former employees) of the Seller or any of its Subsidiaries at the time of the request reasonably available on a mutually convenient basis for purposes of investigating any such Company Claim, (iv) making employees of the Seller and its Subsidiaries (and, to the extent reasonably feasible, former employees) available to provide testimony at a deposition, trial or other proceeding concerning any such Company Claim, (v) providing the Company with access to Company Materials, documents, emails and data residing with or in the possession, custody or control of the Seller, its Subsidiaries or employees (and, to the extent reasonably feasible, former employees) relating to any Company Claim and (vi) consultation and coordination regarding the Company’s defense or prosecution of any Company Claim. To the extent that the Seller and any of its Subsidiaries are parties to the same Company Claim, the appropriate parties shall consult as to strategy and seek to coordinate their actions.

          (c) The Seller and the Company and each of its Subsidiaries each agree, on behalf of itself and its respective counsel and other Representatives, that any communications or Company Materials or Materials shared between the parties or their counsel or other Representatives regarding any Converium Third Party Claims or Company Claim, without regard to whether such communications, Company Material or Material were shared prior to the Closing Date, are intended to be and shall be deemed strictly confidential and protected to the fullest extent permitted by law, including pursuant to the attorney-client privileges, the work product doctrine, the joint defense privilege, the self critical analysis privilege and any other privilege or immunity available under applicable laws, whether or not so identified or marked. The protection from disclosure includes, but is not limited to, disclosure in litigation relating to Converium Third Party Claims, Company Claims or any other Actions.

          (d) The parties agree that if any attempt is made by any third party to secure or obtain Materials or Company Materials, the other party shall be promptly notified and shall be

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given copies of any writings or documents, including subpoenas, summonses and the like, which relate to the attempt by the third party to obtain the information. The parties further agree that if a request is made, whether formally or informally, by any Person or entity (whether a Governmental Entity or otherwise) for the Company or its Subsidiaries to make available, for any purpose, including but not limited to interviews or taking of testimony, any current or former employees, any current or former employees of Seller or any of its Subsidiaries, Materials, Company Materials records and information relating to Converium Third Party Claims or Company Claims (or any other matters in which Seller, Company or any of their respective Affiliates has a continuing interest), neither the Seller, Purchaser nor their respective Subsidiaries may disclose any of the foregoing or make any Employees or employees of Seller or any of its Subsidiaries available, unless and until (i) the person proposing to make the disclosure notifies the parties to this Agreement of such request (such notice to include the provision of copies of any writings or documents, including subpoenas, summonses and the like, which relate to the request by such Person or entity (whether a Governmental Entity or otherwise) to obtain such information) and (ii) the parties receiving such notice are given ample time to take all reasonable steps necessary to prevent or limit (x) disclosure of any Materials, Company Materials or records or information or (y) the making available of any Employees and employees of Seller or any of its Subsidiaries. The parties agree that nothing herein shall require any party hereto to take any action as may be prohibited or refrain from taking any action as may be required by law.

          (e) Any Materials created or produced by the Company or its Subsidiaries shall only be used in connection with the Converium Third Party Claims to which they relate. The Materials shall remain the property of the Company or its Subsidiaries, as the case may be, and, following the conclusion of Converium Third Party Claims, shall be destroyed or returned to the Company or its Subsidiaries, as the case may be, upon twenty (20) days’ written notice. Any Company Materials created or produced by the Seller or its Subsidiaries shall only be used in connection with Company Claims to which they relate. The Company Materials shall remain the property of the Seller or its Subsidiaries, as the case may be, and, following the conclusion of Company Claims, shall be destroyed or returned to the Seller or its Subsidiaries, as the case may be, upon twenty (20) days’ written notice.

          (f) From and after the Closing Date, the Purchaser shall cause the Company and each of its Subsidiaries to retain and preserve in a readily readable and accessible form any and all Materials (including any documents, emails or other data) and any records and information relating to any Converium Third Party Claims, including any of the foregoing in the possession of any Employees. From and after the Closing Date, the Seller and each of its Subsidiaries shall retain and preserve in a readily readable and accessible form any and all Company Materials (including any documents, emails or other data) and any records and information relating to any Company Claims, including any of the foregoing in the possession of any employees of Seller or any of its Subsidiaries.

          (g) The parties hereto and their respective counsel believe that (i) there is a mutuality of interest with respect to matters indemnifiable hereunder (“Common Interest Matters”) and (ii) communications between or among the parties’ counsel and communications involving the parties in the presence of such counsel regarding Common Interest Matters have been and will continue to be essential to the provision of legal advice regarding Common Interest Matters and the continued effective representation of the parties in connection with Common

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Interest Matters, whether or not litigation has been or may be commenced regarding any Common Interest Matters. Accordingly, each party hereto agrees, on behalf of itself and its respective counsel and other Representatives, that this Agreement and any other communications between the parties or their counsel regarding Common Interest Matters are intended to be strictly confidential and protected to the fullest extent by the attorney-client privileges and work product doctrine, whether or not so identified or marked. The protection from disclosure includes, but is not limited to, disclosure in litigation relating to Common Interest Matters. Notwithstanding anything to the contrary herein, nothing shall prevent the disclosure of the existence of this Agreement or the terms hereof to the extent that such disclosure is required by applicable law.

          (h) Each party acknowledges that, as a result of this Agreement, legal counsel for each of the other parties may have access to confidential information of such party in the form of Materials or Company Materials. Each party hereby acknowledges and agrees that nothing in this Agreement and no sharing of information with such legal counsel pursuant to the terms of this Agreement shall be deemed to create an attorney-client relationship between any attorney and anyone other than the client of that attorney. Each party hereby represents and agrees that it will not seek to disqualify counsel for any other party from continuing to represent such other party in any subsequent proceedings, whether or not that other party’s interests become adverse to it, on the basis of access to information obtained hereunder.

          5.15. Rights to the Converium Name and Converium Marks. (a) As of the Closing Date, Purchaser, the Company, its Subsidiaries and their respective Affiliates shall not use in any manner any trademarks of Seller or any of Seller’s Affiliates, including “Converium” (in block letters or otherwise) or the Converium monogram, either alone or in combination with other words, phrases, symbols, or devices, or any other trademarks confusingly similar to or embodying any of the foregoing (all of the foregoing collectively, the “Converium Name and Converium Marks”), except as provided for in the Transitional Trademark License Agreement. As promptly as practicable, but in no event more than the term of the Transactional Trademark License Agreement, Purchaser shall cause the Company and each of its Subsidiaries (i) to cease using in any manner the Converium Name and Converium Marks, (ii) to make all filings with the appropriate Governmental Entity (including without limitation, filing amendments to the applicable charters and by-laws and filing appropriate amendments to policy form filings) to cause the Company and each of its Subsidiaries to change any of their names that contain any of the Converium Name and Converium Marks to a new corporate name that does not include the Converium Name and Converium Marks; (iii) to cease to use in any form whatsoever any of the Converium Name and Converium Marks; and (iv) to re-label, destroy or exhaust all materials bearing the Converium Name and Converium Marks, including signage, advertising, promotional materials, electronic materials, collateral goods, stationery, business cards, websites, and other materials.

          (b) Purchaser acknowledges and agrees that Purchaser, the Company, its Subsidiaries or their respective Affiliates are not acquiring any (i) ownership interest in the Converium Name and Converium Marks or (ii) any other rights to the Converium Name and Converium Marks. The Purchaser, acting on behalf of itself, the Company and each of its Subsidiaries and their respective Affiliates hereby assigns and relinquishes to Seller or its

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designee any and all rights that the Purchaser, the Company and its Subsidiaries may heretofore have had to use the Converium Name and Converium Marks in any trade or business or otherwise. Purchaser, the Company, its Subsidiaries and their respective Affiliates agree not to contest the ownership or validity of any rights of Seller or any of its Affiliates in, or related to, the Converium Name and Converium Marks.

          (c) Purchaser agrees that after the Closing Date, it shall procure that none of the Purchaser, the Company, its Subsidiaries and their respective Affiliates will expressly, or by implication, do business as, or represent themselves as controlled by, Seller or any of Seller’s Affiliates. Notwithstanding the foregoing, and only upon the prior written Consent of Seller, Purchaser, the Company, its Subsidiaries or their respective Affiliates may use the Converium Name and Converium Marks after the Closing Date for the limited purpose of historical identification in materials not designed as advertising or solicitation in the manner and form agreed upon in writing by Seller.

          5.16. Proprietary and Third Party Software. (a) All rights in and to any software, including without limitation, source code, object code and related documentation, that was created, conceived developed or acquired, whether jointly or individually, by the Seller or any of its Affiliates (but excluding any third party software licensed by the Seller or any of the Seller’s Affiliates) prior to the Closing Date shall belong solely to the Seller and shall be proprietary to the Seller (“Proprietary Software”). The Company and each of its Subsidiaries are hereby granted a perpetual, non-exclusive, worldwide, non-sublicensable, royalty-free license to use the Proprietary Software identified on Schedule 5.16(a), used by CRNA and CINA in the operation of their respective businesses as of the Closing Date solely in object code for internal business purposes. CRNA and its Subsidiaries shall be entitled to receive related maintenance and support services for the Proprietary Software from the Seller and its Affiliates solely for a transition period as set forth in the CRNA Transition Services Agreement. It is expressly understood by the Purchaser that the Seller, the Company and its Subsidiaries make no representations or warranties, whether express or implied, with respect to the Proprietary Software and the license granted herein. It is further understood that except as expressly provided in the CRNA Transition Services Agreement and subject to the limitations set forth therein, the Seller and its Affiliates are under no obligation to render any support or maintenance services with respect to the Proprietary Software, which support and maintenance services shall cease upon termination of the CRNA Transition Services Agreement. From and after the Closing Date, the Purchaser shall cause the Company and each of its Subsidiaries to treat all copies of such Proprietary Software as the confidential and proprietary property of the Seller. The Seller will make available a copy of the then current version of the source code of the Proprietary Software existing as of the Closing Date to the Purchaser and the Purchaser may copy, alter, reproduce, create derivative works and modify the source code for the Proprietary Software solely as required to operate the Proprietary Software and enjoy the benefits of the license granted herein. The Company and its Subsidiaries shall not be entitled to any updates to any source code for the Proprietary Software.

          (b) Purchaser acknowledges and agrees that Purchaser, the Company and each of its Subsidiaries and their respective Affiliates are not acquiring any ownership interest or any other rights, in whole or in part, in the Proprietary Software. The Purchaser, acting on behalf of

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itself, the Company and each of its Subsidiaries and their respective Affiliates hereby assigns, transfers, quit-claims and relinquishes to the Seller or its designee all right, title and interest the Purchaser, the Company and each of its Subsidiaries and their respective Affiliates may heretofore have had in and to the Proprietary Software, including ownership interests in the Proprietary Software. Purchaser shall cause the Company and each of its Subsidiaries and their respective Affiliates to execute such other or additional instruments of transfer or conveyance in respect of the Proprietary Software as are reasonably requested by Seller to give full effect to and to perfect the ownership and proprietary rights of Seller in and to the Proprietary Software. Purchaser, the Company and each of its Subsidiaries and their respective Affiliates agree not to contest the ownership or validity of any rights of the Seller or any of its Affiliates in, or related to, the Proprietary Software.

          (c) From and after the Closing Date, the Company and its Subsidiaries shall not be entitled to use of any third party software and related services used by the Company and its Subsidiaries prior to the Closing Date unless provisions to continue use and receive services have been made pursuant to the CRNA Transition Services Agreement, subject however to the restrictions provided by the terms of the applicable license agreements.

ARTICLE VI.

CONDITIONS TO CLOSING

          6.1. Conditions to the Obligation of the Purchaser to Close. The obligation of the Purchaser to purchase the Shares at the Closing shall be subject to the satisfaction of the following conditions at or prior to the Closing (unless waived by the Purchaser):

          (a) Representations, Warranties and Covenants. The representations and warranties of the Seller contained in this Agreement shall be true and correct in all material respects at and as of the date hereof and at and as of the Closing Date, as if made at and as of such time (except to the extent in either case that any such representations or warranties speak as of another date, in which case such representations and warranties shall be true and correct in all material respects at and as of the date specified therein). The Seller shall have performed and complied in all material respects with all covenants and agreements required to be performed or complied with by the Seller on or prior to the Closing Date.

          (b) Consents. All Consents set forth in Schedule 6.1(b) shall have been duly obtained, made or given and shall be in full force and effect.

          (c) Ancillary Agreements. The Ancillary Agreements shall have been executed and delivered by the Seller or the Affiliate of Seller party thereto and shall be in full force and effect.

          (d) No Proceedings. No injunction, order, decree or judgment shall have been issued by any Governmental Entity of competent jurisdiction and be in effect, and no statute, rule or regulation shall have been enacted or promulgated by any Governmental Entity and be in effect, which in each case restrains or prohibits the consummation of the purchase and sale of the Shares. No action or proceeding before any court or regulatory authority, domestic or foreign,

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shall have been instituted or threatened by any Governmental Entity which seeks to prevent or delay the consummation of the purchase and sale of the Shares.

          (e) HSR Act. The required waiting period applicable to the purchase and sale of the Shares under the HSR Act shall have expired or been earlier terminated.

          (f) Certificates. The Seller shall have delivered to the Purchaser a certificate dated the Closing Date, signed by an executive officer thereof, certifying as to the fulfillment of the conditions set forth in Section 6.1(a).

          (g) Surplus Note. Parent shall have caused the Surplus Note to be assigned to the Company or, at the Purchaser’s direction, to any other Person designated by the Purchaser no later than 30 days after the date hereof so long as such assignment to any Person other than the Company does not result in any Adverse Consequences to the Parent, Seller or the Company (if such Adverse Consequences to the Company would have Adverse Consequences to the Parent or the Seller by operation of the indemnity for Pre-6/30 Taxes Section 7.2(b) hereof or otherwise result in Adverse Consequences to the Seller).

          (h) Reinsurance Contract Commutation Payments. The Reinsurance Contracts set forth on Schedule 6.1(h) shall have been commuted on terms such that the aggregate cash payment made to CRNA pursuant to the Commutation (the “Commutation Payment”) is less than the Target Cash Payment by no more than $250,000. To the extent that the Commutation Payment is less than the Target Cash Payment by more than $250,000, the Seller, in its sole discretion, may require the Purchaser to waive the condition set forth in the first sentence of this Section 6.1(h) in which case the Closing shall occur at the time specified in Section 2.2. hereof and the Purchase Price shall be reduced dollar for dollar by the amount that the Target Cash Payment exceeds the Commutation Payment. For purposes of this Section 6.1(h), “Target Cash Payment” means (x) $133,630,000 minus (y) the amount of any cash payments made to CRNA under the Reinsurance Contracts set forth on Schedule 6.1(h) after June 30, 2006 and prior to consummation of the Commutations thereof.

          6.2. Conditions to the Obligation of the Seller to Close. The obligations of the Seller to sell the Shares at the Closing shall be subject to the satisfaction of the following conditions at or prior to the Closing (unless waived by the Seller):

          (a) Representations, Warranties and Covenants. The representations and warranties of the Purchaser contained in this Agreement shall be true and correct in all material respects at and as of the date hereof and at and as of the Closing Date, as if made at and as of such time (except to the extent in either case that any such representations or warranties speak as of another date, in which case such representations and warranties shall be true and correct in all material respects at and as of the date specified therein). The Purchaser shall have performed and complied in all material respects with all covenants and agreements required to be performed or complied with by the Seller on or prior to the Closing Date.

          (b) Consents. All of the Consents set forth in Schedule 6.2 shall have been duly obtained, made or given and shall be in full force and effect.

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          (c) Ancillary Agreements. The Ancillary Agreements shall have been executed and delivered by the Purchaser and the Ancillary Agreements shall be in full force and effect.

          (d) NICO Commutation Agreement. Seller and the Purchaser shall have entered into the agreement to commute the 2004 Aggregate Stop Loss Agreement, by and among CRNA, CINA, Seller and the Purchaser (the “NICO Commutation Agreement”), substantially in the form attached hereto as Annex C and in form and substance reasonably satisfactory to the Seller and the NICO Commutation Agreement shall be in full force and effect .

          (e) Restructuring Transactions; Permitted Commutations. The Restructuring Transactions and the Permitted Commutations shall have been consummated on terms reasonably satisfactory to the Seller.

          (f) Agribusiness IP Rights. Arrangements on terms satisfactory to Seller shall have been made to assign and transfer all right, title and interest in and to the Agribusiness IP Rights to Seller.

          (g) No Proceedings. No injunction, order, decree or judgment shall have been issued by any Governmental Entity of competent jurisdiction and be in effect, and no statute, rule or regulation shall have been enacted or promulgated by any Governmental Entity and be in effect, which in each case restrains or prohibits the consummation of the purchase and sale of the Shares. No action or proceeding before any court or regulatory authority, domestic or foreign, shall have been instituted or threatened by any Governmental Entity which seeks to prevent or delay the consummation of the purchase and sale of the Shares.

          (h) HSR Act. The required waiting period applicable to the purchase and sale of the Shares under the HSR Act shall have expired or been earlier terminated.

          (i) Certificates. The Purchaser shall have delivered to the Seller a certificate dated the Closing Date, signed by an executive officer thereof, certifying as to the fulfillment of the conditions set forth in Section 6.2(a).

          6.3. Waiver of Closing Conditions. The parties acknowledge and agree that if Purchaser or Seller has knowledge of a failure of any condition set forth in Section 6.1 or 6.2, respectively, or of any breach by the other party of any representation, warranty or covenant contained in this Agreement or the Ancillary Agreements, as the case may be, and such party proceeds with the Closing, such party shall be deemed to have waived such condition or breach and such party and its successors, assigns and Affiliates shall not be entitled to be indemnified pursuant to Article VII to sue for damages or to assert any other right or remedy for any losses arising from any matters relating to such condition or breach, notwithstanding anything to the contrary contained herein or in any certificate delivered pursuant hereto.

          6.4. Frustration of Closing Conditions. Neither Purchaser nor Seller may rely on the failure of any condition set forth in Section 6.1 or 6.2, respectively, to be satisfied if such failure was caused by such party’s failure to act in good faith or to use its reasonable best efforts to cause the Closing to occur.

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ARTICLE VII.

INDEMNIFICATION

          7.1. No Survival of Representations and Warranties. No representations, warranties, covenants and agreements of the parties contained in this Agreement shall survive the Closing, except for the agreements set forth in Sections 3.23 (No Other Representations or Warranties), 4.9 (No Other Representations or Warranties), 5.5 (Director and Officer Indemnification), 5.8 (Records Retention, Accounting and Tax Support), 5.9 (Tax Matters), 5.10 (Transfer Taxes), 5.11 (No Section 338 Election), 5.12 (Employee Benefits Matters), 5.13 (Guaranteed Reinsurance Contracts), 5.14 (Litigation Cooperation), 5.15 (Rights to the Converium Name and Marks) and 5.16 (Proprietary and Third Party Software), Article VII (Indemnification) and Article IX (Miscellaneous).

          7.2. Indemnification of the Purchaser. Subject to the limitations set forth in Section 7.1 above, the Seller agrees to indemnify the Purchaser and its successors, permitted assigns, directors, officers, employees and Affiliates (“Purchaser Indemnitees”) from and against all liabilities, losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses (“Adverse Consequences”), arising out of or resulting from (a) civil damages, litigation costs, fines or penalties resulting from any investigation by any Governmental Entity with respect to the accounting treatment or financial reporting of (A) finite or non-traditional reinsurance in which Subsidiaries of the Parent participated, or (B) the MBIA reinsurance program set forth in the Schedules hereto and the resultant restatement of the Parent’s financial statements, in the case of (A) and (B) to the extent such investigations relate to the conduct of such business prior to the Closing; provided, however, that the Seller shall have no obligation to indemnify the Purchaser for (i) any Adverse Consequences arising out of, or resulting from the conduct of the Purchaser or any of its Affiliates or (ii) any Adverse Consequences arising out of or resulting from actions required or permitted to be taken pursuant to this Agreement or taken with the Purchaser’s consent and (b) Pre-6/30 Taxes.

          7.3. Indemnification of the Seller. The Purchaser agrees to indemnify the Seller and its successors, permitted assigns, directors, officers, employees and Affiliates (“Seller Indemnitees”) from and against all Adverse Consequences arising out of or resulting from (a) the breach or nonperformance of any covenant or agreement of the Purchaser contained in this Agreement requiring performance after the Closing, (b) the Senior Notes, (c) the operation of the business of the Company and each of its Subsidiaries following the Closing and (d) the assignment of the Surplus Note to any person other than the Company (including Adverse Consequences to the Company that give rise to Adverse Consequences to the Parent or the Seller as a result of the indemnity for Pre-6/30 Taxes contemplated by Section 7.2(b) or otherwise).

          7.4. Matters Involving Third Parties Other Than Tax Claims. (a) If any third party shall notify any party (the “Indemnified Party”) with respect to any matter (a “Third-Party Claim”) which may give rise to a claim for indemnification against any other party (the “Indemnifying Party”) under this Article VII (other than claims under Guarantees, which shall be the subject of Section 5.13 hereof), then the Indemnified Party shall promptly (and in any

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event within five (5) Business Days after receiving notice of the Third-Party Claim) notify the Indemnifying Party thereof in reasonable detail in writing; provided, however that the failure to provide such written notice on a timely basis shall not release the Indemnifying Party from any of its obligations under this Artcile VII except (i) to the extent the Indemnifying Party is actually materially required thereby and (ii) that the Indemnifying Party shall not be liable for any expenses incurred by the Indemnified Party during the period in which the Indemnified Party failed to give such notice. Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, promptly after the Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim.

          (b) The Indemnifying Party upon its irrevocably and unconditionally notifying the Indemnified Party in writing that it shall indemnify the Indemnified Party in respect of such matter for all Adverse Consequences, shall be entitled to participate in or, at the Indemnifying Party’s option, assume at its own expense the defense, appeal or settlement of such Third-Party Claim with respect to which such indemnity has been invoked with counsel of its own choosing (who shall be reasonably satisfactory to the Indemnified Party), and the Indemnified Party shall fully cooperate with the Indemnifying Party in connection therewith including contesting such Third-Party Claim or making any counterclaim against the Person asserting such Third-Party Claim. Such cooperation shall include the retention and (upon the Indemnifying Party’s request) the provision to the Indemnifying Party of records and information which are reasonably relevant to such Third-Party Claim, and making employees or employees of Seller or its Affiliates available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Should the Indemnifying Party so elect to assume the defense of a Third-Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof.

          (c) Whether or not the Indemnifying Party shall have assumed the defense of a Third-Party Claim, the Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, such Third-Party Claim without the Indemnifying Party’s prior written consent (which consent shall not be unreasonably withheld).

          7.5. Matters Involving Tax Claims. If a Tax Claim is made or threatened by any Taxing Authority that, if successful, may result in an indemnity payment under Section 7.2, the Purchaser shall promptly (and in any event within five (5) Business Days after receiving notice of such Tax Claim) notify the Seller, stating the nature and basis of such claim and the amount thereof, to the extent known. The Seller will have the right, at its option, upon timely notice to the Purchaser, to assume at its own expense control of any audit or other defense of any Tax Claim with its own counsel (who shall be reasonably satisfactory to the Purchaser). The Seller’s right to control a Tax Claim will be limited to issues in respect of which amounts in dispute would be paid by the Seller or for which the Seller would be liable pursuant to Section 7.2. Costs of such Tax Claims are to be borne by the Seller unless the Tax Claim relates to a Taxable Period which begins before and ends after June 30, 2006, in which event such costs shall be fairly apportioned. The Purchaser and each of the Company and its Subsidiaries at their own expense shall cooperate with the Seller in contesting any Tax Claim, which cooperation shall include the retention and, upon the Seller’s request, the

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provision of records and information that are reasonably relevant to such Tax Claim and making Employees available on a mutually convenient basis to provide additional information or explanation of any material provided hereunder. Notwithstanding the foregoing, the Seller shall neither consent nor agree to the settlement of any Tax Claim with respect to any liability for Taxes that may affect the liability for any state, federal or foreign income tax of the Company or any of its Subsidiaries or any affiliated group (as defined in section 1504(a) of the Code) of which the Company or any of its Subsidiaries is a member for any Taxable Period beginning after the Closing Date without the prior written consent of the Purchaser and neither the Seller, nor any entity related to the Seller, shall file an amended Tax Return that may increase the liability for Taxes of the Company or its Subsidiaries after the Closing Date without the prior written consent of the Purchaser. The Purchaser and the Seller shall jointly control all proceedings taken in connection with any claims for Taxes relating solely to a Taxable Period of the Company or any of its Subsidiaries which begins before and ends after June 30, 2006 and each party shall bear its own out-of-pocket costs and expenses of the contest and all joint costs and expenses of the contest shall be borne in the same ratio as the applicable proposed Tax would be allocated.

          7.6. Matters Not Involving Third-Party Claims. Any indemnifiable claim that is not a Third-Party Claim shall be asserted by written notice to the Indemnifying Party.

          7.7. Collateral Source Recoveries. The amount of an indemnification payment in respect of an Adverse Consequence required to be made to any Purchaser Indemnitee or Seller Indemnitee hereunder shall be limited to the amount of any Adverse Consequence that remains after deduction therefrom of (i) any Tax benefits to the Indemnified Party as a result of the Adverse Consequence and (ii) any third-party recoveries relating to the Adverse Consequence giving rise to the indemnification claim paid to the Indemnified Party.

          7.8. Cooperation. Purchaser and Seller shall cooperate with each other with respect to resolving any claim or liability with respect to which one party is obligated to indemnify the other party hereunder including by making commercially reasonable efforts to mitigate or resolve any such claim or liability.

          7.9. Termination of Indemnification. The obligations to indemnify and hold harmless a party hereto (a) pursuant to Section 7.2(c) with respect to Pre-6/30 Taxes, shall terminate at the time the applicable statute of limitations with respect to the Tax Liabilities in question expires (giving effect to any extension thereof) and (b) pursuant to the other clauses of Section 7.2 and 7.3, shall not terminate.

          7.10. Exclusive Remedy. The Purchaser and the Seller acknowledge and agree that prior to the Closing, the sole and exclusive remedy of the Purchaser for any breach or inaccuracy of any representation or warranty contained herein shall be refusal to close the purchase and sale of the Shares hereunder and following the Closing and other than in the case of actual fraud and except as expressly provided in the Ancillary Agreements, or the NICO Commutation Agreement, the indemnification provided for in this Article VII shall be the exclusive remedy in any action seeking damages or any other form of relief brought by any party to this Agreement in respect of the transactions contemplated hereby.

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ARTICLE VIII.

TERMINATION

          8.1. Termination of Agreement. This Agreement may be terminated prior to the Closing:

          (a) by either the Purchaser, on the one hand, or by the Seller, on the other hand, upon written notice to the other if, without fault of the terminating party, the Closing shall not have occurred on or before June 30, 2007; provided, however, that if all conditions to the obligations of the Purchaser, on the one hand, and the Seller, on the other hand, to consummate the Closing (as set forth in Article VI hereof), other than obtaining the Insurance Approvals, have then been satisfied, and the Purchaser and/or the Seller are diligently seeking to obtain such outstanding Insurance Approvals, then the right to terminate this Agreement pursuant to this clause (a) shall not be available to any party hereto, and the obligations hereunder of the parties hereto shall be extended, until July 31, 2007;

          (b) at any time by mutual agreement in writing of the parties hereto;

          (c) by the Purchaser if the Seller has breached any representation, warranty, covenant or agreement contained in this Agreement such that the conditions set forth in Section 6.1(a) hereof would not be satisfied as of any date following the date of this Agreement; provided, however, that the Purchaser may not terminate this Agreement pursuant to this Section 8.1(c) unless any such breach has not been cured within sixty (60) days after written notice thereof by the Purchaser to the Seller informing the Seller of such breach;

          (d) by the Seller if the Purchaser has breached any representation, warranty, covenant or agreement contained in this Agreement such that the conditions set forth in Section 6.2(a) hereof would not be satisfied as of any date following the date of this Agreement; provided, however, that the Seller may not terminate this Agreement pursuant to this Section 8.1(d) unless any such breach has not been cured within sixty (60) days after written notice thereof by the Seller to the Purchaser informing the Purchaser of such breach; or

          (e) by the Seller or the Purchaser if: (i) there shall be a final, non-appealable order of a federal, state or foreign court in effect preventing consummation of the transactions contemplated hereby; or (ii) there shall be any final action taken, or any final statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the transactions contemplated hereby by any Governmental Entity that would make consummation of the transactions contemplated hereby illegal;

provided, however, that the right to terminate this Agreement under this Section 8.1(a), (b), (c), (d) or (e) shall not be available to any party if it is then in breach in any material respect of any provision or any obligation under this Agreement.

          8.2. Effect of Termination. Except as provided in the following sentence, in the event of the termination of this Agreement pursuant to Section 8.1, this Agreement shall thereafter become void and have no effect, and no party hereto shall have any liability or obligation to any other party hereto in respect of this Agreement, except that the provisions of

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Section 5.2 (Access; Confidentiality), Section 5.7 (Press Releases), Article IX (Miscellaneous) and this Section 8.2 shall survive any such termination. Nothing herein shall relieve any party from liability for any breach of any of its covenants or agreements or willful breach of its representations or warranties contained in this Agreement prior to termination of this Agreement.

ARTICLE IX.

MISCELLANEOUS

          9.1. Notices. Any notices and other communications required to be given pursuant to this Agreement shall be in writing and shall be effective upon delivery by hand or upon receipt if sent by certified or registered mail (postage prepaid and return receipt requested) or by a nationally recognized overnight courier service (appropriately marked for overnight delivery) or upon transmission if sent by telex or facsimile (with request for immediate confirmation of receipt in a manner customary for communications of such respective type and with physical delivery of the communication being made by one of the other means specified in this Section 9.1 as promptly as practicable thereafter). Notices are to be addressed as follows:

          (a)     If to the Seller to:

Converium AG
General Guisan-Quai 26
CH-8022 Zurich
Switzerland
Attn: Christian Felderer, Esq.
Telecopy No.: +41 44 639 9066

with a copy to:

Willkie Farr & Gallagher LLP
1 Angel Court
London EC2R 7HJ
England
Attn: Gregory B. Astrachan, Esq.
Telecopy No.: +44 207 696 5455

          (b)     If to the Purchaser to:

Berkshire Hathaway Group
100 First Stamford Place
Stamford, CT 06902
Attn: General Counsel

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with a copy to:

National Indemnity Company
3024 Harney Street
Omaha, NE 68131
Attn: President

or to such other respective addresses as any of the parties hereto shall designate to the others by like notice, provided that notice of a change of address shall be effective only upon receipt thereof.

          9.2. Fees and Expenses. Except as provided herein, each of the parties hereto shall pay its own respective fees and expenses (including, without limitation, the fees of any other attorneys, accountants, investment bankers or other Representatives) incurred in connection with this Agreement and the transactions contemplated hereby, whether or not such transactions are consummated.

          9.3. Entire Agreement; Waivers and Amendments. This Agreement (including the Annexes and Schedules hereto and the documents and instruments referred to herein) contains the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes all prior written or oral agreements and understandings with respect thereto. This Agreement may be amended or modified, and the terms hereof may be waived, only by a writing signed by all parties hereto or, in the case of a waiver, by the party entitled to the benefit of the terms being waived.

          9.4. Assignment; Binding Effect. This Agreement may not be assigned or delegated, in whole or in part, by any party hereto without the prior written consent of the other party hereto. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

          9.5. No Third-Party Beneficiaries. This Agreement is for the benefit of the parties hereto and is not intended to confer upon any other Person any rights or remedies hereunder, except as provided in Section 5.5 with respect to Director and Officer Indemnified Parties and Section 5.12 with respect to the Employees and former Employees of the Company and its Subsidiaries.

          9.6. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the principles of conflicts of law thereof.

          9.7. Consent to Jurisdiction. Except as otherwise expressly provided in this Agreement, the parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement and the Ancillary Agreements or the transactions contemplated hereby and thereby shall be brought in the United States District Court for the Southern District of New York or any New York State court sitting in Manhattan, and each of the parties hereby consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts) in any such suit, action or

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proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Nothing in this Agreement shall be deemed to waive the right of any person to remove any action brought in a state court to a United States District Court to the extent permitted by the laws of the United States of America. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in this Section 9.7 shall be deemed effective service of process on such party.

          9.8. Waiver of Jury Trial and Pre-Answer Security. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY COVENANTS TO THE OTHER THAT: (i) IT WILL NOT SEEK PRE-ANSWER SECURITY FROM THE OTHER UNDER N. Y. S. INSURANCE LAW SECTION 1213; AND (ii) THAT IT WILL NOT SERVE THE SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK AS AGENT FOR THE SERVICE OF PROCESS. THE PARTIES AGREE THAT SHOULD A PARTY BREACH THE FOREGOING COVENANT, IN ADDITION TO ANY OTHER REMEDY AVAILABLE THE NON-BREACHING PARTY SHALL NOT BE SUBJECT TO SECTION 9.7 OF THIS AGREEMENT.

          9.9. Interpretation. This Agreement is the result of arms-length negotiations between the parties hereto and has been prepared jointly by the parties. In applying and interpreting the provisions of this Agreement, there shall be no presumption that the Agreement was prepared by any one party or that the Agreement shall be construed in favor of or against any one party. It is understood and agreed that the specification of any dollar amount in the representations and warranties contained in this Agreement or the inclusion of any specific item in the Schedules hereto is not intended to imply that such amounts or higher or lower amounts, or the items so included or other items, are or are not material, and neither party shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in the Schedules hereto in any dispute or controversy between the parties as to whether any obligation, item or matter not described herein or included in the Schedules is or is not material for purposes of this Agreement. For the purposes of this Agreement, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be constructed to refer to this Agreement as a whole (including all of the Annexes) and not any particular provision of this Agreement, and Article, Section, paragraph and Annexes references are to the Articles, Sections, paragraphs and Annexes to this Agreement unless otherwise specified, (iii) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation” unless the context otherwise requires or unless otherwise specified, (iv) the word “or” shall not be exclusive, (v) provisions shall apply, when appropriate, to successive events and transactions, (vi) “reasonable best efforts” shall not require the expenditure of a material amount of funds by any party, waiver of any material rights or any action or omission

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that would be a breach of this Agreement, and (vii) all references to any period of days shall be deemed to be to the relevant number of calendar days unless otherwise specified.

          9.10. Variation in Pronouns. All pronouns and any variations thereof refer to the masculine, feminine or neuter, single or plural, as the context may require.

          9.11. Captions. The Article and Section headings in this Agreement are inserted for convenience of reference only, and shall not affect the interpretation of this Agreement.

          9.12. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

          9.13. Extension; Waiver. At any time prior to the Closing Date, either party may (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement of the other party or (c) waive compliance with any of the agreements or conditions contained in this Agreement of the other party. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. No delay on the part of any party in exercising any right hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right nor any single or partial exercise of any such right preclude any further exercise thereof or the exercise of any other such right. Notwithstanding the foregoing, the parties acknowledge and agree the if the Purchaser or the Seller has knowledge of a failure of any condition set forth in Article VI or of any breach by the other party of any representation, warranty or covenant contained in this Agreement and such party proceeds with the Closing, such party shall be deemed to have waived such condition or breach and such party and its successors, assigns and Affiliates shall not be entitled to be indemnified pursuant to Article VII, to sue for damages or to assert any other right or remedy for any losses arising from any matters relating to such condition or breach.

          9.14. No Representation Regarding Reserves. Purchaser acknowledges that the Seller has delivered or made available to the Purchaser the Tillinghast Report. Notwithstanding any other provision of this Agreement or any of the Ancillary Agreements, Seller makes no express or implied representation, warranty or covenant that (i) the Reserves are, or will be, adequate or sufficient, or (ii) with respect to any “line item” in the Closing Financial Data that is impacted as a result of any inadequacy or insufficiency of the Reserves. Purchaser agrees that it shall not affect a claim against Seller under any provision of this Agreement or the Ancillary Agreements for Adverse Consequences suffered by it or any of its Affiliates arising out of the inadequacy or insufficiency of the Reserves.

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          IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the date first written above.

NATIONAL INDEMNITY COMPANY
By:	/s/ Brian Snover
	Name:	Brian Snover
	Title:	Vice President

CONVERIUM AG
By:	/s/ Paolo De Martin
	Name:	Paolo De Martin
	Title:	Chief Financial Officer

By:	/s/ Christian Felderer
	Name:	Christian Felderer
	Title:	General Legal Counsel

[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]

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EX-4.48

Exhibit 4.48

Execution Version

Guarantee Request and Reimbursement Agreement

between

Converium AG, Zurich, Switzerland
(hereinafter referred to as the “Borrower”)

and

Bayerische Hypo- und Vereinsbank Aktiengesellschaft, Munich, Germany
(hereinafter referred to as “Bank”)

Whereas:

A.	The Bank is prepared to provide financing to the Borrower by issuing guarantees, standby letters of credit and sureties “on first demand” in accordance with the terms of this Agreement.
B.	The total aggregate amount of all guarantees to be issued by the Bank under this Agreement shall not exceed USD 250,000,000 (in words: US dollars two-hundred and fifty million) or its equivalent at any time.

Now therefore, the Borrower and the Bank agree as follows:

1. Definitions

In this Agreement the following terms shall have the following meaning:

“Agreement” means this Guarantee Request and Reimbursement Agreement.

“Availability Expiry Date” has the meaning given to such term in clause 2.3.

“Business Day” means a day on which banks are open for business in Munich, London and New York.

“Cash Cover Threshold” has the meaning given to such term in clause 10. (f).

“Cash Equivalent Collateral” means instruments, denominated in USD, EURO, CHF, GBP or YEN, that are short-term obligations of, or unconditionally guaranteed by, a government (or agency of such government having an equivalent rating) of an OECD country and are readily tradeable and rated AAA by Moody’s or S&P and qualifying

as zero risk weighted assets under applicable liquidity principles, provided that the same provides for payment of both principal and interest (and not principal alone or interest alone), is not subject to any contingency regarding the payment of principal or interest and is not convertible or exchangeable to any other security.

“Change of Control Event” means the Borrower becomes the subsidiary of another company (other than Converium Holding AG or its current subsidiaries) or one or more person(s) acting either individually or in concert obtain(s) control of Converium Holding AG (meaning that such person(s) are able to direct the affairs and/or control the composition of Converium Holding AG’s board of directors or equivalent body); provided that no such event shall constitute an Event of Default hereunder if the Bank has notified the Borrower that such event shall not constitute an Event of Default hereunder; and provided further that no such event shall constitute an Event of Default hereunder until the date which falls one month after the occurrence of such event.

“Consolidated Tangible Net Worth” means at any time Converium Holding AG’s Total equity as determined from the line item so described under the heading Liabilities and equity in the consolidated financial statements of Converium Holding AG most recently delivered under clause 10 (c) and (d) of this Agreement, minus goodwill.

“Consolidated Total Borrowings” means, at any time Converium Holding AG’s Total debt as determined from the line item so described under the heading Liabilities and equity in the consolidated financial statements of Converium Holding AG most recently delivered under clause 10 (c) and (d) of this Agreement.

“Default Interest Rate” has the meaning given to such term in clause 6.3.

“Event of Default” means any of the events set out in clause 11.

“Evergreen Guarantee” means a guarantee which includes a provision which automatically extends the expiry date thereof for a specified period unless, within some period of time in advance of the then applicable expiry date thereof, the Bank gives notice to the beneficiary to the effect that such guarantee will not be so extended.

“Federal Funds Rate” means, in relation to any day, the rate per annum equal to:

(a)	the weighted average of the rates on overnight Federal funds transactions with members of the US Federal Reserve System arranged by Federal funds brokers, as published for that day (or, if that day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York; or
(b)	if a rate is not so published for any day which is a Business Day, the average of the quotations for that day on such transactions received by the Bank from three (3) Federal funds brokers of recognised standing selected by the Bank.

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“Guarantee Request” shall mean a request of the Borrower to the Bank substantially in form of Annex 1 hereto to issue a guarantee.

“NAIC” means the National Association of Insurance Commissioners (or any successor person which assumes all or any part of its function).

“Non-Extension Date” means, with respect to any Evergreen Guarantee, the date set in the guarantee by which the Bank must give notice to the beneficiary thereof of the non-renewal of such Evergreen Guarantee in order to avoid the automatic extension of the expiry date thereof.

“Rating” means the Standard & Poors (S&P) financial strength rating of the Borrower.

2. Guarantee Facility, Purpose

2.1	Subject to the terms and conditions of this Agreement and to the extent permitted by applicable laws, regulations and internal compliance policies, the Bank is prepared to issue on behalf of the Borrower guarantees or standby letters of credit and sureties “on first demand” (hereinafter all designated as “guarantees”, unless individually specified) in favour of third parties (“Beneficiaries”) denominated in USD, EURO, CHF, GBP or YEN (or any other freely convertible currency if agreed between the parties) up to a total aggregate principal amount of USD 250,000,000 (in words: US dollars two-hundred and fifty million) or, with regard to guarantees issued in other currencies than USD, its equivalent, at any time. If, at any time, the aggregate outstanding amount of guarantees issued under this Agreement exceeds such amount, then the Borrower shall upon demand of the Bank immediately provide full cash cover for the excess amount or shall achieve reduction of the Bank’s obligations accordingly.
	Each guarantee will be issued by the Bank pursuant to a Guarantee Request of the Borrower which shall be substantially in the form of Annex 1 hereto.
2.2	This Guarantee Facility shall be used for the Borrower’s general corporate purposes and the purpose of issuing letters of credit in order to collateralise third party claims related to the global reinsurance underwriting business of the Borrower and its subsidiary Converium Rückversicherung (Deutschland) AG.
	The Bank shall not be obliged to concern itself with the purpose for which a guarantee will be issued.
2.3	This Guarantee Facility is made available by the Bank until the date falling 364 days after the day of signing hereof (the “Availability Expiry Date”). No guarantee will be issued by the Bank after such date but the Agreement shall otherwise remain in full force and effect until expiration of all outstanding guarantees. Each guarantee issued hereunder shall be limited by an expiry date falling no later than 364 days after the date of the issuance of the guarantee.

