10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 __________________________________________________

Form 10-Q

__________________________________________________

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

For the quarterly period ended March 31, 2013

Commission file number 001-33606

__________________________________________________

VALIDUS HOLDINGS, LTD.

(Exact name of registrant as specified in its charter)

__________________________________________________

BERMUDA	98-0501001
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

29 Richmond Road, Pembroke, Bermuda HM 08

(Address of principal executive offices and zip code)

(441) 278-9000

(Registrant’s telephone number, including area code)

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

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

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

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

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

As of May 1, 2013 there were 104,353,625 outstanding Common Shares, $0.175 par value per share, of the registrant.

1

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as at March 31, 2013 (unaudited) and December 31, 2012	2
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2013 and 2012 (unaudited)	3
Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2013 and 2012 (unaudited)	4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012 (unaudited)	5
Notes to Consolidated Financial Statements (unaudited)	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3. Quantitative and Qualitative Disclosures About Market Risk	84
Item 4. Controls and Procedures	85
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	86
Item 1A. Risk Factors	86
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	86
Item 3. Defaults Upon Senior Securities	87
Item 4. Mine Safety Disclosure	87
Item 5. Other Information	87
Item 6. Exhibits	87
Signatures	89

1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Validus Holdings, Ltd.

Consolidated Balance Sheets

As at March 31, 2013 (unaudited) and December 31, 2012

(Expressed in thousands of U.S. dollars, except share and per share information)

	March 31, 2013			December 31, 2012
	(unaudited)
Assets
Fixed maturities, at fair value (amortized cost: 2013—$5,616,693; 2012—$5,008,514)	$	5,676,552		$	5,085,334
Short-term investments, at fair value (amortized cost: 2013—$368,404; 2012—$1,112,929)	367,619			1,114,250
Other investments, at fair value (amortized cost: 2013—$552,233; 2012—$583,068)	532,786			564,448
Cash and cash equivalents	1,369,224			1,219,379
Total investments and cash	7,946,181			7,983,411
Investments in affiliates	128,448			172,329
Premiums receivable	1,195,430			802,159
Deferred acquisition costs	219,504			146,588
Prepaid reinsurance premiums	200,577			99,593
Securities lending collateral	1,914			225
Loss reserves recoverable	429,252			439,967
Paid losses recoverable	15,831			46,435
Income taxes recoverable	2,203			—
Intangible assets	109,529			110,569
Goodwill	20,393			20,393
Accrued investment income	19,708			21,321
Other assets	275,430			177,274
Total assets	$	10,564,400		$	10,020,264
Liabilities
Reserve for losses and loss expenses	$	3,357,691		$	3,517,573
Unearned premiums	1,381,829			894,362
Reinsurance balances payable	187,048			138,550
Securities lending payable	2,380			691
Deferred income taxes	21,800			20,259
Net payable for investments purchased	33,101			38,346
Accounts payable and accrued expenses	111,323			167,577
AlphaCat variable funding notes	290,588			—
Senior notes payable	247,117			247,090
Debentures payable	540,212			540,709
Total liabilities	$	6,173,089		$	5,565,157
Commitments and contingent liabilities
Shareholders’ equity
Common shares, 571,428,571 authorized, par value $0.175 (Issued: 2013—152,963,762; 2012—152,698,191; Outstanding: 2013—106,282,441; 2012—107,921,259)	$	26,769		$	26,722
Treasury shares (2013—46,681,321; 2012—44,776,932)	(8,169		)	(7,836		)
Additional paid-in-capital	2,096,512			2,160,478
Accumulated other comprehensive (loss)	(12,738		)	(2,953		)
Retained earnings	1,801,516			1,844,416
Total shareholders’ equity available to Validus	3,903,890			4,020,827
Noncontrolling interest	487,421			434,280
Total shareholders’ equity	$	4,391,311		$	4,455,107
Total liabilities and shareholders’ equity	$	10,564,400		$	10,020,264

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

2

Validus Holdings, Ltd.

Consolidated Statements of Comprehensive Income

For the Three Months EndedMarch 31, 2013 and 2012 (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information) 

	Three Months Ended
	March 31, 2013			March 31, 2012
	(unaudited)			(unaudited)
Revenues
Gross premiums written	$	1,104,760		$	837,289
Reinsurance premiums ceded	(187,216		)	(107,052		)
Net premiums written	917,544			730,237
Change in unearned premiums	(386,483		)	(279,038		)
Net premiums earned	531,061			451,199
Net investment income	25,649			27,760
Net realized gains on investments	1,721			7,532
Net unrealized (losses) gains on investments	(7,237		)	20,671
Income from investment affiliate	1,477			—
Other income	2,685			8,891
Foreign exchange gains	6,922			3,166
Total revenues	562,278			519,219
Expenses
Losses and loss expenses	144,771			231,989
Policy acquisition costs	93,611			78,132
General and administrative expenses	80,279			66,375
Share compensation expenses	2,318			5,438
Finance expenses	24,446			16,279
Total expenses	345,425			398,213
Net income before taxes and income from operating affiliates	216,853			121,006
Tax benefit (expense)	318			(139		)
Income from operating affiliates	3,523			3,367
Net income	$	220,694		$	124,234
Net loss attributable to noncontrolling interest	2,549			—
Net income available to Validus	$	223,243		$	124,234
Other comprehensive (loss) income
Foreign currency translation adjustments	(9,785		)	1,393
Other comprehensive (loss) income	$	(9,785	)	$	1,393
Comprehensive income available to Validus	$	213,458		$	125,627
Earnings per share
Weighted average number of common shares and common share equivalents outstanding
Basic	107,386,438			99,425,140
Diluted	110,052,999			105,096,090
Basic earnings per share available to common shareholders	$	1.94		$	1.23
Diluted earnings per share available to common shareholders	$	1.90		$	1.18
Cash dividends declared per share	$	2.30		$	0.25

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

3

Validus Holdings, Ltd.

Consolidated Statements of Shareholders’ Equity

For the Three Months EndedMarch 31, 2013 and 2012 (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

	March 31, 2013			March 31, 2012
	(unaudited)			(unaudited)
Common shares
Balance - Beginning of period	$	26,722		$	23,538
Common shares issued, net	47			42
Balance - End of period	$	26,769		$	23,580
Treasury shares
Balance - Beginning of period	$	(7,836	)	$	(6,131	)
Repurchase of common shares	(333		)	(65		)
Balance - End of period	$	(8,169	)	$	(6,196	)
Additional paid-in capital
Balance - Beginning of period	$	2,160,478		$	1,893,890
Common shares issued (redeemed), net	3,074			(1,309		)
Repurchase of common shares	(69,358		)	(11,243		)
Share compensation expenses	2,318			5,438
Balance - End of period	$	2,096,512		$	1,886,776
Accumulated other comprehensive (loss)
Balance - Beginning of period	$	(2,953	)	$	(6,601	)
Other comprehensive (loss) income	(9,785		)	1,393
Balance - End of period	$	(12,738	)	$	(5,208	)
Retained earnings
Balance - Beginning of period	$	1,844,416		$	1,543,729
Dividends	(266,143		)	(27,404		)
Net income	220,694			124,234
Net loss attributable to noncontrolling interest	2,549			—
Balance - End of period	$	1,801,516		$	1,640,559
Total shareholders’ equity available to Validus	$	3,903,890		$	3,539,511
Noncontrolling interest	$	487,421		$	—
Total shareholders’ equity	$	4,391,311		$	3,539,511

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

4

Validus Holdings, Ltd.