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3. Issuance of Guarantees

3.1	A guarantee, subject to Sections 4 and 5 below and the other provisions and requirements of this Agreement, will only be issued by the Bank in response to a written request by the Borrower in the form of the Guarantee Request, which must be duly signed by the Borrower. The proposed date of issuance of the guarantee must be a Business Day within the term of this agreement and the Guarantee Request must be delivered at least two Business Days prior to the proposed date of issuance. The Borrower may also request the issuance of retroactive guarantees in accordance with law and industry practice. The Bank will issue the requested guarantee in the preagreed form annexed as Annex 2 hereto. Guarantee texts that are not in in accordance with this pre-agreed form are subject to approval of the Bank, as are beneficiaries which do not have their seat in either (i) an OECD member country or (ii) a country listed in Annex 3 hereto. The individual beneficiary and the chosen governing law (except for the choice of the laws of the countries listed in Annex 4 hereto which are pre-approved subject only to changes in circumstances in the future of which we will inform you without undue delay) are subject to these not violating laws, regulations or internal compliance policies.
3.2	In compliance with the instructions of the Borrower in the Guarantee Request, the Bank issues guarantees itself (“direct guarantee”) or instructs another bank (“Second Bank”) (which shall be a NAIC approved bank if so requested by the Borrower) under its counterliability (“counter-guarantee”) to issue or confirm the guarantee (“indirect guarantee”). If the Bank does not receive instructions from the Borrower, it may issue an indirect guarantee, provided this is deemed necessary under the circumstances in the interest of the Borrower.
3.3	A Guarantee Request may also be made by the Borrower by facsimile transmission, in which event the Bank shall have no liability for, and the Borrower accepts the full risk of, any error in transmission, lack of due authorisation by the Borrower, non receipt or otherwise. Such Guarantee Request shall be confirmed as soon as reasonably practicable by letter but so that the Bank shall be entitled to rely on such facsimile transmission and to act in accordance with the same notwithstanding the non receipt of any such confirmation or any discrepancy between the facsimile transmission and the confirming letter.
3.4	A guarantee shall have a face amount of at least the then current equivalent of USD 100,000 and in any case less than the then current equivalent of EURO 150,000,000. A maximum of 100 guarantees may be outstanding at any time.
3.5	Evergreen-Guarantees:
	If as of the date twenty (20) days prior to the Non-Extension Date of any Evergreen Guarantee the Bank has not have received a written direction from the Borrower to not cause or permit such extension, the Bank shall nonetheless be permitted (but shall not be obligated) to allow such guarantee to automatically extend for up to 364 days and the Borrower hereby authorizes such extension. Notwithstanding the foregoing, if as a consequence of the automatic extension of any Evergreen Guarantee the expiry date thereof would be a date later than the date falling 364 days after the Availability Expiry Date, then on or prior to the Non-Extension Date with respect to such

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Evergreen Guarantee the Bank shall give such notice as is necessary to prevent such automatic extension. In addition, upon the direction of the Borrower for any Evergreen Guarantee, the Bank shall give such notice as is necessary to prevent an automatic extension of the expiry date of such Evergreen Guarantee; provided, however, that in no event shall the Bank have liability to the Borrower for its failure to give such notice if written direction to give such notice is received by the Bank less than twenty (20) days prior to the Non-Extension Date for such Evergreen Guarantee.

4. Conditions Precedent

4.1 A guarantee will be issued by the Bank subject to the condition precedent that the Bank has received all of the following in form and substance satisfactory to it:

(a)	certified copy of the Articles of Incorporation of the Borrower;
(b)	up-to-date certified extract of the Commercial Register of the Borrower of latest date evidencing that the signatories for the Borrower under this agreement are authorised to enter into this Agreement in the name of the Borrower;
(c)	original or certified copy of the resolution of the “Verwaltungsrat” of the Borrower authorising the execution and performance of this Agreement;
(d)	inhouse legal opinion of the Borrower in form and substance satisfactory to the Bank confirming that this Agreement has been validly entered into by the Borrower which has full power, capacity and authority to do so;
(e)	copies of the audited financial statements of the Borrower and the audited consolidated financial statements of Converium Holding AG, for their fiscal year 2005 and and the preliminary financial statements of each of the Borrower and Converium Holding AG for their fiscal year 2006 (to the extent available); and
(f)	specimen signatures of such agents of the Borrower as shall be authorised to sign this Agreement, a Guarantee Request and any notices required to be given by the Borrower pursuant to the provisions of this Guarantee Agreement.

4.2 Any obligation of the Bank to issue guarantees hereunder is subject to the further conditions precedent that as of the request date and the requested issuance date of the guarantee:

(a)	the representations and warranties set out in Section 9 are correct in all material respects;
(b)	no Event of Default (or any event which with the giving of notice or lapse of time might constitute an Event of Default) is continuing or would result from the proposed issuance; and

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(c) if the Rating of the Borrower is less than the applicable Cash Cover Threshold or the Borrower ceases to have a Rating: the Borrower has (in addition to fulfilling its obligations to collateralise already outstanding guarantees pursuant to clause 10 (f) below) provided cash collateral or Cash Equivalent Collateral in accordance with the requirements of clause 10 (f) below in respect of all guarantees which it requests to be issued.

5. Conditions Governing Guarantees and Reimbursement Claims

5.1 A Guarantee Request of the Borrower and the Borrower’s obligation to reimburse and indemnify the Bank shall be subject to the following:

(a) Guarantee account entries and remuneration/guarantee commission

Upon delivery, respectively, dispatch of the guarantee or the request to issue or confirm the guarantee the Bank is entitled to debit the Borrower’s guarantee account with the amount of the guarantee, with any fees owed in accordance with this Agreement or otherwise agreed between the parties and, for the duration of the Bank’s undertaking, the periodic guarantee commission owed in accordance with this Agreement.

(b) Examination of documents

The Bank will examine with reasonable care, whether any demands for payment, statements and other documents to be presented under a guarantee appear on their face to be conform with the terms of the guarantee and consistent with each other. If documents are sent by means of authenticated teletransmission (e.g. tested telex or SWIFT), the Bank may treat them as originals.

(c) Reimbursement

The Borrower will reimburse the Bank for all required disbursements and expenditures (which in particular includes the immediate reimbursement of payments made by the Bank under the terms of any guarantee and which for indirect guarantees also include all commission, all reasonable expenses and costs charged to the Bank by the Second Bank issuing the guarantee) resulting from the execution and performance of a Guarantee Request, including those resulting from judicial and extrajudicial proceedings and the enforcement or preservation of the Bank’s rights in Germany or abroad and further including all reasonable expenses and costs (legal and otherwise) incurred by the Bank in connection with the enforcement, preservation or assessment of its rights under guarantees which are subject to a law other than German law and/or a place of jurisdiction outside of Germany. This obligation to reimburse also covers disbursements and expenditures incurred after the debit entry of the guarantee amount in the Borrower’s guarantee account has been reversed, in particular to the extent that the obligation to pay under the guarantee is still in effect, or a judical decision for payment exists, which is enforceable in the country where it was passed.

(d) Notification of Borrower

The Bank will, without undue delay (unverzüglich), notify the Borrower upon receiving a demand for payment under any guarantee complying with the terms of such guarantee.

The Bank will provide the Borrower at its request with the originals of the documents received by the Bank and complying with the terms of the guarantee, which are

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relevant for the Borrower, provided the Bank no longer needs them to safeguard its rights or to perform its obligations.

(e) Payment under any Guarantee

The Bank will effect payment in accordance with the terms of the guarantee when it has received from the beneficiary/the Second Bank a demand for payment complying with the terms of the guarantee/counter-guarantee prior to the expiry of the guarantee/counter-guarantee. With respect to such demand for payment under guarantees, standby letters of credit and sureties “on first demand” the Bank can only take into consideration the defence of legal abuse (“Rechtsmißbrauch”), if the Borrower has put forward such defence to the Bank without delay in writing documented by conclusive evidence (“liquide Beweismittel”), or if it is obviously manifest that the preconditions of such defence have occurred, and in each case only to the extent permissible under the terms of the guarantee and the law applicable thereto.

In the case of other sureties, the Bank will consider all permissible objections of defences, which have been made credible to the Bank in writing within a reasonable period so that they may be forwarded to the Beneficiary.

The Borrower may send written statements to the Bank by fax, provided the original letter is sent immediately thereafter.

(f) Cancellation (“Ausbuchung”) of entries in the guarantee account

Upon expiry of direct guarantees, which are not explicitly subject to foreign (i.e. non- German) law, the Bank will reverse the debit entries for these guarantees in the Borrower’s guarantee account and cease to charge guarantee commission, provided these guarantees expire, according to their terms, beyond doubt on a certain calendar date, or upon presentation of documents specified in the guarantee for the purpose of determining the expiry, and provided further that no demand for payment has been received by the Bank before the expiry of such guarantee.

With respect to all other direct guarantees, respectively, indirect guarantees the Bank will reverse the debit entries in the Borrower’s guarantee account and cease to charge guarantee commission, when the Beneficiary has either returned the original guarantee document to the Bank for cancellation, or released the Bank without reserve from its liability, respectively, when the Second Bank has released the Bank without reserve from its liability.

In case of a surety provided for a security in legal proceedings, unless the Beneficiary has returned the original guarantee document to the Bank for cancellation, evidence must be submitted to the Bank either regarding the Beneficiary’s consent to the Bank’s discharge from its liability, or of a final court order according to Section 109 subsection 2 of the German Code of Civil Procedure.

It is incumbent on the Borrower to provide for the relevant requirements for the reversal of the debit entry of the guarantee amount in the Borrower’s guarantee account.

(g) Reduction

In case of reductions of a direct guarantee, the Bank will reverse the corresponding partial amount of the debit entry in the Borrower’s guarantee account and will take this into account when calculating the guarantee commission, provided either that the terms of the reduction clause in the guarantee have been complied with beyond doubt, or that the Bank has been partially released without reserve from its liability by the

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Beneficiary. With respect to indirect guarantees, this provision applies accordingly to the extent the Bank has been partially released without reserve from its liability by the Second Bank. In the event of a demand for partial payment, the guarantee amount will be reduced by the amount paid by the Bank.

(h) Uniform rules for demand guarantees

If a guarantee/counter-guarantee is, in accordance with the Borrower’s instructions, subject to the »Uniform Rules for Demand Guarantees« of the International Chamber of Commerce, Paris (ICC publication No. 458), these rules will apply additionally insofar as they are not inconsistent with the provisions of this Section 5.1.

Except as otherwise expressly stated in such guarantee/counter-guarantee, the Bank is entitled, if it has received a complying demand for extension or payment (»extend or pay«), to effect payment five calendar days after notification thereof to the Borrower, unless prior thereto the Bank has received instruction from the Borrower to extend the validity of the guarantee, and the Bank has accepted such instruction.

(h) Standby letters of credit

Unless otherwise agreed, the Bank issues standby letters of credit subject to the »Uniform Customs and Practice for Documentary Credits« of the International Chamber of Commerce, Paris, which apply additionally insofar as they are not inconsistent with these guarantee conditions.

5.2 The Borrower also acknowledges the following important risk information:

The issuing of guarantees, standby letters of credit and sureties “on first demand”, hereinafter all designated as “guarantee(s)”, unless individually specified) entails special risks for the Borrower. The Bank is obliged to effect payment without delay on receipt of a demand for payment complying with the terms of the guarantee. After payment has been effected by the Bank, the Borrower can put forward any defences or objections arising from the contract underlying the guarantee (for example due to faulty or incorrect delivery, warranty claims) only directly against the Beneficiary. The Borrower therefore bears the risk of having to assert its restitution claims against the Beneficiary in recovery proceedings (risk of litigation) and having to realize them (enforcement/insolvency risk).

On receipt of a demand for payment, the Bank can only take into consideration the defence of abuse of rights (“Rechtsmißbrauch”), if the Borrower has put forward such defence to the Bank and — in the case of indirect guarantees — also to the Second Bank without delay in writing documented by conclusive evidence (“liquide Beweismittel”), or if it is obviously manifest that the preconditions of such defence have occurred and in each case only to the extent permissible under the terms of the guarantee and the law applicable thereto.

According to case law, the obligation to provide a guarantee “on first demand” included in the contract underlying the guarantee may be invalid, if it was agreed in general business conditions and not in a separate individual agreement between the contracting parties. The validity of such a contractual obligation to provide a guarantee “on first demand” cannot be determined by the Bank; instead, it is up to the Borrower to examine this aspect and to obtain professional legal advice, if necessary.

8

6.	Reimbursement, Interest
6.1	All amounts (other than the fees and guarantee commission as to which Section 12 shall apply) payable by the Borrower as a result of the execution and performance of a Guarantee Request (including as a result of any payments made by the Bank to a beneficiary under a guarantee) shall become due three Business Days after the Borrower has received from the Bank a payment notice with respect to such amounts.
6.2	All amounts paid by the Bank and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (i) the sum of the Federal Funds Rate for such day plus 0.50% per annum if such day falls on or before the date the reimbursement or other payment obligation of the Borrower is due and (ii) the Default Interest Rate (as defined below) if such day falls after such due date. Such interest shall accrue from and including the date of the Bank’s payment to and including the date of payment.
6.3	In the event of a default by the Borrower in the payment of any amount due (except interest), the Borrower shall pay interest thereon from the date of the default to the date of actual payment (after as well as before judgement) accruing on a daily basis at an interest rate (the “Default Interest Rate”) of 2 % p.a. above the Federal Funds Rate (or in the case of default in payments due in any other currency than USD, the relevant overnight interest rate quoted to the Bank in the London Interbank Market at or about 11 a.m. London time) for amounts corresponding to the amount in default, such rate to be determined day by day by the Bank conclusively and binding upon the Borrower.
6.4	If the Borrower fails to pay any amount of interest, the Borrower shall pay to the Bank liquidated damages for all amounts of interest overdue calculated at the same rate and for the same period as stipulated in clauses 6.2 and 6.3 above. The Borrower shall be free to prove that no damage has arisen, or the damage has not arisen in the asserted amount. The right of the Bank to claim further damages shall remain unaffected.
6.5	Without prejudice to the foregoing the Borrower shall indemnify the Bank against any expenses or losses which the Bank may sustain or incur as a consequence of the default by the Borrower in payment of any principal amount or interest thereon or any other amount payable hereunder (including all costs incurred by the Bank in respect to the preservation or enforcement of its rights hereunder) except to the extent caused by the gross negligence or willful misconduct of the Bank.
7.	Payments, Currency
7.1	All payments to be made by the Borrower hereunder on account of principal, interest or otherwise shall be made to the credit of an account opened in the name of the Borrower with the Bank, without set off or any counterclaim and free and clear of and exempt from, and without deduction from or on account of, any present or future taxes, levies, imposts, duties, deductions, withholdings, or other charges of whatever nature, imposed, levied, selected, withheld or assessed by or within Germany, Switzerland or any other jurisdiction. If the Borrower is compelled by any applicable law or treaty to deduct any such taxes or make any such other deductions, the

9

Borrower shall pay such additional amounts as may be necessary in order that the payments after such deductions shall equal the amount which would have been required to be paid hereunder in the absence of all such deductions.

7.2	Any payments falling due on a day which is not a Business Day shall be made on the next Business Day and any interest shall accrue and be payable up to that day.
7.3	Payments insufficient to cover due payment obligations under this Agreement will be applied in the following order:

• any amounts due which are not interest and principal;

• interest; and

• principal.

7.4

Where the Bank has been requested to issue a guarantee in a currency other than USD, the Bank shall on the day on which the guarantee is issued determine the USD equivalent thereof at the Bank’s spot rate of exchange and shall debit the Borrower’s guarantee account accordingly. Where a beneficiary has demanded payment under a guarantee in a currency other than USD, the Bank shall, as of the date on which it effects payment, determine the USD equivalent of its payment at its spot rate of exchange and the reimbursement obligation of the Borrower shall be owed in USD acccordingly. Any other currency conversions (e.g. in determining the available facility amount from time time) shall also be calculated by the Bank at its spot rate of exchange on the relevant date.

8.

Increased Costs

If any applicable treaty, law or regulation or any change, therein or in the interpretation thereof shall subject the Bank to any tax or other charge, which affects the cost to the Bank of making or maintaining the Facility or shall change the basis of taxation of payments to the Bank (except for changes in the rate of tax on the overall net income of the Bank) or shall impose, modify or deem applicable any reserve or deposit requirement against assets held by, or deposits with or for the account of, or advances or facilities by the Bank or there shall occur any other condition or event in the relevant Interbank Market or otherwise with respect to this Agreement or the Facility, and the result of any of the foregoing is to increase the cost to the Bank of making or maintaining the Facility or to reduce the amount of principal, interest or other payments, received or receivable by the Bank hereunder, then the Borrower shall pay to the Bank on demand all additional amounts which will indemnify the Bank for such increased cost or reduction applicable to succeeding renewals. In the event that there shall occur any such event, the Bank shall promptly notify the Borrower in writing of such event and its nature, and shall specify to the Borrower the increased costs.

For the avoidance of doubt, any increased cost incurred by the Bank resulting from the discussion paper produced by the Basle Committee on Banking Supervision in January 2001, or any subsequent paper or accord produced by the Basle Committee on Banking Supervision, or the corresponding EU directive, will be recoverable by the Bank under this Section 8, to the extent such increased cost results from compliance with any modification of or accord, directive, guideline, recommendation,

10

transitions rule relating thereto, or any implementation thereof or of the EU directive, made after the date of this Agreement.

9.  Representations and Warranties

In consideration of the Bank entering into this Agreement and making and maintaining the Facility provided for hereunder, the Borrower represents and warrants to the Bank that:

(a)	the Borrower is a stock corporation duly organised, validly existing and in good standing order under the laws of Switzerland;
(b)	the Borrower has the authority to enter into and perform this Agreement to make Guarantee Requests hereunder and to perform its obligations under this Agreement and in this regards all necessary decisions and resolutions of the Borrower and its shareholders have been taken;
(c)	this Agreement constitutes the legal and binding obligations of the Borrower enforceable in accordance with its respective terms;
(d)	the choice of laws of the Federal Republic of Germany constitutes a valid choice of laws under the laws of Switzerland and a judgement of a German court would be enforceable in Switzerland;
(e)	the entry into and the execution and performance of this Agreement does not conflict with the constitutional documents of the Borrower and does not violate any law, directive, order, decree, arbitral award, judgement or any agreement to which the Borrower is a party;
(f)	the payment obligations of the Borrower under this Agreement rank and will rank at least pari passu with all other unsecured obligations of the Borrower;
(g)	no event has occurred which constitutes or will constitute a default under or in respect of this or any other agreement, undertaking, or instrument to which the Borrower is a party;
(h)	there has been no material adverse change in the Borrower’s financial position since the date of the latest audited or unaudited financial statements;
(i)	all necessary approvals, consents or authorisations, filings or registrations required or advisable in connection with the entry into, performance, validity and enforceability of this Agreement and the transactions contemplated hereby have been obtained and are in full force and effect;
(j)	the financial information delivered by the Borrower is complete and correct and convey a complete and correct picture of the financial position of the Borrower as at that date. The financial statements were prepared in accordance with all applicable accounting and auditing principles, and these principles were applied in the same form and manner as in previous years, unless otherwise stated in the financial statements; and

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(k) that, for purposes of Section 8 of the German money laundering act (Geldwäschegesetz), it transacts the business contemplated in this Agreement for its own account.

10. Undertakings

The Borrower undertakes towards the Bank from the date of execution and delivery of this Agreement and so long as any amount payable hereunder is outstanding:

Information:

(a)	to promptly inform the Bank of the occurrence of any event which is or may become an Event of Default (whether with the giving of notice passing of time or the making of any determination) and of all material events, which might negatively affect the ability of the Borrower to fulfil its obligations under or in connection with this Agreement;
(b)	to promptly inform the Bank (i) of any change in its Rating and (ii) of any change in its fiscal year;
(c)	to furnish to the Bank as soon as available, but not later than 6 months after the close of each financial year of the Borrower and Converium Holding AG respectively, the audited financial statements of the Borrower and Converium Holding AG respectively, prepared in accordance with generally accepted accounting principles consistently applied;
(d)	to furnish to the Bank as soon as available, but not later than 60 days after the end of a financial quarter, the quarterly financial statements of Converium Holding AG;
(e)	upon request, to provide to the Bank such additional financial or other information or documentation as the Bank may from time to time reasonably request (including but not limited to information required by regulatory provisions such as sections 13 and 18 of the German Banking Act and documents or evidence required by applicable “know your customer” checks);

 Other:

(f) cash collateralisation: if at any time and as long as the Rating of the Borrower is less than BBB+ (the “Cash Cover Threshold”, until the Rating increases to A- from which point onwards the Rating of A- shall be the “Cash Cover Threshold”) or the Borrower ceases to have a Rating, the Borrower shall within five Business Days of the relevant change in the Rating provide cash collateral (on a blocked, pledged account held with the Bank) in the currencies in which each relevant outstanding guarantee is denominated in an amount equal to 110% of the amounts for which the Bank is under a payment obligation under each outstanding guarantee.

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Instead of cash collateral, the borrower may provide Cash Equivalent Collateral in the currencies in which each relevant outstanding guarantee is denominated, the aggregate fair market value of which must equal 110% of the amounts for which the Bank is under a payment obligation under each outstanding guarantee.

So long as the Borrower remains under the obligation to provide or uphold such collateralisation (by way of cash collateral or Cash Equivalent Collateral) it shall ensure that such collateralisation at all times equals the levels set out above. Any such cash or Cash Equivalent Collateral shall be released as soon as reasonably practicable once the Borrower’s Rating is equal to or above the applicable Cash Cover Threshold. For the avoidance of doubt, the benefits (i.e. interest) arising from the cash or Cash Equivalent Collateral shall itself also serve as collateral but shall otherwise ultimately accrue for the account of the Borrower.

11. Events of Default

Upon the occurrence of any of the following events:

(a)	failure by the Borrower to pay when due any amount payable as a result from the execution and performance of a Guarantee Request or any other amount payable under or in connection with this Agreement, when the same becomes due (unless caused by administrative or technical error and paid within 5 Business Days of its due date); or
(b)	failure by the Borrower to fulfill any obligation under this Agreement to provide cash collateral or Cash Equivalent Collateral, as and when the same becomes due; or
(c)	any representation or warranty made by the Borrower in or in connection with this Agreement or any certificate or statement delivered proves to be incorrect or untrue in any material respect at the time such representation or warranty was made, or (as the case may be) any certificate or statement was dated; or
(d)	failure by the Borrower to fulfil (i) any undertaking or other obligation or provision under this Agreement (except for the non-payment Event of Default described above in item (a) and the collateralisation Event of Default described above in item (b)) and this failure, if capable of remedy, is not remedied within ten days of the earlier of the Bank giving notice to the Borrower or the Borrower becoming otherwise aware of its failure to comply or (ii) any payment obligation not related to this Agreement when such payment obligation becomes due provided it exceeds the amount or equivalent of USD 100,000,000; or
(e)	filing of any involuntary petition against the Borrower in bankruptcy or any involuntary petition seeking reorganisation, an arrangement, readjustment of the Borrower’s debts or of any other relief under any insolvency act or law, now or hereafter existing, or the involuntary appointment of an insolvency

13

	administrator, a receiver or trustee of the Borrower for all or a substantial part of its property or the issuance of a warrant or attachment against any substantial part of the property of the Borrower; or overindebtedness (asset value less than liabilities), inability to pay its debts when due or any other applicable insolvency event occurs or any insolvency filing is made with respect to such events; or
(f)	deterioration of the financial status of the Borrower or the occurrence of an extraordinary situation or a material adverse change in the business, assets or financial or other condition of the Borrower, which give reasonable grounds to conclude that such situation, change or circumstances will imperil, delay or preclude the purpose and performance of this Agreement; or
(g)	the Consolidated Total Borrowings of Converium Holding AG at any time exceed 35 per cent. of Converium Holding AG’s Consolidated Tangible Net Worth; or Converium Holding AG’s Consolidated Tangible Net Worth no longer exceeds USD 1,237,500,000 at any time; or
(h)	the rights or remedies of the Bank under this Agreement or the effectiveness or ranking of any security granted or purporting to be granted in connection with this Agreement are no longer in full force and effect; or
(i)	it is or becomes unlawful for the Borrower to perform any of its obligations under this Agreement; any obligation of the Borrower under this Agreement (or any security granted in respect thereof) is not or cease to be legal, valid, binding or enforceable and the cessation individually or cumulatively materially and adversely affects the interests of the Bank under this Agreement; or the Borrower rescinds or purports to rescind or repudiates or purports to repudiate this Agreement (or any security granted in respect thereof); or
(j)	a Change of Control Event occurs;

then, and in any such event, the Bank’s obligation to make or maintain this Facility shall, upon notice to the Borrower thereof, immediately terminate and the Borrower shall provide full cash collateral in matching currencies on a blocked, pledged account held with the Bank (excluding for the avoidance of doubt any Cash Equivalent Collateral or other non-cash collateral unless the Bank expressly agrees thereto) for any guarantee issued by the Bank except to the extent the Bank is immediately and permanently released from its obligations thereunder by the beneficiary.

The Borrower shall indemnify the Bank against the actual loss or expenses, as conclusively certified to it by the Bank, which the Bank may incur as a consequence of an Event of Default.

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12.	Fees, Costs and Expenses
12.1	The Borrower shall pay to the Bank an up-front fee of 0.20% calculated on the aggregate principal amount of the Facility which shall be payable within seven days of the date of signing of this Agreement.
12.2	As long as the payment undertaking of the Bank under a guarantee remains in force (and including guarantees which have been collateralised and including with respect to periods subject to retroactive effectiveness of any guarantee), the Borrower shall pay to the Bank upon first demand a guarantee commission at the rate of 0.70% p.a. on the amount outstanding under such guarantee, which, in case of and for the duration of an upgrading of the Rating of the Borrower to at least A-, will be reduced to 0.50% p.a., beginning with the next full month falling after such upgrading of the Rating. The guarantee commission shall be payable by the Borrower on a monthly basis for the number of days elapsed on the last Business Day of each month.
12.3	The Borrower shall reimburse the Bank for all costs and expenses incurred by the Bank in connection with the performance and enforcement of this Agreement and the preservation of its rights hereunder, including (but not limited to) value added taxes and the reasonable fees and expenses of legal advisors of the Bank, except to the extent caused by the gross negligence or willful misconduct of the Bank.
12.4	If the Bank receives an amount in respect of the Borrower’s liability under this Agreement or if that liability is converted into a claim, proof, judgement or order in a currency other than the currency (the “Contractual Currencies”) in which the amount is expressed or permitted to be payable under this Agreement:

(a)	the Borrower shall indemnify the Bank as an independent obligation against any loss or liability arising out of or as a result of the conversion;
(b)	if the amount received by the Bank, when converted into the Contractual Currency at the exchange rate determined by the Bank, is less than the amount owed in the Contractual Currency, the borrower shall forthwith on demand pay to the Bank an amount in the contractual currency equal to the deficit; and
(c)	the Borrower shall pay to the Bank on demand any taxes and reasonable exchange costs payable in connection with any such conversion.

12.5 The Borrower waives any right it may have in any jurisdiction to pay any amount under this Agreement in a currency other than that in which it is expressed to be payable.

13. Assignment

This Agreement and the rights and obligations hereunder shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assignees. The Borrower may not assign or transfer, however, any of its rights, duties or obligations hereunder without the Bank’s prior written consent. The Bank may at its own cost, in accordance with standard banking practices, grant sub-participations with respect to all or any parts of its rights, claims and/or

15

obligations under this Agreement to members of the European Central Bank System, banks, financial service providers, financial institutions, insurance companies, institutional investors, funds, pension funds, public pension schemes and similar institutions and may make dispositions with respect to such rights, claims and/or obligations. In particular, the Bank shall be entitled to assign, pledge or transfer in whole or in part any claims for amounts outstanding under this Agreement including collateral provided therefor, if any, to any of the aforementioned institutions. The Bank may take any such measures in particular for the purpose of risk diversification, equity capital optimisation and refinancing. The Borrower herewith releases the Bank from its confidentiality obligation to the extent necessary for taking the measures described above. References to the Bank under this Agreement shall be construed to be references to such institution as if it were an original party hereto.

14. No Waiver

No failure to exercise nor any delay in exercising on our part any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any right provided by law.

15. Communications

The correspondence between the parties shall be submitted to the relevant party at the contact details set out below and shall be in the English language. Documents and evidences in connection with this Agreement have to be submitted, if not in the original English language, together with a certified English translation.

16.	General Legal Provisions
16.1	This Agreement and each Guarantee Request made hereunder shall be governed by and construed in accordance with the laws of Germany. Place of jurisdiction shall be Munich. The Bank shall be entitled, however, to assert any legal action against the Borrower also before any other court of competent jurisdiction.
16.2	Should any of the provisions of this Agreement be or become invalid in whole or in part, the other provisions shall remain in force. The invalid provision shall, according to the intent and purpose of this Agreement, be deemed to be re-placed by such valid provision, which in its economic effect comes as close as legally possible to that of the invalid provision. The same shall apply in cases of a gap (“Regelungslücke”).
16.3	Changes to this Agreement (including with regard to this clause) must be made in writing by all parties thereto.
16.4	The Annexes form an integral part of this Agreement.

***

16

Zurich, ___ August 2006
Signature:
Name, title:
Signature:
Name, title:
	for Converium AG General Guisan-Quai 26 8022 Zurich Switzerland
	Att.: Richard Rabl
	Corporate Treasurer
	Tel.: +41 44 639 96 61
	Fax: +41 44 639 76 61
Munich, ___ August 2006
Signature:
Name, title:
Signature:
Name, title:
	for Bayerische Hypo- und Vereinsbank AG Am Tucherpark 16 80538 München Germany
	Att.: Adrian Indlekofer (Managing
	Director, Institutional Clients Group)
	Tel.: +49-89-378 14374
	Fax: +49-89-378 33 14374

17

Annex 1

Guarantee Request

To: Bayerische Hypo-und Vereinsbank AG

Guarantee Request and Reimbursement Agreement
between
Bayerische Hypo-und Vereinsbank AG and Converium AG
dated [          ] (the “Agreement”)

— Guarantee Request —

Name and Address of Principal			hereby requests
the Borrower — (Converium AG) address			Bayerische Hypo-und Vereinsbank Aktiengesellschaft
—“Principal” —
			—“Bank” —
			to issue a guarantee in the _________ language and in accordance with the specifications set forth below for and on behalf of the Principal
The guarantee is to be issued:
o     for the own account of the Principal within the meaning of Section 8 German Money Laundering Act
o     for the account of the following third party: ________________________________________________
Beneficiary (Name and Address):
Currency	Guarantee Amount	Interest
		o     incl. interest	o     plus interest at a rate of ___% p.a.
Guarantee Amount in Words:
Validity Period:
o     effective date ________ o     expiry date __________ o     unlimited duration _______			Note: The guarantee is of unlimited duration if the Principle fails to stipulate an expiry date or if the law governing this guarantee does not permit limitation of the validity period.

18

Type of Guarantee and Details of Underlying Transaction:
The Guarantee shall secure the [payment] obligations of [insert name] to [insert name of beneficiary] pursuant to the _________ Agreement dated [          ] in the amount of [          ]. The Guarantee shall be issued by the Bank in favour of insert name of beneficiary [               ].
Issuing Bank
o     Bank in favour of Beneficiary (direct guarantee)
o     Second bank in the Beneficiary’s country (indirect guarantee)
o     The following second bank (indirect guarantee): _______________________
Text of Guarantee:
o     see attached	o      in the form of Annex ______ to the Facility Agreement		Note: Texts which do not comply with the form annexed to the Facility Agreement are subject to the Bank’s approval.
Transmission by
o     letter by courier	o     SWIFT / Telex
Delivery or mailing of Guarantee to:
o      Principal o      Beneficiary or second bank		o     Principal’s Representative/Agent abroad (Name and Address)
Special Instructions (e.g. advising of a direct guarantee, deadline, copies to _____ ):
Important Acknowledgement by the Principal: We acknowledge and request that this request for the issuance of a guarantee shall be subject to the terms and conditions of the Facility Agreement. Due to such conditions and the application of foreign law in individual cases, guarantees involve special risks (outlined in particular in Sections 5.1 and 5.2 of the Facility Agreement).			Person to Contact at Principal (name, telephone number):
Conditions Precedent:
We confirm that:
(a)  the representations and warranties set out in Section 9 of the Agreement are correct in all material respects;
(b)  no event of default set out in Section 11 of the Agreement (or any event which with the giving of notice or lapse of time might constitute  an event of default) is continuing or would result from the proposed issuance; and
(c)  the S&P financial strength rating of the Converium AG is not less than the applicable “Cash Cover Threshold” (as defined in the  Agreement).
Place		Date		Legally binding signature(s) and stamp of Principal

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Annex 2
Approved Form of Guarantee / Letter of Credit

Bayerische Hypo- und Vereinsbank AG [acting through its New York Branch]
Attention: [          ]

FOR INTERNAL IDENTIFICATION PURPOSES ONLY
Date:                                                      Our No.                                                        Issuing Bank No.
Irrevocable Letter of
Credit	Accountholder
	Reinsurer
	Issuing Bank
	Beneficiary    (Reinsured)                          Amount
	Expiry
	State of Domicile

Irrevocable		Issue
Letter of Credit No.		Date:
To Beneficiary:	(Name)
	(Address)

We have established this unconditional, clean and irrevocable Letter of Credit in your favor as beneficiary for drawings up to U.S. $                     effective immediately. This Letter of Credit is payable at our office at [Address], Attn: Standby Letter of Credit Unit or such other office as we may advise from time to time and expires with our close of business on                                         . Except when the amount of this Letter of Credit is increased, this Letter of Credit cannot be modified or revoked without your consent.

We hereby undertake to promptly honor your sight draft(s) drawn on us, indicating our Letter of Credit No.                     , for all or any part of this Letter of Credit upon presentation of your draft drawn on us at our offices on or before the expiration date hereof or any automatically extended date of expiration.

The term “Beneficiary” includes any successor by operation of law of the named Beneficiary including, without limitation, any liquidator, receiver, conservator, or supervisor.

It is a condition of this Letter of Credit that it is deemed to be automatically extended without amendment for one (1) year from the initial stated expiry date hereof, or any future expiration date, unless at least thirty (30) days prior to any expiration date we notify you that we elect not to consider this Letter of Credit extended for any such additional period.

Such notice shall be deemed given upon our mailing a written notice to such effect to you at your address specified above by registered mail or overnight courier service.

20

Except as expressly stated herein, this undertaking is not subject to any agreement, condition, or qualification. The obligation of [Name of Issuer] under this Letter of Credit is the individual obligation of [Name of Issuer], and is in no way contingent upon reimbursement with respect thereto.

This Letter of Credit is subject to and governed by the Laws of [the U.S. state of domicile of the Beneficiary] [the state of [New York]] and the 1993 Revision of the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce (Publication 500) and, in the event of any conflict the laws of [the U.S. state of domicile of the Beneficiary] [the state of [New York]] shall control. If this Letter of Credit expires during an interruption of business as described in Article 17 of said Publication 500, we hereby specifically agree to effect payment if this Letter of Credit is drawn against within thirty (30) days after the resumption of business.

Authorized Name (typed)

Signature

21

Annex 3
List of Approved Countries of Beneficiaries

Chile
China
Hong Kong
Israel
India
Malaysia
Puero Rico
Singapore

22

Annex 4
List of Currently Approved Governing Laws

France
Austria
Australia
Belgium
Canada
Czech Republic
Denmark
Spain
Greece
Hong Kong
Ireland
Israel
Italy
Japan
Malyasia
Netherlands
Singapore

23

EX-4.49

Exhibit 4.49

THIS FRONTING AND ADMINISTRATION AGREEMENT is made on the 22^nd day of December 2006

between:

(1)	CONVERIUM AG, a company incorporated in Switzerland whose registered office is at General Guisan-Quai 26, 8022 Zürich, Switzerland (Converium);
(2)	MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AKTIENGESELLSCHAFT IN MÜNCHEN, whose registered office is at Königinstrabe, 107, 80802 München, Germany (Munich Re);
(3)	NATIONAL INDEMNITY COMPANY, a company incorporated in Nebraska, United States of America, whose registered office is at 3024 Harney Street, Omaha, Nebraska, USA 68131 (National Indemnity);
(4)	GLOBAL AEROSPACE UNDERWRITING MANAGERS LIMITED (registered number 2512067) whose registered office is at Fitzwilliam House, 10 St. Mary Axe, London EC3A 8EQ (Global ); and

Whereas:

(A) An aviation and aerospace underwriting pool (the Pool) has been established between certain insurance and reinsurance companies including Converium, Munich Re, National Indemnity and Global in respect of risks written after the date of the Pool Members’ Agreement (as hereinafter defined) and attaching on or after 1 January 2003, and in respect of which inter alia Converium appoints Global as its agent for writing insurance and reinsurance in respect of certain risks and to provide administration and management services in respect of the Pool.

(B) Converium intends to appoint National Indemnity and Munich Re (or members of their Groups) to provide fronting insurance for Converium in respect of Relevant Risks which incept in the Period (all terms as hereinafter defined). The intention is that, unless otherwise stated, in respect of each risk which would be written in the name of Converium under the terms of the Pool Members’ Agreement, National Indemnity or a member of its Group will front 50 per cent. of such risk and Munich Re or a member of its Group will front 50 per cent. of such risk. In certain jurisdictions where there is currently fronting in place in respect of National Indemnity’s or Munich Re’s participation in the Pool, the fronter (being those persons listed in column 4 of of Schedule 2 and Schedule 3) has agreed to extend the fronting that is currently in place so that it covers (in each case) 50 per cent of each risk in such jurisdiction which would be written in the name of Converium under the Pool Members’ Agreement.

(C) Accordingly, this Agreement constitutes a Fronting Arrangement for the purposes of the Pool Members’ Agreement and sets out the basis on which (1) National Indemnity and Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 will appoint Global to underwrite, administer and

manage such Relevant Risks and (2) all business written in the name of National Indemnity and Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 under this Agreement will be fully reinsured by Converium.

Now it is hereby agreed as follows:

1. Definitions

1.1 Unless otherwise defined in this Agreement and unless the context otherwise requires, all words and phrases shall have the meaning ascribed to them in the Pool Members’ Agreement.

Agent means Global as the context requires;

Agreement means this Agreement as amended from time to time;

Business means the business of writing Fronting Insurance Contracts as agent for National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 in their capacity as fronting insurers for Converium and managing such business on behalf of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 and doing such other things ancillary or incidental thereto in any such case as may from time to time be permitted or required by or pursuant to this Agreement and for the avoidance of doubt, Business excludes that portion of any risk reflecting the participation of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 under the Pool Members’ Agreement and that portion of any risk which is written on behalf of Munich Re or National Indemnity by the persons set out in column 4 of Schedule 2 or Schedule 3 respectively;

Business Day means any day (not being a Saturday or Sunday) on which banks are open for the transaction of general banking business in London;

Confidential Information means:

(a)	all information obtained by a party as a result of negotiating and entering into this Agreement;
(b)	all financial or other information received by a party pursuant to this Agreement in respect of Global;
(c)	all financial or other information received by a party pursuant to this Agreement in respect of Converium;
(d)	all financial or other information received by a party pursuant to this Agreement in respect of National Indemnity or Munich Re; and
(e)	information as to the terms of this Agreement or of any agreement referred to in it and information relating to the performance by any party of its obligations under this Agreement or any agreement referred to in it;

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Claim means, in relation to any Reinsured Risk, the notification, by the insured (or as applicable reinsured) of an actual or potential claim under such Reinsured Risk and, for the avoidance of doubt, a Claim shall be deemed to have been made where there is a settlement, compromise, commutation and/or policy buy back entered into by or on behalf of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 in relation to the Reinsured Risks (or any of them);

Claims-Related Extra Contractual Obligation means any liability on the part of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 (or amount agreed to be paid by or on behalf of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 in respect of potential or alleged liability on the part of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3) which has arisen in connection with or which relates in any way to the conduct of a claim and/or the conduct of the Business where such liability (or potential or alleged liability) has arisen because of or relates in any way to any Reinsured Risk in respect of which a Fronting Insurance Contract has been written in such person’s name save to the extent that any Claims-Related Extra Contractual Obligation results from fraud of National Indemnity or a member of its Group, or Munich Re or a member of its Group;

duly authorised means:

(a)	in the United Kingdom, duly authorised to carry on general insurance business under the Financial Services and Markets Act 2000; and
(b)	in any other jurisdiction, duly authorised, licensed or otherwise approved or permitted, under the laws of the applicable jurisdiction, to underwrite or carry on general insurance business covering Specified Risks in accordance with the relevant laws or regulations of such jurisdiction;

Due means with respect to any sum or amount of money that such sum or amount has been demanded by or from the Agent and Due Premium means that amount of written premium that has been demanded by the Agent from an Original Insured, being the insured party to any relevant Fronting Insurance Contract, for and on behalf of Munich Re and /or National Indemnity, as appropriate, by way of bill, invoice or other enforceable demand, and in respect of which the Agent has assigned a date by when such Original Insured must actually pay the amount of premium demanded (Due Date) and calculated in all cases as at the relevant Due Date(s).

Fronting Insurance Contract means a contract of insurance and/or reinsurance which is written by Global pursuant to this Agreement on behalf of National Indemnity or Munich Re or the relevant member of such person’s Group (solely in its capacity as fronting insurer for Converium) in respect of the proportion of the Relevant Risks set out in Clause 2.3(b) attaching during the Period provided that Fronting Insurance

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Contracts shall not relate to the percentage of each policy issued under the Pool Members’ Agreement representing Munich Re’s or National Indemnity’s interest under the Pool Members’ Agreement;

GAI means GLOBAL AEROSPACE, INC. (formerly known as ASSOCIATED AVIATION UNDERWRITERS, INC.) a Delaware corporation.

Group means in relation to a company, that company and any company which is a holding company of that company or a subsidiary of that company or of such holding company;

holding company has the meaning ascribed thereto by Section 736 of the Companies Act 1985;

Incurred Position means, in relation to Converium, such amount as may be determined in accordance with Clause 15 as being the greater of:

(a)	Due Premium (in relation to the relevant Reinsured Risks less any (i) due reinsurance premiums ceded in respect of reinsurance taken out in accordance with the Pool Business Plan (as defined in the Pool Members’ Agreement) as amended from time to time or otherwise taken out by the Agents on behalf of the Members of the Pool as a whole; (ii) original commissions in relation to such Reinsured Risks; and (iii) taxes on the premiums relating to such Reinsured Risks, ((a) less each of (i), (ii) and (iii) being the Net Premiums) multiplied by 150 per cent;
(b)	120 per cent. of outstanding claims amounts attributable to relevant Reinsured Risks (including reserves for claims incurred but not reported maintained by National Indemnity or Munich Re or the relevant member of such person’s Group (as the case may be) in respect of relevant Reinsured Risks) written in the name of National Indemnity or Munich Re or the relevant member of such person’s Group less amounts recoverable in respect of reinsurance taken out in accordance with the Pool Business Plan (as defined in the Pool Members’ Agreement) as amended from time to time or otherwise taken out by the Agents on behalf of the Members of the Pool as a whole ; or
(c)	$8,600,000.00 million plus the Net Premiums in relation to the relevant Reinsured Risks;

provided that:

(i) if in relation to Converium, it has its financial strength rating upgraded to A- or above by S&P or if such rating is not available, above such comparable rating as may be reasonably agreed between the parties the references to “150” and “120” above shall be read as “100” save that nothing in this proviso shall be construed to reduce the Incurred Position below the minimum percentage which is required to allow Munich Re, National Indemnity or the relevant member of its Group to

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receive credit for the Reinsurance to which the security relates under the laws of the jurisdiction in which such person is domiciled; and

(ii)

proviso (i) above shall only apply during such periods as Standard & Poor’s financial strength rating of Converium is A- or above (or if such rating is not available, such comparable rating as may be reasonably agreed between Converium, Munich Re and National Indemnity). Converium shall make such additional deposits to and or increase any relevant LOC(s) in the MR Fund, as appropriate, and the NICO Fund in the event that Standard & Poor’s financial strength rating of Converium falls below A- subsequent to termination of this Agreement under Clause 10.1 so as to comply with the requirements of Clause 13 or Clause 14 (as appropriate) without regard to proviso (i) above;

The Incurred Position shall be calculated by the Agent within 20 business days of the end of each quarter, one quarter in arrears or upon written request by any of the parties hereto, within 25 business days of the receipt of such written request.