Consolidated Statements of Cash Flows

For the Three Months EndedMarch 31, 2013 and 2012 (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

	March 31, 2013			March 31, 2012
	(unaudited)			(unaudited)
Cash flows provided by (used in) operating activities
Net income	$	220,694		$	124,234
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Share compensation expenses	2,318			5,438
Amortization of discount on senior notes	27			27
(Income) from investment affiliate	(1,477		)	—
Net realized (gains) on investments	(1,721		)	(7,532		)
Net unrealized losses (gains) on investments	7,237			(20,671		)
Amortization of intangible assets	1,040			1,040
(Income) from operating affiliates	(3,523		)	(3,367		)
Foreign exchange losses (gains) included in net income	18,906			(13,070		)
Amortization of premium on fixed maturities	5,059			7,517
Change in:
Premiums receivable	(400,153		)	(246,039		)
Deferred acquisition costs	(72,916		)	(49,217		)
Prepaid reinsurance premiums	(100,984		)	(34,026		)
Loss reserves recoverable	6,447			22,916
Paid losses recoverable	30,438			42,903
Income taxes recoverable	(2,132		)	(1,004		)
Accrued investment income	1,532			1,565
Other assets	8,020			(10,880		)
Reserve for losses and loss expenses	(138,633		)	8,702
Unearned premiums	487,467			313,064
Reinsurance balances payable	51,300			31,701
Deferred income taxes	1,250			1,029
Accounts payable and accrued expenses	(59,513		)	(9,425		)
Net cash provided by operating activities	60,683			164,905
Cash flows provided by (used in) investing activities
Proceeds on sales of investments	1,410,509			939,646
Proceeds on maturities of investments	125,841			108,360
Purchases of fixed maturities	(2,140,447		)	(1,080,442		)
Sales (purchases) of short-term investments, net	744,518			(23,943		)
Sales (purchases) of other investments	31,121			(947		)
(Increase) decrease in securities lending collateral	(1,689		)	7,354
Redemption from investment in operating affiliates	50,222			—
Purchase of investment in investment affiliate	(1,341		)	—
Net cash provided by (used in) investing activities	218,734			(49,972		)
Cash flows provided by (used in) financing activities
Net proceeds on issuance of AlphaCat variable funding notes	175,637			—
Issuance (redemption) of common shares, net	3,121			(1,267		)
Purchases of common shares under share repurchase program	(69,691		)	(11,308		)
Dividends paid	(262,232		)	(26,997		)
Increase (decrease) in securities lending payable	1,689			(7,354		)
Third party investment in noncontrolling interest	55,690			—
Net cash (used in) financing activities	(95,786		)	(46,926		)
Effect of foreign currency rate changes on cash and cash equivalents	(33,786		)	16,545
Net increase in cash	149,845			84,552
Cash and cash equivalents - beginning of period	$	1,219,379		$	832,844
Cash and cash equivalents - end of period	$	1,369,224		$	917,396
Taxes paid during the period	$	693		$	3,194
Interest paid during the period	$	17,819		$	15,611

 The accompanying notes are an integral part of these consolidated financial statements (unaudited).

5

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

1. Basis of preparation and consolidation

These unaudited consolidated financial statements include Validus Holdings, Ltd. and its subsidiaries (together, the "Company") and have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 in Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. This Quarterly Report should be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2012, as filed with the U.S. Securities and Exchange Commission (the "SEC").

In the opinion of management, these unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company's financial position and results of operations as at the end of and for the periods presented. Certain amounts in prior periods have been reclassified to conform to current period presentation. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates reflected in the Company's consolidated financial statements include the reserve for losses and loss expenses, premium estimates for business written on a line slip or proportional basis, the valuation of goodwill and intangible assets, reinsurance premiums ceded and reinsurance recoverable balances including the provision for unrecoverable reinsurance recoverable balances and investment valuation. Actual results could differ from those estimates. The results of operations for any interim period are not necessarily indicative of the results for a full year. The term "ASC" used in these notes refers to Accounting Standard Codifications issued by the United States Financial Accounting Standards Board ("FASB").

On November 30, 2012, the Company acquired all of the outstanding common shares of Flagstone Reinsurance Holdings, S.A. ("Flagstone") in exchange for 0.1935 Company common shares and $2.00 cash per Flagstone common share (the "Flagstone Acquisition"). For segmental reporting purposes, the results of Flagstone’s operations since the acquisition date have been included within the Validus Re segment in the consolidated financial statements.

2. Recent accounting pronouncements

(a) Adoption of new accounting standards

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued Accounting Standards Update No. 2011-11, "Disclosures about Offsetting Assets and Liabilities" ("ASU 2011-11"). The objective of ASU 2011-11 is to enhance disclosures by requiring improved information about financial instruments and derivative instruments in relation to netting arrangements.

In January 2013, the FASB issued Accounting Standards Update No. 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU 2013-01”). The objective of ASU 2013-01 is to address implementation issues about the scope of ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. The amendments clarify that the scope of ASU 2011-11 applies to derivatives, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either or subject to an enforceable master netting arrangement or similar agreement. Entities with other types of financial assets and financial liabilities subject to a master netting arrangement or similar agreement also are affected because these amendments make them no longer subject to the disclosure requirements in ASU 2011-11. ASU 2011-11 and 2013-01 became effective for fiscal periods beginning on or after January 1, 2013, and as a result, the Company adopted ASU 2011-11 and 2013-01 effective January 1, 2013. The adoption of these new accounting standards impacts disclosures only; therefore they did not have an impact on the Company's consolidated financial statements. Please refer to Note 7: "Derivative instruments used in hedging activities."

6

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income

In February 2013, the FASB issued Accounting Standard Update No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). The objective of this update is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The amendments became effective for reporting periods beginning after December 15, 2012, and as a result, the Company adopted ASU 2013-02 effective January 1, 2013. The adoption of this new accounting standard did not have an impact on the Company's consolidated financial statements.