Letter of Credit (“LOC”) means a clean, unconditional and irrevocable Letter of Credit issued on behalf of Converium by a bank with a credit rating by Standard and Poors of AA or above (or if such rating is not available, such other comparable rating as may be reasonably agreed between the person in whose favour such Letter of Credit is written and Converium) for the benefit of National Indemnity or Munich Re (or the applicable member of such person’s Group) (as the case may be) in an amount to be determined from time to time in accordance with Clause 13 or Clause 14 (as appropriate) provided that the bank issuing any Letter of Credit must be one that would permit (a) National Indemnity or the relevant member of its Group to receive credit for the Reinsurance to which that Letter of Credit relates under the laws of the jurisdiction in which such person is domiciled; or (b) Munich Re or the relevant member of its Group to receive credit for the Reinsurance to which that Letter of Credit relates under the laws of Germany;

Letter of Credit Notice means a notice issued by National Indemnity or Munich Re (as the case may be) from time to time requiring Converium to either: (a) arrange or cause to be arranged the issue and/or delivery of a Letter of Credit and/or to increase the amount of any such Letter of Credit; or (b) deposit additional funds in the MR Fund or the NICO Fund;

Net Premiums has the meaning given to it in the definition of Incurred Position;

Overriding Commission means the overriding commission payable in accordance with Clause 6, the amount of which shall be calculated in accordance with Schedule 1;

Period means the period beginning at 12:01 am BST on 1 January 2007 and ending at 12.01 a.m. BST on 30 June 2007;

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Pool Members’ Agreement means the Agreement between GAI, Global and various insurance companies and reinsurance companies including National Indemnity, Munich Re and Converium dated 27 November 2002 for the formation of an aviation and aerospace underwriting pool under the management of Global and GAI;

Premium shall have the meaning given to it in Clause 5.1;

profit shall mean, subject to the provisions of Schedule 4 or Schedule 5, for the purposes of Clauses 13.5, 13.12 to 13.14, 14.5 and 14.12 to 14.14:

(a)	the Due Premiums in respect of the relevant Reinsured Risks;
	LESS
(b)	paid claims in respect of the relevant Reinsured Risks as at 31 December 2010;
	LESS
(c)	outstanding claims which have been notified to Global or any of its subsidiaries in relation to relevant Reinsured Risks as at 31 December 2010;
	LESS
(d)	the reserves held for incurred but not reported claims in respect of relevant Reinsured Risks as at 31 December 2010 by Munich Re or National Indemnity or a relevant number of such person’s group, calculated by Munich Re or National Indemnity (or such person’s respective appointee) (as appropriate) in accordance with actuarial best practice and guidance produced by relevant actuarial bodies in the relevant country (and subject to the dispute resolution mechanism in Clause 6),

in the case of (a) to (c) as produced by Global’s computer systems;

Regulatory Action means:

(a)	any order of a court of competent jurisdiction;
(b)	any order made, decision given or final view expressed by a competent national, supranational, governmental or regulatory authority or agency; or
(c)	any enactment of a legislative body;
(i)	which prohibits or restricts to a material extent the carrying on of the Business or the arrangements contemplated by this Agreement; or
(ii)	in consequence of which any of the parties would incur fines or a liability in damages were this Agreement to be performed in accordance with its terms;

Reinsurance has the meaning given to it in Clause 3;

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Reinsured Risks means that percentage of any and all contracts of insurance, reinsurance or retrocession written by either Agent in the name of Munich Re, National Indemnity (or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3) solely in its capacity as fronting insurer for Converium under, pursuant to or in connection with (or purportedly under, pursuant to or in connection with) this Agreement (as such contracts may be amended from time to time) and irrespective of whether the acceptance of such contract was within the scope of the authority granted to the Agent by Munich Re or National Indemnity or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 under the terms of this Agreement or within the scope of (or in accordance with the terms of) the Pool Members’ Agreement and Reinsured Risk shall be construed accordingly. For the avoidance of doubt, Reinsured Risks shall not include the percentage of each policy issued under the Pool Members’ Agreement representing Munich Re’s or National Indemnity’s interest under the Pool Members’ Agreement;

Relevant Risks means Specified Risks relating to those countries set out in Part I of Schedule 2 in the case of Munich Re and the members of its Group and Part I of Schedule 3 in the case of National Indemnity and the members of its Group, which are insurance or reinsurance risks;

Respective Proportion has the meaning given to it in the Pool Members’ Agreement;

Specified Risks means aerospace, aviation and all related and incidental insurance and reinsurance risks;

subsidiary and wholly-owned subsidiary shall have the meanings given thereto in Section 736 of the Companies Act 1985; and

Taxation means all forms of taxation and statutory, governmental, state, provincial, local governmental or municipal impositions, duties, contribution and levies and all penalties, charges, costs and interest relating thereto.

1.2 References to Recitals, Clauses, Schedules and parties are, except where otherwise provided, to Recitals, Clauses, Schedules or parties to this Agreement. The Schedules form part of this Agreement and have the same force and effect as if set out in the body of this Agreement.

1.3 References to a statutory provision include such provision and any regulations made in pursuance thereof as from time to time modified or re-enacted whether before or after the date of this Agreement so far as such modification or re-enactment applies or is capable of applying to any transactions entered into pursuant to this Agreement or to which this Agreement relates and (so far as the same may be relevant) shall include any statutory provisions or regulations which such provisions or regulations have directly or indirectly replaced.

1.4 The headings and index hereto are inserted for convenience only and shall not affect the construction of this Agreement.

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1.5 References to Converium, Munich Re (and any member of its Group), National Indemnity (and any member of its Group) or to the Agents or any of them mean and include their respective successors in title and permitted assigns.

1.6 Where the context so admits, references to the singular shall be deemed to include the plural and vice versa.

1.7 References to Schedule 2 or Schedule 3 shall be to that Schedule as amended in accordance with the terms of Schedule 2 or Schedule 3 (respectively) at the relevant time.

2. Appointment of Global and GAI to write Fronting Insurance

2.1 Each of Munich Re and National Indemnity (for itself and as agent for each member of its Group set out in Part I of Schedule 2 or Part I of Schedule 3 respectively) hereby severally appoints Global to act as agent for it or such member of its Group as is set out in Part I of Schedule 2 or Part I of Schedule 3 in the relevant jurisdiction indicated in those Schedules (which appointment Global hereby accepts and acknowledges):

(a)	to underwrite and/or bind and/or effect Fronting Insurance Contracts in the name of each of such persons in accordance with the terms of this Agreement; and
(b)	to administer the Fronting Insurance Contracts and any reinsurance of them including (without limitation) providing those services specified in paragraphs 1.2 and 2 of Schedule 3 of the Pool Members’ Agreement in relation to the Fronting Insurance Contracts

2.2 The Agent in performing its services under this Agreement shall act as agent (and describe itself as acting as agent) for Munich Re or the relevant member of its Group when acting pursuant to its appointment by Munich Re or a member of its Group or National Indemnity or the relevant member of its Group when acting pursuant to its appointment by National Indemnity or a member of its Group.

2.3 The appointment by each of Munich Re and National Indemnity and the relevant members of their Groups of Global to act as its agent to underwrite and/or bind and/or effect Fronting Insurance Contracts in the name of Munich Re or National Indemnity or the relevant member of its Group is limited to the negotiation and/or underwriting and/or binding and/or effecting of Fronting Insurance Contracts:

(a)	in those countries set out against such person’s name in Part I of Schedule 2 or Part I of Schedule 3;
(b)	in respect of the percentage set out against such person’s name in Part I of Schedule 2 or Part I of Schedule 3 of Converium’s Respective Proportion of the Relevant Risk;

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(c)	which are bound and/or effected prior to the expiration of the Period;
(d)	which incept in the Period (provided that where a policy relating to a Relevant Risk was written prior to the Period and is cancelled but re-written on the same terms save for the fact that Converium is replaced as an underwriter by Munich Re and National Indemnity for the Period, such policy shall be deemed to incept in the Period);
(e)	the period of which does not, in any case, exceed 12 months plus odd time not exceeding 15 months in all;
(f)	the terms of which, where written on a risks attaching basis, do not allow for any risks to attach where the period of such risks exceeds 12 months plus odd time not exceeding 15 months in all;
(g)	which are in respect of Relevant Risks; and
(h)	which are within the scope of the insurance and reinsurance contracts the Agents are authorised to write under the Pool Members’ Agreement.

2.4 Global shall not have any entitlement whatsoever to remuneration from Munich Re, National Indemnity or the members of their Groups and none of Munich Re, National Indemnity or the members of their Groups shall have any obligation whatsoever to remunerate the Agents in respect of the assumption and performance of the Agents’ obligations under this Agreement.

2.5 Either Agent may (subject to prior notification of Converium, Munich Re and National Indemnity) appoint a wholly-owned subsidiary of Global, which has been appointed pursuant to Clause 10 of the Pool Members’ Agreement, for the purposes of providing all or some of the services under this Agreement in relation to such part of the Business as the board of directors of the relevant Agent may determine and shall give prior notice of such appointment to each of Converium, Munich Re and National Indemnity. Such subsidiary shall, as soon as reasonably practicable, become a party to this Agreement by executing a Deed of Adherence in the form (or substantially in the form) set out in Annexure 1.

2.6 The appointment by Munich Re, National Indemnity or the relevant member of their Group of the relevant Agent as its agent under Clause 2.1 shall be extended to the subsidiary, as if references to Globalwere references to such subsidiary, in each case in relation only to such services and/or to such parts of the Business as is determined by the board of directors of the relevant Agent.

2.7 Any appointment of a subsidiary under Clause 2.5 shall terminate upon such subsidiary ceasing to be a wholly-owned subsidiary of Global.

2A. Extension of National Indemnity and Munich Re Fronting Lines

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2A.1 Munich Re’s Respective Proportion of Specified Risks written in the jurisdictions set out in of Schedule 2 is fronted by the company set out opposite such jurisdiction in of Schedule 2 (together the MR Fronters). Munich Re agrees to use its reasonable endeavours to amend its agreements with the MR Fronters so that each MR Fronter also writes fifty per cent (50%) of Converium’s Respective Proportion of Specified Risks in the jurisdiction set out opposite it in of Schedule 2 (the MR Converium Risks),which shall then be 100% quota share reinsured by Munich Re.

2A.2 Converium agrees that to the extent MR Converium Risks are written by the MR Fronters on terms previously agreed with Converium in writing and provided that Munich Re and each member of its Group pays to Converium all amounts received by it from the MR Fronters in relation to them fronting Converium Risks it will:

(a) pay overriding commissions previously notified to and agreed by Converium in writing due to the MR Fronters in respect of the Converium Risks;

(b) provide any security previously notified to and agreed by Converium in writing required by the MR Fronters in relation to the Converium Risks (which security shall be provided from the MR Fund pro rata to the applicable exposure); and

(c) reinsure Munich Re’s reinsurance of the MR Converium Risks on an equivalent basis to that set out in Clause 3.

2A.3 Converium shall pay Munich Re commission (the MR Fronted Commission) for reinsuring the Converium Risks on the basis set out in Clauses 2A.4 to 2A.6.

2A.4 The amount of MR Fronted Commission payable by Converium shall be calculated by reference to the total gross premium income written by the Agents in the period in question in respect of each MR Converium Risk after deduction of (i) any original commission or taxes on premiums payable thereunder but before the deduction of amounts, if any, payable to the Agents under the terms of the Pool Members’ Agreement and (ii) any premiums payable by the Agents for reinsurance in relation to the Pool (such amount being referred to as the MR Relevant Net Premium Income).

2A.5 The amount of MR Fronted Commission payable by Converium to Munich Re shall be calculated by multiplying the MR Relevant Net Premium Income attributable to MR Converium Risks covered by policies written by MR Fronters by 1 per cent. (or by such percentage as may be agreed from time to time between Munich Re and Converium in writing).

2A.6 The amount of MR Fronted Commission attributable to any calendar quarter shall be due and payable on (i) the last business day of the immediately following calendar quarter, or (ii) the date on which a cash distribution is paid by the Agents to Converium under the Pool Members’ Agreement with respect to business written in such calendar quarter, whichever is earlier and shall be deducted by Munich Re from the MR Fund on that date.

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2A.7 National Indemnity’s Respective Proportion of Specified Risks written in the jurisdictions set out in of Schedule 3 is fronted by the company set out opposite such jurisdiction in of Schedule 3 (together the NIC Fronters). National Indemnity agrees to use its reasonable endeavours to amend its agreements with the NIC Fronters so that each NIC Fronter also writes fifty per cent (50%) of Converium’s Respective Proportion of Specified Risks in the jurisdiction set out opposite it in of Schedule 3(Part 1, Schedules 2 and 3)) (the NIC Converium Risks), which shall then be reinsured by National Indemnity.

2A.8 Converium agrees that to the extent the NIC Converium Risks are written by the NIC Fronters on terms previously agreed with Converium in writing and provided that National Indemnity and each member of its Group pays to Converium all amounts received by it from the NIC Fronters in relation to them fronting NIC Converium Risks it will:

(a) pay overriding commissions previously notified to and agreed by Converium in writing due to the NIC Fronters in respect of the NIC Converium Risks;

(b) provide any security previously notified to and agreed by Converium in writing required by the NIC Fronters in relation to the NIC Converium Risks (which security shall be provided from the NIC Fund pro rata to the applicable exposure); and

(c) reinsure National Indemnity’s reinsurance of the NIC Converium Risks on an equivalent basis to that set out in Clause 3.

2A.9 Converium shall pay National Indemnity commission (the NIC Fronted Commission) for reinsuring the NIC Converium Risks on the basis set out in Clauses 2A.10 to 2A.12.

2A.10 The amount of NIC Fronted Commission payable by Converium shall be calculated by reference to the total gross premium income written by the Agents in the period in question in respect of each NIC Converium Risk after deduction of (i) any original commission or taxes on premiums payable thereunder but before the deduction of amounts, if any, payable to the Agents under the terms of the Pool Members’ Agreement and (ii) any premiums payable by the Agents for reinsurance in relation to the Pool (such amount being referred to as the NIC Relevant Net Premium Income).

2A.11 The amount of NIC Fronted Commission payable by Converium to National Indemnity shall be calculated by multiplying the NIC Relevant Net Premium Income attributable to NIC Converium Risks covered by policies written by NIC Fronters by 1 per cent, (or by such percentage as may be agreed from time to time between National Indemnity and Converium in writing).

2A.12 The amount of NIC Fronted Commission attributable to any calendar quarter shall be due and payable on (i) the last business day of the immediately following calendar quarter, or (ii) the date on which a cash distribution is paid by the Agents to Converium under the Pool Members’ Agreement with respect to business written in

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such calendar quarter, whichever is earlier and shall be deducted by National Indemnity from the NICO Fund on that date.

3. Converium’s Reinsurance and Indemnity Obligations

3.1 Immediately upon, and with effect from, the acceptance and/or binding of a Reinsured Risk by the Agents (or either of them), Munich Re or the relevant member of its Group and National Indemnity or the relevant member of its Group shall cede to Converium and Converium agrees to accept by way of reinsurance the quota share percentage set out against such person’s name in Part I of Schedule 2 or Part I of Schedule 3 of Converium’s Respective Proportion of the Relevant Risk (the total amount ceded pursuant to this Clause 3.1 shall be the Reinsurance and the amount ceded in relation to a particular Reinsured Risk by a particular entity shall be the Reinsurance relating to that Reinsured Risk). Such cession and acceptance shall be effected immediately and automatically on, and with effect from, the acceptance and/or binding of the Reinsured Risk in question.

3.2 In consideration of Munich Re and National Indemnity agreeing to enter into this Agreement, Converium agrees to reinsure and indemnify Munich Re, National Indemnity or the relevant member of its Group, without limit in time or amount, in respect of the Ultimate Net Loss of Munich Re, National Indemnity or the relevant member of its Group in respect of, or relating to, each Reinsured Risk in respect of which a Fronting Insurance Contract is written in such person’s name. This Agreement shall only apply to the portion of a risk reflecting Converium’s participation in the Pool Members’ Agreement and in respect of Munich Re, National Indemnity and each member of such person’s Group shall only apply to the portion of such risk actually fronted by such person.

3.3 The term Ultimate Net Loss, as used herein, shall mean all amounts paid or agreed to be paid (including by way of set-off, release or any other form of consideration) by Munich Re, National Indemnity or the relevant member of such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3 (or the Agent(s) on behalf of Munich Re, National Indemnity or the relevant member of such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3) in respect of or in relation to Claims and/or Claims-Related Extra Contractual Obligations relating, in any way, to a Reinsured Risk (or any or all Reinsured Risks) and shall include, without limit, all adjustment expenses arising from the evaluation, assessment, investigation and/or settlement of claims other than the salaries of employees and office expenses of Munich Re or any member of its Group (in the case of Ultimate Net Losses relating to Munich Re or any member of its Group) or National Indemnity or any member of its Group (in the case of Ultimate Net Losses relating to National Indemnity or any member of its Group) provided that Converium shall be entitled to all amounts physically received by way of recoveries/salvages. It is further understood and agreed that:

(a) any of Munich Re, National Indemnity or the relevant member of such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3 shall be entitled to recover any part of its Ultimate Net

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Loss once that has been ascertained without having to wait until its total Ultimate Net Loss has been ascertained; and

(b)

for the avoidance of doubt, notwithstanding any other provision of this Agreement, it is understood and agreed that neither Munich Re, National Indemnity nor the relevant member of such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3 shall be required to actually pay (in the sense of making a physical disbursement of money or monies worth) any amounts in respect of which indemnity is claimed in order to trigger Converium’s indemnity obligations hereunder.

3.4 If the terms of any reinsurance taken out by the Agents for the benefit of Munich Re, National Indemnity or a member of such person’s Group in relation to the Pool (a Pool Reinsurance) cover part or all of any Relevant Risk, the Reinsurance provided for in this Clause 3 shall not extend to such part of that Relevant Risk provided that to the extent the Agents are not able to recover under the Pool Reinsurance the Ultimate Net Loss in respect of such Relevant Risk for any reason other than as a result of a negligent or fraudulent act by Munich Re, National Indemnity or a member of such person’s Group (provided that for the avoidance of doubt a negligent or fraudulent act by the Agent or any person appointed by the Agent to act as agent of Munich Re or National Indemnity shall not be deemed a negligent or fraudulent act by Munich Re, National Indemnity or a member of such person’s Group for the purposes of this clause unless the Agent was instructed to undertake such act by Munich Re or National Indemnity or a member of such person’s Group (other than by instruction approved by Converium), Converium shall reinsure such Ultimate Net Loss pursuant to this Clause 3.

3.5 The Agents, Munich Re and National Indemnity shall (and shall procure that each relevant member of such person’s Group shall) take such reasonable action as is necessary to allow the Agents to make a successful claim under any relevant Pool Reinsurance.

3.6 Converium shall, in all respects, follow the fortunes of Munich Re or National Indemnity or the member of such person’s group in whose name the relevant Fronting Insurance Contract is written in relation to all matters falling within the scope of the Reinsurance and the Reinsurance shall be construed in such a way as to give effect to the parties’ intention that, to the greatest extent permissible by law:

(a)	Munich Re, National Indemnity and the members of their Groups should retain no economic interest in the Reinsured Risks after the application of this Reinsurance; and
(b)	the economic fortunes of Converium in relation to the Reinsured Risks should exactly mirror those of Munich Re or National Indemnity or the member of such person’s Group in whose name the relevant Fronting Insurance Contract is written.

3.7 Accordingly, and without prejudice to the generality of Clause 3.6, Converium shall be unconditionally bound to follow all settlements, compromises, commutations,

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policy buy-backs or other agreements of any nature whatsoever entered into, or agreed, on behalf of Munich Re, National Indemnity or the members of their Groups by the Agents in relation to the Fronting Insurance Contracts including any and all ex gratia payments without regard to the question of whether Munich Re, National Indemnity or the members of their Groups had any liability whatsoever (whether arguable or otherwise) in respect of such settlements, compromises, etc.

3.8 The parties acknowledge and agree that the obligations of Converium to indemnify:

(a)

Munich Re or a member of its Group in whose name the relevant Fronting Insurance Contract is written under this Agreement shall not in any way be affected by any actual or alleged breaches by the Agents or National Indemnity of the terms of this Agreement, the Pool Members’ Agreement or of any duties (whether in contract tort or equity) owed by the Agents or National Indemnity to Converium or Munich Re or the members of their Groups.

(b)

National Indemnity or a member of its Group in whose name the relevant Fronting Insurance Contract is written under this Agreement shall not in any way be affected by any actual or alleged breaches by the Agents or Munich Re of the terms of this Agreement, the Pool Members’ Agreement or of any duties (whether in contract tort or equity) owed by the Agents or Munich Re to Converium or National Indemnity or the members of their Groups.

4. Duties & Waivers

4.1 Converium acknowledges and agrees that this Agreement is being entered into by the parties solely as a Fronting Arrangement for the purposes of the Pool Members’ Agreement in order to facilitate the participation by Converium in the underwriting of risks pursuant to the Pool Members’ Agreement and that, but for Converium having a BBB+ rating from Standard & Poor’s Rating Services, Converium would in any event have participated directly in such risks pursuant to the terms of the Pool Members’ Agreement. Accordingly, subject to Clause 4.3, Converium agrees:

(a)

that it has been afforded the opportunity to conduct its own investigations and due diligence in relation to all matters relevant and/or material to this Agreement and the Pool Members’ Agreement (including the Reinsurance and the Reinsured Risks);

(b)

that neither Munich Re, National Indemnity nor the member of such person’s Group in whose name a Fronting Insurance Contract is written nor its agents nor any person acting on its behalf assumes, shall accept, and owe, any duty of care, whether in contract or in tort, nor fiduciary duties to Converium in relation to any matters falling within the scope of this Agreement or the Reinsurance and none of Munich Re, National Indemnity or the

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	member of such person’s Group in whose name a Fronting Insurance Contract is written shall accept, or have, any vicarious liability for any acts or omissions of the Agents in relation thereto;
(c)	to waive any duty of disclosure on the part of Munich Re, National Indemnity or any member of such person’s Group in whose name a relevant Fronting Insurance Contract is written and/or its agents and/or any other person acting on behalf of Munich Re, National Indemnity or the member of such person’s Group in whose name the relevant Fronting Insurance Contract is written in relation to the Reinsurance and/or the subject-matter of this Agreement (including, but not limited to, each and every Reinsured Risk and/or the cession thereof);
(d)	to acknowledge and accept the validity of each Fronting Insurance Contract underwritten by an Agent on behalf of Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 for the benefit of Converium pursuant to (or in purported pursuance of) this Agreement;
(e)	to waive and/or otherwise exclude any right (or remedy) that it might have, whether now or in the future, to seek or otherwise claim damages in respect of, or to avoid, rescind or otherwise challenge the validity of any Fronting Insurance Contract and/or the Reinsurance and/or the cession of, any Reinsured Risk on any grounds including;

(i)	misrepresentation and/or non-disclosure of material facts (whether innocent, or negligent); and/or
(ii)	any breach (or alleged breach) of any duty of utmost good faith by Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 (or any person acting on behalf of Munich Re, National Indemnity or the members of their Groups set out in Schedule 2 or Schedule 3); and

(f) save to the extent otherwise provided for in this Agreement, Converium shall indemnify and keep indemnified Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 in respect of any claim, loss or liability of any kind (including without limitation any liability to the Agents (or either of them) under the Pool Members’ Agreement) in respect of or in connection with the conduct (or purported conduct) of the Business.

4.2 Unless the contrary is expressly stated, no terms of this Agreement and/or Reinsurance which are expressed to be warranties (or which might be otherwise have been construed as warranties but for this Clause 4.2) shall take effect as warranties

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within the meaning of the Marine Insurance Act 1906 (which for the purposes of information only provides, in general circumstances, for the discharge of liability should a warranty be breached) but shall, instead, be construed and take effect as innominate terms.

4.3 For the avoidance of doubt, however, nothing in this Clause 4 is intended to affect and/or waive and/or otherwise exclude any rights or remedies which Converium might have, whether now or in the future, arising out of, or relating to, fraud on the part of any of Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 themselves (as opposed to fraud of the Agents, or either of them, on behalf of Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3), provided that the parties agree that no fraud on the part of:

(a)	National Indemnity or a member of its Group shall impact the obligations of Converium to Munich Re or a member of its Group;and
(b)	Munich Re or a member of its Group shall impact the obligations of Converium to National Indemnity.

5. Premiums and Pool Payments

5.1 Subject to Clause 6, each of Munich Re and National Indemnity agrees for itself and as agent for each member of its Group set out in Part I of Schedule 2 and Part I of Schedule 3 respectively that Converium shall be entitled to all amounts actually received by the Agents (or either of them) in respect of premiums payable under the terms and conditions of the Reinsured Risks including, for the avoidance of doubt, any and all adjustment and/or reinstatement premiums but after the deduction of any commissions or brokerage or other deductions payable or to be deducted therefrom (Premiums) provided that all amounts payable to Converium pursuant to Clause 7 of the Pool Members’ Agreement less all amounts payable by Converium under Clause 7.5 of the Pool Members’ Agreement (and less all amounts due to National Indemnity or Munich Re, respectively, under Clause 6 as Overriding Commission) shall be paid:

(a) as to fifty percent directly to National Indemnity (or such member of its Group listed in Part I of Schedule 3 as National Indemnity shall advise Converium and the Agents) in relation to Reinsurance Risks covered by Fronting Insurance Contracts written in the name of National Indemnity or any member of its Group set out in Part I of Schedule 3 to be held as set out in Clause 14.2.

5.2 The Agents shall hold such proportion of the Premiums that is equivalent to any Overriding Commission payable (or potentially payable) by Converium to:

(a) Munich Re or any member of its Group and shall pay such amount to Munich Re in accordance with Clause 6 and shall only pay to Converium the remaining amount;

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(b) National Indemnity or any member of its Group and shall pay such amount to National Indemnity (or such member of its Group listed in Part I of Schedule 3 as National Indemnity shall advise Converium and the Agents in writing prior to such payment being made) in accordance with Clause 6 and shall only pay the remaining amount as specified in Clause 5.1 (a).

5.3 All amounts payable by Converium to the Agents pursuant to Clause 7 of the Pool Members’ Agreement shall, except in the case where the MR Fund contains sufficient monies, when the amounts shall be paid as to fifty per cent from the MR Fund, be paid by Converium as to fifty per cent directly to the Agents and as to fifty per cent from the NIC Fund, provided that National Indemnity shall not be obligated to make any payment described in Clauses 14.17(b) or (c) which would cause the NIC Fund to be reduced below $8, 600,000.00 million (or, if lower and Clause 14.8 applies, the amount required to be held in the NIC Fund pursuant to Clause 14.8). Any shortfall in amounts payable by Converium to the Agents pursuant to Clause 7 of the Pool Members’ Agreement by reason of either of the foregoing provisos shall be paid by Converium.

6. Overriding Commission

6.1 In consideration of Munich Re and the members of its Group set out in Part I of Schedule 2 agreeing to front for Converium in respect of the Reinsured Risks, Converium agrees to pay commission to Munich Re for itself and as agent for such member of its Group (Munich Re Overriding Commission) in respect of each Reinsured Risk covered by Fronting Insurance Contracts written by such persons.

6.2 In consideration of National Indemnity and the members of its Group set out in Part I of Schedule 3 agreeing to front for Converium in respect of the Reinsured Risks, Converium agrees to pay commission to National Indemnity (or such member of National Indemnity’s Group listed in Part I of Schedules as National Indemnity shall advise Converium and the Agents) for itself and as agent for such members of its Group (NIC Overriding Commission and together with Munich Re Overriding Commission, Overriding Commission) in respect of each Reinsured Risk covered by Fronting Insurance Contracts written by such persons.

6.3 Subject always to Clause 6.4, the relevant Agent shall calculate the amount of Overriding Commission payable in respect of all Premiums written in respect of the relevant Reinsured Risks and shall:

(a)	deduct and withhold such amounts from the Premiums payable as set out in Clause 5.1; and
(b)	account for, and pay, such amounts to Munich Re or National Indemnity (or such member of its Group listed in Part I of Schedule 3 as National Indemnity shall advise Converium and the Agents in writing prior to such payment being made) in accordance with Schedule 1.

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6.4 Converium’s obligation to pay Overriding Commission to Munich Re or National Indemnity shall be discharged only by the actual receipt by Munich Re or National Indemnity (or such member of National Indemnity’s Group listed in Part I of Schedule 3 as National Indemnity shall advise Converium and the Agents) of the amounts due and not by the deduction or withholding by the Agents (or any of them) of amounts calculated to be due in respect of Overriding Commission provided that such payment obligation shall be discharged to the extent that the Overriding Commission (or part thereof) payable to Munich Re or National Indemnity is set-off against monies due and payable by Munich Re or National Indemnity to the relevant Agent in connection with the Pool. The receipt of Overriding Commission by Munich Re or National Indemnity in respect of Fronting Insurance Contracts written by members of such person’s Group shall discharge Converium’s obligations in respect thereof and Converium shall not be concerned as to the application of such amounts.

7. Claims

7.1 The Agents shall manage and perform the administration of the Reinsured Risks and the negotiation and settlement of Claims thereunder and, in doing so, shall act as agent of Munich Re, National Indemnity (and the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3) and Converium.

7.2 Without prejudice to the generality of Clause 7.1, all decisions made by the Agents in relation to the administration of the Reinsured Risks and the negotiation and/or settlement of Claims thereunder shall be made as agents for Munich Re, National Indemnity (and the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3) and Converium and shall be deemed to be in the knowledge of all of them (to the greatest extent permitted or allowable by law).

7.3 As between Converium and any of Munich Re, National Indemnity and the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3, Munich Re, National Indemnity and the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 shall have no obligation to provide or disburse funds in respect of any obligations arising under or in relation to Reinsured Risks. Such funds shall be provided by Converium and, accordingly, Converium shall ensure that, at all times, sufficient funds are provided to the Agents to enable all obligations under or in relation to each Reinsured Risk to be met as and when they fall due.

7.4 Any and all funds provided by Converium pursuant to Clause 7.3 shall, until physically disbursed to the relevant insured or reinsured under the relevant Reinsured Risk or claimant against such insured, be held by the Agents as agent for Converium and payment of such funds by Converium to the Agents shall not constitute a discharge of, or operate to discharge, the obligations of Converium to Munich Re, National Indemnity or any members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 under the terms of the Reinsurance, which obligations shall be discharged only by (and to the extent of):

(a) physical disbursements of relevant amounts to insureds and/or reinsureds under the Reinsured Risks or claimant against such insured; and/or

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(b) physical disbursement to Munich Re, National Indemnity or any members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 of amounts due under the Reinsurance to Munich Re, National Indemnity or any members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3.

8. Accounts and Information

8.1 Each Agent agrees to provide accounting and other information to Munich Re, National Indemnity or Converium in the form and in the manner that may be reasonably required by Munich Re, National Indemnity or Converium from time to time by giving notice as provided for in Clause 22.

8.2 Each of the Agents shall keep, in such forms as may be agreed from time to time with (a) Munich Re and Converium in relation to Relevant Risks for which Munich Re or a member of its Group provides Fronting Insurance Contracts or (b) National Indemnity and Converium in relation to Relevant Risks for which National Indemnity or a member of its Group provides Fronting Insurance Contracts, books, records, underwriting statistics and accounts of all transactions under this Agreement.

8.3 Munich Re, National Indemnity or Converium may, subject to any confidentiality obligations of either Agent, at all reasonable times and on reasonable notice appoint its officers, employees agents, or auditors to inspect, examine and verify at the offices of either Agent (and to take copies of such books and records) all such accounts, records, books, vouchers, correspondence and papers relating to any of the functions performed by the relevant Agent under this Agreement insofar as they relate to the affairs of Munich Re or the members of its Group set out in Part I of Schedule 2 or National Indemnity or the members of its Group set out in Part I of Schedule 3 or Converium or a member of its Group respectively, including without limitation the application of any money belonging to them paid or received by the relevant Agent and the operation of bank accounts of such persons by the relevant Agent pursuant to this Agreement, and each of the Agents shall whenever reasonably required at any time during normal business hours give such officers, employees, servants or agents access to its offices for such purposes.

8.4 Each of National Indemnity and Munich Re undertakes to agree to supply, to the extent permissible under any applicable law or regulatory requirements, such information as either Agent shall reasonably request from time to time in order to facilitate the management of the Business or the arrangements referred to in Clause 2A (but shall not be obliged to provide any information relating to any business of each of National Indemnity and Munich Re or any member of its Group to the extent it does not relate to the Business or the arrangements referred to in Clause 2A).

9. Relationship between the Parties

9.1 Nothing in this Agreement shall create or constitute a partnership between the parties hereto or any of them nor, save as expressly provided herein, constitute any one the agent of another and no party shall do or suffer anything to be done whereby it shall or may be represented that it is the partner or agent of any other party hereto

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(save as aforesaid) unless such party is appointed partner or agent of another party subject to the consent in writing of every other party to this Agreement.

9.2 The relationship between the parties to this Agreement is as described in this Agreement. Neither that relationship nor the services to be provided by Global nor any other matter shall give rise to any fiduciary or equitable obligations which would hinder Global from acting as contemplated under the terms of this Agreement.

10. Termination

10.1 For the purposes of this Clause 10, a Trigger Event shall be deemed to have occurred in relation to a party if:

(a)	it ceases to be duly authorised (or has any suspension, restriction or other limitation imposed in respect of its authority, licence, approval or permission) in respect of Specified Risks in the jurisdiction in which it is incorporated or has its principal place of business (home jurisdiction);
(b)	it goes into liquidation whether compulsorily or voluntarily (otherwise than a voluntary and solvent liquidation for the purpose of reconstruction or amalgamation pursuant to a scheme previously agreed between the parties);
(c)	it enters into any composition with its creditors generally or suffers any similar action in consequence of default by it in its obligations in respect of any indebtedness for borrowed moneys;
(d)	an administration order shall be made in respect of such party;
(e)	it stops or threatens to stop payment or ceases or threatens to cease to carry on its business (otherwise than in connection with or in pursuance of a winding-up for the purpose of a reconstruction or amalgamation pursuant to a scheme previously agreed between the parties) or is deemed for the purpose of Section 123 of the Insolvency Act 1986 to be unable to pay its debts;
(f)	it has an administrative receiver or other receiver or other similar official appointed over all (or substantially all) of its undertaking and assets;
(g)	it suffers any action similar to any of the events described in Clauses 10.1(a) to (f) under the laws of any competent jurisdiction;
(h)	it has its financial strength rating downgraded below BBB+ (or in the case of Converium BBB) by Standard & Poor’s Rating Service (S&P) or if such rating is not available, below such

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	comparable rating as may be reasonably agreed between the parties, or it requests or agrees that S&P should cease to rate it;
(i)	Converium is subject to a change of control as defined in Clause 15.2(f) of the Pool Members’ Agreement.

10.2 In the event that a Trigger Event occurs in relation to any of Munich Re or a member of its Group set out in Part I of Schedule 2 or National Indemnity or a member of its Group set out in Part I of Schedule 3, the Agents or either of them may suspend entirely with immediate effect the appointment by the relevant person (the defaulter) pursuant to Clause 2.1(a), in which case the parties shall seek to agree a basis upon which such suspension might be lifted and the appointment reinstated. From the time of any such suspension until the time such agreement is reached, Clause 10.3 shall apply.

10.3 If this Clause 10.3 applies (by reason of Clause 10.2 or 10.7), neither of the Agents shall (nor shall they have any authority to):

(a)	accept Fronting Insurance Contracts in the name of the defaulter or the person invoking this Clause 10.3 pursuant to Clause 10.7 (as appropriate);
(b)	provide quotations or enter into (or continue) any negotiations relating to the possible acceptance of, Fronting Insurance Contracts in the name of the defaulter or the person invoking this Clause 10.3 pursuant to Clause 10.7 (as appropriate); or
(c)	agree any amendments to the terms of or otherwise agree any endorsements to any Fronting Insurance Contract which would, or would be reasonably likely to, increase materially the gross exposure of the defaulter under the Fronting Insurance Contract in question.

10.4 In the event that any of Munich Re, National Indemnity or a member of such person’s Group set out in Part I of Schedule 2 or Part I of Schedule 3 ceases to be duly authorised (or has any suspension, restriction or other limitation imposed in respect of its authority, licence, approval or permission) in respect of any Relevant Risk in a jurisdiction set out against such person’s name in Part I of Schedule 2 or Part I of Schedule 3 (an Applicable Territory) in circumstances where Clause 10.1(a) does not apply to such person (a Non-Authorisation Event), then the appointment by such person (the non-authorised person) pursuant to Clause 2.1(a) in relation to any relevant Applicable Territory shall be suspended with immediate effect, in which case the parties shall seek to agree the basis upon which such suspension might be lifted and the relevant part of the appointment reinstated. From the time of any such suspension until the time such agreement is reached, Clause 10.6 shall apply.

10.5 If Clause 10.4 applies, as an alternative to suspension pursuant to Clause 10.4, Munich Re or National Indemnity shall have the right to appoint an alternate member of its respective Group meeting the requirements of the Pool Members’ Agreement to replace a non-authorized person by notice to Converium and Agents. If Munich Re or

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National Indemnity appoint an alternative pursuant to this Clause 10.5, Munich Re or National Indemnity shall procure that the alternative member of its Group shall enter into an agreement by which it agrees to be bound by this Agreement as if it were the entity it replaces.

10.6 If this Clause 10.6 applies (by reason of Clause 10.4), neither of the Agents shall (nor shall they have any authority to):

(a)	accept Fronting Insurance Contracts in the name of the non-authorised person in or relating to the Applicable Territory in question;
(b)	provide quotations for, or enter into (or continue) any negotiations relating to the possible acceptance of, Fronting Insurance Contracts in the name of the non-authorised person relating to the Applicable Territory in question; or
(c)	agree any amendments to the terms of or otherwise agree any endorsements to any Fronting Insurance Contract in the name of the non-authorised person previously written (and which relates to the Applicable Territory in question) which would, or would be reasonably likely to, increase materially the gross exposure of the non-authorised person under the Fronting Insurance Contract in question.

10.7 In the event that:

(a)	Converium ceases lawfully to be able to reinsure any Fronting Insurance Contracts;
(b)	Converium’s participation in the arrangements established by the Pool Members’ Agreement is terminated; or
(c)	a Trigger Event occurs in relation to Converium,

then any person making an appointment pursuant to Clause 2.1 (a) shall be able to suspend all appointments or, Converium or either Agent shall be entitled, by written notice to the other parties, to suspend all appointments pursuant to Clause 2. l(a) in which case the parties shall seek to agree the basis upon which such suspension might be lifted and the relevant part of the appointment reinstated. From the time of any such suspension until the time such agreement is reached, Clause 10.3 shall apply.

10.8 For the avoidance of doubt, the Agents’ administrative obligations under Clause 2. l(b) and their duties of management and administration of the Reinsured Risks and the negotiation and settlement of Claims under Clause 7 shall not cease by reason of the suspension or termination, in whole or in part, of an appointment pursuant to Clause 2.1 (a) (except to the extent that continuing to perform the administrative obligations would be inconsistent with such suspension or termination or that the parties so agree).

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10.9 Each party shall notify the other parties upon becoming aware of a Trigger Event in relation to any of Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 or Converium at any time.

10.10 Each of Munich Re and National Indemnity shall notify the other parties upon becoming aware that the Non-Authorisation Event under Clause 10.4 applies to it or any member of its Group set out in Part I of Schedule 2 or Part I of Schedule 3 at any time.

10.11 Converium shall notify the other parties upon becoming aware that Clause 10.7(a), (b) or (c) applies to it, at any time.

10.12 Suspension and/or termination of the appointment pursuant to Clause 2.1 (a) in whatever manner shall in no way affect or limit any accrued rights which any party to this Agreement may have against the others pursuant to this Agreement or any rights expressly stated to survive termination of this Agreement.

10.13 Except to the extent that any of (a) Munich Re or (b) National Indemnity, and Converium agree otherwise (such agreement to be in writing and notified to the Agents), neither the Reinsurance, nor the obligations of any of Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 or Converium, shall terminate if this Agreement or any part of it is terminated or suspended.

10.14 The appointment of the Agents (or either of them) pursuant to Clause 2.1 (a) shall terminate automatically at any time when a termination of the appointment of the Agent(s) to provide services under the Pool Members’ Agreement takes effect. Neither Munich Re nor any member of its Group, National Indemnity or any member of its Group nor Converium shall be required to make any payment to the Agents (or either of them) in the event of such a termination save as provided for in the Pool Members’ Agreement.

10.15 The appointment pursuant to Clause 2.1 may not be terminated save as expressly provided for in this Agreement.

10.16 For the avoidance of doubt, the occurrence of a Trigger Event or a Non-Authorisation Event shall not constitute a breach of this Agreement and, save in the case of fraud, a person to which a Trigger Event applies shall have no liability pursuant to this Agreement, whether in damages or otherwise, arising from or in connection with any such event, apart from any loss suffered by the Agents and/or Converium (excluding indirect, special or consequential loss or loss of profit, goodwill or business opportunity) directly resulting from a failure by a person to which a Trigger Event applies to notify Global that such an event applies to it in accordance with Clause 10.8 or 10.9 (as the case may be) and the Agents continue to write insurance business on behalf of such person under this Agreement.

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11. Confidentiality

11.1 Every party hereto shall hold in confidence and shall not divulge to any other party or any third party any Confidential Information nor make any public or press announcement regarding this Agreement or matters connected herewith except as provided in Clause 11.2, 11.3,11.4 or (as the case may be) Clause 11.5.

11.2 Notwithstanding the provisions of Clause 11.1, any party may disclose Confidential Information:

(a)	in respect of any party to any other party with the prior written consent of the first party;
(b)	with the consent of the other parties (such consent not to be unreasonably withheld or delayed);
(c)	if and to the extent required by law or for the purpose of any judicial proceedings;
(d)	if and to the extent required or permitted by this Agreement;
(e)	if and to the extent required by any securities exchange or regulatory or governmental body or tax authority to which that party or a member of its Group is subject, wherever situated;
(f)	to any member of its Group and to its officers and employees or those of such member, in any such case to the extent that such person needs to know such information in order to manage or monitor its business or in the performance of his or its duties;
(g)	to its professional advisers, auditors and bankers; or
(h)	if and to the extent the information has come into the public domain through no fault of that party.

11.3 Notwithstanding Clause 11.1:

(a)	each Agent shall, be entitled to provide extracts of this Agreement to such banks, reinsurers and brokers and other managing agents of reinsurers in the ordinary course of business as it reasonably deems necessary for the purpose of carrying out the Business;
(b)	any party may give a copy of this Agreement, or a summary of it, to any insurance company which is a member of any insurance pool constituted by the Pool Members’ Agreement but not a party hereto.