(b) Recently issued accounting standards not yet adopted

In March 2013, the FASB issued Accounting Standard Update No. 2013-05, “Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (“ASU 2013-05”). The objective of this update is to resolve the diversity in practice about whether Subtopic 810-10, Consolidation-Overall, or Subtopic 830-30, Foreign Currency Matters-Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary within a foreign entity. The amendments in this Update are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact of this guidance; however it is not expected to have a material impact on the Company's consolidated financial statements.

7

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

3. Investments

(a) Trading Securities

The Company's investments in fixed maturities, short-term investments and other investments are classified as trading and carried at fair value, with related net unrealized gains or losses included in earnings.

The amortized cost, gross unrealized gains and (losses) and estimated fair value of investments at March 31, 2013 were as follows:

	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,417,884		$	7,150		$	(65	)	$	1,424,969
Non-U.S. government and government agency	396,948			4,314			(5,061		)	396,201
States, municipalities, political subdivision	36,933			816			(18		)	37,731
Agency residential mortgage-backed securities	372,469			12,311			(284		)	384,496
Non-agency residential mortgage-backed securities	27,010			177			(903		)	26,284
U.S. corporate	1,466,941			17,990			(753		)	1,484,178
Non-U.S. corporate	632,880			9,027			(915		)	640,992
Bank loans	718,427			13,617			(233		)	731,811
Catastrophe bonds	47,006			748			(182		)	47,572
Asset-backed securities	500,195			2,750			(627		)	502,318
Total fixed maturities	5,616,693			68,900			(9,041		)	5,676,552
Total short-term investments	368,404			60			(845		)	367,619
Other investments
Fund of hedge funds	4,192			273			(465		)	4,000
Private equity investments	12,968			258			(301		)	12,925
Hedge funds (a)	528,874			45,037			(67,143		)	506,768
Mutual funds	6,199			2,894			—			9,093
Total other investments	552,233			48,462			(67,909		)	532,786
Total	$	6,537,330		$	117,422		$	(77,795	)	$	6,576,957
Noncontrolling interest (a)	$	(450,000	)	$	(38,441	)	$	60,354		$	(428,087	)
Total investments excluding noncontrolling interest	$	6,087,330		$	78,981		$	(17,441	)	$	6,148,870

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

8

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The amortized cost, gross unrealized gains and (losses) and estimated fair value of investments at December 31, 2012 were as follows:

	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,091,357		$	7,957		$	(84	)	$	1,099,230
Non-U.S. government and government agency	295,602			6,904			(227		)	302,279
States, municipalities, political subdivision	41,286			800			(23		)	42,063
Agency residential mortgage-backed securities	375,368			13,708			(202		)	388,874
Non-agency residential mortgage-backed securities	106,536			1,266			(1,346		)	106,456
U.S. corporate	1,189,173			21,681			(681		)	1,210,173
Non-U.S. corporate	582,115			11,373			(223		)	593,265
Bank loans	663,217			10,593			(427		)	673,383
Catastrophe bonds	56,757			481			(291		)	56,947
Asset-backed securities	607,103			5,767			(206		)	612,664
Total fixed maturities	5,008,514			80,530			(3,710		)	5,085,334
Total short-term investments	1,112,929			1,349			(28		)	1,114,250
Other investments
Fund of hedge funds	4,677			299			(219		)	4,757
Private equity investments	12,857			94			—			12,951
Hedge funds (a)	559,335			21,814			(42,623		)	538,526
Mutual funds	6,199			2,015			—			8,214
Total other investments	583,068			24,222			(42,842		)	564,448
Total	$	6,704,511		$	106,101		$	(46,580	)	$	6,764,032
Noncontrolling interest (a)	(450,000		)	(19,427		)	36,690			(432,737		)
Total investments excluding noncontrolling interest	$	6,254,511		$	86,674		$	(9,890	)	$	6,331,295

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

9

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following table sets forth certain information regarding the investment ratings of the Company’s fixed maturities portfolio as at March 31, 2013 and December 31, 2012. Investment ratings are the lower of Moody’s or Standard & Poor’s rating for each investment security, presented in Standard & Poor’s equivalent rating. For investments where Moody’s and Standard & Poor’s ratings are not available, Fitch ratings are used and presented in Standard & Poor’s equivalent rating.

	March 31, 2013				December 31, 2012
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
AAA	$	820,687	14.5	%	$	1,062,794	20.9	%
AA	2,338,976		41.2	%	1,862,322		36.6	%
A	1,285,519		22.6	%	1,049,969		20.6	%
BBB	447,761		7.9	%	374,447		7.4	%
Investment grade	4,892,943		86.2	%	4,349,532		85.5	%
BB	355,124		6.3	%	373,907		7.4	%
B	397,877		7.0	%	330,416		6.5	%
CCC	4,374		0.1	%	4,483		0.1	%
CC	3,261		—	%	3,259		0.1	%
D/NR	22,973		0.4	%	23,737		0.4	%
Non-Investment grade	783,609		13.8	%	735,802		14.5	%
Total Fixed Maturities	$	5,676,552	100.0	%	$	5,085,334	100.0	%

The amortized cost and estimated fair value amounts for fixed maturity securities held at March 31, 2013 and December 31, 2012 are shown below by contractual maturity. Actual maturity may differ from contractual maturity because certain borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

	March 31, 2013				December 31, 2012
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	719,492	$	725,393	$	526,529	$	530,499
Due after one year through five years	3,626,561		3,661,494		2,971,118		3,018,544
Due after five years through ten years	367,885		373,504		418,377		424,304
Due after ten years	3,081		3,063		3,483		3,993
	4,717,019		4,763,454		3,919,507		3,977,340
Asset-backed and mortgage-backed securities	899,674		913,098		1,089,007		1,107,994
Total	$	5,616,693	$	5,676,552	$	5,008,514	$	5,085,334

10

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

(b)  Net investment income

Net investment income was derived from the following sources: 

	Three Months Ended
	March 31, 2013			March 31, 2012
Fixed maturities and short-term investments	$	27,531		$	27,276
Cash and cash equivalents	533			2,317
Securities lending income	—			5
Total gross investment income	28,064			29,598
Investment expenses	(2,415		)	(1,838		)
Net investment income	$	25,649		$	27,760

(c) Net realized gains (losses) and change in net unrealized gains (losses)

The following represents an analysis of net realized gains and the change in net unrealized (losses) gains on investments:

	Three Months Ended
	March 31, 2013			March 31, 2012
Fixed maturities, short-term and other investments and cash equivalents
Gross realized gains	$	10,720		$	10,008
Gross realized (losses)	(8,999		)	(2,476		)
Net realized gains on investments	1,721			7,532
Net unrealized gains on securities lending	—			37
Change in net unrealized (losses) gains on investments	(7,237		)	20,634
Net change in unrealized (losses) gains on investments	$	(7,237	)	$	20,671
Total net realized gains and change in net unrealized (losses) gains on investments	$	(5,516	)	$	28,203
Noncontrolling interest (a)	4,651			—
Total net realized gains and change in net unrealized (losses) gains on investments excluding noncontrolling interest	$	(865	)	$	28,203

(a) Includes change in net unrealized (losses) on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

11

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

(d) Pledged investments

The following tables outline investments pledged as collateral under the Company's credit facilities. For further details of the credit facilities, please refer to Note 12: “Debt and financing arrangements.”

	March 31, 2013
Description	Commitment		Issued and Outstanding		Investments pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		380,087		524,195
$500,000 secured bi-lateral letter of credit facility	500,000		89,511		126,146
Talbot FAL Facility	25,000		25,000		36,830
PaCRe senior secured letter of credit facility	10,000		258		—
IPC Bi-lateral facility	80,000		25,882		98,771
$550,000 Flagstone Bi-lateral facility	550,000		296,979		487,127
	$	2,090,000	$	817,717	$	1,273,069

	December 31, 2012
Description	Commitment		Issued and Outstanding		Investments pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		376,570		517,210
$500,000 secured bi-lateral letter of credit facility	500,000		92,402		125,991
Talbot FAL Facility	25,000		25,000		41,372
PaCRe senior secured letter of credit facility	10,000		219		—
IPC Bi-lateral facility	80,000		40,613		98,593
$550,000 Flagstone Bi-lateral facility	550,000		381,019		416,414
	$	2,090,000	$	915,823	$	1,199,580

4. Fair Value Measurements

The Company has adopted all authoritative guidance in effect as of the balance sheet date regarding certain market conditions that allow for fair value measurements that incorporate unobservable inputs where active market transaction based measurements are unavailable.

(a) Classification within the fair value hierarchy

Under U.S. GAAP, a company must determine the appropriate level in the fair value hierarchy for each fair value measurement. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or liability, into three levels. It gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

12

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The three levels of the fair value hierarchy are described below:

• Level 1 - Fair values are measured based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access.

• Level 2 - Fair values are measured based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

• Level 3 - Fair values are measured based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect our own judgments about assumptions where there is little, if any, market activity for that asset or liability that market participants might use.

The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment.

Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This may lead us to change the selection of our valuation technique (from market to cash flow approach) or may cause us to use multiple valuation techniques to estimate the fair value of a financial instrument. This circumstance could cause an instrument to be reclassified between levels within the fair value hierarchy.

There have been no material changes in the Company's valuation techniques during the period represented by these consolidated financial statements. The following methods and assumptions were used in estimating the fair value of each class of financial instrument recorded in the Consolidated Balance Sheets.

(b) Level 1 and Level 2 assets measured at fair value

Fixed maturity investments

Fixed maturity investments included in Level 2 are U.S. government and government agency, non-U.S. government and government agency, states, municipalities, political subdivision, agency residential mortgage-backed, non-agency residential mortgage-backed, U.S. corporate, non-U.S. corporate, bank loans, catastrophe bonds and asset backed securities.

In general, the Company's fixed maturity investment portfolios are priced using pricing services, such as index providers and pricing vendors, as well as broker quotations. The pricing vendors provide pricing for a high volume of liquid securities that are actively traded. For securities that do not trade on an exchange, the pricing services generally utilize market data and other observable inputs in matrix pricing models to determine month end prices. Prices are generally verified using third party data. Securities which are priced by an index provider are generally included in the index.

In general, broker-dealers value securities through their trading desks based on observable inputs. The methodologies include mapping securities based on trade data, bids or offers, observed spreads, and performance on newly issued securities. Broker-dealers also determine valuations by observing secondary trading of similar securities. Prices obtained from broker quotations are considered non-binding, however they are based on observable inputs and by observing secondary trading of similar securities obtained from active, non-distressed markets.

The Company considers these Level 2 inputs as they are corroborated with other market observable inputs. The techniques generally used to determine the fair value of the Company's fixed maturity investments are detailed below by asset class.

13

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

U.S. government and government agency

Level 2 - U.S. government and agency securities consist primarily of debt securities issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. Fixed maturity investments included in U.S. government and government agency securities are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources and integrate other observations from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The fair value of each security is individually computed using analytical models which incorporate option adjusted spreads and other daily interest rate data.

Non-U.S. government and government agency

Level 2 - Non-U.S. government and government agency securities consist of debt securities issued by non-U.S. governments and their agencies along with supranational organizations (also known as sovereign debt securities). Securities held in these sectors are primarily priced by pricing services who employ proprietary discounted cash flow models to value the securities. Key quantitative inputs for these models are daily observed benchmark curves for treasury, swap and high issuance credits. The pricing services then apply a credit spread for each security which is developed by in-depth and real time market analysis. For securities in which trade volume is low, the pricing services utilize data from more frequently traded securities with similar attributes. These models may also be supplemented by daily market and credit research for international markets.

States, municipalities, political subdivision

Level 2 - The Company's states, municipal and political subdivision portfolio contains debt securities issued by U.S. domiciled state and municipal entities. These securities are generally priced by independent pricing services using the techniques described for U.S. government and government agency securities described above.

Agency residential mortgage-backed securities

Level 2 - The Company's agency residential mortgage-backed investments are primarily priced by pricing services using a mortgage pool specific model which utilizes daily inputs from the active to be announced ("TBA") market which is very liquid, as well as the U.S. treasury market. The model also utilizes additional information, such as the weighted average maturity, weighted average coupon and other available pool level data which is provided by the sponsoring agency. Valuations are also corroborated with daily active market quotes.

Non-agency residential mortgage-backed securities

Level 2 - The Company's non-agency mortgage-backed investments include non-agency prime residential mortgage-backed fixed maturity investments. The Company has no fixed maturity investments classified as sub-prime held in its fixed maturity investments portfolio. Securities held in these sectors are primarily priced by pricing services using an option adjusted spread ("OAS") model or other relevant models, which principally utilize inputs including benchmark yields, available trade information or broker quotes, and issuer spreads. The pricing services also review collateral prepayment speeds, loss severity and delinquencies among other collateral performance indicators for the securities valuation, when applicable.

U.S. corporate

Level 2 - Corporate debt securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The Company's corporate fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk. In certain instances, securities are individually evaluated using a spread which is added to the U.S. treasury curve or a security specific swap curve as appropriate.

14

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Non - U.S. corporate

Level 2 - Non - U.S. corporate debt securities consist primarily of investment-grade debt of a wide variety of non-U.S. corporate issuers and industries. The Company's non - U.S. corporate fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk.

Bank loans

Level 2 - The Company's bank loan investments consist primarily of below-investment-grade debt of a wide variety of corporate issuers and industries. The Company's bank loans are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk.

Catastrophe bonds

Level 2 - Catastrophe bonds are recorded at fair value and are based on broker or underwriter bid indications.