11.4 Each party shall procure that any person to whom Confidential Information is disclosed pursuant to Clauses 11.2(f) or (g) complies with the restrictions set out in this Clause 11 as if such person were a party to this Agreement.

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11.5 The provisions of this Clause 11 shall remain in full force and effect notwithstanding the termination of this Agreement and each party shall remain bound by the provisions of this Clause 11 for only a period of five years following cessation by both Agents of the provision of any services to Munich Re or National Indemnity (or any member of such person’s Group) pursuant to this Agreement.

11.6 Neither Global nor GAI shall be obliged to disclose to any other party or, in making any decision or taking any action in relation to the Business or the management thereof, to take into consideration information the disclosure of which by Global or (as the case may be) by GAI to any other party would or might be a breach of duty or confidence to any other person excluding the details of any cover written and any other information which another party requires to be in compliance with applicable law.

12. Undertakings

12.1 Global shall use all reasonable care and skill in the performance of their respective obligations under this Agreement and shall comply with all applicable laws relating thereto.

12.2 Each of Munich Re and National Indemnity severally agrees, warrants and undertakes to each of the Agents and Converium that (i) it and each member of its Group listed in Part I of Schedule 2 or Part I of Schedule 3 (respectively) has (and so long as the appointment of the relevant Agent remains in force under this Agreement shall continue to have) power to employ each of the Agents; (ii) it and each member of its Group listed in Part I of Schedule 2 or Part I of Schedule 3 (respectively) has and will have all necessary consents, powers and authorities to authorise each of the Agents to act as its agent as contemplated by this Agreement; (iii) it has all necessary consents, powers and authorities to enter into this Agreement in accordance with its terms; and (iv) it has been validly appointed by each member of its Group listed in Part I of Schedule 2 or Part I of Schedule 3 (respectively) as agent for the purposes of making the appointment on behalf of such person in Clause 2.1 and any other purpose necessary pursuant to this Agreement.

12.3 Converium agrees, warrants and undertakes to the Agent, Munich Re and National Indemnity that it has (and so long as the appointment of the Agent remains in force under the Pool Members’ Agreement shall continue to have) power to employ the Agent and has and will have all necessary consents, powers and authorities: (i) to enter into this Agreement in accordance with its terms (including, without limitation, the Reinsurance); and (ii) to authorise the Agent to act as its agent as contemplated by this Agreement.

12.4 Subject to Munich Re or National Indemnity being fully reimbursed or indemnified (under Clause 3 or otherwise) by Converium for any loss or liability it may incur, Munich Re or National Indemnity hereby undertakes to ratify (and to procure that any relevant member of its Group ratifies) every act performed or thing done by each of the Agents which shall hereafter be performed or done in exercise or purported exercise of the powers conferred or to be conferred upon the Agent by this Agreement provided only that such acts are in accordance with the terms of this Agreement and within the scope of the authority granted to the Agent hereunder.

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12.5 Each of Munich Re and National Indemnity represents and warrants to the Agents and National Indemnity that those members of its Group marked * in Part I of Schedule 2 or Part I of Schedule 3 is duly authorised to write all Relevant Risks in the United Kingdom and undertakes to take all reasonable steps to ensure such authorisations are maintained during the duration of this Agreement.

12.6 Each of Munich Re and National Indemnity undertakes to notify the Agent and Converium in writing as soon as reasonably practicable of any changes as to the authorisations (whether in relation to any Applicable Territory or the United Kingdom) which it or the members of its Group listed in Part I of Schedule 2 or Part I of Schedule 3 has, or expects to obtain, from time to time.

13. Munich Re Security

13.1 Converium shall on or before the 3^rd January 2007 (or such later date as Munich Re may specify) pay to Munich Re the sum of
$ 8, 600,00.00 million, or arrange or cause to be arranged the issue and delivery to Munich Re of a Loc in the same sum, to be held on the basis set out in Clause 13.3.

13.2 Any amounts paid or LOC’s issued and delivered pursuant to Clauses , 13.1, 13.4, 13.6 or 13.9 (or because of the definition of Incurred Position) shall be paid to the account of Munich Re notified to Converium in writing by Munich Re from time to time.

13.3 The amounts held pursuant to Clause 13.2 shall be known as the MR Fund. Such amounts shall be held by Munich Re as trustee for Converium provided that Munich Re shall be entitled to make payments from such account and /or LOC(s), as the case may be, in order to pay amounts which are due:

(a)	or claimed to be due under Reinsured Risks in respect of which Fronting Insurance Contracts have been written by it or members of its Group;
(b)	to it or members of its Group from Converium under the terms of the Reinsurance;
(c)	to it or members of its Group from Converium in respect of Overriding Commission; and/or
(d)	pursuant to Clause 2A.

13.4 At any time prior to 31 December 2010 that the MR Fund (together with the amount of any claims paid by the Agents or Munich Re in relation to the Reinsured Risks) is less than the fifty per cent (50%) of the Incurred Position, within ten Business Days of receiving notice from Munich Re or the Agents (or, if later, the date on which the Incurred Position is determined in accordance with Schedule 6), Converium shall pay to Munich Re such additional amount, or arrange or cause to be arranged the issue and delivery to Munich Re of a Loc in such amount, or increase or cause to be increased any existing Loc in the MR Fund by such additional amount as

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shall be required for the MR Fund to equal fifty per cent (50%) of the Incurred Position.

13.5 Munich Re shall pay to Converium within ten Business Days of 31 March 2011 (or, if later, the date on which the profit is determined in accordance with Schedule 4), the profit arising on any Fronting Insurance Contracts written by Munich Re or any member of its Group calculated on the basis set out in Clause 13.12, or allow any LOC or LOC’s that has or have been issued and delivered to Munich Re in accordance with Clauses, 13.1, 13,4, 13.6 or 13.9 (or because of the definition of Incurred Position) to be reduced, in the aggregate, by an amount equivalent to such profit. Nothing in this Clause 13.5 shall be construed to require Munich Re to pay any amount or reduce the LOC’s delivered to Munich Re in accordance with and pursuant to Converium’s obligations under this Agreement that would cause the MR Fund to be less than the greater of (a) and (b) below:

(a) the sum of:

(i)	100 per cent. of outstanding claims reserves, including reserves for claims incurred but not reported, maintained by Munich Re or the relevant member of its Group in accordance with applicable law or regulation in respect of relevant Reinsured Risks written in the name of such person (the MR Reserves); plus
(ii)	the greater of:

(A)	$8,600,000.00 million; and
(B)	20% of the MR Reserves; or

(b) the minimum amount which is required to allow Munich Re or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled.

The greater of (a) or (b) above shall be referred to as the Post Profit Incurred Position.

13.6 At any time after 31 December 2010 but prior to 31 December 2014 that the MR Fund is less than the Post Profit Incurred Position, within ten Business Days of receiving notice from Munich Re or Agents (or, if later, the date on which the Post Profit Incurred Position is determined in accordance with Schedule 6), Converium shall pay to Munich Re such additional amount as shall be required for the MR Fund to equal the Post Profit Incurred Position.

13.7 Munich Re shall pay to Converium, or allow any LOC or LOC’s that has or have been issued and delivered to Munich Re in accordance with clauses, 13.1, 13.4, 13.6 or 13.9 (or because of the definition of Incurred Position) to be reduced, in the aggregate, by an equivalent amount, within ten Business Days of 31 March 2015 (or, if later, within ten Business Days of the date on which the MR Reserves are

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determined in accordance with Schedule 6 for that date), the amount required to reduce the MR Fund to the greater of:

(a) the MR Reserves; or

(b) the minimum amount which is required to allow Munich Re or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled.

13.8 At any time after 31 March 2015 that the MR Fund is less than the greater of:

(a)	the MR Reserves; or
(b)	the minimum amount required to allow Munich Re or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled,

Munich Re may serve a Letter of Credit Notice which shall state the amount of additional security required to increase the MR Fund to the greater of (a) and (b) above.

13.9 Within ten Business Days of receipt of notice pursuant to Clause 13.8 (or, if later, the date on which the MR Reserves are determined in accordance with Schedule 6), Converium may either:

(a)	arrange or cause to be arranged the issue and delivery to Munich Re of a Letter of Credit in the amount set out in the Letter of Credit Notice for the benefit of Munich Re; or
(b)	deposit the required additional funds in the MR Fund.

If Converium elects to provide a Letter of Credit in response to the Letter of Credit Notice, Converium shall, if practicable and if agreed by Munich Re, be entitled to provide the necessary security by increasing, or causing to be increased, the amount of any existing Letter of Credit by the amount of the Letter of Credit Notice rather than by issuing and delivering, or causing to be issued and delivered, a new Letter of Credit). For the avoidance of doubt, nothing in this Clause shall be construed as limiting the number of Letter of Credit Notices that may be served from time to time by Munich Re.

13.10 Within ten Business Days of the end of each quarter following 31 December 2014, Munich Re shall pay to Converium the amount, if any, by which the MR Fund exceeds the greater of:

(a) the MR Reserves; and

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(b) the amount required to allow Munich Re or such member of its Group to receive credit for the Reinsurance of the fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled.

13.11 In applying Clauses 13.8, 13.9 and 13.10, all currencies shall be converted to US$ at the relevant exchange rate used by (or to be used by) the Agents for the purpose of the audited accounts produced for the Pool for the year most recently ended. Clauses 13.4 through 13.10 may be terminated by the agreement Munich Re and Converium without the consent of the other parties.

13.12 Global shall, by no later than 31 March 2011 deliver to Munich Re and Converium its calculation of the profit attributable to the Fronting Insurance Contracts written by Munich Re and the members of its Group calculated on a basis consistent with that used for the purposes of the audited accounts produced for the Pool in the year ended on 31 December 2010 (the MR Statement). The MR Statement shall be accompanied by sufficient information to allow Munich Re and Converium to understand how the profit set out in the MR Statement has been calculated and the basis upon which it has been calculated (including without limitation the calculation of the MR IBNR). The process in Clause 15.1 and Schedule 4 shall apply in relation to the MR Statement.

13.13 In determining profit, Global shall:

(a)	calculate each of the items in (a) to (d) inclusive of the definition of profit using each of US$, Canadian $, € and GBP by allocating all relevant premiums, claims and reserves to one only of such currencies in accordance with Global’s current practice, for the avoidance of doubt profit shall be paid out in each of the four currencies; and
(b)	use the incurred but not reported reserves as reported by Munich Re and applicable members of its Group for the Reinsured Risks (the MR IBNR).

13.14 If the calculation of profit in any of the four currencies shows a loss, then Global shall calculate the total profit attributable to the Fronting Insurance Contracts in US$ by converting to US$ at the relevant exchange rate used by the Agents for the purpose of the audited accounts produced for the Pool for the year ended 31 December 2010 (the Exchange Rate) (such amount being the Total $ Distribution).

13.15 If Clause 13.14 applies, the amount of any distribution pursuant to Clause 13.5 (using the Exchange Rate to calculate the amount of the distribution) shall be limited to the Total $ Distribution and the distribution in one or more of the currencies not in deficit shall be reduced to ensure that the Total $ Distribution is not exceeded (the distribution of currencies in which there was a profit shall be reduced by an equal percentage so that the distribution equals the Total $ Distribution at the Exchange Rate).

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13.16 Global shall, by no later than 31 March 2015 deliver to Munich Re and Converium its calculation of outstanding reserves on claims reported on Reinsured Risks and Munich Re’s calculation of outstanding reserves on incurred but not reported claims on Reinsured Risks as of the prior 31 December together with the actuarial calculation of those reserves and sufficient information to allow Converium, and Munich Re to understand how the reserves were set. This process shall be repeated within 90 days of the end of each calendar quarter so long as Clause 13.10 remains in effect.

13.17 The amounts required to be held in the MR Fund shall be reduced by:

(a)	fifty per cent of the amount of any Letter of Credit established by Converium pursuant to Clause 15.5(c)(iii) (or, with the consent of Munich Re Clause 15.5(c)(iv)) of the Pool Members’ Agreement which relates to the Reinsured Risks;
(b)	fifty per cent of any amount paid by (or on behalf of) Converium towards the fund held by the Agents on behalf of the Pool in relation claims on business written during the Period; and
(c)	fifty per cent of the amount of any reinsurance premiums paid by (or on behalf of) Converium in relation to reinsurance taken out by the Agents in relation to the business of the Pool written during the Period,

provided that the MR Fund shall not be reduced below $8,600,000.00 million (or, if lower and Clause 13.8 applies, the amount required to be held in the MR Fund pursuant to Clause 13.8) as a result of the operation of Clauses 13.17(b) or (c).

13.18 To the extent that the MR Fund consists of monies Munich Re shall pay to Converium an amount equal to the interest which is deemed to have accrued on that part of the MR Fund in the quarter to 31 March, 30 June, 30 September and 31 December in each year within two Business Days of such date. The amount of such interest shall be calculated on a daily basis. Interest shall accrue on the amounts in the MR Fund in each quarter at a rate equal to the “yield on the one year US Treasury Notes” on the first Business Day after the 31 March, 30 June, 30 September or 31 December ending the previous quarter as shown in the Wall Street Journal for the close of that first Business Day of the calendar quarter. For the purposes of the foregoing sentence, the “one year US Treasury Yield” shall mean the annual yield on the U. S. Treasury Bond or Note maturing on the day nearest the first anniversary of that first Business Day of that calendar quarter. If there are two bonds or notes that are equally near the third anniversary, the annual yield of the instruments will be averaged. No interest shall be paid by Munich Re to Converium in respect of any LOC issued and delivered to Munich Re in accordance with and pursuant to Converium’s obligations under this Agreement.

13.19 References in this Clause 13 to reserves for claims incurred but not reported shall mean the amount of such reserves required to be kept in accordance with actuarial best practice in the relevant jurisdiction and the guidance produced by relevant actuarial bodies. Converium shall be provided with sufficient information at

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all times to understand how such reserves have been calculated and the basis on which they have been calculated. Converium may challenge the calculation of any such reserve as set out in Schedule 6 and until such dispute is resolved in accordance with Schedule 6, the provision of this Clause 13 for which the reserves were provided shall have no effect.

14. National Indemnity Security

14.1 Converium shall on or before 3rd January 2007 (or such later date as National Indemnity may specify) pay to National Indemnity the sum of $8,600,000.00 million to be held on the basis set out in Clause 14.3.

14.2 Any amounts paid pursuant to Clauses 5.1(a), 14.1, 14.4, 14.6 or 14.9 or because of the definition of Incurred Position, shall be paid to the account of National Indemnity notified to Converium in writing by National Indemnity from time to time.

14.3 The amounts held pursuant to Clause 14.2 shall be known as the NICO Fund. Such amounts shall be held by National Indemnity as trustee for Converium provided that National Indemnity shall be entitled to make payments from such account in order to pay amounts which are due:

(a)	or claimed to be due under Reinsured Risks in respect of which Fronting Insurance Contracts have been written by it or members of its Group;
(b)	to it or members of its Group from Converium under the terms of the Reinsurance;
(c)	to it or members of its Group from Converium in respect of Overriding Commission; and/or
(d)	pursuant to Clause 2A.

14.4 At any time prior to 31 December 2010 that the NICO Fund together with the amount of any claims paid by the Agents or National Indemnity in relation to the Reinsured Risks is less than fifty per cent (50%) of the Incurred Position, within ten Business Days of receiving notice from National Indemnity or the Agents (or, if later, the date on which the Incurred Position is determined in accordance with Schedule 6), Converium shall pay to National Indemnity such additional amount as shall be required for the NICO Fund to equal fifty per cent (50%) of the Incurred Position.

14.5 National Indemnity shall pay to Converium within ten Business Days of 31 March 2011 (or, if later, the date on which the profit is determined in accordance with Schedule 5), the profit arising on any Fronting Insurance Contracts written by National Indemnity or any member of its Group calculated on the basis set out in Clause 14.12. Nothing in this clause shall be construed to require National Indemnity to pay any amount which would cause the NICO Fund to be less than the greater of (a) and (b) below:

(a) the sum of:

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(i)	100 per cent, of outstanding claims reserves, including reserves for claims incurred but not reported maintained by National Indemnity or the relevant member of its Group in accordance with applicable laws in respect of relevant Reinsured Risks written in the name of the relevant person (the NIC Reserves); plus
(ii)	the greater of:

(A)	$8,600,000.00 million; and
(B)	20% of the NIC Reserves; and

(b) the minimum amount which is required to allow National Indemnity or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which each person is domiciled.

The greater of (a) or (b) above shall be referred to as the NIC Post Profit Incurred Position.

14.6 At any time after 31 December 2010 but prior to 31 December 2014 that the NICO Fund is less than the NIC Post Profit Incurred Position, within ten Business Days of receiving notice from National Indemnity or Agents (or, if later, the date on which the Post Profit Incurred Position is determined in accordance with Schedule 6), Converium shall pay to National Indemnity such additional amount as shall be required for the NICO Fund to equal the Post Profit Incurred Position.

14.7 National Indemnity shall pay to Converium within ten Business Days of 31 March 2015 (or, if later, within ten Business Days of the date on which the NIC Reserves are determined in accordance with Schedule 6 for that date), an amount as shall be required to reduce the NIC Fund to the greater of:

(a)	the NIC Reserves; or
(b)	the minimum amount which is required to allow National Indemnity or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled.

14.8 At any time after 31 March 2015 that the NICO Fund is less than the greater of:

(a)	the NIC Reserves; or
(b)	the minimum amount required to allow National Indemnity or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled,

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National Indemnity may serve a Letter of Credit Notice which shall state the amount of additional security required to increase the NICO Fund to the greater of (a) and (b) above.

14.9 Within ten Business Days of receipt of a notice pursuant to Clause 14.8 (or, if later, the date on which the NIC Reserves are determined in accordance with Schedule 6), Converium may either:

(a)	arrange or cause to be arranged the issue and delivery to National Indemnity of a Letter of Credit in the amount set out in the Letter of Credit Notice for the benefit of National Indemnity; or
(b)	deposit the required additional funds in the NICO Fund.

If Converium elects to provide a Letter of Credit in response to the Letter of Credit Notice, Converium shall, if practicable and if agreed by NICO, be entitled to provide the necessary security by increasing, or causing to be increased, the amount of any existing Letter of Credit by the amount of the Letter of Credit Notice rather than by issuing and delivering, or causing to be issued and delivered, a new Letter of Credit). For the avoidance of doubt, nothing in this Clause shall be construed as limiting the number of Letter of Credit Notices that may be served from time to time by NICO.

14.10 Within ten Business Days of the end of each quarter following 31 December 2013, National Indemnity shall pay to Converium the amount, if any, by which the NICO Fund exceeds the greater of:

(a)	the NIC Reserves; and
(b)	the amount required to allow National Indemnity or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled.

14.11 In applying Clauses 14.8, 14.9 and 14.10, all currencies shall be converted to US$ at the relevant exchange rate used by (or to be used by) the Agents for the purpose of the audited accounts produced for the Pool for the year most recently ended. Clauses 14.4 through 14.10 may be terminated by National Indemnity and Converium without the consent of the other parties.

14.12 Global shall, by no later than 31 March 2011 deliver to National Indemnity and Converium its calculation of the profit attributable to the Fronting Insurance Contracts written by National Indemnity and the members of its Group calculated on a basis consistent with that used for the purposes of the audited accounts produced for the Pool in the three years ended on 31 December 2010 (the NIC Statement). The National Indemnity Statement shall be accompanied by sufficient information to allow National Indemnity and Converium to understand how the profit set out in the NIC Statement has been calculated and the basis upon which it has been calculated (including without limitation the calculation of the NIC IBNR). The process in Clause 15.2 and Schedule 5 shall apply in relation to the NIC Statement.

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14.13 In determining profit, Global shall:

(a)	calculate each of the items in (a) to (d) inclusive of the definition of profit using each of US$, Canadian $, € and GBP by allocating all relevant premiums, claims and reserves to one only of such currencies in accordance with Global’s current practice, for the avoidance of doubt profit shall be paid out in each of the four currencies; and
(b)	use the incurred but not reported reserves as reported by National Indemnity and applicable members of its Group for the Reinsured Risks (the NIC IBNR).

14.14 If the calculation of profit in any of the four currencies shows a loss, then Global shall calculate the total profit attributable to the Fronting Insurance Contracts in US$ by converting to US$ at the relevant exchange rate used by the Agents for the purpose of the audited accounts produced for the Pool for the year ended 31 December 2010 (the Exchange Rate) (such amount being the Total $ Distribution).

14.15 If Clause 14.14 applies, the amount of any distribution pursuant to Clause 14.5 (using the Exchange Rate to calculate the amount of the distribution) shall be limited to the Total $ Distribution and the distribution in one or more of the currencies not in deficit shall be reduced to ensure that the Total $ Distribution is not exceeded (the distribution of currencies in which there was a profit shall be reduced by an equal percentage so that the distribution equals the Total $ Distribution at the Exchange Rate).

14.16 Global shall, by no later than 31 March 2015 deliver to National Indemnity and Converium its calculation of outstanding reserves on claims reported on Reinsured Risks and National Indemnity’s calculation of outstanding reserves on incurred but not reported claims on Reinsured Risks as of the prior 31 December together with the actuarial calculation of those reserves and sufficient information to allow Converium, and National Indemnity to understand how the reserves were set. This process shall be repeated within 90 days of the end of each calendar quarter so long as Clause 14.10 remains in effect.

14.17 The amounts required to be held in the NIC Fund shall be reduced by:

(a)	fifty percent of the amount of the Letter of Credit established by Converium pursuant to Clause 15.5(c)(iii) (or, with the consent of NIC Clause 15.5(c)(iv)) of the Pool Members’ Agreement which relates to the Reinsured Risks;
(b)	fifty per cent of any amount paid by (or on behalf of) Converium towards the fund held by the [Agents on behalf of the] Pool in relation claims on business written during the Period; and
(c)	fifty per cent of the amount of any reinsurance premiums paid by (or on behalf of) Converium in relation to reinsurance taken out

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by the Agents in relation to the business of the Pool written during the Period

provided that the NIC Fund shall not be reduced below $8,600,000.00 million (or if lower and Clause 14.8 applies, the amount required to be held in the NIC Fund pursuant to Clause 14.8) as a result of the operation of Clauses 14.17(b) or (c).

14.18 National Indemnity shall pay to Converium an amount equal to the interest which is deemed to have accrued on the NIC Fund in the quarter to 31 March, 30 June, 30 September and 31 December in each year within two Business Days of such date. The amount of such interest shall be calculated on a daily basis. Interest shall accrue on the amounts in the NIC Fund in each quarter at a rate equal to the “yield on the one year US Treasury Notes” on the first Business Day after the 31 March, 30 June, 30 September or 31 December ending the previous quarter as shown in the Wall Street Journal for the close of that first Business Day of the calendar quarter. For the purposes of the foregoing sentence, the “one year US Treasury Yield” shall mean the annual yield on the U.S. Treasury Bond or Note maturing on the day nearest the first anniversary of that first Business Day of that calendar quarter. If there are two bonds or notes that are equally near the third anniversary, the annual yield of the instruments will be averaged.

14.19 References in this Clause 14 to reserves for claims incurred but not reported shall mean the amount of such reserves required to be kept in accordance with actuarial best practice in the relevant jurisdiction and guidance produced by relevant actuarial bodies in the jurisdiction. Converium shall be provided with sufficient information at all times to understand how such reserves have been calculated and the basis on which they have been calculated, Converium may challenge the calculation of any such reserve as set out in Schedule 6 and until such dispute is resolved in accordance with Schedule 6, the provision of this Clause 14 for which the reserves were provided shall have no effect.

15. Dispute Resolution

15.1 Within thirty (30) days of receipt of Global’s calculations under Clause 13, either Converium or Munich Re may challenge Global’s calculations under Clause 13. In that event, the dispute shall be settled as provided in Schedule 6 or in the case of the calculation of profit, Schedule 4.

15.2 Within thirty (30) days of receipt of Global’s calculations under Clause 14, either Converium or National Indemnity may challenge Agents’ calculations under Clause 14. In that event, the dispute shall be settled as provided in Schedule 6 or in the case of the calculation of profit, Schedule 5.

16. Letters of Credit and Authority

16.1 Notwithstanding any other provision of this Agreement, National Indemnity or Munich Re may, at any time, draw down upon any Letter of Credit provided by or on behalf Converium pursuant to Clause 13 or Clause 14, in order to:

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(a)	fund the payment of amounts due or claimed to be due under Reinsured Risks in respect of which Fronting Insurance Contracts have been written by it or members of its Group;
(b)	pay any amounts which are due to it or any member of its Group from Converium under the terms of the Reinsurance; and/or
(c)	pay any amounts which are due to it or any member of its Group from Converium in respect of Overriding Commission.

16.2 Any bank issuing a Letter of Credit relating to this Agreement shall be unconditionally obliged to accede to any request made by or on behalf of Munich Re or National Indemnity (as appropriate) to draw down on such Letter of Credit provided only that such bank is satisfied that such request is made by, or with the proper authority of, Munich Re or National Indemnity (as appropriate) and/or its authorised representatives (who shall not include the Agent or any replacements).

16.3 Each of Munich Re and National Indemnity hereby grants the Agent authority to act as their respective agents in taking all necessary action on its behalf to exercise its rights under Clauses 13 and 14, including (without limitation) the service of a Letter of Credit Notice, but nothing herein shall be construed as granting the Agent any authority with respect to disputes under Clauses 15.1 or 15.2 or Schedules 4, 5 or 6.

17. Set-off

17.1 National Indemnity may set off any amount due to it from Converium against any amount owed by National Indemnity or any member of its Group to Converium under this Agreement.

17.2 Munich Re may set off any amount due to it from Converium against any amount owed by Munich Re or any member of its Group to Converium under this Agreement.

18. Regulatory Matters

18.1 The parties shall co-operate with each other to ensure that all information necessary or desirable for making (or responding to any requests for further information following) any regulatory notification or filing made in respect of this Agreement, or any agreement, arrangement or concerted practice of which it forms part, is supplied to the party dealing with such notification or filing and that they are properly, accurately and promptly made.

18.2 The parties will each procure that any other registrations, filings and/or submissions required under the laws or regulations of any jurisdiction in respect of the Agreement or any Fronting Insurance Contract are made.

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19. Waiver of Obligations

19.1 Waiver by any party of any default by any other party in the performance of any obligation of such other party hereunder shall not affect such party’s rights in respect of any other default nor any subsequent default of the same or of a different kind nor shall any delay or omission of any party to exercise any right arising from any default affect or prejudice that party’s rights as to the same or any future default. Waiver by one party of any default by any other party shall not constitute a waiver of such default on the part of or on behalf of any other party.

19.2 Subject to Clause 19.3, no claim shall be made by Converium against any officer, employee, agent or sub-contractor of either Agent in respect of any matter arising in respect of this Agreement, save in the case of criminal actions or omissions, fraud or wilful misconduct.

19.3 Clause 19.2 shall not preclude the Agents from making claims against any of its agents or sub-contractors on behalf of Converium, National Indemnity or Munich Re or the members of their Groups.

20. Amendment and Representations

20.1 Any amendment to any term of this Agreement shall be in writing and signed by the authorised representatives of the parties hereto provided that rights and obligations between Converium and (a) Munich Re or (b) National Indemnity may be amended by written agreement between Converium and such person.

20.2 This Agreement sets out the entire agreement and understanding between the parties in relation to the Business and the arrangements in Clause 2A. It is agreed that no party has entered into this Agreement in reliance upon, or been induced to enter into this Agreement by, any representation, warranty or undertaking of any other party hereto (whether express or implied and whether pursuant to statute or otherwise) which is not set out in this Agreement and to the extent that it may have done so, it hereby waives (on behalf of itself and the members of its Group) all rights, remedies and claims it may have in respect thereto. A party may claim in contract for breach of warranty under this Agreement but shall otherwise have no claim or remedy in respect of misrepresentation (whether negligent or otherwise, and whether made prior to, and/or in, this Agreement) or untrue statement made by any other party provided that this Clause 20.2 shall not exclude any liability for, or remedy in respect of, any fraud including, without limitation, fraudulent misrepresentation by any party (or (where relevant) any member of its Group).

21. Assignment

No party shall sell, transfer or encumber all or any of its rights or obligations under this Agreement without the prior written consent of all the other parties.

22. Notices and Communications

22.1 Notices under this Agreement shall be sent to a party at its address and for the attention of the individual set out in Clause 22.3 provided that a party may change its

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notice details on giving notice to the other parties of the change in accordance with this Clause 22. That notice shall only be effective on the date falling five clear Business Days after the notification has been received or such later date as may be specified in the notice.

22.2 All notices or other communications required for the purposes of this Agreement shall be in English and shall be given or sent by hand, facsimile, first class post or airmail to the parties and shall be deemed to be received: (i) if given by hand, at the time of delivery; or (ii) if sent by facsimile; at the time when the sender receives from the recipient facsimile machine or from the addressee of the notice confirmation of receipt of the whole of the facsimile; or (iii) if sent by first class post, 24 hours after posting; or (iv) if sent by airmail, 6 clear Business Days after the date of posting.

22.3 Notices under this Agreement shall be sent to the following addresses or facsimile numbers for the attention of the person indicated:

Party	Title of individual/address	Facsimile Number
National Indemnity (for itself or as agent for any member of its Group)	Attention: General Counsel 100 First Stamford Place Stamford, CT, USA 06092	+1-203-363-5221
Munich Re (for itself or as agent for any member of its Group)	Attention: Doris Höpke (Head of Aviation and Space) Königinstraße 107 80802 München Germany	+49-89- 3891 — 4278
Converium	Attention: Chris Bell/Christian Felderer General Guisan — Quai 26 8022, Zurich Switzerland	+41-1-639-9066
Global	Attention: Company Secretary Fitzwilliam House 10 St. Mary Axe London EC3A 8EQ	+44 20 7369 2840

22.4 Different persons may be authorised to give or receive instructions for different purposes, and such persons may include officers of corporations other than the parties hereto, authorised in that regard by the board of the relevant party. A certified copy of a resolution of the board of Munich Re, National Indemnity or Converium or the relevant member of such person’s Group (or with respect to National Indemnity and members of its Group, the Executive Committee of the board of such entity) may be received and accepted by the Agent as conclusive evidence of

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the authority of any person to act and may be considered in full force and effect until receipt of written notice to the contrary.

23. Governing Law and Arbitration

23.1 This Agreement and the relationship between the parties shall be governed by and interpreted in accordance with the law of England and Wales.

23.2 Save as set out in Schedules 4, 5 and 6 each party to this Agreement irrevocably agrees that the courts of England are to have exclusive jurisdiction to settle any dispute (including claims for set-off and counterclaims) which may arise in connection with the validity, effect, interpretation or performance of, or the legal relationships established by, this Agreement or otherwise in connection with this Agreement and for such purposes irrevocably submits to the jurisdiction of such courts.

23.3 All parties agree that a final judgment or order of any court referred to in Clause 23.2 in connection with this Agreement is conclusive and binding on it and may be entered against it in the courts of any other jurisdiction.

24. Costs

24.1 Each party shall be responsible for the legal and other professional charges and expenses (including Value Added Tax) incurred by it in connection with the preparation and negotiation of this Agreement.

24.2 Any costs and expenses which arise pursuant to the terms of the Pool Members Agreement solely as a result of the operation of this Agreement and which would not have arisen had the Pool Members Agreement been effected on the basis existing prior to this Agreement shall be paid by Converium.

25. Enforceability

25.1 If any provision of this Agreement or any part thereof:

(a)	purports to exclude or restrict or limit any liability and such exclusion or restriction or limitation is prohibited or rendered void or unenforceable by any legislation to which it is subject; or
(b)	is itself prohibited or rendered void or unenforceable by any legislation to which it is subject,

then the exclusion, restriction or limitation or the provision or part thereof in question shall be so prohibited or rendered void or unenforceable to the extent to which it is thus prohibited or rendered void or unenforceable and no further and the validity or enforceability of any other part of this Agreement shall not thereby be affected.

26. Relationship with pool members’ agreement

26.1 This Agreement shall constitute a Fronting Arrangement for the purposes of the Pool Members’ Agreement and save as set out in this Agreement Converium shall

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effect all payments under Clause 9.1(f) (subject to Clauses 9.1(g) and (h)) of the Pool Members’ Agreement as if it is a Nominating Insurer.

26.2 Subject to Clause 26.3, as between Converium and the Agent, the terms of this Agreement are without prejudice to their rights and obligations under the Pool Members’ Agreement.

26.3 Converium acknowledges that the terms of the Indemnity (as defined in Clause 20 of the Pool Members’ Agreement) shall apply (mutatis mutandis) to any claims, losses, expenses and liabilities properly made against or incurred by Indemnified Directors (as defined therein) in the purported execution of and discharge of their duties with respect to the performance of services under this Agreement.

26.4 Converium acknowledges that Clause 4.2 of the Pool Members’ Agreement shall apply to any losses, liabilities or expenses of the Agent (or a wholly-owned subsidiary of Global appointed pursuant to Clause 2.5) under this Agreement.

27. No Rights Under Contracts (Rights of Third Parties) Act 1999

A person who is not a party to this Agreement is not intended to have any right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms, save in respect of Clause 26.3 conferring the rights and benefits of indemnities on the Indemnified Directors and Clause 19.2 conferring rights and benefits on employees, agents or sub-contractors of either Agent (each such party being for the purposes of this Clause 27 a Third Party), which shall be enforceable by such persons by way of proceedings in the courts specified in Clause 23 subject to and in accordance with the Contracts (Rights of Third Parties) Act 1999, and Clauses 26.3 and 19.2 and this Clause 27 shall not be varied by the parties to this Agreement without the consent of each relevant Third Party. Any other provision of this Agreement may be varied or revoked without such consent.

28. Counterparts

This Agreement may be executed in any number of counterparts and by the parties to it on separate counterparts, each of which is an original but all of which together constitute one and the same instrument.

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SCHEDULE 1

AMOUNT AND BASIS OF CALCULATION OF OVERRIDING

COMMISSION

1. Introductory

This Schedule sets out further terms and principles applicable to the calculation and payment of Overriding Commission in accordance with Clause 6.

2. Procedure and Amounts

2.1 The amount of Overriding Commission payable by Converium shall be calculated by reference to the total gross premium income written by the Agent in the period in question in respect of each Reinsured Risk after deduction of any (i) original commission or taxes on premiums payable thereunder but before the deduction of amounts, if any, payable to the Agent under the terms of the Pool Members’ Agreement and (ii) any premiums payable for reinsurance in relation to the Pool by the Agents (such amount being referred to as the Relevant Net Premium Income).

2.2 The amount of Overriding Commission payable by Converium to National Indemnity shall be calculated by multiplying the Relevant Net Premium Income attributable to Reinsured Risks covered by Fronting Insurance Contracts written by National Indemnity or members of its Group by 4 per cent. (or by such percentage as may be agreed from time to time between National Indemnity and Converium).

2.3 The amount of Overriding Commission payable by Converium to Munich Re shall be calculated by multiplying the Relevant Net Premium Income attributable to Reinsured Risks covered by Fronting Insurance Contracts written by Munich Re or members of its Group by 4 per cent. (or by such percentage as may be agreed from time to time between Munich Re and Converium).

2.4 Subject to Clause 6.2, the amount of Overriding Commission attributable to any calendar quarter shall be due and payable on (i) the last business day of the immediately following calendar quarter, or (ii) the date on which a cash distribution is paid by the Agents to Converium under the Pool Members’ Agreement with respect to business written in such calendar quarter, whichever is earlier and shall be deducted by National Indemnity from the NICO Fund or by Munich Re from the MR Fund on that date.

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SCHEDULE 2

MUNICH RE GROUP FRONTING

Part I

Munich Re Group Fronters

			4. Member of
			Munich Re
			Group in whose	5. Percentage
			name Fronting	of
1. Agent			Insurance	Converium’s
Accepting			Contracts should	Respective
Business	2. Jurisdiction	3. Business	be written	Proportion
Global	Worldwide, subject to licensing regulations	Business written in the UK	GRLK		50

GR LK means Great Lakes Reinsurance (UK) plc

The companies, jurisdictions and business listed in columns 2-4 respectively of this may be amended or added to with the written agreement (in such person’s absolute discretion) of Converium, Global and Munich Re provided that the amendment would not result in a Trigger Event occurring, and that all relevant Fronting Insurance Contracts written after the date of the agreement are written in the name of the replacement companies, jurisdictions and business.

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SCHEDULE 3

NATIONAL INDEMNITY GROUP FRONTING

Part I
National Indemnity Group Fronters

			4. Member
			of National
			Indemnity
			Group in
			whose name
			Fronting	5. Percentage
			Insurance	of
1. Agent			Contracts	Converium’s
Accepting			should be	Respective
Business	2. Jurisdiction	3. Business	written	Proportion
Global	Worldwide, subject to licencing restrictions	Business written in the UK	BHII		50

BHII means Berkshire Hathaway International Insurance Ltd.

The companies, jurisdictions and business listed in columns 2-4 respectively of this Schedule may be amended or added to with the written agreement (in such person’s absolute discretion) of Converium, Global and NIC provided that the amendment would not result in a Trigger Event occurring, and that all relevant Fronting Insurance Contracts written after the date of the agreement are written in the name of the replacement companies, jurisdictions and business.

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Part II
Jurisdictions in which National Indemnity is fronted

1 . Agent
Accepting			4. Fronter for
Business	2. Jurisdiction	3. Business	National Indemnity
Global	Mexico, Ecuador, Colombia and Venezuela written in the UK	Business written in the UK	RSAI
Global	US Surplus lines (except where written in BHII)	Business written in the UK	The Marine Insurance Company Limited

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SCHEDULE 4

MR STATEMENT DISPUTE RESOLUTION MECHANISM

1. Each of Munich Re or Converium may request from the Agents such additional information as it reasonably requires to confirm whether it agrees with the MR Statement and the Agents or Munich Re shall provide such information, to the extent they have it or are entitled to it, promptly and in any case within 5 Business Days of the request.

2. Munich Re or Converium may notify the Agents and Munich Re or Converium (as appropriate) in writing (such notification being an Objection Notice) within thirty (30) days after receipt that is disputes the MR Statement. Any notice indicating that Munich Re or Converium does not accept the MR Statement shall only be valid for the purposes of this Agreement if it sets out the reasons why the person serving the notice believes the MR Statement does not correctly state the profits attributable to the Fronting Insurance Contracts written by Munich Re and the members of its Group calculated in accordance with Clause 13 and specifies the adjustments which, in such person’s opinion, should be made to the MR Statement. The validity of any such notice shall be a matter for determination by the Independent Firm.

3. If an Objection Notice is served in accordance with 2 above, then Munich Re and Converium shall use all reasonable endeavours (in conjunction with the Agents):

(a) to meet and discuss the objections in the Objection Notice; and

(b) to reach agreement upon the adjustments (if any) required to be made to the MR Statement, within a period of five (5) Business Days after receipt by the Agents of the Objection Notice.

4. If both Munich Re and Converium notify the Agents in writing that they are satisfied with the MR Statement (either as originally submitted or after adjustments agreed between Munich Re and Converium pursuant to 3 above) or if neither Munich Re or Converium gives a valid Objection Notice within the thirty (30) day period referred to in 2 above, then the MR Statement (as so adjusted, if applicable) shall be final and binding for the purposes of this agreement.

5. If Converium and Munich Re do not reach agreement within five (5) Business Days of receipt by the Agents of the Objection Notice, then the matters in dispute may be referred (on the application of either the Converium or Munich Re) for determination by such firm of actuaries of international standing as shall be agreed by Converium and Munich Re or, failing agreement, appointed by the President for the time being of the Institute of Actuaries in England and Wales on the application of Converium or Munich Re (the Independent Firm). Converium and Munich Re shall use all reasonable endeavours to agree with the Independent Firm the precise terms of reference to apply to its role as soon as reasonably practicable following a referral to the Independent Firm. Converium and Munich Re shall procure that the Agents

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comply with any reasonable requests of the Independent Firm. The following general terms of reference and procedure shall apply in any event:

(a) Converium and Munich Re shall each prepare a written statement within five (5) days of the formal appointment of the Independent Firm on the matters in dispute which (together with the relevant supporting documents) shall be submitted to the Independent Firm for determination. The matters in dispute shall be limited to the matters specified in the Objection Notice;

(b) following delivery of their respective submissions, Converium, and Munich Re shall each have the opportunity to comment once only on the other’s submissions by written comment delivered to the Independent Firm not later than ten (10) days after receipt of the other’s submissions;

(c) any response to a subsequent request by the Independent Firm for information from Converium, Munich Re or the Agents shall be copied to Converium and Munich Re at the same time and, unless otherwise directed by the Independent Firm, each person receiving a copy of the information may, within ten (10) days after it receives such information, comment once only on that information;

(d) in giving its determination, the Independent Firm shall state what adjustments (if any) are necessary, solely for the purposes of this agreement, to the MR Statement in respect of the matters in dispute in order to comply with the requirements of this agreement and to determine finally the MR Statement;

(e) the Independent Firm shall determine (using its own legal advice as appropriate) any question of the legal construction of this agreement but only insofar as it is relevant to the determination of the MR Statement;

(f) the Independent Firm shall act as an expert (and not as an arbitrator) in making any such determination and any such determination (including any determination of any fact which it has found it necessary to determine for the purposes of its determination) shall, in the absence of manifest error, be final and binding on the parties; and

(g) without prejudice to any other rights which they may respectively have under this agreement, the parties expressly waive, to the extent permitted by law, any rights of recourse to the courts they may otherwise have to challenge the Independent Firm’s determination;

6. Converium and Munich Re shall each be responsible for their own costs in connection with the preparation, review and agreement or determination of the MR Statement.

7. The fees and expenses of the Independent Firm and the Agents shall be shared equally between Converium and Munich Re or in such other proportions as the Independent Firm shall determine.

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SCHEDULE 5

NIC STATEMENT DISPUTE RESOLUTION MECHANISM

1. Each of National Indemnity or Converium may request from the Agents such additional information as it reasonably requires to confirm whether it agrees with the NIC Statement and the Agents shall provide such information, to the extent they have it or are entitled to it, promptly and in any case within 5 Business Days of the request.

2. National Indemnity or Converium may notify the Agents and National Indemnity or Converium (as appropriate) in writing (such notification being a NICO Objection Notice) within thirty (30) days after receipt that it disputes the NIC Statement. Any notice indicating that National Indemnity or Converium does not accept the NIC Statement shall only be valid for the purposes of this Agreement if it sets out the reasons why the person serving the notice believes the NIC Statement does not correctly state the profits attributable to the Fronting Insurance Contracts written by National Indemnity and the members of its Group calculated in accordance with Clause 14 and specifies the adjustments which, in such person’s opinion, should be made to the NIC Statement. The validity of any such notice shall be a matter for determination by the Independent Firm.

3. If a NICO Objection Notice is served in accordance with 2 above, then National Indemnity and Converium shall use all reasonable endeavours (in conjunction with the Agents):

(a) to meet and discuss the objections in the Objection Notice; and

(b) to reach agreement upon the adjustments (if any) required to be made to the NIC Statement, within a period of five (5) Business Days after receipt by the Agents of the Objection Notice.

4. If both National Indemnity and Converium notify the Agents in writing that they are satisfied with the NIC Statement (either as originally submitted or after adjustments agreed between National Indemnity and Converium pursuant to 3 above) or if neither National Indemnity or Converium gives a valid Objection Notice within the thirty (30) day period referred to in 2 above, then the NIC Statement (as so adjusted, if applicable) shall be final and binding for the purposes of this agreement.

5. If Converium and National Indemnity do not reach agreement within five (5) Business Days of receipt by the Agents of the Objection Notice, then the matters in dispute may be referred (on the application of either the Converium or National Indemnity) for determination by such firm of actuaries of international standing as shall be agreed by Converium and National Indemnity or, failing agreement, appointed by the President for the time being of the Institute of Actuaries in England and Wales on the application of Converium or National Indemnity (the Independent Firm). Converium and National Indemnity shall use all reasonable endeavours to agree with the Independent Firm the precise terms of reference to apply to its role as soon as reasonably practicable following a referral to the Independent Firm. Converium and National Indemnity shall procure that the Agents comply with any

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reasonable requests of the Independent Firm. The following general terms of reference and procedure shall apply in any event:

(a) Converium and National Indemnity shall each prepare a written statement within five (5) days of the formal appointment of the Independent Firm on the matters in dispute which (together with the relevant supporting documents) shall be submitted to the Independent Firm for determination. The matters in dispute shall be limited to the matters specified in the Objection Notice;

(b) following delivery of their respective submissions, Converium, and National Indemnity shall each have the opportunity to comment once only on the other’s submissions by written comment delivered to the Independent Firm not later than ten (10) days after receipt of the other’s submissions;

(c) any response to a subsequent request by the Independent Firm for information from Converium, National Indemnity or the Agents shall be copied to Converium and National Indemnity at the same time and, unless otherwise directed by the Independent Firm, each person receiving a copy of the information may, within ten (10) days after it receives such information, comment once only on that information;

(d) in giving its determination, the Independent Firm shall state what adjustments (if any) are necessary, solely for the purposes of this agreement, to the NIC Statement in respect of the matters in dispute in order to comply with the requirements of this agreement and to determine finally the NIC Statement;

(e) the Independent Firm shall determine (using its own legal advice as appropriate) any question of the legal construction of this agreement but only insofar as it is relevant to the determination of the NIC Statement;

(f) the Independent Firm shall act as an expert (and not as an arbitrator) in making any such determination and any such determination (including any determination of any fact which it has found it necessary to determine for the purposes of its determination) shall, in the absence of manifest error, be final and binding on the parties; and

(g) without prejudice to any other rights which they may respectively have under this agreement, the parties expressly waive, to the extent permitted by law, any rights of recourse to the courts they may otherwise have to challenge the Independent Firm’s determination;

6. Converium and National Indemnity shall each be responsible for their own costs in connection with the preparation, review and agreement or determination of the NIC Statement.

7. The fees and expenses of the Independent Firm and the Agents shall be shared equally between Converium and National Indemnity or in such other proportions as the Independent Firm shall determine.

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SCHEDULE 6

DISPUTE MECHANISM IN RELATION TO RESERVE CALCULATIONS

1. Converium may dispute any calculation carried out by the Agents, Munich Re or National Indemnity or any reserves figure provided by the Agents, Munich Re or National Indemnity and Munich Re or National Indemnity may dispute any calculation carried out by the Agents as set out in this Schedule.

2. The disputing party may request from the person providing the information in dispute or any other party such additional information as it reasonably requires and such person shall provide such information, to the extent they have it or are entitled to it, promptly and in any case within 5 Business Days of the request.

3. The disputing party may notify the person providing the information in dispute in writing (such notification being an Objection Notice) within thirty (30) days after receipt that it disputes the information. Any notice indicating that the disputing party does not accept the information shall only be valid for the purposes of this Agreement if it sets out the reasons why the person serving the notice believes the information has not been properly calculated in accordance with the Agreement and specifies the adjustments which, in such person’s opinion, should be made to the information. Ultimately, the validity of any such notice shall be a matter for determination by the Independent Firm.

4. If an Objection Notice is served in accordance with paragraph 3 above, then the disputing party and the disputer shall use all reasonable endeavours (in conjunction with the Agents):

(a) to meet and discuss the objections in the Objection Notice; and

(b) to reach agreement upon the adjustments (if any) required to be made to the information, within a period of five (5) Business Days after receipt of the Objection Notice.

5. If the disputing party and the disputer agree in writing that they are satisfied with the information (either as originally submitted or after adjustments agreed between them above) then the information (as so adjusted, if applicable) shall be final and binding for the purposes of this agreement.

6. The disputing party and the disputer do not reach agreement within five (5) Business Days of receipt of the Objection Notice, then the matters in dispute may be referred (on the application of either of them) for determination by such other firm of actuaries of international standing as shall be agreed by them or, failing agreement, appointed by the President for the time being of the Institute of Actuaries in England and Wales on the application of either of them (the Independent Firm). The disputing party and the disputer shall use all reasonable endeavours to agree with the Independent Firm the precise terms of reference to apply to its role as soon as reasonably practicable following a referral to the Independent Firm. The disputing party and the disputer shall procure that the Agents comply with any reasonable

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requests of the Independent Firm. The following general terms of reference and procedure shall apply in any event:

(a) the disputing party and the disputer shall each prepare a written statement within five (5) days of the formal appointment of the Independent Firm on the matters in dispute which (together with the relevant supporting documents) shall be submitted to the Independent Firm for determination. The matters in dispute shall be limited to the matters specified in the Objection Notice;

(b) following delivery of their respective submissions, the disputing party and the disputer shall each have the opportunity to comment once only on the other’s submissions by written comment delivered to the Independent Firm not later than ten (10) days after receipt of the other’s submissions;

(c) any response to a subsequent request by the Independent Firm for information from the disputing party and the disputer shall be copied to the other at the same time and, unless otherwise directed by the Independent Firm, each person receiving a copy of the information may, within ten (10) days after it receives such information, comment once only on that information;

(d) in giving its determination, the Independent Firm shall state what adjustments (if any) are necessary, solely for the purposes of this agreement, to the information in respect of the matters in dispute in order to comply with the requirements of this Agreement;

(e) the Independent Firm shall determine (using its own legal advice as appropriate) any question of the legal construction of this Agreement;

(f) the Independent Firm shall act as an expert (and not as an arbitrator) in making any such determination and any such determination (including any determination of any fact which it has found it necessary to determine for the purposes of its determination) shall, in the absence of manifest error, be final and binding on the parties; and

(g) without prejudice to any other rights which they may respectively have under this agreement, the parties expressly waive, to the extent permitted by law, any rights of recourse to the courts they may otherwise have to challenge the Independent Firm’s determination;

7. The disputing party and the disputer shall each be responsible for their own costs in connection with the preparation, review and agreement or determination of the information.

8. The fees and expenses of the Independent Firm and the Agents shall be shared equally between the disputing party and the disputer or in such other proportions as the Independent Firm shall determine.

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In witness whereof this Agreement has been signed by and on behalf of the parties on the day and year first before written.

SIGNED by Anthony Medniuk	)
	)
for and on behalf of	)
GLOBAL AEROSPACE	)
UNDERWRITING MANAGERS	)
LIMITED	)
SIGNED by Jeff Cassidy	)
	)
for and on behalf of	)
GLOBAL AEROSPACE, INC.	)
SIGNED by Paul Ziehl and Simone Oesterlein	)
and	)
duly authorised representatives of	)
MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT	) )
AKTIENGESELLSCHAFT
in MÜNCHEN	)
SIGNED by Forrest N. Krutter, Secretary	)
and	)
for and on behalf of	)
NATIONAL INDEMNITY COMPANY	)

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SIGNED by Christopher Bell
and Benjamin Gentsch
for and on behalf of)
CONVERIUM AG )
 
)

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ANNEXURE 1

FORM OF DEED OF ADHERENCE FOR USE BY SUBSIDIARIES OF

GLOBAL AND GAI

DEED OF ADHERENCE

THIS DEED is made the [       ] day of [      ], 20[      ] by

(1)	[      ] (No.      ) whose registered office is at [      ] hereinafter called [New Subsidiary];
(2)	GLOBAL AEROSPACE UNDERWRITING MANAGERS LIMITED (registered number 2512067) whose registered office is at Fitzwilliam House, 10 St. Mary Axe, London EC3 8EQ (Global);
(3)	GLOBAL AEROSPACE, INC. a Delaware company (GAI);
(4)	NATIONAL INDEMNITY COMPANY, a company incorporated in Nebraska, United States of America, whose registered office is at 3024 Harney Street, Omaha, Nebraska, USA 68131 (National Indemnity);
(5)	CONVERIUM AG, a company incorporated in Switzerland whose registered office is at General Guisan-Quai 26, 8022 Zürich, Switzerland (Converium); and
(6)	MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AKTIENGESELLSCHAFT IN MÜNCHEN, whose registered office is at Königinstraße, 107, 80802 München, Germany (Munich Re).

Whereas:

(a) [Global/GAI] has duly [incorporated] [acquired] [New Subsidiary] [to be] [as] its wholly owned subsidiary in accordance with the provisions of the reinsurance fronting and administration agreement made between Global, GAI, National Indemnity and Converium and Munich Re dated • November 2004 as it may have been subsequently amended (the Agreement).

(b) Under the provisions of Clause 2.5 of the Agreement, [New Subsidiary] shall become a party to the Agreement by executing a Deed of Adherence in the form (or substantially in the form) set out in Annexure 1 to the Agreement and this Deed is in such form.

Now this deed witnesseth as follows:

1. Words and phrases defined in the Agreement shall, unless the context otherwise requires, have the same meaning in this Deed.

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2. [New Subsidiary] agrees and undertakes to be bound by and to have the benefit of the Agreement as if it were named therein as a party in its capacity as and being a subsidiary of [Global/GAI].

3. [New Subsidiary], subject to and in accordance with Clause 2.5 of the Agreement, agrees to act as agent for [XXX] on and in accordance with the terms of the Agreement including on and with effect from [INSERT EFFECTIVE DATE].

4. This Deed and the relationship between the parties shall be governed by and interpreted in accordance with English law. For the benefit of the other parties hereto, each party to this Deed irrevocably agrees that the Courts of England are to have exclusive jurisdiction to settle any dispute which may arise in connection with this Deed and for any such purposes irrevocably submits to the jurisdiction of such Courts.

In witness whereof this document has been executed as a Deed the day and year first before written.

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In witness whereof this Agreement has been signed by and on behalf of the parties on the day and year first before written.

SIGNED by	)
	)
for and on behalf of	)
GLOBAL AEROSPACE	)
UNDERWRITING MANAGERS	)
LIMITED	)
SIGNED by	)
	)
for and on behalf of	)
GLOBAL AEROSPACE, INC.	)
SIGNED by	)
	)
and	)
duly authorised representatives of	)
MÜNCHENER RÜCKVERSICHERUNGS-	)
GESELLSCHAFT	)
AKTIENGESELLSCHAFT	)
in MÜNCHEN	)
SIGNED by Forrest N. Krutter, Secretary	)
and	)
for and on behalf of	)
NATIONAL INDEMNITY COMPANY	)

Page 51

SIGNED by Christopher Bell	)
and Benjamin Gentsch	)
for and on behalf of)
CONVERIUM AG

Page 52

EX-4.50

Exhibit 4.50

Standard Stock Purchase Plan

of Converium Holding AG, Zug, Switzerland

December 2006

1	Introduction
1.1	The Converium Stock Purchase Plan (the “Plan”) is an incentive scheme of Converium Holding AG, Zug, Switzerland (the “Company”).
1.2	The Plan shall provide an increased incentive for selected employees and members of the board of directors (the “Board of Directors”) of the Company and of its subsidiaries to contribute to the future success and prosperity of the Company, which will enhance the value of the stock of the Company for the benefit of the Company’s shareholders and increase the ability of the Company to attract and retain employees of exceptional skill and experience.
1.3	The Plan shall provide these employees and members of the Board of Directors an opportunity to obtain shares of the Company (the “Shares”).
1.4	All rights and obligations of the participant(s) in the Plan (the “Participant(s)”) are as described in these terms and conditions of the Plan.
2	Participation in the Plan
2.1	Eligible Participants of this Plan are generally Employees (as defined below) as well as members of the Board of Directors. Participants will be determined by the Nomination and Remuneration Committee of the Board of Directors (the “Committee”) and/or other bodies of the Converium group.
	For the purposes of this Plan, the expression “Employee” shall mean a Participant who is employed for 50 per cent or more of a full employment (and who is not an employee with an hourly wage) by the Company, a company directly or indirectly controlled by the Company (or any other company or business as determined by the Committee in its absolute discretion), provided, however, that on the relevant date, no notice of termination has been given or termination agreement concluded in respect of the employment agreement of such Employee, other than as provided for in Section 7.2.3. A transfer of an Employee from the Company or an affiliated company to the Company or another affiliated company, and a leave of absence, duly authorized in writing by the relevant employer, for military service or sickness, or for any other purpose approved by the Committee shall not be deemed a termination of employment unless employment is terminated during such leave of absence.

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2.2	The holding of one of the positions mentioned in clause 2.1 shall grant no right to participate or to a continued participation in the Plan or to employment with the Company or a subsidiary of the Company. The Committee shall have full discretion to elect persons other than those mentioned in clause 2.1 as Participants.
3	Offering Periods
3.1	Depending on the Plan, offerings of Shares are scheduled to take place once or twice a year, generally for periods of one month. The offering periods, the number of Shares that may be purchased or the amount that may be invested by a Participant and the purchase price per Share will be determined by the Committee and/or other bodies of the Converium group and communicated to the relevant Participants through electronic or other means (the “Grant Notice”).
3.2	The Grant Notice shall also set forth the other terms and conditions of the offering of Shares which are not specified in this Plan. In the event of any discrepancy between the terms and conditions of the Grant Notice and those of this Plan, the terms and conditions of the Grant Notice shall prevail.
4	Purchase Price for Shares
	The purchase price per Share (the “Purchase Price”) will be as set forth in the Grant Notice and shall in general correspond to the closing price of the Shares on the SWX Swiss Exchange on or about the date of the Purchase Notice or the closing price of the Shares on the SWX Swiss Exchange on the beginning and/or end of the respective offering period.
5	Purchase of Shares
5.1	In order to purchase Shares, Participants will have to complete and send to the plan administrator appointed by the Committee (the “Plan Administrator”) a purchase notice (the “Purchase Notice”). Upon receipt of the duly completed Purchase Notice by the Plan Administrator, the purchase of the respective Shares will become binding on and irrevocable by the Participant.
5.2	Unless provided for differently in the Purchase Notice, the Participant shall, at the time of sending the Purchase Notice, transfer the Purchase Price to the bank account indicated in the Purchase Notice. If the purchase and/or the delivery of the Shares is, at the time of purchase, subject to stamp duty, similar tax or levy, the Participant shall, simultaneously with the transfer of the Purchase Price, also transfer the amount necessary to pay such stamp duty, similar tax or levy. The Plan Administrator will inform the Participants from time to time accordingly.
6	Delivery of Shares
6.1	The Shares will be delivered as soon as possible after receipt by the Plan Administrator

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	of the Purchase Notice and with all rights (such as dividend rights) pertaining to such Shares on the date of delivery. Delivery on that date is conditional upon receipt by the Plan Administrator of a duly completed Purchase Notice and the Purchase Price applicable to the Shares purchased (as well as stamp duty, similar tax or levy, if any).
6.2	The Shares will be delivered to the securities account of the Participant opened with the Plan Administrator or its correspondent bank.
7	Vesting Period
7.1	The right to the Shares is conditional upon the Participant being an Employee on the dates specified in the Grant Notice under “Vesting”.
7.2	Disregarding the provisions of Section 7.1, the right of a Participant to the Shares shall become unconditional at the time one of the following events occurs:

7.2.1	Normal retirement of the Participant;
7.2.2	permanent disability of the Participant, as determined by the Company, or death of the Participant;
7.2.3	termination of employment based on grounds for which the employer of the Participant, the Company and/or any of its subsidiaries are solely responsible;
7.2.4	transfer of a Participant from the Company or an affiliated company to the Company or another affiliated company in another tax jurisdiction, if the Committee decides, in its sole discretion, that the right of a Participant to the Options shall become unconditional.

8	Adjustment of the Plan
8.1	In the event of a Potential Adjustment Event (as defined below), the Board of Directors shall, if deemed necessary by the Board of Directors, adjust the rights under the Plan, by applying adjustment methods customary in the market at that time. For the purposes hereof, a “Potential Adjustment Event” includes:

8.1.1	a sub-division, consolidation or reclassification of the Shares;
8.1.2	a grant or distribution to existing holders of Shares of subscription or other rights for the acquisition of Shares or other securities or rights granting the right to payment of dividends and/or the proceeds of liquidation of the Company, in any case for free or for payment (cash or other) at less than the prevailing market price as determined by the Committee;
8.1.3	a reduction of the share capital or of other securities or rights granting the right to payment of dividends and/or the proceeds of liquidation of the Company (in any case by way of a cancellation of Shares or such other securities or rights);
8.1.4	any similar event that may have a diluting or concentrative effect on the market value of the Shares;

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8.1.5	a consolidation, amalgamation or merger of the Company, in which the Company is not the continuing corporation;
8.1.6	a sale by the Company of all or substantially all of its business and / or assets to a person or entity which is not a wholly-owned subsidiary of the Company;

8.2  In the event of a Potential Adjustment Event, the Board of Directors shall also have the right to terminate the Plan and compensate Participants with unvested Shares with such cash or other compensation to the Participants as the Board of Directors shall determine in its sole discretion.

8.3  Any Additional Taxes (as defined below) that may be imposed on the Participant as a result of such a modification and/or, following such modification, a purchase of Shares, shall be borne by the Company. In this context, “Additional Taxes” means such taxes, social contributions and similar duties in excess of those which would have been borne by the Participant absent such a modification.

9 Take-over situation¹

Upon the occurrence of a Take-over Situation (as defined below) all outstanding Shares granted shall immediately vest. For the purposes hereof, a “Take-over Situation” shall mean the conclusion of a binding tender offer for more than 33 1/3 per cent of the total voting power (whether exercisable or not) of the Company by a person (or two or more persons acting in concert), provided that the conditions, if any, for such offer have been met or waived.

10	Taxes / Social Security / Brokerage Fees
10.1	All taxes, duties and similar charges imposed or levied in connection with the purchase, holding and transfer of Shares, such as stamp duties, value added taxes, direct taxes of the Participant (excluding direct taxes imposed on the Company or the relevant employer), will be payable by the Participant.
10.2	Unless provided for differently in the Grant Notice, all payments on account of social insurance, pension fund or similar contributions to be made in connection with the purchase or holding of Shares as a result of such purchase and the transfer or disposal of Shares acquired through the purchase of Shares pursuant to this Plan will be payable by the Participant.
10.3	All brokerage fees charged by the Plan Administrator in connection with the purchase of Shares in accordance with Section 5 and the transfer of such Shares to the account of the Participant with the Plan Administrator or its correspondent bank will be borne by the Company. Brokerage fees and costs and expenses related to a later transfer or sale of such Shares will be borne by the Participant.

¹ inserted April 20, 2004/amended by NRC on November 29, 2006

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11	Transfer Restriction
	The rights and potential rights granted under the Plan may not be transferred or pledged by the Participant, except that the Board of Directors, in its absolute discretion, may permit a transfer or pledge thereof, which transfer or pledge shall become effective only upon registration thereof in the relevant register.
12	No Segregation
	The Company will not and shall not be required to segregate any Shares or any cash which may at any time be used for the purposes of this Plan and the Plan shall constitute an unfunded plan of the Company.
13	Amendment and Administration of the Plan
13.1	The Board of Directors shall have the right to amend or terminate the Plan or to decide on modifications thereof in a particular case at any time. On termination, the Plan remains applicable to rights or potential rights to Shares existing at that time unless such rights or potential rights are terminated by the Board of Directors at the same time.
13.2	Unless provided for differently in this Plan, decisions with respect to this Plan shall be taken by the Committee who shall delegate administrative functions to the Plan Administrator.
13.3	The Plan Administrator shall administer the Plan and maintain a register setting out, inter alia, the details of each Participant and the number of vested and unvested Shares to which such Participant is entitled to, showing their vesting date and Purchase Price.
13.4	The Plan Administrator shall establish rules and regulations for the administration of the Plan, in particular the purchase of Shares and the sale or transfer of Shares.
14	Applicable law / jurisdiction
14.1	The Plan and the rights granted thereunder shall be subject to and governed by Swiss law.
14.2	Exclusive place of jurisdiction for all disputes arising out of or in connection with this Plan shall, to the extent legally possible, be the commercial courts of Zurich, Switzerland.
15	Acceptance of the Plan
	By accepting any right or potential right to purchase Shares under this Plan or any related right, the Participant explicitly accepts the terms and conditions of the Plan, in particular the choice of law and jurisdiction clause.

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EX-4.51

Exhibit 4.51

Standard Stock Option Plan

of Converium Holding AG, Zug, Switzerland

December 2006

1	Introduction
1.1	The Converium Stock Option Plan (the “Plan”) is an incentive scheme of Converium Holding AG, Zug, Switzerland (the “Company”).
1.2	The Plan shall provide an increased incentive for selected employees and members of the board of directors (the “Board of Directors”) of the Company and of its subsidiaries to contribute to the future success and prosperity of the Company, which will enhance the value of the stock of the Company for the benefit of the Company’s shareholders and increase the ability of the Company to attract and retain employees of exceptional skill and experience.
1.3	The Plan shall provide these employees and members of the Board of Directors an opportunity to obtain options to acquire shares of the Company (the “Shares”). An option shall mean a right granted under this Plan to purchase one Share (the “Option(s)”). The Options will be issued by the Company.
1.4	All rights and obligations of the participant(s) in the Plan (the “Participant(s)”) are as described in these terms and conditions of the Plan.
2	Participation in the Plan
2.1	Eligible Participants of this Plan are generally selected executive staff and other key personal as well as members of the Board of Directors. Participants will be determined by the Nomination and Remuneration Committee of the Board of Directors (the “Committee”) and/or other bodies of the Converium group.
2.2	The holding of one of the positions mentioned in clause 2.1 shall grant no right to participate or to a continued participation in the Plan or to employment with the Company or a subsidiary of the Company. The Committee shall have full discretion to elect persons other than those mentioned in clause 2.1 as Participants.

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3	Grant of Options
3.1	Options are granted to Participants free of charge, subject to any payments made on
3.2	account of social insurance, pension fund or similar contributions or other payments or deductions to be made by an employer on salary payments in general which payments or deductions will be shared between the Participant and the Company (or other employer of the Participant) on the same basis as ordinary salary payments of Participants of the relevant employer (or fees of members of the Board of Directors).
3.3	Depending on the Plan, Option grants are scheduled to take place once or twice a year. The time of the grant of Options and the number of Options granted to a Participant will be determined by the Committee and/or other bodies of the Converium group and communicated to each Participant in the form of a grant notice (the “Grant Notice”). The Grant Notice shall also set forth the other terms and conditions of the Options which are not specified in this Plan. In the event of any discrepancy between the terms and conditions of the Grant Notice and those of this Plan, the terms and conditions of the Grant Notice shall prevail.
4	Strike Price of Options
	The strike price of a particular Option is the price at which one Share may be purchased under the Option (the “Strike Price”). The Strike Price will be as set forth in the Grant Notice and shall in general correspond to the closing price of the Shares on the SWX Swiss Exchange on or about the date of the Grant Notice or the closing price of the Shares on the SWX Swiss Exchange on the beginning and/or end of the respective grant period.
5	Exercise of Options
5.1	Subject to Section 7, Options may be exercised in one or more installments at any time after the expiry of the applicable vesting period until the expiration of the Options as stated in the relevant Grant Notice.
5.2	In order to exercise Options, Participants will have to complete and send to the plan administrator appointed by the Committee (the “Plan Administrator”) an exercise notice (the “Exercise Notice”). Upon receipt of the duly completed exercise notice by the Plan Administrator, the exercise of the respective Options will become binding on and irrevocable by the Participant.
5.3	Unless provided for differently in the Grant Notice, the Participant shall, at the time of sending the exercise notice, transfer the Strike Price applicable to the Options exercised to the bank account indicated in the Exercise Notice. If the exercise of the Options and/or the delivery of the Shares is, at the time of exercise, subject to stamp duty,

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	similar tax or levy, the Participant shall, simultaneously with the transfer of the Strike Price, also transfer the amount necessary to pay such stamp duty, similar tax or levy. The Plan Administrator will inform the Participants from time to time accordingly.
6	Delivery of Shares
6.1	The Shares will be delivered as soon as possible after receipt by the Plan Administrator of the Exercise Notice and with all rights (such as dividend rights) pertaining to such Shares on the date of delivery. Delivery of the Shares on that date is conditional upon receipt by the Plan Administrator of a duly completed Exercise Notice and the Strike Price applicable to the Options exercised (as well as stamp duty, similar tax or levy, if any).
6.2	The Shares will be delivered to the securities account of the Participant opened with the Plan Administrator or its correspondent bank.
7	Vesting Period
7.1	The right to the Options is conditional upon the Participant being an Employee (as defined below) on the dates specified in the Grant Notice under “Vesting”:
	For the purposes of this Section 7, the expression “Employee” shall mean a Participant who is employed (and who is not an employee with an hourly wage) by the Company, a company directly or indirectly controlled by the Company (or any other company or business as determined by the Committee in its absolute discretion), provided, however, that on the relevant date, no notice of termination has been given or termination agreement concluded in respect of the employment agreement of such Employee, other than as provided for in Section 7.2.3. A transfer of an Employee from the Company or an affiliated company to the Company or another affiliated company, and a leave of absence, duly authorized in writing by the relevant employer, for military service or sickness, or for any other purpose approved by the Committee shall not be deemed a termination of employment unless employment is terminated during such leave of absence.
7.2	Disregarding the provisions of Section 7.1, the right of a Participant to the Options shall become unconditional at the time one of the following events occurs:

7.2.1	Normal retirement of the Participant;
7.2.2	permanent disability of the Participant, as determined by the Company;
7.2.3	death of the Participant;
7.2.4	termination of employment based on grounds for which the employer of the Participant, the Company and/or any of its subsidiaries are solely responsible;
7.2.5	transfer of a Participant from the Company or an affiliated company to the Company or another affiliated company in another tax jurisdiction, if the

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     Committee decides, in its sole discretion, that the right of a Participant to the Options shall become unconditional.

	1If a Participant ceases to be an Employee for any reason other than those set out in Section 7.2.1 and 7.2.2, the Options held by such Participant or its successors may be only exercised within three months after such event (one year in case of death) and not later than their expiration date as stated in the relevant Grant Notice. Options not exercised during this three months period (one year in case of death) shall lapse.
8	Adjustment of the Plan and of Options
8.1	In the event of a Potential Adjustment Event (as defined below), the Board of Directors of the Company shall, if deemed necessary by the Board of Directors, adjust the rights under the Plan and the Options outstanding, by applying adjustment methods customary in the market at that time. For the purposes hereof, a “Potential Adjustment Event” includes:

8.1.1	a sub-division, consolidation or reclassification of the Shares;
8.1.2	a grant or distribution to existing holders of Shares of subscription or other rights for the acquisition of Shares or other securities or rights granting the right to payment of dividends and/or the proceeds of liquidation of the Company, in any case for free or for payment (cash or other) at less than the prevailing market price as determined by the Committee;
8.1.3	a reduction of the share capital or of other securities or rights granting the right to payment of dividends and/or the proceeds of liquidation of the Company (in any case by way of a cancellation of Shares or such other securities or rights);
8.1.4	any similar event that may have a diluting or concentrative effect on the market value of the Shares;
8.1.5	a consolidation, amalgamation or merger of the Company, in which the Company is not the continuing corporation;
8.1.6	a sale by the Company of all or substantially all of its business and / or assets to a person or entity which is not a wholly-owned subsidiary of the Company;

8.2 In the event of a Potential Adjustment Event, the Board of Directors shall also have the right to decide that Options shall vest or to terminate the Plan and buy back or cancel outstanding Options against such cash or other compensation to the Participants as the Board of Directors shall determine in its sole discretion.

8.3 Any Additional Taxes (as defined below) that may be imposed on the Participant as a

¹ amended August 23, 2003

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result of such a modification of the terms and conditions of the Options or of the Plan and/or, following such modification, an exercise of Options, shall be borne by the Company. In this context, “Additional Taxes” means such taxes, social contributions and similar duties in excess of those which would have been borne by the Participant absent such a modification of the terms and conditions of the Options.

9

Take-over situation1

Upon the occurrence of a Take-over Situation (as defined below) all outstanding Options granted shall immediately vest. For the purposes hereof, a “Take-over Situation” shall mean the conclusion of a binding tender offer for more than 33 1/3 per cent of the total voting power (whether exercisable or not) of the Company by a person (or two or more persons acting in concert), provided that the conditions, if any, for such offer have been met or waived.

10	Taxes / Social Security / Brokerage Fees
10.1	All taxes, duties and similar charges imposed or levied in connection with the exercise of Options and the holding and transfer of Shares, such as stamp duties, value added taxes, direct taxes of the Participant (excluding direct taxes imposed on the Company or the relevant employer), will be payable by the Participant.
10.2	Unless provided for differently in the Grant Notice, all payments on account of social insurance, pension fund or similar contributions to be made in connection with the exercise of Options, the holding of Shares as a result of such exercise and the transfer or disposal of Shares acquired through the exercise of Options will be payable by the Participant.
10.3	All brokerage fees charged by the Plan Administrator in connection with the exercise of Options and the transfer of the Shares resulting from such exercise to the account of the Participant with the Plan Administrator or its correspondent bank will be borne by the Company. Brokerage fees and costs and expenses related to a later transfer or sale of such Shares will be borne by the Participant.
11	Transfer Restriction / Forfeiture
11.1	The Options granted under the Plan may not be transferred or pledged by the Participant, except that the Board of Directors, in its absolute discretion, may permit a transfer or pledge thereof, which transfer or pledge shall become effective only upon registration thereof in the relevant register.
11.2	Grant Notices may provide for immediate forfeiture of an Option, or Shares acquired upon exercise of an Option, or clawback of any gain realized thereon, in the event that

¹ inserted April 20, 2004/amended by NRC on November 29, 2006

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	the relevant Participant engages in activities inimical to the interests of the Company and/or any of its subsidiaries, as determined by the Committee.
12	No Segregation
	The Company will not and shall not be required to segregate any Shares or any cash which may at any time be represented by the Options and the Plan shall constitute an unfunded plan of the Company.
13	Amendment and Administration of the Plan
13.1	The Board of Directors shall have the right to amend or terminate the Plan or to decide on modifications thereof in a particular case at any time. On termination, the Plan remains applicable to Options outstanding at that time unless such Options are terminated by the Board of Directors at the same time.
13.2	Unless provided for differently in this Plan, decisions with respect to this Plan shall be taken by the Committee who shall delegate administrative functions to the Plan Administrator.
13.3	The Plan Administrator shall administer the Plan and maintain a register setting out, inter alia, the details of each Participant and the number of vested and unvested Options to which such Participant is entitled to, showing their vesting date and expiration date and Strike Price.
13.4	The Plan Administrator shall establish rules and regulations for the administration of the Plan, in particular the exercise of Options, the allotment of Shares and the sale or transfer of Shares.
14	Applicable law / jurisdiction
14.1	The Plan and the rights granted thereunder shall be subject to and governed by Swiss law.
14.2	Exclusive place of jurisdiction for all disputes arising out of or in connection with this Plan shall, to the extent legally possible, be the commercial courts of Zurich, Switzerland.
15	Acceptance of the Plan
	By accepting any Option or any related right, the Participant explicitly accepts the terms and conditions of the Plan, in particular the choice of law and jurisdiction clause.

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EX-4.52

Exhibit 4.52

TRANSACTION AGREEMENT

          This Transaction Agreement dated as of May 9, 2007 (the “Agreement”) is entered into by and between SCOR S.A., a société anonyme organized and existing under the laws of the French Republic (“SCOR” or the “Offeror”), and Converium Holding AG, an Aktiengesellschaft organized and existing under the laws of Switzerland (“Converium” or the “Company” and, together with the Offeror, the “Parties”). Capitalized terms not expressly defined herein shall have the meaning ascribed to them in the Offer Prospectus (as defined below).

     WHEREAS, on April 5, 2007, the Offeror has published a public tender offer in Switzerland for all the publicly held registered shares with a nominal value of CHF 5 each of Converium published on April 5, 2007 (the “Offer”, the prospectus relating to the Offer being referred to as the “Offer Prospectus”);

     WHEREAS, the Parties firmly believe that relations based on trust, mutual understanding and respect are an essential element in the reinsurance industry;

     WHEREAS, the Offeror has agreed to modify the Offer pursuant to the terms set forth herein (the “Modified Offer”) and to take certain other actions as set forth below;

     WHEREAS, the board of Directors of the Company (the “Company Board”) has agreed to recommend and support acceptance of the Modified Offer and to take certain other actions as set forth below;

     NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, intending to be legally bound hereby, the Parties hereby agree as follows:

ARTICLE I

MODIFIED OFFER

     Section 1.1 Offer Price. Subject to the terms and conditions set forth herein and in the Offer Prospectus, SCOR hereby agrees (i) to increase the Offer Price, for each Converium Share tendered, to (a) 0.5 New SCOR Shares with a nominal value of EUR 7.8769723 each and (b) CHF 5.50 in cash and (ii) not to reduce the Offer Price by the proposed gross dividend of CHF 0.20 per Converium Share. The other provisions of Section B.3 of the Offer Prospectus shall remain unchanged.

     Section 1.2 Other Terms and Conditions of Modified Offer. The other terms and conditions of the Offer, as set forth in the Offer Prospectus, shall remain unchanged.

     Section 1.3 Announcement of the Modified Offer. The Parties’ agreement on the Modified Offer will be announced on May 10, 2007 at 7:00 a.m. CET by way of mutually agreed press releases which shall inter alia make explicit reference to the Company Board’s unanimous approval and recommendation as well as the support of the Company’s Global Executive Committee of such Modified Offer.

     Section 1.4 Modified Offer Prospectus. Subject to Sections 2.1 and 5.2 below, the Offeror shall publish a modified Prospectus reflecting the Modified Offer (the “Modified Prospectus”) no later than two (2) SWX trading days following the approval of the Modified Offer by the Swiss Takeover Board.

1 Final version transaction agreement SCOR/Converium

ARTICLE II

RECOMMENDATION OF THE MODIFIED OFFER

     Section 2.1 Recommendation. The Company Board has unanimously resolved at its meeting held on May [9], 2007, subject to a Superior Offer (as defined below) not having been made or formally pre-announced in the meantime (subject to Section 4.2 below), (i) to recommend to the Company’s shareholders to accept the Modified Offer and tender their Converium Shares into the Modified Offer and (ii) to unanimously adopt and publish, as part of the Modified Prospectus, a modified Company Board report prepared in accordance with Art. 29 para. 1 of the Swiss Federal Act on Stock Exchanges and Securities Trading (“SESTA”) endorsing and recommending the Modified Offer without reservation and recommending that the Company’s shareholders accept such Modified Offer (the “Modified Company Report”). In this context, the Company will ensure that the Modified Company Report be prepared as soon as reasonably practicable after the date hereof and that the Modified Company Report will be filed with the Swiss Takeover Board for approval jointly with the Modified Prospectus.

     Section 2.2 Actions of Company Board. As from the date hereof, (i) the Company Board and the members of the Global Executive Committee shall, subject to a Superior Offer not having been announced or pre-announced (subject to Section 4.2 below), publicly support the Modified Offer and (ii) the Company shall abstain from taking any action or doing, or cause to abstain from doing, any such thing that may (a) prevent or compromise the Modified Offer, its success or its strategic or commercial value or rationale or (b) be otherwise detrimental to the Modified Offer.

ARTICLE III

OFFEROR COVENANTS

     Section 3.1 Swiss Presence. Subject to the settlement of the Modified Offer, the Offeror agrees to (i) maintain a strong presence in Zurich and (ii) make Zurich one of the three European key hubs of the combined Group, together with Paris and Cologne. The Zurich operating entity shall become a strategic pillar of the combined Group.

     Section 3.2 Swiss Employees. Subject to the settlement of the Modified Offer, for a period of twelve (12) months following the date of settlement of the Modified Offer, the Offeror agrees to ensure that the Company and its Swiss subsidiaries do not serve notice to any of their present employees or change the compensation plans for such employees. During such period, the Company and its Swiss subsidiaries may, however, terminate employees for cause (wichtigem Grund , Art.337CO). The foregoing limitations to serve notice shall not be applicable to any present employees of the Company and its Swiss subsidiaries who have a Change in Control clause in their employment agreements and such employment agreements will continue to apply.

     Section 3.3 Specific Key Employees. Subject to the settlement of the Modified Offer, the employment agreements of Ms. Inga Beale and Mr. Paolo De Martin shall be terminated with effect as of December 31, 2007 by the termination agreements attached hereto as Exhibits 1a and 1b respectively. The Company Board hereby confirms that it has obtained the approval of Ms. Inga Beale and Mr. Paolo De Martin who have agreed to use, until December 31, 2007, their best efforts to ensure a smooth transition of the management of the Company to the Offeror and to act in a loyal manner.

2 Final version transaction agreement SCOR/Converium

     Section 3.4 SWX Secondary Listing. Upon settlement of the Modified Offer or as soon as reasonably practicable thereafter, a secondary listing of the Offeror’s shares on the SWX Exchange shall be implemented.

     Section 3.5 Protection of the Members of the Company Board. Subject to the settlement of the Modified Offer, the Offeror agrees, subject to applicable laws and regulations, to release and discharge, to the extent permitted in accordance with applicable laws and regulations, each of the members of the Company Board from any and all claims and liabilities which the Company has or may have against any member arising out of any matter, cause or event occurring on or before the date of the EGM (as defined below), provided that the foregoing shall not apply in connection with any willful or grossly negligent acts or omissions of a member. Furthermore, the Offeror shall ensure that the Company maintains for six (6) years as of the date hereof tail insurance for the present members of the Company Board and officers of the Company and its subsidiaries that is based on the present D&O insurance of the Company and provides the same coverage as such insurance.

ARTICLE IV

COMPANY COVENANTS

     Section 4.1 Conduct of Business. To the extent permitted under applicable laws and regulations, the Company shall, for the whole duration of this Agreement, (i) operate (and shall procure that its affiliates operate) its business and the businesses of its affiliates in the ordinary course of business consistent with past practice, (ii) abstain (and shall procure that its affiliates and representatives abstain) from (a) taking any actions outside the ordinary course of business consistent with past practice and (b) issuing any type of equity securities or debt instrument of any nature whatsoever, and (iii) shall, and shall cause each of its affiliates to, use all reasonable commercial efforts to preserve intact its material business organization and relationships with third parties (including its relationships with ceding companies, suppliers, employees, financial institutions and business partners) and to keep available the services of their present officers and key employees. The Company shall in particular ensure that it or its affiliates do not undertake any action that triggers the Offer Conditions (as defined in Section 5.2 below).

     Section 4.2 No Solicitation. The Company shall immediately cease and cause to be terminated all existing discussions or negotiations with any party conducted heretofore with respect to any Acquisition Proposal (as defined below) and not initiate or solicit in any way any discussions or negotiations with respect to any Acquisition Proposal after the date hereof. The Company shall promptly notify the Offeror (i) if it becomes aware that a third party has the intention of announcing or pre-announcing an Acquisition Proposal and (ii) of any Acquisition Proposal received after the date hereof, in each case, not later than twenty four (24) hours after the knowledge or the receipt of such Acquisition Proposal. Except on a date that is not earlier than the fourth (4th) business day following a Notice of a Superior Offer (as defined below), the Company Board shall not (i) withdraw or modify in a manner adverse to the Offeror, or propose publicly to withdraw or modify in a manner adverse to the Offeror, the approval or recommendation by the Company Board set forth in the Modified Company Report, or (ii) approve or recommend, or propose publicly to approve or recommend, any Superior Offer. The Company shall promptly (and in any event within one (1) business day) notify the Offeror following any determination by the Company Board with respect to an Acquisition Proposal, that such Acquisition Proposal is a Superior Offer (“Notice of Superior Offer”). During the three (3) business day period after receipt of the Notice of Superior Offer, the Offeror shall have reasonable opportunity to propose such adjustments, modifications or amendments to the terms and conditions of this Agreement as the Offeror believes would enable the Company Board to proceed with the transactions contemplated herein (provided, however, that the Offeror shall

3 Final version transaction agreement SCOR/Converium

not have any obligation to propose any adjustment, modification or amendment to the terms and conditions of this Agreement or the Modified Offer) and the Company shall negotiate with the Offeror in good faith with respect thereto during such three (3) business day period.

     For purposes hereof, (1) “Acquisition Proposal” shall mean any proposal or offer from any party other than the Offeror relating to any (i) tender or exchange offer involving Converium Shares or other acquisition of Converium Shares, (ii) merger, consolidation or other business combination involving the Company or any of its affiliates, (iii) direct or indirect acquisition or purchase of a business or assets that constitutes a substantial part of the business or assets of the Company or its affiliates, or a substantial amount of the equity securities of the Company or any of its affiliates, (iv) recapitalization or restructuring of the Company, or (v) other transaction similar to any of the foregoing with respect to the Company or any of its affiliates, other than the transactions contemplated by this Agreement and (2) “Superior Offer” shall mean any public offer (or an increase of an existing public offer) to all of the shareholders of the Company to acquire all of the Converium Shares, on terms and conditions that the Company Board determines in its good faith judgment, after due consideration of its fiduciary duties and based upon an opinion of independent financial and legal experts, to be superior for the Company’s shareholders when compared as a whole with the terms and conditions of the Modified Offer, provided such offer is at a price or consideration that on a fully diluted basis is not lower than the Offer Consideration and that the conditions to such offer are no more restrictive than the Offer Conditions.

     Section 4.3 Shareholders’ Meetings. In the annual shareholders’ meeting of the Company that has been convened for May 10 2007 (“AGM”), the Company and the Company Board shall (i) (a) withdraw the proposal for a capital reduction for the purpose of a par value repayment to shareholders of the Company (agenda item 3) and (b) propose against any third party proposal for (x) such a capital reduction (or similar thereto) or (y) an increase of the proposed gross dividend of CHF 0.20 per Converium Share (agenda item 2), (ii) provide the Offeror’s Chairman and CEO the opportunity to address the Company’s shareholders and to explain the advantages of the combination between Converium and SCOR and (iii) support the Modified Offer and the creation of the combined Group. In addition, the Company shall procure that Mr. Derrell J. Hendrix shall not stand for re-election as currently proposed under agenda item 5 of the AGM and the Company and the Company Board shall instead announce Mr. Hendrix’ decision not to stand for re-election and propose to the AGM to support a proposal by the Offeror to elect in lieu of Mr. Hendrix Mr. Gilles Meyer, Director of Business Unit 1 of SCOR Global Life and member of the SCOR Group Executive Committee, to the Company Board for a term of three (3) years. If the Offer is declared successful, the Company Board shall immediately convene an extraordinary meeting of shareholders of the Company to be held as soon as practicable with such agenda and proposals that shall have been submitted by the Offeror (“EGM”).