Asset-backed securities

Level 2 - Asset backed securities include mostly investment-grade debt securities backed by pools of loans with a variety of underlying collateral, including automobile loan receivables, student loans, credit card receivables, and CLO debt originated by a variety of financial institutions. Securities held in these sectors are primarily priced by pricing services. The pricing services apply dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The pricing services determine the expected cash flows for each security held in this sector using historical prepayment and default projections for the underlying collateral and current market data. In addition, a spread is applied to the relevant benchmark and used to discount the cash flows noted above to determine the fair value of the securities held in this sector.

Short term investments

Level 1 & Level 2 - Short term investments consist primarily of highly liquid securities with maturities less than one year from the date of purchase. The fair value of the Company's portfolio of short term investments are generally determined using amortized cost which approximates fair value. These securities are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their amortized cost approximates fair value. The Company determined that certain of its short-term investments held in highly liquid money market-type funds would be included in Level 1 as their fair values are based on quoted market prices in active markets.

Mutual funds

Level 2 -Mutual funds consist of two investment funds which are invested in various quoted investments. The fair value of units in the mutual funds is based on the net asset value of the fund as reported by the fund manager.

(c) Level 3 assets measured at fair value

Other investments

Level 3 includes financial instruments that are valued using market approach and income approach valuation techniques. These models incorporate both observable and unobservable inputs. The Company's hedge funds, a fund of hedge funds and private equity investments are the only financial instruments in this category as at March 31, 2013. For each respective hedge fund investment, the Company obtains and reviews the valuation methodology used by the fund administrators and investment managers

15

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

to ensure that the hedge fund investments are following fair value principles consistent with U.S. GAAP in determining the net asset value (“NAV”).

Other investments in Level 3 consist of hedge funds, a fund of hedge funds and private equity investments. Within the hedge fund industry, there is a general lack of transparency necessary to facilitate a detailed independent assessment of the values placed on the securities underlying the NAV provided by the fund manager or fund administrator. To address this, on a quarterly basis, we perform a number of monitoring procedures designed to assist us in the assessment of the quality of the information provided by managers and administrators. These procedures include, but are not limited to, regular review and discussion of each fund's performance with its manager and regular evaluation of fund performance against applicable benchmarks.

Hedge funds

The hedge funds were valued at $506,768 at March 31, 2013. The hedge funds consist of an investment in four Paulson & Co. managed funds (the "Paulson hedge funds") and three investment funds assumed from the Flagstone Acquisition (the "Flagstone investment funds"). The Paulson hedge funds' administrator provides monthly reported NAVs with a one-month delay in its valuation. As a result, the funds' administrator's February 28, 2013 NAV was used as a partial basis for fair value measurement in the Company's March 31, 2013 balance sheet. The fund manager provides an estimate of the NAV at March 31, 2013 based on estimated performance. The Company adjusts fair value to the fund manager's estimated NAV that incorporates relevant valuation sources on a timely basis. To determine the reasonableness of the estimated NAV, the Company assesses the variance between the fund manager's estimated NAV and the fund administrator's NAV. Material variances are recorded in the current reporting period while immaterial variances are recorded in the following reporting period. Historically, our valuation estimates have not materially differed from the subsequent NAVs. The Flagstone investment fund administrators provide either monthly or quarterly reported NAVs with a one-month or one-quarter delay in its valuation, respectively. As a result, the February 28, 2013 NAV or the December 31, 2012 NAV was used as a basis for fair value measurement in the Company's March 31, 2013 balance sheet. As these valuation techniques incorporate both observable and significant unobservable inputs, both the Paulson hedge funds and the Flagstone investment funds are classified as Level 3 assets. The Paulson hedge funds noted above are subject to quarterly liquidity.

Private equity investments

Private equity investments consist of an investment in three private equity funds assumed from the Flagstone Acquisition. The private equity investments respective fund administrator provides either monthly or quarterly NAVs with a one-month or one-quarter delay in its valuation, respectively. As a result, the February 28, 2013 NAV or the December 31, 2012 NAV was used as a basis for fair value measurement in the Company's March 31, 2013 balance sheet. As this valuation technique incorporates both observable and significant unobservable inputs, the private equity investments are classified as Level 3 assets.

Fund of hedge funds

The fund of hedge funds includes a side pocket. While a redemption request has been submitted, the timing of receipt of proceeds on the side pocket is unknown. The fund's administrator provides a monthly reported NAV with a one-month delay in its valuation. As a result, the fund administrator's February 28, 2013 NAV was used as a basis for fair value measurement in the Company's March 31, 2013 balance sheet. The fund manager provides an estimate of the fund NAV at March 31, 2013 based on the estimated performance provided from the underlying third-party funds. To determine the reasonableness of the NAV, the Company compares the one-month delayed fund administrator's NAV to the fund manager's estimated NAV that incorporates relevant valuation sources on a timely basis. Material variances are recorded in the current reporting period while immaterial variances are recorded in the following reporting period. As this valuation technique incorporates both observable and significant unobservable inputs, the fund of hedge funds is classified as a Level 3 asset.

16

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

At March 31, 2013, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1		Level 2		Level 3			Total
U.S. government and government agency	$	—	$	1,424,969	$	—		$	1,424,969
Non-U.S. government and government agency	—		396,201		—			396,201
States, municipalities, political subdivision	—		37,731		—			37,731
Agency residential mortgage-backed securities	—		384,496		—			384,496
Non-agency residential mortgage-backed securities	—		26,284		—			26,284
U.S. corporate	—		1,484,178		—			1,484,178
Non-U.S. corporate	—		640,992		—			640,992
Bank loans	—		731,811		—			731,811
Catastrophe bonds	—		47,572		—			47,572
Asset-backed securities	—		502,318		—			502,318
Total fixed maturities	—		5,676,552		—			5,676,552
Short-term investments	332,663		34,956		—			367,619
Other investments
Fund of hedge funds	—		—		4,000			4,000
Private equity investments	—		—		12,925			12,925
Hedge funds (a)	—		—		506,768			506,768
Mutual funds	—		9,093		—			9,093
Total other investments	—		9,093		523,693			532,786
Total	$	332,663	$	5,720,601	$	523,693		$	6,576,957
Noncontrolling interest (a)	—		—		(428,087		)	(428,087		)
Total investments excluding noncontrolling interest	$	332,663	$	5,720,601	$	95,606		$	6,148,870

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

17

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

At December 31, 2012, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1		Level 2		Level 3			Total
U.S. government and government agency	$	—	$	1,099,230	$	—		$	1,099,230
Non-U.S. government and government agency	—		302,279		—			302,279
States, municipalities, political subdivision	—		42,063		—			42,063
Agency residential mortgage-backed securities	—		388,874		—			388,874
Non-agency residential mortgage-backed securities	—		106,456		—			106,456
U.S. corporate	—		1,210,173		—			1,210,173
Non-U.S. corporate	—		593,265		—			593,265
Bank loans	—		673,383		—			673,383
Catastrophe bonds	—		56,947		—			56,947
Asset-backed securities	—		612,664		—			612,664
Total fixed maturities	—		5,085,334		—			5,085,334
Short-term investments	1,063,175		51,075		—			1,114,250
Other investments
Fund of hedge funds	—		—		4,757			4,757
Private equity investments	—		—		12,951			12,951
Hedge funds (a)	—		—		538,526			538,526
Mutual funds	—		8,214		—			8,214
Total other investments	—		8,214		556,234			564,448
Total	$	1,063,175	$	5,144,623	$	556,234		$	6,764,032
Noncontrolling interest (a)					(432,737		)	(432,737		)
Total investments excluding noncontrolling interest	$	1,063,175	$	5,144,623	$	123,497		$	6,331,295

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

At March 31, 2013, Level 3 investments excluding the noncontrolling interest totaled $95,606 (December 31, 2012: $123,497), representing 1.6% (December 31, 2012: 2.0%) of total investments, excluding noncontrolling interest, measured at fair value on a recurring basis.