     Section 4.4 Trading in Shares and Related Securities by the Company. From the date hereof until the day of the six (6)-month anniversary of the additional acceptance period of the Modified Offer (or any later period during which the Swiss best price rule may apply), the Company shall abstain (and shall procure that its affiliates abstain) from (i) (a) acquiring or selling any Converium Shares or (b) entering into any (x) agreement (either on or off exchange) relating to the acquisition or sale of Converium Shares and/or (y) derivative transaction having Converium Shares as underlying; (ii) amending the terms and/or conditions of existing employee stock options or derivatives issued by the Company, its affiliates or representatives without the Offeror’s prior written consent; (iii) tendering treasury shares held or acquired by the Company or its affiliates (the “Treasury Shares”) for acceptance in the Modified Offer; and (iv) selling or agreeing to sell any of the Treasury Shares to any third party (other than the delivery of Treasury Shares to fulfill the share delivery obligations of the Company under the various employee participation plans in effect as of the date hereof). The Offeror is hereby informed that all rights of the beneficiaries under the Company’s currently

4 Final version transaction agreement SCOR/Converium

existing stock options plan and stock purchase plan vest and become exercisable on the first day of the extension period (art 14.para.5) of the Modified Offer. Due to the immediately preceding restrictions, the Company may not have a sufficient number of shares to cover all its obligations to deliver shares but will have to cover a proportion of the commitments under such stock options plan and stock purchase plan by paying full cash compensation for the value of the shares to be delivered to the beneficiaries of such plans, unless an exemption from the provisions of this Section 4.4 is granted by the Offeror to the Company.

     Section 4.5 Rating Evaluation Service. The Company agrees to execute any and all required documents upon execution of this Agreement to permit a Rating Evaluation Service to be performed by Standard & Poors’ as soon as practicable.

     Section 4.6 US Litigation. Immediately following the execution of this Agreement, the Company shall take all steps necessary to obtain dismissal with prejudice of the litigation it commenced in the United States District Court for the Southern District of New York entitled Converium Holding AG v SCOR S.A. and Patinex AG, No. 07 CV 3042 (GEL). The Company shall also, in connection with the putative class action commenced in the United States District Court for the Southern District of New York entitled Sclater-Booth v SCOR S.A. and Patinex AG, No. 07 CV 3476, cooperate with the Offeror in the Offeror’s defense of that lawsuit, including by providing documents and testimony should the Offeror reasonably deem documents from the Company necessary to its defense of that lawsuit.

     Section 4.7 Other Actions. Immediately following the execution of this Agreement, the Company shall take all steps necessary to withdraw all its filings and claims for relief (Anträge, Rechtsbegehren) made to the Swiss Takeover Board and other Swiss governmental authorities (including the FOPI) and file its approval with the Offer and the Modified Offer with the Swiss Takeover Board and other competent Swiss governmental authorities. The Company shall not oppose any filings of the Offeror with any governmental authority that aim at demonstrating that the Offeror’s exclusion of the United States has been carried out in compliance with applicable laws and regulations and cooperate with the Offeror in that regard.

     Section 4.8 Seamless Transfer of Managerial Control. The Company and the members of the Company Board shall use their best effort to ensure a seamless and smooth transfer of the managerial control over the Company to the Offeror immediately after the EGM of the Company mentioned in Section 4.3 above has been held. To ensure its control over the Company the Offeror will at such EGM propose and elect new board members of the Company and will, furthermore, replace the current CEO and the current CFO of the Company. Furthermore, the Company and its key employees shall use their best efforts to maintain the relationships with the Company’s current clients and other stakeholders.

     Section 4.9 Company Board. Provided that the Modified Offer is successful and becomes unconditional, all present members of the Company Board will resign with effect as of the EGM. The Offeror will ensure that at such EGM new members of the Company Board are elected.

ARTICLE V

MUTUAL COVENANTS

     Section 5.1 Announcement. The timing and content of any announcement, press release, or other public statement concerning this Agreement or any further agreement entered into between the Offeror and the Company shall only occur upon, and be determined in advance by, mutual agreement and consent of each of the Parties, unless required by applicable

5 Final version transaction agreement SCOR/Converium

laws and regulations (in which case, the disclosing Party shall consult in advance with the other Party concerning the reasons for, and content of, such disclosure). Notwithstanding the foregoing, the Offeror shall be free to make filings to the Swiss Takeover Board and other authorities in support of the Modified Offer and its approval as deemed appropriate by the Offeror.

          Section 5.2 Cooperation. From the date hereof and for the whole duration of this Agreement, to the extent permitted under applicable laws and regulations, each of SCOR and Converium shall, and Converium shall cause each of its affiliates to, coordinate, cooperate and use commercially reasonable best efforts: (i) to immediately contact and jointly meet with each of the Swiss Takeover Board and the Swiss Federal Office of Private Insurance (“FOPI”) to explain the consequences of this Agreement from the Parties’ perspective; (ii) to duly publish the Modified Prospectus, including the Modified Company Report, as set forth above; (iii) to take all actions necessary or advisable to consummate and make effective the transactions contemplated by this Agreement as promptly as practicable, including (1) the approval of the FOPI for exceeding each of the 33% and the 50% thresholds of Converium’s share capital, (2) the fulfillment of the Offer conditions set forth in Section B.9 of the Offer Prospectus (the “Offer Conditions”), (3) the due settlement of the Modified Offer in accordance with its terms, and (4) to obtain all consents, approvals, permits and authorizations required to be obtained from counterparties to agreements which are material to the business of the Company or its affiliates, including the agreements entered into with Zurich Financial Services Group, National Indemnity, GAUM and MDU.

          Section 5.3 Integration Committee. Upon execution of this Agreement, the Offeror and the Company shall set up a joint committee the purpose of which will be to organize and anticipate on all matters that will be necessary in order to ensure a smooth integration process (the “Integration Committee”). The list of the members of such Integration Committee and its specific functions and governance will be agreed upon by the Parties, being understood that each Party shall have an identical representation on such Integration Committee.

          Section 5.4 Underwriting Committee. Upon execution of this Agreement, the Offeror and the Company shall set up a joint committee the purpose of which will be to organize (i) the combination of the Offeror’s “Dynamic Lift Plan” and the Company’s “Roadmap” and (ii) the 2008 underwriting plan (the “Underwriting Committee”). The list of the members of such Underwriting Committee will be agreed upon by the Parties, being understood that each Party shall have an identical representation on such Underwriting Committee.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

     Each of the Parties hereby represents and warrants to the other Party as follows:

     (a) Such Party has full corporate power and authority to execute and deliver this Agreement. The execution, delivery and performance by such Party of this Agreement have been duly authorized by such Party’s Board of Directors, and no other corporate action on the part of such Party is necessary to authorize the execution and delivery by such Party of this Agreement.

     (b) This Agreement has been duly executed and delivered by such Party and, assuming due and valid authorization, execution and delivery thereof by the other Party, this Agreement is a valid and binding obligation of such Party enforceable against such Party in accordance with its terms, except as limited by applicable bankruptcy, insolvency and other similar applicable laws and regulations affecting enforcement of creditors’ rights generally.

6 Final version transaction agreement SCOR/Converium

     (c) Except as regards the U.S. litigation matters referred to in Section 4.6 above, there is no suit, action, proceeding or arbitration pending against or, to the knowledge of such Party, threatened against or affecting such Party or its affiliates by any third party nor is there any order outstanding against such Party or any of its affiliates that (i) seeks to restrain or enjoin the consummation of any of the transactions contemplated by this Agreement, or (ii) could reasonably be expected to negatively impair the ability of such Party to consummate any of the transactions contemplated by this Agreement.

ARTICLE VII

TERMINATION

     Section 7.1 Termination. This Agreement may be terminated: (i) by mutual written consent of the Parties; or (ii) by any Party, if the Modified Offer is unsuccessful or is otherwise withdrawn, upon public announcement by the Offeror of the Modified Offer’s lack of success or withdrawal; or (iii) by the Offeror, if the Company materially breaches its representations, warranties or covenants under this Agreement; or (iv) by the Offeror, if the Company Board withdraws or fails to make its recommendation of the Offer, solely in a manner expressly permitted under this Agreement; or (v) by the Company, if the Company Board withdraws or fails to make its recommendation of the modified Offer, solely in a manner expressly permitted under this Agreement; or (vi) by any Party, if a competing public tender offer has an acceptance rate of 50% or more of all voting rights and is declared successful (subject to conditions subsequent by the relevant offeror).

     Section 7.2 Liability. If the obligations under this Agreement are terminated according to Section 7.1 above, such termination shall be without liability of any Party to the other Party; provided, however, that if such termination shall result from the breach by any Party of its representations, warranties or covenants under this Agreement, such Party shall be fully liable for all damages suffered by the other Party as a result of such breach.

ARTICLE VIII

MISCELLANEOUS

     Section 8.1 Fees and Expenses. All fees and expenses incurred in connection with this Agreement and the consummation of the transactions contemplated herein shall be borne by the Party incurring such fees or expenses.

     Section 8.2 Consents to References. The Offeror and the Company shall be entitled to include in filings under applicable rules and regulations, including the SESTA, the General Regulation of the Autorite des marches financiers, the U.S. Securities Act of 1933, as amended and the U.S. Securities Exchange Act of 1934, as amended, information in connection with this Agreement and the transactions contemplated herein.

     Section 8.3 Entire Agreement; No Third Party Beneficiaries. This Agreement and the Exhibits hereto constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof and thereof. With the exception of Sections 3.3 and 3.5 hereof which confer rights to the third parties expressly referred to in such Sections, this Agreement is not

7 Final version transaction agreement SCOR/Converium

intended to, and does not, confer upon any person other than the Parties hereto any rights or remedies hereunder.

          Section 8.4 Amendments and Waivers. This Agreement may be amended, superseded, cancelled, renewed or extended, only by a written instrument signed by each of the Offeror and the Company or, in the case of a waiver, only by a written instrument signed by the Party waiving compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.

          Section 8.5 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the sole benefit of the Parties hereto and their respective successors, heirs, permitted assigns and legal representatives and it shall not be construed as conferring any rights or remedies on any Person other than the Parties and their respective successors and permitted assigns. Pending settlement of the Modified Offer, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either Party (whether by operation of law or otherwise) without the prior written consent of the other Party. Following settlement of the Modified Offer, the Offeror shall have the right to assign any or all of its rights and obligations to any Affiliate of the Offeror. Any attempted assignment not permitted under this Section 8.5 shall be null and void.

          Section 8.6 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date of delivery if delivered personally or by courier service, (ii) on the date of confirmation of receipt (or the first business day following such receipt if the date is not a business day) if sent via facsimile (receipt confirmed), or (iii) on the date of confirmation of receipt (or the first business day following such receipt if the date is not a business day) if delivered by an internationally recognized courier service. All notices hereunder shall be delivered to the Parties at the following addresses or facsimile numbers:

(i) If to the Offeror, to:

SCOR S.A.
1, Avenue du Général de Gaulle
92074 Paris — La Défense Cedex
France
Fax: +33.1.46.98.78.39
Attention: Emmanuelle Rousseau — Group General Counsel

with a copy to (which shall not constitute notice to the Offeror):

Skadden, Arps, Slate, Meagher & Flom LLP
68, rue du Faubourg Saint Honoré
75008 Paris
Fax: + 33.1.55.27.21.95
Attention: Armand W. Grumberg

and to

Homburger
Weinbergstrasse 56/58
8006 Zürich
Fax : +41 43 222 15 00
Attention : Dieter Gericke

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(ii) If to the Company, to:

Converium AG
General Guisan-Quai 26
8002 Zurich
Switzerland
Fax: + 41.44.639.90.90
Attention: Christian Felderer — General Counsel

with a copy to (which shall not constitute notice to the Company):

Baker & McKenzie
Zollikerstrasse 225
8034 Zurich
Switzerland
Fax: + 41.44.384.12.84
Attention: Urs Schenker

or to such other address as the Party to whom notice is given may have previously furnished to the other Party in writing in the manner set forth above (provided that notice of any change of address shall be effective only upon receipt thereof).

          Section 8.7 Severability. If any provision of this Agreement is held to be invalid or unenforceable for any reason, such provision shall be ineffective to the extent of such invalidity or unenforceability; provided, however, that the remaining provisions shall continue in full force without being impaired or invalidated in any way. The Parties agree to replace any invalid or unenforceable provision with a valid provision which most closely approximates the intent and economic effect of the invalid or unenforceable provision.

          Section 8.8 Governing Law. This Agreement shall be exclusively governed by and construed in accordance with the substantive laws of Switzerland, without regard to the principles of conflicts of laws thereof.

          Section 8.9 Jurisdiction. Any disputes arising out of or in connection with this Agreement shall be submitted to the Commercial Court of Zurich, Zurich 1.

          Section 8.10 Specific Performance. The Parties hereto agree that irreparable damages would occur in the event that any provision of this Agreement was not performed in accordance with the terms hereof and that the Parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law that may be available, and the Parties waive and shall waive in such proceedings the posting of any bond or security in connection with any proceedings related thereto.

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     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

SCOR S.A.
By:	/s/ Denis Kessler
Name:	Denis Kessler
Title:	Chairman and CEO
CONVERIUM HOLDING AG
By:	/s/ Markus Dennler
Name:	Markus Dennler
Title:	Chairman of the Board
By:	/s/ Inga Beale
Name:	Inga Beale
Title:	CEO

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EXHIBIT 1A/B

TERMINATION AGREEMENT
regarding employment agreement

between

[Employee], [Address], Switzerland

Employee

and

Converium AG, General Guisan-Quai 26, 8002 Zurich, Switzerland

Employer

Employee and Employer entered into an employment agreement on [l] (such agreement, as amended, the “Employment Agreement”). Employee and Employer wish to terminate such Employment Agreement. Therefore, the Parties agree as follows:

1.

The Employment Agreement shall terminate as of 31 December 2007. At such date at the latest, the Employee shall also resign from any corporate or other functions it may have within the Employer, Converium Holding AG, any of their direct or indirect subsidiaries, any Converium pension funds and/or any other Converium affiliated entity, joint venture or similar organization (together the “Converium Group”). The Employee hereby expressly confirms that except for the Employment Agreement with the Employer it is not, and has not been, an employee of, or adviser to, any member of the Converium Group. For a period of five (5) years as of January 1, 2008 (unless a longer period is required by applicable law), the Employee shall continue to comply with the confidentiality provisions of [article 13 (Inga Beale) / article 14 (Paolo De Martin)] of the Employment Agreement and article 7 of Annex 1 thereto. Furthermore, for a period of one (1) year as of January 1, 2008, the Employee shall not solicit, induce, or attempt to induce employees of the Converium Group to terminate employment with, or otherwise cease their relationship with the Converium Group or solicit or hire any employee of the Converium Group to work for or to provide services to any third party.

Notwithstanding any provision to the contrary set forth in the Employment Agreement, at termination, the Employee shall return all property, access codes, computers, client files and lists and other documents or information of, or relating to, Converium Group to Converium Group and not keep or use in any way any copies of such access codes, files and/or other documents or information.

2.

The Employer shall make a gross lump-sum payment as per 31 December 2007 of CHF [4.2 Mio. for Inga Beale and 2.5 Mio. for Paolo de Martin] (“Lump Sum Payment”). The Lump Sum Payment shall be in full settlement and discharge of any rights of any nature whatsoever, known or unknown, actual or contingent, that the Employee may have or will have on 31 December 2007 or thereafter as an employee, adviser, director, officer or other corporate body within or on behalf of any member of the Converium Group against any member of the Converium Group and any of their current or former directors, officers, employees, representatives and agents. The Lump Sum Payment also covers, without limitation, any claims for accrued vacation, over-hours or over-time, severance payments, change of control payments and unexercised or unvested stock options, stock appreciation rights or employee shares. The Employer shall make all applicable deductions such as social security contributions or source taxes from the Lump Sum Payment. Payment shall be made on February 1, 2008 against valid delivery on such date of a waiver and release in the form attached as Annex A hereto.

3.

During the date hereof and 31 December 2007, (i) the Employment Agreement shall remain in full force and effect, except that the Employer shall not be obligated to maintain or assign particular tasks, functions, titles or powers of the Employee within the Converium Group and the Employee shall resign from such functions upon request by the Employer (and retransfer any qualifying shares, if any) and (ii) the Employee shall use its best efforts to ensure a smooth transition of the management of the Converium Group to SCOR S.A. and act in a loyal manner.

Place, Date:
Employee:	Employer
	Converium AG

2

Annex A

Statement of Waiver and Release

After due and considerate negotiations, Converium AG (“Company”) and I entered a Termination Agreement dated        (the “Termination Agreement”). I hereby expressly confirm that upon receipt of the Lump Sum Payment (as defined in the Termination Agreement), I knowingly and voluntarily release and forever discharge the Company and any other member of the Converium Group (as defined in the Termination Agreement), any of their current and former employees, officers, directors, representatives and agents, as well as all otherwise affiliated or related entities or persons of and from any and all claims of any nature whatsoever, known or unknown, actual or contingent, I have or may have now or in the future against them in connection with my activity within or on behalf of the Converium Group.

Place, date:

By:

EX-4.53

Exhibit 4.53

THIS FRONTING AND ADMINISTRATION AGREEMENT is made on the 25 day of April 2007

between:

(1) CONVERIUM AG, a company incorporated in Switzerland whose registered office is at General Guisan-Quai 26, 8022 Zürich, Switzerland (Converium);

(2) MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AKTIENGESELLSCHAFT IN MÜNCHEN, whose registered office is at Königinstraße, 107, 80802 München, Germany (Munich Re);

(3) NATIONAL INDEMNITY COMPANY, a company incorporated in Nebraska, United States of America, whose registered office is at 3024 Harney Street, Omaha, Nebraska, USA 68131 (National Indemnity);

(4) GLOBAL AEROSPACE UNDERWRITING MANAGERS LIMITED (registered number 2512067) whose registered office is at Fitzwilliam House, 10 St. Mary Axe, London EC3A 8EQ (Global); and

Whereas:

(A) An aviation and aerospace underwriting pool (the Pool) has been established between certain insurance and reinsurance companies including Converium, Munich Re, National Indemnity and Global in respect of risks written after the date of the Pool Members’ Agreement (as hereinafter defined) and attaching on or after 1 January 2003, and in respect of which inter alia Converium appoints Global as its agent for writing insurance and reinsurance in respect of certain risks and to provide administration and management services in respect of the Pool.

(B) Converium intends to appoint National Indemnity and Munich Re (or members of their Groups) to provide fronting insurance for Converium in respect of Relevant Risks which incept in the Period (all terms as hereinafter defined). The intention is that, unless otherwise stated, in respect of each risk which would be written in the name of Converium under the terms of the Pool Members’ Agreement, National Indemnity or a member of its Group will front 50 per cent. of such risk and Munich Re or a member of its Group will front 50 per cent. of such risk. In certain jurisdictions where there is currently fronting in place in respect of National Indemnity’s or Munich Re’s participation in the Pool, the fronter (being those persons listed in column 4 of Part II if any of Schedule 2 and Schedule 3) has agreed to extend the fronting that is currently in place so that it covers (in each case) 50 per cent of each risk in such jurisdiction which would be written in the name of Converium under the Pool Members’ Agreement.

(C) Accordingly, this Agreement constitutes a Fronting Arrangement for the purposes of the Pool Members’ Agreement and sets out the basis on which (1) National Indemnity and Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 will appoint Global to underwrite, administer and

manage such Relevant Risks and (2) all business written in the name of National Indemnity and Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 under this Agreement will be fully reinsured by Converium.

Now it is hereby agreed as follows:

1. Definitions

1.1 Unless otherwise defined in this Agreement and unless the context otherwise requires, all words and phrases shall have the meaning ascribed to them in the Pool Members’ Agreement.

Agent means Global as the context requires;

Agreement means this Agreement as amended from time to time;

Business means the business of writing Fronting Insurance Contracts as agent for National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 in their capacity as fronting insurers for Converium and managing such business on behalf of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 and doing such other things ancillary or incidental thereto in any such case as may from time to time be permitted or required by or pursuant to this Agreement and for the avoidance of doubt, Business excludes that portion of any risk reflecting the participation of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 under the Pool Members’ Agreement and that portion of any risk which is written on behalf of Munich Re or National Indemnity by the persons set out in column 4 of Part II if any of Schedule 2 or Schedule 3 respectively;

Business Day means any day (not being a Saturday or Sunday) on which banks are open for the transaction of general banking business in London;

Confidential Information means:

(a) all information obtained by a party as a result of negotiating and entering into this Agreement;

(b) all financial or other information received by a party pursuant to this Agreement in respect of Global;

(c) all financial or other information received by a party pursuant to this Agreement in respect of Converium;

(d) all financial or other information received by a party pursuant to this Agreement in respect of National Indemnity or Munich Re; and

(e) information as to the terms of this Agreement or of any agreement referred to in it and information relating to the performance by any party of its obligations under this Agreement or any agreement referred to in it;

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Claim means, in relation to any Reinsured Risk, the notification, by the insured (or as applicable reinsured) of an actual or potential claim under such Reinsured Risk and, for the avoidance of doubt, a Claim shall be deemed to have been made where there is a settlement, compromise, commutation and/or policy buy back entered into by or on behalf of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 in relation to the Reinsured Risks (or any of them);

Claims-Related Extra Contractual Obligation means any liability on the part of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 (or amount agreed to be paid by or on behalf of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 in respect of potential or alleged liability on the part of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3) which has arisen in connection with or which relates in any way to the conduct of a claim and/or the conduct of the Business where such liability (or potential or alleged liability) has arisen because of or relates in any way to any Reinsured Risk in respect of which a Fronting Insurance Contract has been written in such person’s name save to the extent that any Claims-Related Extra Contractual Obligation results from fraud of National Indemnity or a member of its Group, or Munich Re or a member of its Group;

duly authorised means:

(a) in the United Kingdom, duly authorised to carry on general insurance business under the Financial Services and Markets Act 2000; and

(b) in any other jurisdiction, duly authorised, licensed or otherwise approved or permitted, under the laws of the applicable jurisdiction, to underwrite or carry on general insurance business covering Specified Risks in accordance with the relevant laws or regulations of such jurisdiction;

Due means with respect to any sum or amount of money that such sum or amount has been demanded by or from the Agent and Due Premium means that amount of written premium that has been demanded by the Agent from an Original Insured, being the insured party to any relevant Fronting Insurance Contract, for and on behalf of Munich Re and /or National Indemnity, as appropriate, by way of bill, invoice or other enforceable demand, and in respect of which the Agent has assigned a date by when such Original Insured must actually pay the amount of premium demanded (Due Date) and calculated in all cases as at the relevant Due Date(s).

Fronting Insurance Contract means a contract of insurance and/or reinsurance which is written by Global pursuant to this Agreement on behalf of National Indemnity or Munich Re or the relevant member of such person’s Group (solely in its capacity as fronting insurer for Converium) in respect of the proportion of the Relevant Risks set out in Clause 2.3(b) attaching during the Period provided that Fronting Insurance

Page 3

Contracts shall not relate to the percentage of each policy issued under the Pool Members’ Agreement representing Munich Re’s or National Indemnity’s interest under the Pool Members’ Agreement;

GAI means GLOBAL AEROSPACE, INC. (formerly known as ASSOCIATED AVIATION UNDERWRITERS, INC.) a Delaware corporation.

Group means in relation to a company, that company and any company which is a holding company of that company or a subsidiary of that company or of such holding company;

holding company has the meaning ascribed thereto by Section 736 of the Companies Act 1985;

Incurred Position means, in relation to Converium, such amount as may be determined in accordance with Clause 15 as being the greater of:

(a) Due Premium (in relation to the relevant Reinsured Risks less any (i) due reinsurance premiums ceded in respect of reinsurance taken out in accordance with the Pool Business Plan (as defined in the Pool Members’ Agreement) as amended from time to time or otherwise taken out by the Agents on behalf of the Members of the Pool as a whole; (ii) original commissions in relation to such Reinsured Risks; and (iii) taxes on the premiums relating to such Reinsured Risks, ((a) less each of (i), (ii) and (iii) being the Net Premiums) multiplied by 150 per cent;

(b) 120 per cent. of outstanding claims amounts attributable to relevant Reinsured Risks (including reserves for claims incurred but not reported maintained by National Indemnity or Munich Re or the relevant member of such person’s Group (as the case may be) in respect of relevant Reinsured Risks) written in the name of National Indemnity or Munich Re or the relevant member of such person’s Group less amounts recoverable in respect of reinsurance taken out in accordance with the Pool Business Plan (as defined in the Pool Members’ Agreement) as amended from time to time or otherwise taken out by the Agents on behalf of the Members of the Pool as a whole ; or

(c) $12,900,000.00 plus the Net Premiums in relation to the relevant Reinsured Risks;

provided that:

(i) if in relation to Converium, it has its financial strength rating upgraded to A- or above by S&P or if such rating is not available, above such comparable rating as may be reasonably agreed between the parties the references to “150” and “120” above shall be read as “100” save that nothing in this proviso shall be construed to reduce the Incurred Position below the minimum percentage which is required to allow Munich Re, National Indemnity or the relevant member of its Group to

Page 4

receive credit for the Reinsurance to which the security relates under the laws of the jurisdiction in which such person is domiciled; and

(ii)

proviso (i) above shall only apply during such periods as Standard & Poor’s financial strength rating of Converium is A- or above (or if such rating is not available, such comparable rating as may be reasonably agreed between Converium, Munich Re and National Indemnity). Converium shall make such additional deposits to and or increase any relevant LOC(s) in the MR Fund, as appropriate, and the NICO Fund in the event that Standard & Poor’s financial strength rating of Converium falls below A- subsequent to termination of this Agreement under Clause 10.1 so as to comply with the requirements of Clause 13 or Clause 14 (as appropriate) without regard to proviso (i) above;

The Incurred Position shall be calculated by the Agent within 20 business days of the end of each quarter, one quarter in arrears or upon written request by any of the parties hereto, within 25 business days of the receipt of such written request.

Letter of Credit (“LOC”) means a clean, unconditional and irrevocable Letter of Credit issued on behalf of Converium by a bank with a credit rating by Standard and Poors of AA or above (or if such rating is not available, such other comparable rating as may be reasonably agreed between the person in whose favour such Letter of Credit is written and Converium) for the benefit of National Indemnity or Munich Re (or the applicable member of such person’s Group) (as the case may be) in an amount to be determined from time to time in accordance with Clause 13 or Clause 14 (as appropriate) provided that the bank issuing any Letter of Credit must be one that would permit (a) National Indemnity or the relevant member of its Group to receive credit for the Reinsurance to which that Letter of Credit relates under the laws of the jurisdiction in which such person is domiciled; or (b) Munich Re or the relevant member of its Group to receive credit for the Reinsurance to which that Letter of Credit relates under the laws of Germany;

Letter of Credit Notice means a notice issued by National Indemnity or Munich Re (as the case may be) from time to time requiring Converium to either: (a) arrange or cause to be arranged the issue and/or delivery of a Letter of Credit and/or to increase the amount of any such Letter of Credit; or (b) deposit additional funds in the MR Fund or the NICO Fund;

Net Premiums has the meaning given to it in the definition of Incurred Position;

Overriding Commission means the overriding commission payable in accordance with Clause 6, the amount of which shall be calculated in accordance with Schedule 1;

Period means the period beginning at 12:01 am BST on 1 July 2007 and ending at 12.01 a.m. BST on 1 January 2008;

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Pool Members’ Agreement means the Agreement between GAI, Global and various insurance companies and reinsurance companies including National Indemnity, Munich Re and Converium dated 27 November 2002 for the formation of an aviation and aerospace underwriting pool under the management of Global and GAI;

Premium shall have the meaning given to it in Clause 5.1;

profit shall mean, subject to the provisions of Schedule 4 or Schedule 5, for the purposes of Clauses 13.5, 13.12 to 13.14, 14.5 and 14.12 to 14.14:

(a)	the Due Premiums in respect of the relevant Reinsured Risks;
	LESS
(b)	paid claims in respect of the relevant Reinsured Risks as at 31 December 2010;
	LESS
(c)	outstanding claims which have been notified to Global or any of its subsidiaries in relation to relevant Reinsured Risks as at 31 December 2010;
	LESS
(d)	the reserves held for incurred but not reported claims in respect of relevant Reinsured Risks as at 31 December 2010 by Munich Re or National Indemnity or a relevant number of such person’s group, calculated by Munich Re or National Indemnity (or such person’s respective appointee) (as appropriate) in accordance with actuarial best practice and guidance produced by relevant actuarial bodies in the relevant country (and subject to the dispute resolution mechanism in Clause 6),

in the case of (a) to (c) as produced by Global’s computer systems;

Regulatory Action means:

(a)	any order of a court of competent jurisdiction;
(b)	any order made, decision given or final view expressed by a competent national, supranational, governmental or regulatory authority or agency; or
(c)	any enactment of a legislative body;
(i)	which prohibits or restricts to a material extent the carrying on of the Business or the arrangements contemplated by this Agreement; or
(ii)	in consequence of which any of the parties would incur fines or a liability in damages were this Agreement to be performed in accordance with its terms;

Reinsurance has the meaning given to it in Clause 3;

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Reinsured Risks means that percentage of any and all contracts of insurance, reinsurance or retrocession written by either Agent in the name of Munich Re, National Indemnity (or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3) solely in its capacity as fronting insurer for Converium under, pursuant to or in connection with (or purportedly under, pursuant to or in connection with) this Agreement (as such contracts may be amended from time to time) and irrespective of whether the acceptance of such contract was within the scope of the authority granted to the Agent by Munich Re or National Indemnity or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 under the terms of this Agreement or within the scope of (or in accordance with the terms of) the Pool Members’ Agreement and Reinsured Risk shall be construed accordingly. For the avoidance of doubt, Reinsured Risks shall not include the percentage of each policy issued under the Pool Members’ Agreement representing Munich Re’s or National Indemnity’s interest under the Pool Members’ Agreement;

Relevant Risks means Specified Risks relating to those countries set out in Part I of Schedule 2 in the case of Munich Re and the members of its Group and Part I of Schedule 3 in the case of National Indemnity and the members of its Group, which are insurance or reinsurance risks;

Respective Proportion has the meaning given to it in the Pool Members’ Agreement;

Specified Risks means aerospace, aviation and all related and incidental insurance and reinsurance risks;

subsidiary and wholly-owned subsidiary shall have the meanings given thereto in Section 736 of the Companies Act 1985; and

Taxation means all forms of taxation and statutory, governmental, state, provincial, local governmental or municipal impositions, duties, contribution and levies and all penalties, charges, costs and interest relating thereto.

1.2 References to Recitals, Clauses, Schedules and parties are, except where otherwise provided, to Recitals, Clauses, Schedules or parties to this Agreement. The Schedules form part of this Agreement and have the same force and effect as if set out in the body of this Agreement.

1.3 References to a statutory provision include such provision and any regulations made in pursuance thereof as from time to time modified or re-enacted whether before or after the date of this Agreement so far as such modification or re-enactment applies or is capable of applying to any transactions entered into pursuant to this Agreement or to which this Agreement relates and (so far as the same may be relevant) shall include any statutory provisions or regulations which such provisions or regulations have directly or indirectly replaced.

1.4 The headings and index hereto are inserted for convenience only and shall not affect the construction of this Agreement.

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1.5 References to Converium, Munich Re (and any member of its Group), National Indemnity (and any member of its Group) or to the Agents or any of them mean and include their respective successors in title and permitted assigns.

1.6 Where the context so admits, references to the singular shall be deemed to include the plural and vice versa.

1.7 References to Schedule 2 or Schedule 3 shall be to that Schedule as amended in accordance with the terms of Schedule 2 or Schedule 3 (respectively) at the relevant time.

2. Appointment of Global and GAI to write Fronting Insurance

2.1 Each of Munich Re and National Indemnity (for itself and as agent for each member of its Group set out in Part I of Schedule 2 or Part I of Schedule 3 respectively) hereby severally appoints Global to act as agent for it or such member of its Group as is set out in Part I of Schedule 2 or Part I of Schedule 3 in the relevant jurisdiction indicated in those Schedules (which appointment Global hereby accepts and acknowledges):

(a)	to underwrite and/or bind and/or effect Fronting Insurance Contracts in the name of each of such persons in accordance with the terms of this Agreement; and
(b)	to administer the Fronting Insurance Contracts and any reinsurance of them including (without limitation) providing those services specified in paragraphs 1.2 and 2 of Schedule 3 of the Pool Members’ Agreement in relation to the Fronting Insurance Contracts

2.2 The Agent in performing its services under this Agreement shall act as agent (and describe itself as acting as agent) for Munich Re or the relevant member of its Group when acting pursuant to its appointment by Munich Re or a member of its Group or National Indemnity or the relevant member of its Group when acting pursuant to its appointment by National Indemnity or a member of its Group.

2.3 The appointment by each of Munich Re and National Indemnity and the relevant members of their Groups of Global to act as its agent to underwrite and/or bind and/or effect Fronting Insurance Contracts in the name of Munich Re or National Indemnity or the relevant member of its Group is limited to the negotiation and/or underwriting and/or binding and/or effecting of Fronting Insurance Contracts:

(a)	in those countries set out against such person’s name in Part I of Schedule 2 or Part I of Schedule 3;
(b)	in respect of the percentage set out against such person’s name in Part I of Schedule 2 or Part I of Schedule 3 of Converium’s Respective Proportion of the Relevant Risk;

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(c)	which are bound and/or effected prior to the expiration of the Period;
(d)	which incept in the Period (provided that where a policy relating to a Relevant Risk was written prior to the Period and is cancelled but re-written on the same terms save for the fact that Converium is replaced as an underwriter by Munich Re and National Indemnity for the Period, such policy shall be deemed to incept in the Period);
(e)	the period of which does not, in any case, exceed 12 months plus odd time not exceeding 15 months in all;
(f)	the terms of which, where written on a risks attaching basis, do not allow for any risks to attach where the period of such risks exceeds 12 months plus odd time not exceeding 15 months in all;
(g)	which are in respect of Relevant Risks; and
(h)	which are within the scope of the insurance and reinsurance contracts the Agents are authorised to write under the Pool Members’ Agreement.

2.4 Global shall not have any entitlement whatsoever to remuneration from Munich Re, National Indemnity or the members of their Groups and none of Munich Re, National Indemnity or the members of their Groups shall have any obligation whatsoever to remunerate the Agents in respect of the assumption and performance of the Agents’ obligations under this Agreement.

2.5 Either Agent may (subject to prior notification of Converium, Munich Re and National Indemnity) appoint a wholly-owned subsidiary of Global, which has been appointed pursuant to Clause 10 of the Pool Members’ Agreement, for the purposes of providing all or some of the services under this Agreement in relation to such part of the Business as the board of directors of the relevant Agent may determine and shall give prior notice of such appointment to each of Converium, Munich Re and National Indemnity. Such subsidiary shall, as soon as reasonably practicable, become a party to this Agreement by executing a Deed of Adherence in the form (or substantially in the form) set out in Annexure 1.

2.6 The appointment by Munich Re, National Indemnity or the relevant member of their Group of the relevant Agent as its agent under Clause 2.1 shall be extended to the subsidiary, as if references to Global were references to such subsidiary, in each case in relation only to such services and/or to such parts of the Business as is determined by the board of directors of the relevant Agent.

2.7 Any appointment of a subsidiary under Clause 2.5 shall terminate upon such subsidiary ceasing to be a wholly-owned subsidiary of Global.

2A. Extension of National Indemnity and Munich Re Fronting Lines

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2A.1 Munich Re’s Respective Proportion of Specified Risks written in the jurisdictions set out in Part II if any of Schedule 2 is fronted by the company set out opposite such jurisdiction in Part II if any of Schedule 2 (together the MR Fronters). Munich Re agrees to use its reasonable endeavours to amend its agreements with the MR Fronters so that each MR Fronter also writes fifty per cent (50%) of Converium’s Respective Proportion of Specified Risks in the jurisdiction set out opposite it in Part II if any of Schedule 2 (the MR Converium Risks), which shall then be 100% quota share reinsured by Munich Re.

2A.2 Converium agrees that to the extent MR Converium Risks are written by the MR Fronters on terms previously agreed with Converium in writing and provided that Munich Re and each member of its Group pays to Converium all amounts received by it from the MR Fronters in relation to them fronting Converium Risks it will:

(a) pay overriding commissions previously notified to and agreed by Converium in writing due to the MR Fronters in respect of the Converium Risks;

(b) provide any security previously notified to and agreed by Converium in writing required by the MR Fronters in relation to the Converium Risks (which security shall be provided from the MR Fund pro rata to the applicable exposure); and

(c) reinsure Munich Re’s reinsurance of the MR Converium Risks on an equivalent basis to that set out in Clause 3.

2A.3 Converium shall pay Munich Re commission (the MR Fronted Commission) for reinsuring the Converium Risks on the basis set out in Clauses 2A.4 to 2A.6.

2A.4 The amount of MR Fronted Commission payable by Converium shall be calculated by reference to the total gross premium income written by the Agents in the period in question in respect of each MR Converium Risk after deduction of (i) any original commission or taxes on premiums payable thereunder but before the deduction of amounts, if any, payable to the Agents under the terms of the Pool Members’ Agreement and (ii) any premiums payable by the Agents for reinsurance in relation to the Pool (such amount being referred to as the MR Relevant Net Premium Income).

2A.5 The amount of MR Fronted Commission payable by Converium to Munich Re shall be calculated by multiplying the MR Relevant Net Premium Income attributable to MR Converium Risks covered by policies written by MR Fronters by 1 per cent. (or by such percentage as may be agreed from time to time between Munich Re and Converium in writing).

2A.6 The amount of MR Fronted Commission attributable to any calendar quarter shall be due and payable on (i) the last business day of the immediately following calendar quarter, or (ii) the date on which a cash distribution is paid by the Agents to Converium under the Pool Members’ Agreement with respect to business written in such calendar quarter, whichever is earlier and shall be deducted by Munich Re from the MR Fund on that date.

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2A.7 National Indemnity’s Respective Proportion of Specified Risks written in the jurisdictions set out in Part II if any of Schedule 3 is fronted by the company set out opposite such jurisdiction in Part II if any of Schedule 3 (together the NIC Fronters). National Indemnity agrees to use its reasonable endeavours to amend its agreements with the NIC Fronters so that each NIC Fronter also writes fifty per cent (50%) of Converium’s Respective Proportion of Specified Risks in the jurisdiction set out opposite it in Part II if any of Schedule 3 (the NIC Converium Risks), which shall then be reinsured by National Indemnity.

2A.8 Converium agrees that to the extent the NIC Converium Risks are written by the NIC Fronters on terms previously agreed with Converium in writing and provided that National Indemnity and each member of its Group pays to Converium all amounts received by it from the NIC Fronters in relation to them fronting NIC Converium Risks it will:

(a) pay overriding commissions previously notified to and agreed by Converium in writing due to the NIC Fronters in respect of the NIC Converium Risks;

(b) provide any security previously notified to and agreed by Converium in writing required by the NIC Fronters in relation to the NIC Converium Risks (which security shall be provided from the NIC Fund pro rata to the applicable exposure); and

(c) reinsure National Indemnity’s reinsurance of the NIC Converium Risks on an equivalent basis to that set out in Clause 3.

2A.9 Converium shall pay National Indemnity commission (the NIC Fronted Commission) for reinsuring the NIC Converium Risks on the basis set out in Clauses 2A.10 to 2A.12.

2A.10 The amount of NIC Fronted Commission payable by Converium shall be calculated by reference to the total gross premium income written by the Agents in the period in question in respect of each NIC Converium Risk after deduction of (i) any original commission or taxes on premiums payable thereunder but before the deduction of amounts, if any, payable to the Agents under the terms of the Pool Members’ Agreement and (ii) any premiums payable by the Agents for reinsurance in relation to the Pool (such amount being referred to as the NIC Relevant Net Premium Income).

2A.11 The amount of NIC Fronted Commission payable by Converium to National Indemnity shall be calculated by multiplying the NIC Relevant Net Premium Income attributable to NIC Converium Risks covered by policies written by NIC Fronters by 1 per cent. (or by such percentage as may be agreed from time to time between National Indemnity and Converium in writing).

2A.12 The amount of NIC Fronted Commission attributable to any calendar quarter shall be due and payable on (i) the last business day of the immediately following calendar quarter, or (ii) the date on which a cash distribution is paid by the Agents to Converium under the Pool Members’ Agreement with respect to business written in

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such calendar quarter, whichever is earlier and shall be deducted by National Indemnity from the NICO Fund on that date.

3. Converium’s Reinsurance and Indemnity Obligations

3.1 Immediately upon, and with effect from, the acceptance and/or binding of a Reinsured Risk by the Agents (or either of them), Munich Re or the relevant member of its Group and National Indemnity or the relevant member of its Group shall cede to Converium and Converium agrees to accept by way of reinsurance the quota share percentage set out against such person’s name in Part I of Schedule 2 or Part I of Schedule 3 of Converium’s Respective Proportion of the Relevant Risk (the total amount ceded pursuant to this Clause 3.1 shall be the Reinsurance and the amount ceded in relation to a particular Reinsured Risk by a particular entity shall be the Reinsurance relating to that Reinsured Risk). Such cession and acceptance shall be effected immediately and automatically on, and with effect from, the acceptance and/or binding of the Reinsured Risk in question.

3.2 In consideration of Munich Re and National Indemnity agreeing to enter into this Agreement, Converium agrees to reinsure and indemnify Munich Re, National Indemnity or the relevant member of its Group, without limit in time or amount, in respect of the Ultimate Net Loss of Munich Re, National Indemnity or the relevant member of its Group in respect of, or relating to, each Reinsured Risk in respect of which a Fronting Insurance Contract is written in such person’s name. This Agreement shall only apply to the portion of a risk reflecting Converium’s participation in the Pool Members’ Agreement and in respect of Munich Re, National Indemnity and each member of such person’s Group shall only apply to the portion of such risk actually fronted by such person.

3.3 The term Ultimate Net Loss, as used herein, shall mean all amounts paid or agreed to be paid (including by way of set-off, release or any other form of consideration) by Munich Re, National Indemnity or the relevant member of such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3 (or the Agent(s) on behalf of Munich Re, National Indemnity or the relevant member of such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3) in respect of or in relation to Claims and/or Claims-Related Extra Contractual Obligations relating, in any way, to a Reinsured Risk (or any or all Reinsured Risks) and shall include, without limit, all adjustment expenses arising from the evaluation, assessment, investigation and/or settlement of claims other than the salaries of employees and office expenses of Munich Re or any member of its Group (in the case of Ultimate Net Losses relating to Munich Re or any member of its Group) or National Indemnity or any member of its Group (in the case of Ultimate Net Losses relating to National Indemnity or any member of its Group) provided that Converium shall be entitled to all amounts physically received by way of recoveries/salvages. It is further understood and agreed that:

(a) any of Munich Re, National Indemnity or the relevant member of such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3 shall be entitled to recover any part of its Ultimate Net

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Loss once that has been ascertained without having to wait until its total Ultimate Net Loss has been ascertained; and

(b)

for the avoidance of doubt, notwithstanding any other provision of this Agreement, it is understood and agreed that neither Munich Re, National Indemnity nor the relevant member of such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3 shall be required to actually pay (in the sense of making a physical disbursement of money or monies worth) any amounts in respect of which indemnity is claimed in order to trigger Converium’s indemnity obligations hereunder.