18

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following tables present a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31, 2013
		Other Investments			Estimated Fair Value
Level 3 investments - Beginning of period		$	556,234		$	556,234
Purchases		459			459
Sales		(31,334		)	(31,334		)
Realized gains		40			40
Unrealized (losses)		(1,706		)	(1,706		)
Level 3 investments - End of period		$	523,693		$	523,693
Noncontrolling interest (a)		(428,087		)	(428,087		)
Level 3 investments excluding noncontrolling interest		$	95,606		$	95,606

	Three Months Ended March 31, 2012
		Other Investments			Estimated Fair Value
Level 3 investments - Beginning of period		$	8,880		$	8,880
Purchases		1,529			1,529
Sales		(620		)	(620		)
Realized gains		28			28
Unrealized (losses)		(1,492		)	(1,492		)
Level 3 investments - End of period		$	8,325		$	8,325

(a) Includes Level 3 investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

There have not been any transfers between Levels 1 and 2 during the three months ended March 31, 2013 or 2012. There have not been any transfers into or out of Level 3 during the three months ended March 31, 2013 or 2012.

5. Investments in affiliates

(a) Operating affiliates

AlphaCat Re 2011, Ltd.

On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011, Ltd. ("AlphaCat Re 2011"), a special purpose reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. At the time of formation, Validus Reinsurance, Ltd. ("Validus Re"), a wholly owned subsidiary of the Company, had a majority voting equity interest in AlphaCat Re 2011 and as a result the financial statements of AlphaCat Re 2011 were included in the consolidated financial statements of the Company.

On December 23, 2011, AlphaCat Re 2011 completed a secondary offering of its common shares to third party investors, along with a partial sale of Validus Re's common shares to one of the third party investors.

As a result of these transactions, Validus Re maintained an equity interest in AlphaCat Re 2011, however its share of AlphaCat Re 2011's outstanding voting rights decreased to 43.7%. As a result of the Company's voting interest falling below 50%, the individual assets and liabilities and corresponding noncontrolling interest of AlphaCat Re 2011 were derecognized from the

19

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

consolidated balance sheet of the Company as at December 31, 2011 and the remaining investment in AlphaCat Re 2011 has been treated as an equity method investment effective December 31, 2011.

AlphaCat Re 2011 is now considered "off-risk" as all reinsurance contracts written by the company have expired. As a result, on January 4, 2013 and January 23, 2013, a partial return of investment was made to the investors of AlphaCat Re 2011. Validus Re's corresponding portion of the return of investment was $46,436.

AlphaCat Re 2012, Ltd.

On May 29, 2012, the Company joined with other investors in capitalizing AlphaCat Re 2012, Ltd. ("AlphaCat Re 2012"), a special purpose reinsurer formed for the purpose of writing collateralized reinsurance with a particular focus on windstorm risks for Florida domiciled insurance companies. The Company holds an equity interest of 37.9% and a voting interest of 49.0% in AlphaCat Re 2012, therefore the investment has been treated as an equity method investment as at March 31, 2013.

On February 22, 2013, a partial return of investment was made to the investors of AlphaCat Re 2012. Validus Re's corresponding portion of the return of investment was $3,786.

AlphaCat 2013, Ltd.

On December 17, 2012, the Company joined with other investors in capitalizing AlphaCat 2013, Ltd. ("AlphaCat 2013"), a special purpose vehicle formed for the purpose of investing in collateralized reinsurance. The Company holds an equity interest of 19.7% and a voting interest of 40.9% in AlphaCat 2013, therefore the investment has been treated as an equity method investment as at March 31, 2013.

The following table presents a reconciliation of the beginning and ending investment in operating affiliates balances for the three months ended March 31, 2013: 

	Three Months Ended March 31, 2013
	Investment in operating affiliate (AlphaCat Re 2011)			Investment in operating affiliate (AlphaCat Re 2012)			Investment in operating affiliate (AlphaCat 2013)		Total
As at December 31, 2012	$	62,792		$	29,319		$	45,000	$	137,111
Return of investment	(46,436		)	(3,786		)	—		(50,222		)
Income from operating affiliates	449			1,825			1,100		3,374
As at March 31, 2013	$	16,805		$	27,358		$	46,100	$	90,263

The following table presents a reconciliation of the beginning and ending investment in operating affiliate balances for the three months ended March 31, 2012: 

	Three Months Ended March 31, 2012
	Investment in operating affiliate (AlphaCat Re 2011)		Total
As at December 31, 2011	$	53,031	$	53,031
Income from operating affiliates	3,367		3,367
As at March 31, 2012	$	56,398	$	56,398

20

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following table presents the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012 and AlphaCat 2013 as at March 31, 2013:

	Investment in operating affiliates
	Investment at cost		Voting ownership %		Equity ownership %		Carrying value
AlphaCat Re 2011	$	16,355	43.7	%	22.3	%	$	16,805
AlphaCat Re 2012	25,533		49.0	%	37.9	%	27,358
AlphaCat 2013	45,000		40.9	%	19.7	%	46,100
Total	$	86,888					$	90,263

(b) Investment in Insurance Linked Securities ("ILS")

The Company received $219,400 of third party subscriptions in three of the AlphaCat ILS funds as of December 31, 2012. The AlphaCat ILS funds invest in instruments with returns linked to property catastrophe reinsurance, retrocession and ILS contracts. Two of the funds are variable interest entities and are consolidated by the Company as Validus Re is deemed to be the primary beneficiary. The third fund is also a variable interest entity, however, it is not consolidated by the Company as Validus Re is not deemed to be the primary beneficiary. As a result, the investment in this fund is included in "Investments in affiliates" as at March 31, 2013. Income from this ILS fund was $149 for the three months ended March 31, 2013. The Company's investment in this fund amounted to $20,149 as at March 31, 2013. The Company's maximum exposure to loss with respect to this investment is limited to the investment carrying amount reported in the Company's Consolidated Balance Sheet.

(c) Investment affiliate

Aquiline Financial Services Fund II L.P.

On December 20, 2011, Validus Re entered into an Assignment and Assumption Agreement (the "Agreement") with Aquiline Capital Partners LLC, a Delaware limited liability company (the "Assignor") and Aquiline Capital Partners II GP (Offshore) Ltd., a Cayman Islands company limited by shares (the "General Partner") pursuant to which Validus Re has assumed 100% of the Assignor's interest in Aquiline Financial Services Fund II L.P. (the "Partnership") representing a total capital commitment of $50,000 (the "Commitment"), as a limited partner in the Partnership (the "Transferred Interest"). The Transferred Interest is governed by the terms of an Amended and Restated Exempted Limited Partnership Agreement dated as of July 2, 2010 (the "Limited Partnership Agreement"). Pursuant to the terms of the Limited Partnership Agreement, the Commitment will expire on July 2, 2015.

The private equity limited partnership provides quarterly capital account statements with a three-month delay in its valuation. As a result, the limited partnership's December 31, 2012 capital account statement was used as a basis for calculation of the Company's share of partnership income for the period.

The following table presents a reconciliation of the beginning and ending investment in the Company's investment affiliate balance for the three months ended March 31, 2013:

	Three Months Ended March 31, 2013
	Investment in limited partnership (Aquiline Financial Services Fund II L.P) (a)
As at December 31, 2012	$	15,218
Capital contributions	1,341
Income from investment affiliate	1,477
As at March 31, 2013	$	18,036

(a) As at March 31, 2012, this investment was included in "Other investments" as a Level 3 investment in the fair value hierarchy.

21

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following table presents the Company's investment in the Aquiline Financial Services Fund II L.P. as at March 31, 2013:

	Investment in non-consolidated affiliate
	Investment at cost		Voting ownership %		Equity Ownership		Carrying Value
Aquiline Financial Services Fund II L.P	$	18,959	—	%	6.7	%	$	18,036

6. Noncontrolling interest

 On April 2, 2012, the Company joined with other investors in capitalizing PaCRe a new Class 4 Bermuda reinsurer formed for the purpose of writing high excess property catastrophe reinsurance. Validus Re has a majority voting equity interest in PaCRe and as a result, the financial statements of PaCRe are included in the consolidated financial statements of the Company. The portion of PaCRe's earnings attributable to third party investors for the three months ended March 31, 2013 is recorded in the Consolidated Statements of Comprehensive Income as net loss attributable to noncontrolling interest. The Company has an equity interest of 10% and the remaining 90% interest is held by third party investors.

The Company received $219,400 of third party subscriptions in three of the AlphaCat ILS funds as of December 31, 2012. The AlphaCat ILS funds invest in instruments with returns linked to property catastrophe reinsurance, retrocession and ILS contracts. Two of the funds are variable interest entities and are consolidated by the Company as Validus Re is deemed to be the primary beneficiary. Validus Re has a majority participating interest in these funds and as a result, the financial statements of these funds are included in the consolidated financial statements of the Company. The portion of the AlphaCat ILS funds' earnings attributable to third party investors for the three months ended March 31, 2013 is recorded in the Consolidated Statements of Comprehensive Income within net loss/income attributable to noncontrolling interest.

The following table presents a reconciliation of the beginning and ending balances of noncontrolling interest for the three months ended March 31, 2013:

	Three Months Ended March 31, 2013
	PaCRe			AlphaCat ILS Funds		Total
As at December 31, 2012	$	434,280		$	—	$	434,280
Purchase of shares by noncontrolling interest	—			55,690		55,690
Net (loss) income attributable to noncontrolling interest	(3,135		)	586		(2,549		)
As at March 31, 2013	$	431,145		$	56,276	$	487,421

There was no noncontrolling interest activity for the three months ended March 31, 2012.

7. Derivative instruments used in hedging activities

The Company enters into derivative instruments for risk management purposes, specifically to hedge unmatched foreign currency exposures and interest rate exposures. As at March 31, 2013 the Company held a foreign currency forward contract to mitigate the risk of foreign currency exposure of unpaid losses denominated in Chilean Pesos (CLP) as well as foreign currency forward contracts to mitigate the risk of fluctuations in the Euro to U.S. dollar exchange rates. As at March 31, 2013, the Company held two interest rate swap contracts to mitigate the risk of interest rate exposure on the payment of interest on the Company's 2006 and 2007 Junior Subordinated Deferrable Debentures, as well as three interest rate swaps and one cross-currency interest rate swap to mitigate the risk of interest rate and foreign exchange rate exposure on the payment of interest on the Flagstone's 2006 and 2007 Junior Subordinated Deferrable Interest Notes.

As part of the Flagstone Acquisition, the Company assumed foreign currency forward contracts which are not designated as hedging instruments.

22

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following table summarizes information on the location and amount of the fair value of derivatives not designated as hedging instruments on the consolidated balance sheet at March 31, 2013:

			Asset derivatives			Liability derivatives
Derivatives not designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Foreign currency forward contracts	$	147,398	Other assets	$	266	Accounts payable and accrued expenses	$	2,646

The following table summarizes information on the location and amount of the fair value of derivatives designated as hedging instruments on the consolidated balance sheet at March 31, 2013:

			Asset derivatives			Liability derivatives
Derivatives designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Foreign currency forward contracts	$	55,450	Other assets	$	701	Accounts payable and accrued expenses	$	—
Interest rate swap contracts	$	452,263	Other assets	$	—	Accounts payable and accrued expenses	$	447

The following table summarizes information on the location and amount of the fair value of derivatives not designated as hedging instruments on the consolidated balance sheet at December 31, 2012:

			Asset derivatives			Liability derivatives
Derivatives not designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Currency swaps	$	17,153	Other assets	$	—	Accounts payable and accrued expenses	$	772
Foreign currency forward contracts	$	310,541	Other assets	$	—	Accounts payable and accrued expenses	$	394

The following table summarizes information on the location and amount of the fair value of derivatives designated as hedging instruments on the consolidated balance sheet at December 31, 2012:

			Asset derivatives			Liability derivatives
Derivatives designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Foreign currency forward contracts	$	35,976	Other assets	$	—	Accounts payable and accrued expenses	$	223
Interest rate swap contracts	$	289,800	Other assets	$	—	Accounts payable and accrued expenses	$	220

(a) Classification within the fair value hierarchy

As described in Note 4: "Fair value measurements", under U.S. GAAP, a company must determine the appropriate level in the fair value hierarchy for each fair value measurement. The assumptions used within the valuation are observable in the marketplace, can be derived from observable data or are supported by observable levels at which other similar transactions are executed in the marketplace. Accordingly, these derivatives were classified within Level 2 of the fair value hierarchy.