3.4 If the terms of any reinsurance taken out by the Agents for the benefit of Munich Re, National Indemnity or a member of such person’s Group in relation to the Pool (a Pool Reinsurance) cover part or all of any Relevant Risk, the Reinsurance provided for in this Clause 3 shall not extend to such part of that Relevant Risk provided that to the extent the Agents are not able to recover under the Pool Reinsurance the Ultimate Net Loss in respect of such Relevant Risk for any reason other than as a result of a negligent or fraudulent act by Munich Re, National Indemnity or a member of such person’s Group (provided that for the avoidance of doubt a negligent or fraudulent act by the Agent or any person appointed by the Agent to act as agent of Munich Re or National Indemnity shall not be deemed a negligent or fraudulent act by Munich Re, National Indemnity or a member of such person’s Group for the purposes of this clause unless the Agent was instructed to undertake such act by Munich Re or National Indemnity or a member of such person’s Group (other than by instruction approved by Converium), Converium shall reinsure such Ultimate Net Loss pursuant to this Clause 3.

3.5 The Agents, Munich Re and National Indemnity shall (and shall procure that each relevant member of such person’s Group shall) take such reasonable action as is necessary to allow the Agents to make a successful claim under any relevant Pool Reinsurance.

3.6 Converium shall, in all respects, follow the fortunes of Munich Re or National Indemnity or the member of such person’s group in whose name the relevant Fronting Insurance Contract is written in relation to all matters falling within the scope of the Reinsurance and the Reinsurance shall be construed in such a way as to give effect to the parties’ intention that, to the greatest extent permissible by law:

(a)	Munich Re, National Indemnity and the members of their Groups should retain no economic interest in the Reinsured Risks after the application of this Reinsurance; and
(b)	the economic fortunes of Converium in relation to the Reinsured Risks should exactly mirror those of Munich Re or National Indemnity or the member of such person’s Group in whose name the relevant Fronting Insurance Contract is written.

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3.7 Accordingly, and without prejudice to the generality of Clause 3.6, Converium shall be unconditionally bound to follow all settlements, compromises, commutations, policy buy-backs or other agreements of any nature whatsoever entered into, or agreed, on behalf of Munich Re, National Indemnity or the members of their Groups by the Agents in relation to the Fronting Insurance Contracts including any and all ex gratia payments without regard to the question of whether Munich Re, National Indemnity or the members of their Groups had any liability whatsoever (whether arguable or otherwise) in respect of such settlements, compromises, etc.

3.8 The parties acknowledge and agree that the obligations of Converium to indemnify:

(a)

Munich Re or a member of its Group in whose name the relevant Fronting Insurance Contract is written under this Agreement shall not in any way be affected by any actual or alleged breaches by the Agents or National Indemnity of the terms of this Agreement, the Pool Members’ Agreement or of any duties (whether in contract tort or equity) owed by the Agents or National Indemnity to Converium or Munich Re or the members of their Groups.

(b)

National Indemnity or a member of its Group in whose name the relevant Fronting Insurance Contract is written under this Agreement shall not in any way be affected by any actual or alleged breaches by the Agents or Munich Re of the terms of this Agreement, the Pool Members’ Agreement or of any duties (whether in contract tort or equity) owed by the Agents or Munich Re to Converium or National Indemnity or the members of their Groups.

4. Duties & Waivers

4.1 Converium acknowledges and agrees that this Agreement is being entered into by the parties solely as a Fronting Arrangement for the purposes of the Pool Members’ Agreement in order to facilitate the participation by Converium in the underwriting of risks pursuant to the Pool Members’ Agreement and that Converium would in any event have participated directly in such risks pursuant to the terms of the Pool Members’ Agreement. Accordingly, subject to Clause 4.3, Converium agrees:

(a)	that it has been afforded the opportunity to conduct its own investigations and due diligence in relation to all matters relevant and/or material to this Agreement and the Pool Members’ Agreement (including the Reinsurance and the Reinsured Risks);
(b)	that neither Munich Re, National Indemnity nor the member of such person’s Group in whose name a Fronting Insurance Contract is written nor its agents nor any person acting on its behalf assumes, shall accept, and owe, any duty of care, whether in contract or in tort, nor fiduciary duties to Converium in relation

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	to any matters falling within the scope of this Agreement or the Reinsurance and none of Munich Re, National Indemnity or the member of such person’s Group in whose name a Fronting Insurance Contract is written shall accept, or have, any vicarious liability for any acts or omissions of the Agents in relation thereto;
(c)	to waive any duty of disclosure on the part of Munich Re, National Indemnity or any member of such person’s Group in whose name a relevant Fronting Insurance Contract is written and/or its agents and/or any other person acting on behalf of Munich Re, National Indemnity or the member of such person’s Group in whose name the relevant Fronting Insurance Contract is written in relation to the Reinsurance and/or the subject-matter of this Agreement (including, but not limited to, each and every Reinsured Risk and/or the cession thereof);
(d)	to acknowledge and accept the validity of each Fronting Insurance Contract underwritten by an Agent on behalf of Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 for the benefit of Converium pursuant to (or in purported pursuance of) this Agreement;
(e)	to waive and/or otherwise exclude any right (or remedy) that it might have, whether now or in the future, to seek or otherwise claim damages in respect of, or to avoid, rescind or otherwise challenge the validity of any Fronting Insurance Contract and/or the Reinsurance and/or the cession of, any Reinsured Risk on any grounds including:

(i)	misrepresentation and/or non-disclosure of material facts (whether innocent, or negligent); and/or
(ii)	any breach (or alleged breach) of any duty of utmost good faith by Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 (or any person acting on behalf of Munich Re, National Indemnity or the members of their Groups set out in Schedule 2 or Schedule 3); and

(f) save to the extent otherwise provided for in this Agreement, Converium shall indemnify and keep indemnified Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 in respect of any claim, loss or liability of any kind (including without limitation any liability to the Agents (or either of them) under the Pool Members’ Agreement) in respect of or in connection with the conduct (or purported conduct) of the Business.

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4.2 Unless the contrary is expressly stated, no terms of this Agreement and/or Reinsurance which are expressed to be warranties (or which might be otherwise have been construed as warranties but for this Clause 4.2) shall take effect as warranties within the meaning of the Marine Insurance Act 1906 (which for the purposes of information only provides, in general circumstances, for the discharge of liability should a warranty be breached) but shall, instead, be construed and take effect as innominate terms.

4.3 For the avoidance of doubt, however, nothing in this Clause 4 is intended to affect and/or waive and/or otherwise exclude any rights or remedies which Converium might have, whether now or in the future, arising out of, or relating to, fraud on the part of any of Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 themselves (as opposed to fraud of the Agents, or either of them, on behalf of Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3), provided that the parties agree that no fraud on the part of:

(a)	National Indemnity or a member of its Group shall impact the obligations of Converium to Munich Re or a member of its Group; and
(b)	Munich Re or a member of its Group shall impact the obligations of Converium to National Indemnity.

5. Premiums and Pool Payments

5.1 Subject to Clause 6, each of Munich Re and National Indemnity agrees for itself and as agent for each member of its Group set out in Part I of Schedule 2 and Part I of Schedule 3 respectively that Converium shall be entitled to all amounts actually received by the Agents (or either of them) in respect of premiums payable under the terms and conditions of the Reinsured Risks including, for the avoidance of doubt, any and all adjustment and/or reinstatement premiums but after the deduction of any commissions or brokerage or other deductions payable or to be deducted therefrom (Premiums) provided that all amounts payable to Converium pursuant to Clause 7 of the Pool Members’ Agreement less all amounts payable by Converium under Clause 7.5 of the Pool Members’ Agreement (and less all amounts due to National Indemnity or Munich Re, respectively, under Clause 6 as Overriding Commission) shall be paid:

(a) as to fifty per cent directly to National Indemnity (or such member of its Group listed in Part I of Schedule 3 as National Indemnity shall advise Converium and the Agents) in relation to Reinsurance Risks covered by Fronting Insurance Contracts written in the name of National Indemnity or any member of its Group set out in Part I of Schedule 3 to be held as set out in Clause 14.2.

5.2 The Agents shall hold such proportion of the Premiums that is equivalent to any Overriding Commission payable (or potentially payable) by Converium to:

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(a)	Munich Re or any member of its Group and shall pay such amount to Munich Re in accordance with Clause 6 and shall only pay to Converium the remaining amount;
(b)	National Indemnity or any member of its Group and shall pay such amount to National Indemnity (or such member of its Group listed in Part I of Schedule 3 as National Indemnity shall advise Converium and the Agents in writing prior to such payment being made) in accordance with Clause 6 and shall only pay the remaining amount as specified in Clause 5.1(a).

5.3 All amounts payable by Converium to the Agents pursuant to Clause 7 of the Pool Members’ Agreement shall, except in the case where the MR Fund contains sufficient monies, when the amounts shall be paid as to fifty per cent from the MR Fund, be paid by Converium as to fifty per cent directly to the Agents and as to fifty per cent from the NIC Fund, provided that National Indemnity shall not be obligated to make any payment described in Clauses 14.17(b) or (c) which would cause the NIC Fund to be reduced below $ 12,900,000.00 (or, if lower and Clause 14.8 applies, the amount required to be held in the NIC Fund pursuant to Clause 14.8). Any shortfall in amounts payable by Converium to the Agents pursuant to Clause 7 of the Pool Members’ Agreement by reason of either of the foregoing provisos shall be paid by Converium.

6. Overriding Commission

6.1 In consideration of Munich Re and the members of its Group set out in Part I of Schedule 2 agreeing to front for Converium in respect of the Reinsured Risks, Converium agrees to pay commission to Munich Re for itself and as agent for such member of its Group (Munich Re Overriding Commission) in respect of each Reinsured Risk covered by Fronting Insurance Contracts written by such persons.

6.2 In consideration of National Indemnity and the members of its Group set out in Part I of Schedule 3 agreeing to front for Converium in respect of the Reinsured Risks, Converium agrees to pay commission to National Indemnity (or such member of National Indemnity’s Group listed in Part I of Schedule 3 as National Indemnity shall advise Converium and the Agents) for itself and as agent for such members of its Group (NIC Overriding Commission and together with Munich Re Overriding Commission, Overriding Commission) in respect of each Reinsured Risk covered by Fronting Insurance Contracts written by such persons.

6.3 Subject always to Clause 6.4, the relevant Agent shall calculate the amount of Overriding Commission payable in respect of all Premiums written in respect of the relevant Reinsured Risks and shall:

(a) deduct and withhold such amounts from the Premiums payable as set out in Clause 5.1; and

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(b) account for, and pay, such amounts to Munich Re or National Indemnity (or such member of its Group listed in Part I of Schedule 3 as National Indemnity shall advise Converium and the Agents in writing prior to such payment being made) in accordance with Schedule 1.

6.4 Converium’s obligation to pay Overriding Commission to Munich Re or National Indemnity shall be discharged only by the actual receipt by Munich Re or National Indemnity (or such member of National Indemnity’s Group listed in Part I of Schedule 3 as National Indemnity shall advise Converium and the Agents) of the amounts due and not by the deduction or withholding by the Agents (or any of them) of amounts calculated to be due in respect of Overriding Commission provided that such payment obligation shall be discharged to the extent that the Overriding Commission (or part thereof) payable to Munich Re or National Indemnity is set-off against monies due and payable by Munich Re or National Indemnity to the relevant Agent in connection with the Pool. The receipt of Overriding Commission by Munich Re or National Indemnity in respect of Fronting Insurance Contracts written by members of such person’s Group shall discharge Converium’s obligations in respect thereof and Converium shall not be concerned as to the application of such amounts.

7. Claims

7.1 The Agents shall manage and perform the administration of the Reinsured Risks and the negotiation and settlement of Claims thereunder and, in doing so, shall act as agent of Munich Re, National Indemnity (and the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3) and Converium.

7.2 Without prejudice to the generality of Clause 7.1, all decisions made by the Agents in relation to the administration of the Reinsured Risks and the negotiation and/or settlement of Claims thereunder shall be made as agents for Munich Re, National Indemnity (and the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3) and Converium and shall be deemed to be in the knowledge of all of them (to the greatest extent permitted or allowable by law).

7.3 As between Converium and any of Munich Re, National Indemnity and the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3, Munich Re, National Indemnity and the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 shall have no obligation to provide or disburse funds in respect of any obligations arising under or in relation to Reinsured Risks. Such funds shall be provided by Converium and, accordingly, Converium shall ensure that, at all times, sufficient funds are provided to the Agents to enable all obligations under or in relation to each Reinsured Risk to be met as and when they fall due.

7.4 Any and all funds provided by Converium pursuant to Clause 7.3 shall, until physically disbursed to the relevant insured or reinsured under the relevant Reinsured Risk or claimant against such insured, be held by the Agents as agent for Converium and payment of such funds by Converium to the Agents shall not

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constitute a discharge of, or operate to discharge, the obligations of Converium to Munich Re, National Indemnity or any members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 under the terms of the Reinsurance, which obligations shall be discharged only by (and to the extent of):

(a)	physical disbursements of relevant amounts to insureds and/or reinsureds under the Reinsured Risks or claimant against such insured; and/or
(b)	physical disbursement to Munich Re, National Indemnity or any members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 of amounts due under the Reinsurance to Munich Re, National Indemnity or any members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3.

8. Accounts and Information

8.1 Each Agent agrees to provide accounting and other information to Munich Re, National Indemnity or Converium in the form and in the manner that may be reasonably required by Munich Re, National Indemnity or Converium from time to time by giving notice as provided for in Clause 03.

8.2 Each of the Agents shall keep, in such forms as may be agreed from time to time with (a) Munich Re and Converium in relation to Relevant Risks for which Munich Re or a member of its Group provides Fronting Insurance Contracts or (b) National Indemnity and Converium in relation to Relevant Risks for which National Indemnity or a member of its Group provides Fronting Insurance Contracts, books, records, underwriting statistics and accounts of all transactions under this Agreement.

8.3 Munich Re, National Indemnity or Converium may, subject to any confidentiality obligations of either Agent, at all reasonable times and on reasonable notice appoint its officers, employees agents, or auditors to inspect, examine and verify at the offices of either Agent (and to take copies of such books and records) all such accounts, records, books, vouchers, correspondence and papers relating to any of the functions performed by the relevant Agent under this Agreement insofar as they relate to the affairs of Munich Re or the members of its Group set out in Part I of Schedule 2 or National Indemnity or the members of its Group set out in Part I of Schedule 3 or Converium or a member of its Group respectively, including without limitation the application of any money belonging to them paid or received by the relevant Agent and the operation of bank accounts of such persons by the relevant Agent pursuant to this Agreement, and each of the Agents shall whenever reasonably required at any time during normal business hours give such officers, employees, servants or agents access to its offices for such purposes.

8.4 Each of National Indemnity and Munich Re undertakes to agree to supply, to the extent permissible under any applicable law or regulatory requirements, such information as either Agent shall reasonably request from time to time in order to facilitate the management of the Business or the arrangements referred to

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in Clause 2A (but shall not be obliged to provide any information relating to any business of each of National Indemnity and Munich Re or any member of its Group to the extent it does not relate to the Business or the arrangements referred to in Clause 2A).

9. Relationship between the Parties

9.1 Nothing in this Agreement shall create or constitute a partnership between the parties hereto or any of them nor, save as expressly provided herein, constitute any one the agent of another and no party shall do or suffer anything to be done whereby it shall or may be represented that it is the partner or agent of any other party hereto (save as aforesaid) unless such party is appointed partner or agent of another party subject to the consent in writing of every other party to this Agreement.

9.2 The relationship between the parties to this Agreement is as described in this Agreement. Neither that relationship nor the services to be provided by Global nor any other matter shall give rise to any fiduciary or equitable obligations which would hinder Global from acting as contemplated under the terms of this Agreement.

10. Termination

10.1 For the purposes of this Clause 10, a Trigger Event shall be deemed to have occurred in relation to a party if:

(a)	it ceases to be duly authorised (or has any suspension, restriction or other limitation imposed in respect of its authority, licence, approval or permission) in respect of Specified Risks in the jurisdiction in which it is incorporated or has its principal place of business (home jurisdiction);
(b)	it goes into liquidation whether compulsorily or voluntarily (otherwise than a voluntary and solvent liquidation for the purpose of reconstruction or amalgamation pursuant to a scheme previously agreed between the parties);
(c)	it enters into any composition with its creditors generally or suffers any similar action in consequence of default by it in its obligations in respect of any indebtedness for borrowed moneys;
(d)	an administration order shall be made in respect of such party;
(e)	it stops or threatens to stop payment or ceases or threatens to cease to carry on its business (otherwise than in connection with or in pursuance of a winding-up for the purpose of a reconstruction or amalgamation pursuant to a scheme previously agreed between the parties) or is deemed for the purpose of Section 123 of the Insolvency Act 1986 to be unable to pay its debts;

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(f)	it has an administrative receiver or other receiver or other similar official appointed over all (or substantially all) of its undertaking and assets;
(g)	it suffers any action similar to any of the events described in Clauses 10.1(a) to (f) under the laws of any competent jurisdiction;
(h)	it has its financial strength rating downgraded below BBB+ (or in the case of Converium BBB) by Standard & Poor’s Rating Service (S&P) or if such rating is not available, below such comparable rating as may be reasonably agreed between the parties, or it requests or agrees that S&P should cease to rate it;
(i)	Converium is subject to a change of control as defined in Clause 15.2 (f) of the Pool Members’ Agreement.

10.2 In the event that a Trigger Event occurs in relation to any of Munich Re or a member of its Group set out in Part I of Schedule 2 or National Indemnity or a member of its Group set out in Part I of Schedule 3, the Agents or either of them may suspend entirely with immediate effect the appointment by the relevant person (the defaulter) pursuant to Clause 2.1(a), in which case the parties shall seek to agree a basis upon which such suspension might be lifted and the appointment reinstated. From the time of any such suspension until the time such agreement is reached, Clause 10.3 shall apply.

10.3 If this Clause 10.3 applies (by reason of Clause 10.2 or 10.7), neither of the Agents shall (nor shall they have any authority to):

(a)	accept Fronting Insurance Contracts in the name of the defaulter or the person invoking this Clause 10.3 pursuant to Clause 10.7 (as appropriate);
(b)	provide quotations or enter into (or continue) any negotiations relating to the possible acceptance of, Fronting Insurance Contracts in the name of the defaulter or the person invoking this Clause 10.3 pursuant to Clause 10.7 (as appropriate); or
(c)	agree any amendments to the terms of or otherwise agree any endorsements to any Fronting Insurance Contract which would, or would be reasonably likely to, increase materially the gross exposure of the defaulter under the Fronting Insurance Contract in question.

10.4 In the event that any of Munich Re, National Indemnity or a member of such person’s Group set out in Part I of Schedule 2 or Part I of Schedule 3 ceases to be duly authorised (or has any suspension, restriction or other limitation imposed in respect of its authority, licence, approval or permission) in respect of any Relevant Risk in a jurisdiction set out against such person’s name in Part I of Schedule 2 or Part I of Schedule 3 (an Applicable Territory) in circumstances

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where Clause 10.1(a) does not apply to such person (a Non-Authorisation Event), then the appointment by such person (the non-authorised person) pursuant to Clause 2.1(a) in relation to any relevant Applicable Territory shall be suspended with immediate effect, in which case the parties shall seek to agree the basis upon which such suspension might be lifted and the relevant part of the appointment reinstated. From the time of any such suspension until the time such agreement is reached, Clause 10.6 shall apply.

10.5 If Clause 10.4 applies, as an alternative to suspension pursuant to Clause 10.4, Munich Re or National Indemnity shall have the right to appoint an alternate member of its respective Group meeting the requirements of the Pool Members’ Agreement to replace a non-authorized person by notice to Converium and Agents. If Munich Re or National Indemnity appoint an alternative pursuant to this Clause 10.5, Munich Re or National Indemnity shall procure that the alternative member of its Group shall enter into an agreement by which it agrees to be bound by this Agreement as if it were the entity it replaces.

10.6 If this Clause 10.6 applies (by reason of Clause 10.4), neither of the Agents shall (nor shall they have any authority to):

(a)	accept Fronting Insurance Contracts in the name of the non-authorised person in or relating to the Applicable Territory in question;
(b)	provide quotations for, or enter into (or continue) any negotiations relating to the possible acceptance of, Fronting Insurance Contracts in the name of the non-authorised person relating to the Applicable Territory in question; or
(c)	agree any amendments to the terms of or otherwise agree any endorsements to any Fronting Insurance Contract in the name of the non-authorised person previously written (and which relates to the Applicable Territory in question) which would, or would be reasonably likely to, increase materially the gross exposure of the non-authorised person under the Fronting Insurance Contract in question.

10.7 In the event that:

(a)	Converium ceases lawfully to be able to reinsure any Fronting Insurance Contracts;
(b)	Converium’s participation in the arrangements established by the Pool Members’ Agreement is terminated; or
(c)	a Trigger Event occurs in relation to Converium,

then any person making an appointment pursuant to Clause 2.1(a) shall be able to suspend all appointments or, Converium or either Agent shall be entitled, by written notice to the other parties, to suspend all appointments pursuant to Clause 2.1(a) in

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which case the parties shall seek to agree the basis upon which such suspension might be lifted and the relevant part of the appointment reinstated. From the time of any such suspension until the time such agreement is reached, Clause 10.3 shall apply.

10.8 For the avoidance of doubt, the Agents’ administrative obligations under Clause 2.1(b) and their duties of management and administration of the Reinsured Risks and the negotiation and settlement of Claims under Clause 7 shall not cease by reason of the suspension or termination, in whole or in part, of an appointment pursuant to Clause 2.1(a) (except to the extent that continuing to perform the administrative obligations would be inconsistent with such suspension or termination or that the parties so agree).

10.9 Each party shall notify the other parties upon becoming aware of a Trigger Event in relation to any of Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 or Converium at any time.

10.10 Each of Munich Re and National Indemnity shall notify the other parties upon becoming aware that the Non-Authorisation Event under Clause 10.4 applies to it or any member of its Group set out in Part I of Schedule 2 or Part I of Schedule 3 at any time.

10.11 Converium shall notify the other parties upon becoming aware that Clause 10.7(a), (b) or (c) applies to it, at any time.

10.12 Suspension and/or termination of the appointment pursuant to Clause 2.1(a) in whatever manner shall in no way affect or limit any accrued rights which any party to this Agreement may have against the others pursuant to this Agreement or any rights expressly stated to survive termination of this Agreement.

10.13 Except to the extent that any of (a) Munich Re or (b) National Indemnity, and Converium agree otherwise (such agreement to be in writing and notified to the Agents), neither the Reinsurance, nor the obligations of any of Munich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 or Converium, shall terminate if this Agreement or any part of it is terminated or suspended.

10.14 The appointment of the Agents (or either of them) pursuant to Clause 2.1(a) shall terminate automatically at any time when a termination of the appointment of the Agent(s) to provide services under the Pool Members’ Agreement takes effect. Neither Munich Re nor any member of its Group, National Indemnity or any member of its Group nor Converium shall be required to make any payment to the Agents (or either of them) in the event of such a termination save as provided for in the Pool Members’ Agreement.

10.15 The appointment pursuant to Clause 2.1 may not be terminated save as expressly provided for in this Agreement.

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10.16 For the avoidance of doubt, the occurrence of a Trigger Event or a Non-Authorisation Event shall not constitute a breach of this Agreement and, save in the case of fraud, a person to which a Trigger Event applies shall have no liability pursuant to this Agreement, whether in damages or otherwise, arising from or in connection with any such event, apart from any loss suffered by the Agents and/or Converium (excluding indirect, special or consequential loss or loss of profit, goodwill or business opportunity) directly resulting from a failure by a person to which a Trigger Event applies to notify Global that such an event applies to it in accordance with Clause 10.8 or 10.9 (as the case may be) and the Agents continue to write insurance business on behalf of such person under this Agreement.

11. Confidentiality

11.1 Every party hereto shall hold in confidence and shall not divulge to any other party or any third party any Confidential Information nor make any public or press announcement regarding this Agreement or matters connected herewith except as provided in Clause 11.2, 11.3, 11.4 or (as the case may be) Clause 11.5.

11.2 Notwithstanding the provisions of Clause 11.1, any party may disclose Confidential Information:

(a)	in respect of any party to any other party with the prior written consent of the first party;
(b)	with the consent of the other parties (such consent not to be unreasonably withheld or delayed);
(c)	if and to the extent required by law or for the purpose of any judicial proceedings;
(d)	if and to the extent required or permitted by this Agreement;
(e)	if and to the extent required by any securities exchange or regulatory or governmental body or tax authority to which that party or a member of its Group is subject, wherever situated;
(f)	to any member of its Group and to its officers and employees or those of such member, in any such case to the extent that such person needs to know such information in order to manage or monitor its business or in the performance of his or its duties;
(g)	to its professional advisers, auditors and bankers; or
(h)	if and to the extent the information has come into the public domain through no fault of that party.

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11.3 Notwithstanding Clause 11.1:

(a)	each Agent shall, be entitled to provide extracts of this Agreement to such banks, reinsurers and brokers and other managing agents of reinsurers in the ordinary course of business as it reasonably deems necessary for the purpose of carrying out the Business;
(b)	any party may give a copy of this Agreement, or a summary of it, to any insurance company which is a member of any insurance pool constituted by the Pool Members’ Agreement but not a party hereto.

11.4 Each party shall procure that any person to whom Confidential Information is disclosed pursuant to Clauses 11.2(f) or (g) complies with the restrictions set out in this Clause 11 as if such person were a party to this Agreement.

11.5 The provisions of this Clause 11 shall remain in full force and effect notwithstanding the termination of this Agreement and each party shall remain bound by the provisions of this Clause 11 for only a period of five years following cessation by both Agents of the provision of any services to Munich Re or National Indemnity (or any member of such person’s Group) pursuant to this Agreement.

11.6 Neither Global nor GAI shall be obliged to disclose to any other party or, in making any decision or taking any action in relation to the Business or the management thereof, to take into consideration information the disclosure of which by Global or (as the case may be) by GAI to any other party would or might be a breach of duty or confidence to any other person excluding the details of any cover written and any other information which another party requires to be in compliance with applicable law.

12. Undertakings

12.1 Global shall use all reasonable care and skill in the performance of their respective obligations under this Agreement and shall comply with all applicable laws relating thereto.

12.2 Each of Munich Re and National Indemnity severally agrees, warrants and undertakes to each of the Agents and Converium that (i) it and each member of its Group listed in Part I of Schedule 2 or Part I of Schedule 3 (respectively) has (and so long as the appointment of the relevant Agent remains in force under this Agreement shall continue to have) power to employ each of the Agents; (ii) it and each member of its Group listed in Part I of Schedule 2 or Part I of Schedule 3 (respectively) has and will have all necessary consents, powers and authorities to authorise each of the Agents to act as its agent as contemplated by this Agreement; (iii) it has all necessary consents, powers and authorities to enter into this Agreement in accordance with its terms; and (iv) it has been validly appointed by each member of its Group listed in Part I of Schedule 2 or Part I of Schedule 3 (respectively) as agent for the purposes of making the appointment on behalf of

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such person in Clause 2.1 and any other purpose necessary pursuant to this Agreement.

12.3 Converium agrees, warrants and undertakes to the Agent, Munich Re and National Indemnity that it has (and so long as the appointment of the Agent remains in force under the Pool Members’ Agreement shall continue to have) power to employ the Agent and has and will have all necessary consents, powers and authorities: (i) to enter into this Agreement in accordance with its terms (including, without limitation, the Reinsurance); and (ii) to authorise the Agent to act as its agent as contemplated by this Agreement.

12.4 Subject to Munich Re or National Indemnity being fully reimbursed or indemnified (under Clause 3 or otherwise) by Converium for any loss or liability it may incur, Munich Re or National Indemnity hereby undertakes to ratify (and to procure that any relevant member of its Group ratifies) every act performed or thing done by each of the Agents which shall hereafter be performed or done in exercise or purported exercise of the powers conferred or to be conferred upon the Agent by this Agreement provided only that such acts are in accordance with the terms of this Agreement and within the scope of the authority granted to the Agent hereunder.

12.5 Each of Munich Re and National Indemnity represents and warrants to the Agents and National Indemnity that those members of its Group marked * in Part I of Schedule 2 or Part I of Schedule 3 is duly authorised to write all Relevant Risks in the United Kingdom and undertakes to take all reasonable steps to ensure such authorisations are maintained during the duration of this Agreement.

12.6 Each of Munich Re and National Indemnity undertakes to notify the Agent and Converium in writing as soon as reasonably practicable of any changes as to the authorisations (whether in relation to any Applicable Territory or the United Kingdom) which it or the members of its Group listed in Part I of Schedule 2 or Part I of Schedule 3 has, or expects to obtain, from time to time.

13. Munich Re Security

13.1 Converium shall on or before the 2^nd July 2007 (or such later date as Munich Re may specify) pay to Munich Re the sum of $ 12,900,000.00 , or arrange or cause to be arranged the issue and delivery to Munich Re of a LOC in the same sum, to be held on the basis set out in Clause 13.3.

13.2 Any amounts paid or LOC’s issued and delivered pursuant to Clauses , 13.1, 13.4, 13.6 or 13.9 (or because of the definition of Incurred Position) shall be paid to the account of Munich Re notified to Converium in writing by Munich Re from time to time.

13.3 The amounts held pursuant to Clause 13.2 shall be known as the MR Fund. Such amounts shall be held by Munich Re as trustee for Converium provided that Munich Re shall be entitled to make payments from such account and /or LOC(s), as the case may be, in order to pay amounts which are due:

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(a)	or claimed to be due under Reinsured Risks in respect of which Fronting Insurance Contracts have been written by it or members of its Group;
(b)	to it or members of its Group from Converium under the terms of the Reinsurance;
(c)	to it or members of its Group from Converium in respect of Overriding Commission; and/or
(d)	pursuant to Clause 2A.

13.4 At any time prior to 31 December 2010 that the MR Fund (together with the amount of any claims paid by the Agents or Munich Re in relation to the Reinsured Risks) is less than the fifty per cent (50%) of the Incurred Position, within ten Business Days of receiving notice from Munich Re or the Agents (or, if later, the date on which the Incurred Position is determined in accordance with Schedule 6), Converium shall pay to Munich Re such additional amount, or arrange or cause to be arranged the issue and delivery to Munich Re of a LOC in such amount, or increase or cause to be increased any existing LOC in the MR Fund by such additional amount as shall be required for the MR Fund to equal fifty per cent (50%) of the Incurred Position.

13.5 Munich Re shall pay to Converium within ten Business Days of 31 March 2011 (or, if later, the date on which the profit is determined in accordance with Schedule 4), the profit arising on any Fronting Insurance Contracts written by Munich Re or any member of its Group calculated on the basis set out in Clause 13.12, or allow any LOC or LOC’s that has or have been issued and delivered to Munich Re in accordance with Clauses, 13.1, 13.4, 13.6 or 13.9 (or because of the definition of Incurred Position) to be reduced, in the aggregate, by an amount equivalent to such profit. Nothing in this Clause 13.5 shall be construed to require Munich Re to pay any amount or reduce the LOC’s delivered to Munich Re in accordance with and pursuant to Converium’s obligations under this Agreement that would cause the MR Fund to be less than the greater of (a) and (b) below:

(a) the sum of:

(i)	100 per cent. of outstanding claims reserves, including reserves for claims incurred but not reported, maintained by Munich Re or the relevant member of its Group in accordance with applicable law or regulation in respect of relevant Reinsured Risks written in the name of such person (the MR Reserves); plus
(ii)	the greater of:

(A)	$12,900,000.00 ; and
(B)	20% of the MR Reserves; or

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(b) the minimum amount which is required to allow Munich Re or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled.

The greater of (a) or (b) above shall be referred to as the Post Profit Incurred Position.

13.6 At any time after 31 December 2010 but prior to 31 December 2014 that the MR Fund is less than the Post Profit Incurred Position, within ten Business Days of receiving notice from Munich Re or Agents (or, if later, the date on which the Post Profit Incurred Position is determined in accordance with Schedule 6), Converium shall pay to Munich Re such additional amount as shall be required for the MR Fund to equal the Post Profit Incurred Position.

13.7 Munich Re shall pay to Converium, or allow any LOC or LOC’s that has or have been issued and delivered to Munich Re in accordance with clauses, 13.1, 13.4, 13.6 or 13.9 (or because of the definition of Incurred Position) to be reduced, in the aggregate, by an equivalent amount, within ten Business Days of 31 March 2015 (or, if later, within ten Business Days of the date on which the MR Reserves are determined in accordance with Schedule 6 for that date), the amount required to reduce the MR Fund to the greater of:

(a) the MR Reserves; or

(b) the minimum amount which is required to allow Munich Re or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled.

13.8 At any time after 31 March 2015 that the MR Fund is less than the greater of:

(a)	the MR Reserves; or
(b)	the minimum amount required to allow Munich Re or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled,

Munich Re may serve a Letter of Credit Notice which shall state the amount of additional security required to increase the MR Fund to the greater of (a) and (b) above.

13.9 Within ten Business Days of receipt of notice pursuant to Clause 13.8 (or, if later, the date on which the MR Reserves are determined in accordance with Schedule 6), Converium may either:

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(a)	arrange or cause to be arranged the issue and delivery to Munich Re of a Letter of Credit in the amount set out in the Letter of Credit Notice for the benefit of Munich Re; or
(b)	deposit the required additional funds in the MR Fund.

If Converium elects to provide a Letter of Credit in response to the Letter of Credit Notice, Converium shall, if practicable and if agreed by Munich Re, be entitled to provide the necessary security by increasing, or causing to be increased, the amount of any existing Letter of Credit by the amount of the Letter of Credit Notice rather than by issuing and delivering, or causing to be issued and delivered, a new Letter of Credit). For the avoidance of doubt, nothing in this Clause shall be construed as limiting the number of Letter of Credit Notices that may be served from time to time by Munich Re.

13.10 Within ten Business Days of the end of each quarter following 31 December 2014, Munich Re shall pay to Converium the amount, if any, by which the MR Fund exceeds the greater of:

(a)	the MR Reserves; and
(b)	the amount required to allow Munich Re or such member of its Group to receive credit for the Reinsurance of the fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled.

13.11 In applying Clauses 13.8, 13.9 and 13.10, all currencies shall be converted to US$ at the relevant exchange rate used by (or to be used by) the Agents for the purpose of the audited accounts produced for the Pool for the year most recently ended. Clauses 13.4 through 13.10 may be terminated by the agreement Munich Re and Converium without the consent of the other parties.

13.12 Global shall, by no later than 31 March 2011 deliver to Munich Re and Converium its calculation of the profit attributable to the Fronting Insurance Contracts written by Munich Re and the members of its Group calculated on a basis consistent with that used for the purposes of the audited accounts produced for the Pool in the year ended on 31 December 2010 (the MR Statement). The MR Statement shall be accompanied by sufficient information to allow Munich Re and Converium to understand how the profit set out in the MR Statement has been calculated and the basis upon which it has been calculated (including without limitation the calculation of the MR IBNR). The process in Clause 15.1 and Schedule 4 shall apply in relation to the MR Statement.

13.13 In determining profit, Global shall:

(a) calculate each of the items in (a) to (d) inclusive of the definition of profit using each of US$, Canadian $, € and GBP by allocating all relevant premiums, claims and reserves to one only of such currencies in accordance with Global’s current practice, for the

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	avoidance of doubt profit shall be paid out in each of the four currencies; and
(b)	use the incurred but not reported reserves as reported by Munich Re and applicable members of its Group for the Reinsured Risks (the MR IBNR).

13.14 If the calculation of profit in any of the four currencies shows a loss, then Global shall calculate the total profit attributable to the Fronting Insurance Contracts in US$ by converting to US$ at the relevant exchange rate used by the Agents for the purpose of the audited accounts produced for the Pool for the year ended 31 December 2010 (the Exchange Rate) (such amount being the Total $ Distribution).

13.15 If Clause 13.14 applies, the amount of any distribution pursuant to Clause 13.5 (using the Exchange Rate to calculate the amount of the distribution) shall be limited to the Total $ Distribution and the distribution in one or more of the currencies not in deficit shall be reduced to ensure that the Total $ Distribution is not exceeded (the distribution of currencies in which there was a profit shall be reduced by an equal percentage so that the distribution equals the Total $ Distribution at the Exchange Rate).

13.16 Global shall, by no later than 31 March 2015 deliver to Munich Re and Converium its calculation of outstanding reserves on claims reported on Reinsured Risks and Munich Re’s calculation of outstanding reserves on incurred but not reported claims on Reinsured Risks as of the prior 31 December together with the actuarial calculation of those reserves and sufficient information to allow Converium, and Munich Re to understand how the reserves were set. This process shall be repeated within 90 days of the end of each calendar quarter so long as Clause 13.10 remains in effect.

13.17 The amounts required to be held in the MR Fund shall be reduced by:

(a)	fifty per cent of the amount of any Letter of Credit established by Converium pursuant to Clause 15.5(c)(iii) (or, with the consent of Munich Re Clause 15.5(c)(iv)) of the Pool Members’ Agreement which relates to the Reinsured Risks;
(b)	fifty per cent of any amount paid by (or on behalf of) Converium towards the fund held by the Agents on behalf of the Pool in relation claims on business written during the Period; and
(c)	fifty per cent of the amount of any reinsurance premiums paid by (or on behalf of) Converium in relation to reinsurance taken out by the Agents in relation to the business of the Pool written during the Period,

provided that the MR Fund shall not be reduced below $12,900,000.00 (or, if lower and Clause 13.8 applies, the amount required to be held in the MR Fund pursuant to Clause 13.8) as a result of the operation of Clauses 13.17(b) or (c).

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13.18 To the extent that the MR Fund consists of monies Munich Re shall pay to Converium an amount equal to the interest which is deemed to have accrued on that part of the MR Fund in the quarter to 31 March, 30 June, 30 September and 31 December in each year within two Business Days of such date. The amount of such interest shall be calculated on a daily basis. Interest shall accrue on the amounts in the MR Fund in each quarter at a rate equal to the “yield on the one year US Treasury Notes” on the first Business Day after the 31 March, 30 June, 30 September or 31 December ending the previous quarter as shown in the Wall Street Journal for the close of that first Business Day of the calendar quarter. For the purposes of the foregoing sentence, the “one year US Treasury Yield” shall mean the annual yield on the U. S. Treasury Bond or Note maturing on the day nearest the first anniversary of that first Business Day of that calendar quarter. If there are two bonds or notes that are equally near the third anniversary, the annual yield of the instruments will be averaged. No interest shall be paid by Munich Re to Converium in respect of any LOC issued and delivered to Munich Re in accordance with and pursuant to Converium’s obligations under this Agreement.

13.19 References in this Clause 13 to reserves for claims incurred but not reported shall mean the amount of such reserves required to be kept in accordance with actuarial best practice in the relevant jurisdiction and the guidance produced by relevant actuarial bodies. Converium shall be provided with sufficient information at all times to understand how such reserves have been calculated and the basis on which they have been calculated. Converium may challenge the calculation of any such reserve as set out in Schedule 6 and until such dispute is resolved in accordance with Schedule 6, the provision of this Clause 13 for which the reserves were provided shall have no effect.

14. National Indemnity Security

14.1 Converium shall on or before 2nd July 2007 (or such later date as National Indemnity may specify) pay to National Indemnity the sum of $12,900,000.00 to be held on the basis set out in Clause 14.3.

14.2 Any amounts paid pursuant to Clauses 5.1(a), 14.1, 14.4, 14.6 or 14.9 or because of the definition of Incurred Position, shall be paid to the account of National Indemnity notified to Converium in writing by National Indemnity from time to time.

14.3 The amounts held pursuant to Clause 14.2 shall be known as the NICO Fund. Such amounts shall be held by National Indemnity as trustee for Converium provided that National Indemnity shall be entitled to make payments from such account in order to pay amounts which are due:

(a)	or claimed to be due under Reinsured Risks in respect of which Fronting Insurance Contracts have been written by it or members of its Group;
(b)	to it or members of its Group from Converium under the terms of the Reinsurance;

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(c)	to it or members of its Group from Converium in respect of Overriding Commission; and/or
(d)	pursuant to Clause 2A.

14.4 At any time prior to 31 December 2010 that the NICO Fund together with the amount of any claims paid by the Agents or National Indemnity in relation to the Reinsured Risks is less than fifty per cent (50%) of the Incurred Position, within ten Business Days of receiving notice from National Indemnity or the Agents (or, if later, the date on which the Incurred Position is determined in accordance with Schedule 6), Converium shall pay to National Indemnity such additional amount as shall be required for the NICO Fund to equal fifty per cent (50%) of the Incurred Position.

14.5 National Indemnity shall pay to Converium within ten Business Days of 31 March 2011 (or, if later, the date on which the profit is determined in accordance with Schedule 5), the profit arising on any Fronting Insurance Contracts written by National Indemnity or any member of its Group calculated on the basis set out in Clause 14.12. Nothing in this clause shall be construed to require National Indemnity to pay any amount which would cause the NICO Fund to be less than the greater of (a) and (b) below:

(a) the sum of:

(i)	100 per cent. of outstanding claims reserves, including reserves for claims incurred but not reported maintained by National Indemnity or the relevant member of its Group in accordance with applicable laws in respect of relevant Reinsured Risks written in the name of the relevant person (the NIC Reserves); plus
(ii)	the greater of:

(A)	$12,900,000.00 ; and
(B)	20% of the NIC Reserves; and

(b) the minimum amount which is required to allow National Indemnity or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which each person is domiciled.

The greater of (a) or (b) above shall be referred to as the NIC Post Profit Incurred Position.

14.6 At any time after 31 December 2010 but prior to 31 December 2014 that the NICO Fund is less than the NIC Post Profit Incurred Position, within ten Business Days of receiving notice from National Indemnity or Agents (or, if later, the date on which the Post Profit Incurred Position is determined in accordance with Schedule 6), Converium shall pay to National Indemnity such additional

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amount as shall be required for the NICO Fund to equal the Post Profit Incurred Position.

14.7 National Indemnity shall pay to Converium within ten Business Days of 31 March 2015 (or, if later, within ten Business Days of the date on which the NIC Reserves are determined in accordance with Schedule 6 for that date), an amount as shall be required to reduce the NIC Fund to the greater of:

(a)	the NIC Reserves; or
(b)	the minimum amount which is required to allow National Indemnity or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled.

14.8 At any time after 31 March 2015 that the NICO Fund is less than the greater of:

(a) the NIC Reserves; or

(b) the minimum amount required to allow National Indemnity or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled,

National Indemnity may serve a Letter of Credit Notice which shall state the amount of additional security required to increase the NICO Fund to the greater of (a) and (b) above.

14.9 Within ten Business Days of receipt of a notice pursuant to Clause 14.8 (or, if later, the date on which the NIC Reserves are determined in accordance with Schedule 6), Converium may either:

(a)	arrange or cause to be arranged the issue and delivery to National Indemnity of a Letter of Credit in the amount set out in the Letter of Credit Notice for the benefit of National Indemnity; or
(b)	deposit the required additional funds in the NICO Fund.

If Converium elects to provide a Letter of Credit in response to the Letter of Credit Notice, Converium shall, if practicable and if agreed by NICO, be entitled to provide the necessary security by increasing, or causing to be increased, the amount of any existing Letter of Credit by the amount of the Letter of Credit Notice rather than by issuing and delivering, or causing to be issued and delivered, a new Letter of Credit). For the avoidance of doubt, nothing in this Clause shall be construed as limiting the number of Letter of Credit Notices that may be served from time to time by NICO.

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14.10 Within ten Business Days of the end of each quarter following 31 December 2014, National Indemnity shall pay to Converium the amount, if any, by which the NICO Fund exceeds the greater of:

(a)	the NIC Reserves; and
(b)	the amount required to allow National Indemnity or such member of its Group to receive credit for the Reinsurance of the Fronting Insurance Contracts written by it under the laws of the jurisdiction in which such person is domiciled.

14.11 In applying Clauses 14.8, 14.9 and 14.10, all currencies shall be converted to US$ at the relevant exchange rate used by (or to be used by) the Agents for the purpose of the audited accounts produced for the Pool for the year most recently ended. Clauses 14.4 through 14.10 may be terminated by National Indemnity and Converium without the consent of the other parties.

14.12 Global shall, by no later than 31 March 2011 deliver to National Indemnity and Converium its calculation of the profit attributable to the Fronting Insurance Contracts written by National Indemnity and the members of its Group calculated on a basis consistent with that used for the purposes of the audited accounts produced for the Pool in the three years ended on 31 December 2010 (the NIC Statement). The National Indemnity Statement shall be accompanied by sufficient information to allow National Indemnity and Converium to understand how the profit set out in the NIC Statement has been calculated and the basis upon which it has been calculated (including without limitation the calculation of the NIC IBNR). The process in Clause 15.2 and Schedule 5 shall apply in relation to the NIC Statement.

14.13 In determining profit, Global shall:

(a)	calculate each of the items in (a) to (d) inclusive of the definition of profit using each of US$, Canadian $, € and GBP by allocating all relevant premiums, claims and reserves to one only of such currencies in accordance with Global’s current practice, for the avoidance of doubt profit shall be paid out in each of the four currencies; and
(b)	use the incurred but not reported reserves as reported by National Indemnity and applicable members of its Group for the Reinsured Risks (the NIC IBNR).

14.14 If the calculation of profit in any of the four currencies shows a loss, then Global shall calculate the total profit attributable to the Fronting Insurance Contracts in US$ by converting to US$ at the relevant exchange rate used by the Agents for the purpose of the audited accounts produced for the Pool for the year ended 31 December 2010 (the Exchange Rate) (such amount being the Total $ Distribution).

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14.15 If Clause 14.14 applies, the amount of any distribution pursuant to Clause 14.5 (using the Exchange Rate to calculate the amount of the distribution) shall be limited to the Total $ Distribution and the distribution in one or more of the currencies not in deficit shall be reduced to ensure that the Total $ Distribution is not exceeded (the distribution of currencies in which there was a profit shall be reduced by an equal percentage so that the distribution equals the Total $ Distribution at the Exchange Rate).

14.16 Global shall, by no later than 31 March 2015 deliver to National Indemnity and Converium its calculation of outstanding reserves on claims reported on Reinsured Risks and National Indemnity’s calculation of outstanding reserves on incurred but not reported claims on Reinsured Risks as of the prior 31 December together with the actuarial calculation of those reserves and sufficient information to allow Converium, and National Indemnity to understand how the reserves were set. This process shall be repeated within 90 days of the end of each calendar quarter so long as Clause 14.10 remains in effect.

14.17 The amounts required to be held in the NIC Fund shall be reduced by:

(a)	fifty percent of the amount of the Letter of Credit established by Converium pursuant to Clause 15.5(c)(iii) (or, with the consent of NIC Clause 15.5(c)(iv)) of the Pool Members’ Agreement which relates to the Reinsured Risks;
(b)	fifty per cent of any amount paid by (or on behalf of) Converium towards the fund held by the [Agents on behalf of the] Pool in relation claims on business written during the Period; and
(c)	fifty per cent of the amount of any reinsurance premiums paid by (or on behalf of) Converium in relation to reinsurance taken out by the Agents in relation to the business of the Pool written during the Period

provided that the NIC Fund shall not be reduced below $12,900,000.00 (or if lower and Clause 14.8 applies, the amount required to be held in the NIC Fund pursuant to Clause 14.8) as a result of the operation of Clauses 14.17(b) or (c).

14.18 National Indemnity shall pay to Converium an amount equal to the interest which is deemed to have accrued on the NIC Fund in the quarter to 31 March, 30 June, 30 September and 31 December in each year within two Business Days of such date. The amount of such interest shall be calculated on a daily basis. Interest shall accrue on the amounts in the NIC Fund in each quarter at a rate equal to the “yield on the one year US Treasury Notes” on the first Business Day after the 31 March, 30 June, 30 September or 31 December ending the previous quarter as shown in the Wall Street Journal for the close of that first Business Day of the calendar quarter. For the purposes of the foregoing sentence, the “one year US Treasury Yield” shall mean the annual yield on the U.S. Treasury Bond or Note maturing on the day nearest the first anniversary of that first Business Day of that calendar quarter. If there are two bonds or notes that are equally near the third anniversary, the annual yield of the instruments will be averaged.

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14.19 References in this Clause 14 to reserves for claims incurred but not reported shall mean the amount of such reserves required to be kept in accordance with actuarial best practice in the relevant jurisdiction and guidance produced by relevant actuarial bodies in the jurisdiction. Converium shall be provided with sufficient information at all times to understand how such reserves have been calculated and the basis on which they have been calculated. Converium may challenge the calculation of any such reserve as set out in Schedule 6 and until such dispute is resolved in accordance with Schedule 6, the provision of this Clause 14 for which the reserves were provided shall have no effect.

15. Dispute Resolution

15.1 Within thirty (30) days of receipt of Global’s calculations under Clause 13, either Converium or Munich Re may challenge Global’s calculations under Clause 13. In that event, the dispute shall be settled as provided in Schedule 6 or in the case of the calculation of profit, Schedule 4.

15.2 Within thirty (30) days of receipt of Global’s calculations under Clause 14, either Converium or National Indemnity may challenge Agents’ calculations under Clause 14. In that event, the dispute shall be settled as provided in Schedule 6 or in the case of the calculation of profit, Schedule 5.

16. Letters of Credit and Authority

16.1 Notwithstanding any other provision of this Agreement, National Indemnity or Munich Re may, at any time, draw down upon any Letter of Credit provided by or on behalf Converium pursuant to Clause 13 or Clause 14, in order to:

(a)	fund the payment of amounts due or claimed to be due under Reinsured Risks in respect of which Fronting Insurance Contracts have been written by it or members of its Group;
(b)	pay any amounts which are due to it or any member of its Group from Converium under the terms of the Reinsurance; and/or
(c)	pay any amounts which are due to it or any member of its Group from Converium in respect of Overriding Commission.

16.2 Any bank issuing a Letter of Credit relating to this Agreement shall be unconditionally obliged to accede to any request made by or on behalf of Munich Re or National Indemnity (as appropriate) to draw down on such Letter of Credit provided only that such bank is satisfied that such request is made by, or with the proper authority of, Munich Re or National Indemnity (as appropriate) and/or its authorised representatives (who shall not include the Agent or any replacements).

Each of Munich Re and National Indemnity hereby grants the Agent authority to act as their respective agents in taking all necessary action on its behalf to exercise its

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rights under Clauses 13 and 14, including (without limitation) the service of a Letter of Credit Notice, but nothing herein shall be construed as granting the Agent any authority with respect to disputes under Clauses 15.1 or 15.2 or Schedules 4, 5 or 6.

17. Change of Control

In the event that Converium undergoes a change of control, such that 50.1% or more of the voting stock of Converium Holdings AG becomes owned by a single shareholder and the resulting merged entity or group of entities has the same or a worse credit-rating issued to it by Standard and Poor’s than A-, or the then equivalent, at any time after the said change of control, then the parties hereto agree that the date of 31 December 2014 as set out in Articles 13.10 and 14.10 herein shall be changed forthwith to 31 December 2015 and the payments provided for shall be effected in accordance with that amended date.

If the above provision has come into effect, then, if at any time after the said change of control Converium or the merged entity or group of entities receives an improved credit rating from Standard and Poor’s such that it has a credit rating of better than A- or the then equivalent, then the provisions of the above-mentioned Articles 13.10 and 14.10 shall be revert immediately to provide for payments, if any due, to made at the end of each quarter following 31 December 2014.

18. SET-OFF

18.1 National Indemnity may set off any amount due to it from Converium against any amount owed by National Indemnity or any member of its Group to Converium under this Agreement.

18.2 Munich Re may set off any amount due to it from Converium against any amount owed by Munich Re or any member of its Group to Converium under this Agreement.

19. Regulatory Matters

19.1 The parties shall co-operate with each other to ensure that all information necessary or desirable for making (or responding to any requests for further information following) any regulatory notification or filing made in respect of this Agreement, or any agreement, arrangement or concerted practice of which it forms part, is supplied to the party dealing with such notification or filing and that they are properly, accurately and promptly made.

19.2 The parties will each procure that any other registrations, filings and/or submissions required under the laws or regulations of any jurisdiction in respect of the Agreement or any Fronting Insurance Contract are made.

20. Waiver of Obligations

20.1 Waiver by any party of any default by any other party in the performance of any obligation of such other party hereunder shall not affect such party’s rights in respect of any other default nor any subsequent default of the same or of a different

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kind nor shall any delay or omission of any party to exercise any right arising from any default affect or prejudice that party’s rights as to the same or any future default. Waiver by one party of any default by any other party shall not constitute a waiver of such default on the part of or on behalf of any other party.

20.2 Subject to Clause 20.3, no claim shall be made by Converium against any officer, employee, agent or sub-contractor of either Agent in respect of any matter arising in respect of this Agreement, save in the case of criminal actions or omissions, fraud or wilful misconduct.

20.3 Clause 20.2 shall not preclude the Agents from making claims against any of its agents or sub-contractors on behalf of Converium, National Indemnity or Munich Re or the members of their Groups.

21. Amendment and Representations

21.1 Any amendment to any term of this Agreement shall be in writing and signed by the authorised representatives of the parties hereto provided that rights and obligations between Converium and (a) Munich Re or (b) National Indemnity may be amended by written agreement between Converium and such person.

21.2 This Agreement sets out the entire agreement and understanding between the parties in relation to the Business and the arrangements in Clause 2A. It is agreed that no party has entered into this Agreement in reliance upon, or been induced to enter into this Agreement by, any representation, warranty or undertaking of any other party hereto (whether express or implied and whether pursuant to statute or otherwise) which is not set out in this Agreement and to the extent that it may have done so, it hereby waives (on behalf of itself and the members of its Group) all rights, remedies and claims it may have in respect thereto. A party may claim in contract for breach of warranty under this Agreement but shall otherwise have no claim or remedy in respect of misrepresentation (whether negligent or otherwise, and whether made prior to, and/or in, this Agreement) or untrue statement made by any other party provided that this Clause 0 shall not exclude any liability for, or remedy in respect of, any fraud including, without limitation, fraudulent misrepresentation by any party (or (where relevant) any member of its Group).

22. Assignment

No party shall sell, transfer or encumber all or any of its rights or obligations under this Agreement without the prior written consent of all the other parties.

23. Notices and Communications

23.1 Notices under this Agreement shall be sent to a party at its address and for the attention of the individual set out in Clause 0 provided that a party may change its notice details on giving notice to the other parties of the change in accordance with this Clause 03. That notice shall only be effective on the date falling five clear Business Days after the notification has been received or such later date as may be specified in the notice.

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23.2 All notices or other communications required for the purposes of this Agreement shall be in English and shall be given or sent by hand, facsimile, first class post or airmail to the parties and shall be deemed to be received: (i) if given by hand, at the time of delivery; or (ii) if sent by facsimile; at the time when the sender receives from the recipient facsimile machine or from the addressee of the notice confirmation of receipt of the whole of the facsimile; or (iii) if sent by first class post, 24 hours after posting; or (iv) if sent by airmail, 6 clear Business Days after the date of posting.

23.3 Notices under this Agreement shall be sent to the following addresses or facsimile numbers for the attention of the person indicated:

Party	Title of individual/address	Facsimile Number
National Indemnity (for itself or as agent for any member of its Group)	Attention: General Counsel 100 First Stamford Place Stamford, CT, USA 06092	+1-203-363-5221
Munich Re (for itself or as agent for any member of its Group)	Attention: Doris Höpke (Head of Aviation and Space) Königinstraße 107 80802 München Germany	+49-89- 3891-4278
Converium	Attention: Chris Bell/Christian Felderer General Guisan – Quai 26 8022, Zurich Switzerland	+41-1-639-9066
Global	Attention: Company Secretary Fitzwilliam House 10 St. Mary Axe London EC3A 8EQ	+44 20 7369 2840

23.4 Different persons may be authorised to give or receive instructions for different purposes, and such persons may include officers of corporations other than the parties hereto, authorised in that regard by the board of the relevant party. A certified copy of a resolution of the board of Munich Re, National Indemnity or Converium or the relevant member of such person’s Group (or with respect to National Indemnity and members of its Group, the Executive Committee of the board of such entity) may be received and accepted by the Agent as conclusive evidence of the authority of any person to act and may be considered in full force and effect until receipt of written notice to the contrary.

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24. Governing Law and Arbitration

24.1 This Agreement and the relationship between the parties shall be governed by and interpreted in accordance with the law of England and Wales.

24.2 Save as set out in Schedules 4, 5 and 6 each party to this Agreement irrevocably agrees that the courts of England are to have exclusive jurisdiction to settle any dispute (including claims for set-off and counterclaims) which may arise in connection with the validity, effect, interpretation or performance of, or the legal relationships established by, this Agreement or otherwise in connection with this Agreement and for such purposes irrevocably submits to the jurisdiction of such courts.

24.3 All parties agree that a final judgment or order of any court referred to in Clause 0 in connection with this Agreement is conclusive and binding on it and may be entered against it in the courts of any other jurisdiction.

25. Costs

25.1 Each party shall be responsible for the legal and other professional charges and expenses (including Value Added Tax) incurred by it in connection with the preparation and negotiation of this Agreement.

25.2 Any costs and expenses which arise pursuant to the terms of the Pool Members Agreement solely as a result of the operation of this Agreement and which would not have arisen had the Pool Members Agreement been effected on the basis existing prior to this Agreement shall be paid by Converium.

26. Enforceability

26.1 If any provision of this Agreement or any part thereof:

(a)	purports to exclude or restrict or limit any liability and such exclusion or restriction or limitation is prohibited or rendered void or unenforceable by any legislation to which it is subject; or
(b)	is itself prohibited or rendered void or unenforceable by any legislation to which it is subject,

then the exclusion, restriction or limitation or the provision or part thereof in question shall be so prohibited or rendered void or unenforceable to the extent to which it is thus prohibited or rendered void or unenforceable and no further and the validity or enforceability of any other part of this Agreement shall not thereby be affected.

27. Relationship with pool members’ agreement

27.1 This Agreement shall constitute a Fronting Arrangement for the purposes of the Pool Members’ Agreement and save as set out in this Agreement Converium shall effect all payments under Clause 9.1(f) (subject to Clauses 9.1(g) and (h)) of the Pool Members’ Agreement as if it is a Nominating Insurer.

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27.2 Subject to Clause 0, as between Converium and the Agent, the terms of this Agreement are without prejudice to their rights and obligations under the Pool Members’ Agreement.

27.3 Converium acknowledges that the terms of the Indemnity (as defined in Clause 20 of the Pool Members’ Agreement) shall apply (mutatis mutandis) to any claims, losses, expenses and liabilities properly made against or incurred by Indemnified Directors (as defined therein) in the purported execution of and discharge of their duties with respect to the performance of services under this Agreement.

27.4 Converium acknowledges that Clause 4.2 of the Pool Members’ Agreement shall apply to any losses, liabilities or expenses of the Agent (or a wholly-owned subsidiary of Global appointed pursuant to Clause 2.5) under this Agreement.

28. No Rights Under Contracts (Rights of Third Parties) Act 1999

A person who is not a party to this Agreement is not intended to have any right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms, save in respect of Clause 0 conferring the rights and benefits of indemnities on the Indemnified Directors and Clause 0 conferring rights and benefits on employees, agents or sub-contractors of either Agent (each such party being for the purposes of this Clause 28 a Third Party), which shall be enforceable by such persons by way of proceedings in the courts specified in Clause 04 subject to and in accordance with the Contracts (Rights of Third Parties) Act 1999, and Clauses 0 and 20.2 and this Clause 28 shall not be varied by the parties to this Agreement without the consent of each relevant Third Party. Any other provision of this Agreement may be varied or revoked without such consent.

29. Counterparts

This Agreement may be executed in any number of counterparts and by the parties to it on separate counterparts, each of which is an original but all of which together constitute one and the same instrument.

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SCHEDULE 1

AMOUNT AND BASIS OF CALCULATION OF OVERRIDING

COMMISSION

1. Introductory

This Schedule sets out further terms and principles applicable to the calculation and payment of Overriding Commission in accordance with Clause 6.

2. Procedure And Amounts

2.1 The amount of Overriding Commission payable by Converium shall be calculated by reference to the total gross premium income written by the Agent in the period in question in respect of each Reinsured Risk after deduction of any (i) original commission or taxes on premiums payable thereunder but before the deduction of amounts, if any, payable to the Agent under the terms of the Pool Members’ Agreement and (ii) any premiums payable for reinsurance in relation to the Pool by the Agents (such amount being referred to as the Relevant Net Premium Income).

2.2 The amount of Overriding Commission payable by Converium to National Indemnity shall be calculated by multiplying the Relevant Net Premium Income attributable to Reinsured Risks covered by Fronting Insurance Contracts written by National Indemnity or members of its Group by 4 per cent. (or by such percentage as may be agreed from time to time between National Indemnity and Converium).

2.3 The amount of Overriding Commission payable by Converium to Munich Re shall be calculated by multiplying the Relevant Net Premium Income attributable to Reinsured Risks covered by Fronting Insurance Contracts written by Munich Re or members of its Group by 4 per cent. (or by such percentage as may be agreed from time to time between Munich Re and Converium).

2.4 Subject to Clause 6.2, the amount of Overriding Commission attributable to any calendar quarter shall be due and payable on (i) the last business day of the immediately following calendar quarter, or (ii) the date on which a cash distribution is paid by the Agents to Converium under the Pool Members’ Agreement with respect to business written in such calendar quarter, whichever is earlier and shall be deducted by National Indemnity from the NICO Fund or by Munich Re from the MR Fund on that date.

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SCHEDULE 2

MUNICH RE GROUP FRONTING

Part I
Munich Re Group Fronters

			4. Member of
			Munich Re
			Group in whose	5. Percentage
			name Fronting	of
1. Agent			Insurance	Converium’s
Accepting			Contracts should	Respective
Business	2. Jurisdiction	3. Business	be written	Proportion
Global	Worldwide, subject to licensing	Business written in
	regulations	the UK	GRLK	50

GR LK means Great Lakes Reinsurance (UK) plc

The companies, jurisdictions and business listed in columns 2-4 respectively of this may be amended or added to with the written agreement (in such person’s absolute discretion) of Converium, Global and Munich Re provided that the amendment would not result in a Trigger Event occurring, and that all relevant Fronting Insurance Contracts written after the date of the agreement are written in the name of the replacement companies, jurisdictions and business.

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SCHEDULE 3

NATIONAL INDEMNITY GROUP FRONTING

Part I
National Indemnity Group Fronters

			4. Member
			of National
			Indemnity
			Group in
			whose name
			Fronting	5. Percentage
			Insurance	of
1. Agent			Contracts	Converium’s
Accepting			should be	Respective
Business	2. Jurisdiction	3. Business	written	Proportion
Global	Worldwide, subject to licensing restrictions	Business written in the UK	BHII		50

BHII means Berkshire Hathaway International Insurance Ltd.

The companies, jurisdictions and business listed in columns 2-4 respectively of this Schedule may be amended or added to with the written agreement (in such person’s absolute discretion) of Converium, Global and NIC provided that the amendment would not result in a Trigger Event occurring, and that all relevant Fronting Insurance Contracts written after the date of the agreement are written in the name of the replacement companies, jurisdictions and business.

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Part II
Jurisdictions in which National Indemnity is fronted

1. Agent
Accepting			4. Fronter for
Business	2. Jurisdiction	3. Business	National Indemnity
Global	Colombia and Venezuela written in the UK	Business written in the UK	Royal & Sun Alliance subject to licensing restrictions.
Global	US Surplus lines (except where written in BHII – currently California only)	Business written in the UK	The Marine Insurance Company Limited

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SCHEDULE 4

MR STATEMENT DISPUTE RESOLUTION MECHANISM

1. Each of Munich Re or Converium may request from the Agents such additional information as it reasonably requires to confirm whether it agrees with the MR Statement and the Agents or Munich Re shall provide such information, to the extent they have it or are entitled to it, promptly and in any case within 5 Business Days of the request.

2. Munich Re or Converium may notify the Agents and Munich Re or Converium (as appropriate) in writing (such notification being an Objection Notice) within thirty (30) days after receipt that is disputes the MR Statement. Any notice indicating that Munich Re or Converium does not accept the MR Statement shall only be valid for the purposes of this Agreement if it sets out the reasons why the person serving the notice believes the MR Statement does not correctly state the profits attributable to the Fronting Insurance Contracts written by Munich Re and the members of its Group calculated in accordance with Clause 13 and specifies the adjustments which, in such person’s opinion, should be made to the MR Statement. The validity of any such notice shall be a matter for determination by the Independent Firm.

3. If an Objection Notice is served in accordance with 2 above, then Munich Re and Converium shall use all reasonable endeavours (in conjunction with the Agents):

(a)	to meet and discuss the objections in the Objection Notice; and
(b)	to reach agreement upon the adjustments (if any) required to be made to the MR Statement, within a period of five (5) Business Days after receipt by the Agents of the Objection Notice.

4. If both Munich Re and Converium notify the Agents in writing that they are satisfied with the MR Statement (either as originally submitted or after adjustments agreed between Munich Re and Converium pursuant to 3 above) or if neither Munich Re or Converium gives a valid Objection Notice within the thirty (30) day period referred to in 2 above, then the MR Statement (as so adjusted, if applicable) shall be final and binding for the purposes of this agreement.

5. If Converium and Munich Re do not reach agreement within five (5) Business Days of receipt by the Agents of the Objection Notice, then the matters in dispute may be referred (on the application of either the Converium or Munich Re) for determination by such firm of actuaries of international standing as shall be agreed by Converium and Munich Re or, failing agreement, appointed by the President for the time being of the Institute of Actuaries in England and Wales on the application of Converium or Munich Re (the Independent Firm). Converium and Munich Re shall use all reasonable endeavours to agree with the Independent Firm the precise terms of reference to apply to its role as soon as reasonably practicable following a referral to the Independent Firm. Converium and Munich Re shall procure that the Agents

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comply with any reasonable requests of the Independent Firm. The following general terms of reference and procedure shall apply in any event:

(a)	Converium and Munich Re shall each prepare a written statement within five (5) days of the formal appointment of the Independent Firm on the matters in dispute which (together with the relevant supporting documents) shall be submitted to the Independent Firm for determination. The matters in dispute shall be limited to the matters specified in the Objection Notice;
(b)	following delivery of their respective submissions, Converium, and Munich Re shall each have the opportunity to comment once only on the other’s submissions by written comment delivered to the Independent Firm not later than ten (10) days after receipt of the other’s submissions;
(c)	any response to a subsequent request by the Independent Firm for information from Converium, Munich Re or the Agents shall be copied to Converium and Munich Re at the same time and, unless otherwise directed by the Independent Firm, each person receiving a copy of the information may, within ten (10) days after it receives such information, comment once only on that information;
(d)	in giving its determination, the Independent Firm shall state what adjustments (if any) are necessary, solely for the purposes of this agreement, to the MR Statement in respect of the matters in dispute in order to comply with the requirements of this agreement and to determine finally the MR Statement;
(e)	the Independent Firm shall determine (using its own legal advice as appropriate) any question of the legal construction of this agreement but only insofar as it is relevant to the determination of the MR Statement;
(f)	the Independent Firm shall act as an expert (and not as an arbitrator) in making any such determination and any such determination (including any determination of any fact which it has found it necessary to determine for the purposes of its determination) shall, in the absence of manifest error, be final and binding on the parties; and
(g)	without prejudice to any other rights which they may respectively have under this agreement, the parties expressly waive, to the extent permitted by law, any rights of recourse to the courts they may otherwise have to challenge the Independent Firm’s determination;

6. Converium and Munich Re shall each be responsible for their own costs in connection with the preparation, review and agreement or determination of the MR Statement.

7. The fees and expenses of the Independent Firm and the Agents shall be shared equally between Converium and Munich Re or in such other proportions as the Independent Firm shall determine.

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SCHEDULE 5

NIC STATEMENT DISPUTE RESOLUTION MECHANISM

1. Each of National Indemnity or Converium may request from the Agents such additional information as it reasonably requires to confirm whether it agrees with the NIC Statement and the Agents shall provide such information, to the extent they have it or are entitled to it, promptly and in any case within 5 Business Days of the request.

2. National Indemnity or Converium may notify the Agents and National Indemnity or Converium (as appropriate) in writing (such notification being a NICO Objection Notice) within thirty (30) days after receipt that it disputes the NIC Statement. Any notice indicating that National Indemnity or Converium does not accept the NIC Statement shall only be valid for the purposes of this Agreement if it sets out the reasons why the person serving the notice believes the NIC Statement does not correctly state the profits attributable to the Fronting Insurance Contracts written by National Indemnity and the members of its Group calculated in accordance with Clause 14 and specifies the adjustments which, in such person’s opinion, should be made to the NIC Statement. The validity of any such notice shall be a matter for determination by the Independent Firm.

3. If a NICO Objection Notice is served in accordance with 2 above, then National Indemnity and Converium shall use all reasonable endeavours (in conjunction with the Agents):

(a)	to meet and discuss the objections in the Objection Notice; and
(b)	to reach agreement upon the adjustments (if any) required to be made to the NIC Statement, within a period of five (5) Business Days after receipt by the Agents of the Objection Notice.

4. If both National Indemnity and Converium notify the Agents in writing that they are satisfied with the NIC Statement (either as originally submitted or after adjustments agreed between National Indemnity and Converium pursuant to 3 above) or if neither National Indemnity or Converium gives a valid Objection Notice within the thirty (30) day period referred to in 2 above, then the NIC Statement (as so adjusted, if applicable) shall be final and binding for the purposes of this agreement.

5. If Converium and National Indemnity do not reach agreement within five (5) Business Days of receipt by the Agents of the Objection Notice, then the matters in dispute may be referred (on the application of either the Converium or National Indemnity) for determination by such firm of actuaries of international standing as shall be agreed by Converium and National Indemnity or, failing agreement, appointed by the President for the time being of the Institute of Actuaries in England and Wales on the application of Converium or National Indemnity (the Independent Firm). Converium and National Indemnity shall use all reasonable endeavours to agree with the Independent Firm the precise terms of reference to apply to its role as soon as reasonably practicable following a referral to the Independent Firm. Converium and National Indemnity shall procure that the Agents comply with any

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reasonable requests of the Independent Firm. The following general terms of reference and procedure shall apply in any event:

(a) Converium and National Indemnity shall each prepare a written statement within five (5) days of the formal appointment of the Independent Firm on the matters in dispute which (together with the relevant supporting documents) shall be submitted to the Independent Firm for determination. The matters in dispute shall be limited to the matters specified in the Objection Notice;

(b) following delivery of their respective submissions, Converium, and National Indemnity shall each have the opportunity to comment once only on the other’s submissions by written comment delivered to the Independent Firm not later than ten (10) days after receipt of the other’s submissions;

(c) any response to a subsequent request by the Independent Firm for information from Converium, National Indemnity or the Agents shall be copied to Converium and National Indemnity at the same time and, unless otherwise directed by the Independent Firm, each person receiving a copy of the information may, within ten (10) days after it receives such information, comment once only on that information;

(d) in giving its determination, the Independent Firm shall state what adjustments (if any) are necessary, solely for the purposes of this agreement, to the NIC Statement in respect of the matters in dispute in order to comply with the requirements of this agreement and to determine finally the NIC Statement;

(e) the Independent Firm shall determine (using its own legal advice as appropriate) any question of the legal construction of this agreement but only insofar as it is relevant to the determination of the NIC Statement;

(f) the Independent Firm shall act as an expert (and not as an arbitrator) in making any such determination and any such determination (including any determination of any fact which it has found it necessary to determine for the purposes of its determination) shall, in the absence of manifest error, be final and binding on the parties; and

(g) without prejudice to any other rights which they may respectively have under this agreement, the parties expressly waive, to the extent permitted by law, any rights of recourse to the courts they may otherwise have to challenge the Independent Firm’s determination;

6. Converium and National Indemnity shall each be responsible for their own costs in connection with the preparation, review and agreement or determination of the NIC Statement.

7. The fees and expenses of the Independent Firm and the Agents shall be shared equally between Converium and National Indemnity or in such other proportions as the Independent Firm shall determine.

Page 49

SCHEDULE 6

DISPUTE MECHANISM IN RELATION TO RESERVE CALCULATIONS

1. Converium may dispute any calculation carried out by the Agents, Munich Re or National Indemnity or any reserves figure provided by the Agents, Munich Re or National Indemnity and Munich Re or National Indemnity may dispute any calculation carried out by the Agents as set out in this Schedule.

2. The disputing party may request from the person providing the information in dispute or any other party such additional information as it reasonably requires and such person shall provide such information, to the extent they have it or are entitled to it, promptly and in any case within 5 Business Days of the request.

3. The disputing party may notify the person providing the information in dispute in writing (such notification being an Objection Notice) within thirty (30) days after receipt that it disputes the information. Any notice indicating that the disputing party does not accept the information shall only be valid for the purposes of this Agreement if it sets out the reasons why the person serving the notice believes the information has not been properly calculated in accordance with the Agreement and specifies the adjustments which, in such person’s opinion, should be made to the information. Ultimately, the validity of any such notice shall be a matter for determination by the Independent Firm.

4. If an Objection Notice is served in accordance with paragraph 3 above, then the disputing party and the disputer shall use all reasonable endeavours (in conjunction with the Agents):

(a)	to meet and discuss the objections in the Objection Notice; and
(b)	to reach agreement upon the adjustments (if any) required to be made to the information, within a period of five (5) Business Days after receipt of the Objection Notice.

5. If the disputing party and the disputer agree in writing that they are satisfied with the information (either as originally submitted or after adjustments agreed between them above) then the information (as so adjusted, if applicable) shall be final and binding for the purposes of this agreement.

6. The disputing party and the disputer do not reach agreement within five (5) Business Days of receipt of the Objection Notice, then the matters in dispute may be referred (on the application of either of them) for determination by such other firm of actuaries of international standing as shall be agreed by them or, failing agreement, appointed by the President for the time being of the Institute of Actuaries in England and Wales on the application of either of them (the Independent Firm). The disputing party and the disputer shall use all reasonable endeavours to agree with the Independent Firm the precise terms of reference to apply to its role as soon as reasonably practicable following a referral to the Independent Firm. The disputing party and the disputer shall procure that the Agents comply with any reasonable

Page 50

requests of the Independent Firm. The following general terms of reference and procedure shall apply in any event:

(a) the disputing party and the disputer shall each prepare a written statement within five (5) days of the formal appointment of the Independent Firm on the matters in dispute which (together with the relevant supporting documents) shall be submitted to the Independent Firm for determination. The matters in dispute shall be limited to the matters specified in the Objection Notice;

(b) following delivery of their respective submissions, the disputing party and the disputer shall each have the opportunity to comment once only on the other’s submissions by written comment delivered to the Independent Firm not later than ten (10) days after receipt of the other’s submissions;

(c) any response to a subsequent request by the Independent Firm for information from the disputing party and the disputer shall be copied to the other at the same time and, unless otherwise directed by the Independent Firm, each person receiving a copy of the information may, within ten (10) days after it receives such information, comment once only on that information;

(d) in giving its determination, the Independent Firm shall state what adjustments (if any) are necessary, solely for the purposes of this agreement, to the information in respect of the matters in dispute in order to comply with the requirements of this Agreement;

(e) the Independent Firm shall determine (using its own legal advice as appropriate) any question of the legal construction of this Agreement;

(f) the Independent Firm shall act as an expert (and not as an arbitrator) in making any such determination and any such determination (including any determination of any fact which it has found it necessary to determine for the purposes of its determination) shall, in the absence of manifest error, be final and binding on the parties; and

(g) without prejudice to any other rights which they may respectively have under this agreement, the parties expressly waive, to the extent permitted by law, any rights of recourse to the courts they may otherwise have to challenge the Independent Firm’s determination;

7. The disputing party and the disputer shall each be responsible for their own costs in connection with the preparation, review and agreement or determination of the information.

8. The fees and expenses of the Independent Firm and the Agents shall be shared equally between the disputing party and the disputer or in such other proportions as the Independent Firm shall determine.

Page 51

In witness whereof this Agreement has been signed by and on behalf of the parties on the day and year first before written.

SIGNED by	)
	)
for and on behalf of	)
GLOBAL AEROSPACE	)
UNDERWRITING MANAGERS	)
LIMITED	)
SIGNED by	)
	)
for and on behalf of	)
GLOBAL AEROSPACE, INC.	)
SIGNED by	)
	)
and	)
duly authorised representatives of	)
MÜNCHENER RÜCKVERSICHERUNGS-	)
GESELLSCHAFT	)
AKTIENGESELLSCHAFT	)
in MÜNCHEN	)
SIGNED by Forrest N. Krutter, Secretary	)
and	)
for and on behalf of	)
NATIONAL INDEMNITY COMPANY	)

Page 52

SIGNED by Christopher Bell	)
and Benjamin Gentsch	)
for and on behalf of)
CONVERIUM AG

Page 53

ANNEXURE 1

FORM OF DEED OF ADHERENCE FOR USE BY SUBSIDIARIES OF

GLOBAL AND GAI

DEED OF ADHERENCE

THIS DEED is made the [       ] day of [       ], 20[ ] by

(1)	[       ] (No.       ) whose registered office is at [      ] hereinafter called [New Subsidiary];
(2)	GLOBAL AEROSPACE UNDERWRITING MANAGERS LIMITED (registered number 2512067) whose registered office is at Fitzwilliam House, 10 St. Mary Axe, London EC3 8EQ (Global);
(3)	GLOBAL AEROSPACE, INC. a Delaware company (GAI);
(4)	NATIONAL INDEMNITY COMPANY, a company incorporated in Nebraska, United States of America, whose registered office is at 3024 Harney Street, Omaha, Nebraska, USA 68131 (National Indemnity);
(5)	CONVERIUM AG, a company incorporated in Switzerland whose registered office is at General Guisan-Quai 26, 8022 Zürich, Switzerland (Converium); and
(6)	MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AKTIENGESELLSCHAFT IN MÜNCHEN, whose registered office is at Königinstraße, 107, 80802 München, Germany (Munich Re).

Whereas:

(a) [Global/GAI] has duly [incorporated] [acquired] [New Subsidiary] [to be] [as] its wholly owned subsidiary in accordance with the provisions of the reinsurance fronting and administration agreement made between Global, GAI, National Indemnity and Converium and Munich Re dated • November 2004 as it may have been subsequently amended (the Agreement).

(b) Under the provisions of Clause 2.5 of the Agreement, [New Subsidiary] shall become a party to the Agreement by executing a Deed of Adherence in the form (or substantially in the form) set out in Annexure 1 to the Agreement and this Deed is in such form.

Now this deed witnesseth as follows:

1. Words and phrases defined in the Agreement shall, unless the context otherwise requires, have the same meaning in this Deed.

Page 54

2. [New Subsidiary] agrees and undertakes to be bound by and to have the benefit of the Agreement as if it were named therein as a party in its capacity as and being a subsidiary of [Global/GAI].

3. [New Subsidiary], subject to and in accordance with Clause 2.5 of the Agreement, agrees to act as agent for [XXX] on and in accordance with the terms of the Agreement including on and with effect from [INSERT EFFECTIVE DATE].

4. This Deed and the relationship between the parties shall be governed by and interpreted in accordance with English law. For the benefit of the other parties hereto, each party to this Deed irrevocably agrees that the Courts of England are to have exclusive jurisdiction to settle any dispute which may arise in connection with this Deed and for any such purposes irrevocably submits to the jurisdiction of such Courts.

In witness whereof this document has been executed as a Deed the day and year first before written.

Page 55

DATED __            2007

GLOBAL AEROSPACE UNDERWRITING MANAGERS LIMITED

- and -

GLOBAL AEROSPACE, INC.

- and -

MÜNCHENER RÜCKVERSICHERUNGS- 
GESELLSCHAFT AKTIENGESELLSCHAFT
IN MÜNCHEN

- and -

NATIONAL INDEMNITY COMPANY

- and -

CONVERIUM AG

FRONTING AND ADMINISTRATION
AGREEMENT RELATING TO THE GLOBAL
AEROSPACE UNDERWRITERS POOL

CONTENTS

CLAUSE		PAGE
1.	DEFINITIONS		2
2.	APPOINTMENT OF GLOBAL AND GAI TO WRITE FRONTING INSURANCE		8
3.	CONVERIUM’S REINSURANCE AND INDEMNITY OBLIGATIONS		12
4.	DUTIES & WAIVERS		14
5.	PREMIUMS AND POOL PAYMENTS		16
6.	OVERRIDING COMMISSION		17
7.	CLAIMS		18
8.	ACCOUNTS AND INFORMATION		19
9.	RELATIONSHIP BETWEEN THE PARTIES		20
10.	TERMINATION		20
11.	CONFIDENTIALITY		24
12.	UNDERTAKINGS		25
13.	MUNICH RE SECURITY		26
14.	NATIONAL INDEMNITY SECURITY		31
15.	DISPUTE RESOLUTION		36
16.	LETTERS OF CREDIT AND AUTHORITY		36
17.	CHANGE OF CONTROL		37
18.	SET-OFF		37
19.	REGULATORY MATTERS		37
20.	WAIVER OF OBLIGATIONS		37
21.	AMENDMENT AND REPRESENTATIONS		38
22.	ASSIGNMENT		38
23.	NOTICES AND COMMUNICATIONS		38
24.	GOVERNING LAW AND ARBITRATION		40
25.	COSTS		40
26.	ENFORCEABILITY		40
27.	RELATIONSHIP WITH POOL MEMBERS’ AGREEMENT		40
28.	NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999		41
29.	COUNTERPARTS		41

Page I

SCHEDULE 1 AMOUNT AND BASIS OF CALCULATION OF    OVERRIDING COMMISSION	42
SCHEDULE 2 MUNICH RE GROUP FRONTING	43
SCHEDULE 3 NATIONAL INDEMNITY GROUP FRONTING	44
SCHEDULE 4 MR STATEMENT DISPUTE RESOLUTION MECHANISM	46
SCHEDULE 5 NIC STATEMENT DISPUTE RESOLUTION MECHANISM	48
SCHEDULE 6 DISPUTE MECHANISM IN RELATION TO RESERVE    CALCULATIONS	50
ANNEXURE 1 FORM OF DEED OF ADHERENCE FOR USE BY SUBSIDIARIES OF GLOBAL AND GAI	54
	Page II

EX-7.1

Exhibit 7.1

Ratio of earnings to fixed charges

	As of December 31,
(US$ millions, except ratios)	2006		2005		2004		2003		2002
Income from continuing operations before taxes		255.5		50.2		21.0		230.8		48.4
Fixed charges:
Interest expense		16.7		17.2		18.7		17.2		2.0
Interest portion of rental expense		3.5		3.4		3.7		3.1		2.7
Income from continuing operating before taxes plus fixed charges		275.7		70.8		43.4		251.1		53.1
Fixed charges
Interest expense		16.7		17.2		18.7		17.2		2.0
Interest portion of rental expense		3.5		3.4		3.7		3.1		2.7
Total fixed charges		20.2		20.6		22.4		20.3		4.7
Ratio of earnings to fixed charges		13.6		3.4		1.9		12.4		11.3

The ratio of earnings to fixed charges is calculated by taking the sum of income (loss) before taxes plus fixed charges divided by fixed charges. Fixed charges consist of interest expense and the interest portion of rental expense.

EX-8.1

Exhibit 8.1

Subsidiaries of the Registrant

Company Name	Country of Incorporation
Converium AG	Switzerland/Zurich
Converium IP Management AG	Switzerland/Zurich
Converium Rückversicherung (Deutschland) AG	Germany/Cologne
Converium Holding (UK) Ltd	United Kingdom/London
Converium Insurance (UK) Ltd	United Kingdom/London
Converium London Management Ltd	United Kingdom/London
Converium Underwriting Ltd	United Kingdom/London
Converium Finance S.A.	Luxembourg/Luxembourg
Converium Finance (Bermuda) Ltd	Bermuda/Hamilton

EX-12.1

Exhibit 12.1

I, Inga Beale, certify that:

1. I have reviewed this annual report on Form 20-F of Converium Holding AG (the “Company”);

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 Company as of, and for, the periods presented in this report;

4. The Company’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 Company 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 Company, 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 controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurances 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 Company’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 on such evaluations; and

d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the Company’s auditors and the audit committee of the Company’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 Company’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 Company’s internal controls over financial reporting.

Date: June 13, 2007

By: /s/ Inga Beale
Inga Beale
Chief Executive Officer, Converium Holding AG

EX-12.2

Exhibit 12.2

I, Paolo De Martin, certify that:

1. I have reviewed this annual report on Form 20-F of Converium Holding AG (the “Company”);

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 Company as of, and for, the periods presented in this report;

4. The Company’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 Company 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 Company, 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 controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurances 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 Company’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 on such evaluations; and

d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the Company’s auditors and the audit committee of the Company’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 Company’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 Company’s internal controls over financial reporting.

Date: June 13, 2007

By: /s/ Paolo De Martin
Paolo De Martin
Chief Financial Officer, Converium Holding AG

EX-13.0

Exhibit 13.0

Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 20-F of Converium Holding AG (the "Company") for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Inga K. Beale, as Chief Executive Officer of the Company, and Paolo De Martin, as Chief Financial Officer, of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of her/his knowledge:

     (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

BY:	/s/ Inga K. Beale
	Name: Inga K. Beale
	Title: Chief Executive Officer, Converium Holding AG
BY:	/s/ Paolo De Martin
	Name: Paolo De Martin
	Title: Chief Financial Officer, Converium Holding AG

Date: June 13, 2007