(b) Derivative instruments designated as a fair value hedge

The Company designates its derivative instruments as fair value hedges and formally and contemporaneously documents all relationships between the hedging instruments and hedged items and links the hedging derivatives to specific assets and liabilities.

23

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The Company assesses the effectiveness of the hedges, both at inception and on an on-going basis and determines whether the hedges are highly effective in offsetting changes in fair value of the linked hedged items.

The following table provides the total impact on earnings relating to the derivative instruments formally designated as fair value hedges along with the impact of the related hedged items for the three months ended March 31, 2013 and 2012:

		Three Months Ended March 31, 2013
Derivatives designated as fair value hedges and related hedged item:	Location of gain (loss) recognized in income	Amount of gain (loss) recognized in income on derivative			Amount of gain (loss) on hedged item recognized in income attributable to risk being hedged			Amount of gain (loss) recognized in income on derivative (ineffective portion)
Foreign currency forward contracts	Foreign exchange gains (losses)	$	1,261		$	(1,261	)	$	—
		Three Months Ended March 31, 2012
Derivatives designated as fair value hedges and related hedged item:	Location of gain (loss) recognized in income	Amount of gain (loss) recognized in income on derivative			Amount of gain (loss) on hedged item recognized in income attributable to risk being hedged			Amount of gain (loss) recognized in income on derivative (ineffective portion)
Foreign currency forward contracts	Foreign exchange gains (losses)	$	(3,319	)	$	3,319		$	—

(c) Derivative instruments designated as a cash flow hedge

The Company designates its interest rate derivative instruments as cash flow hedges and formally and contemporaneously documents all relationships between the hedging instruments and hedged items and links the hedging derivatives to specific assets and liabilities. The Company assesses the effectiveness of the hedges, both at inception and on an on-going basis (as required) and determines whether the hedges are highly effective in offsetting changes in fair value of the linked hedged items. The Company currently applies the long haul method when assessing the hedge's effectiveness.

The following table provides the total impact on other comprehensive income and earnings relating to the derivative instruments formally designated as cash flow hedges along with the impact of the related hedged items for the three months ended March 31, 2013:

		Three Months Ended March 31, 2013
Derivatives designated as cash flow hedges and related hedged item:	Location of the effective portion recognized in other comprehensive (loss) recognized in income	Location of the effective portion subsequently reclassified to earnings and the ineffective portion excluded from effectiveness testing	Amount of effective portion recognized in other comprehensive income		Amount of effective portion subsequently reclassified to earnings			Amount of ineffective portion excluded from effectiveness testing
Interest rate swap contracts	Other comprehensive income	Finance expenses	$	1,608	$	(1,608	)	$	—

There was no interest rate swap contract activity for the three months ended March 31, 2012.

(d) Balance sheet offsetting

There was no balance sheet offsetting activity as at March 31, 2013 or December 31, 2012.

The Company currently provides cash collateral as security for interest rate swap contracts. The Company does not provide cash collateral or financial instruments as security for foreign currency forward contracts. Our derivative instruments are generally traded under International Swaps and Derivatives Association master netting agreements, which establish terms that apply to all transactions. On a periodic basis, the amounts receivable from or payable to the counterparties are settled in cash. The Company has not elected to settle multiple transactions with an individual counterparty on a net basis.

24

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

8. Reserve for losses and loss expenses

Reserves for losses and loss expenses are based in part upon the estimation of case losses reported from brokers, insureds and ceding companies. The Company also uses statistical and actuarial methods to estimate ultimate expected losses and loss expenses. The period of time from the occurrence of a loss, the reporting of a loss to the Company and the settlement of the Company's liability may be several months or years. During this period, additional facts and trends may be revealed. As these factors become apparent, case reserves will be adjusted, sometimes requiring an increase or decrease in the overall reserves of the Company, and at other times requiring a reallocation of incurred but not reported reserves to specific case reserves. These estimates are reviewed and adjusted regularly, and such adjustments, if any, are reflected in earnings in the period in which they become known. While management believes that it has made a reasonable estimate of ultimate losses, there can be no assurances that ultimate losses and loss expenses will not exceed the total reserves.

 The following table represents an analysis of paid and unpaid losses and loss expenses incurred and a reconciliation of the beginning and ending unpaid losses and loss expenses for the three months ended March 31, 2013 and 2012:

	Three Months Ended
	March 31, 2013			March 31, 2012
Reserve for losses and loss expenses, beginning of period	$	3,517,573		$	2,631,143
Losses and loss expenses recoverable	(439,967		)	(372,485		)
Net reserves for losses and loss expenses, beginning of period	3,077,606			2,258,658
Increase (decrease) in net losses and loss expenses incurred in respect of losses occurring in:
Current year	210,569			262,413
Prior years	(65,798		)	(30,424		)
Total incurred losses and loss expenses	144,771			231,989
Total net paid losses	(260,112		)	(204,223		)
Foreign exchange	(33,826		)	11,894
Net reserve for losses and loss expenses, end of period	2,928,439			2,298,318
Losses and loss expenses recoverable	429,252			351,292
Reserve for losses and loss expenses, end of period	$	3,357,691		$	2,649,610

9. Reinsurance

The Company enters into reinsurance and retrocession agreements in order to mitigate its accumulation of loss, reduce its liability on individual risks, enable it to underwrite policies with higher limits and increase its aggregate capacity. The cession of insurance and reinsurance does not legally discharge the Company from its primary liability for the full amount of the policies, and the Company is required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance or retrocession agreement. Amounts recoverable from reinsurers are estimated in a manner consistent with the underlying liabilities.

Credit risk

The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. The reinsurance program is generally placed with reinsurers whose rating, at the time of placement, was A- or better rated by Standard & Poor's or the equivalent with other rating agencies. Exposure to a single reinsurer is also controlled with restrictions dependent on rating. At March 31, 2013, 97.9% of reinsurance recoverables (which includes loss reserves recoverable and recoverables on paid losses) were from reinsurers rated A- or better and included $181,163 of IBNR recoverable (December 31, 2012: $185,255). Reinsurance recoverables by reinsurer are as follows:

25

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

	March 31, 2013				December 31, 2012
	Reinsurance Recoverable		% of Total		Reinsurance Recoverable		% of Total
Top 10 reinsurers	$	339,061	76.2	%	$	360,234	74.1	%
Other reinsurers’ balances > $1 million	97,409		21.9	%	115,262		23.7	%
Other reinsurers’ balances < $1 million	8,613		1.9	%	10,906		2.2	%
Total	$	445,083	100.0	%	$	486,402	100.0	%

	March 31, 2013
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd’s Syndicates	A+	$	69,769	20.6	%
National Indemnity	AA+	64,667		19.1	%
Everest Re	A+	52,863		15.6	%
Hannover Re	AA-	42,431		12.5	%
Fully Collateralized	NR	29,906		8.8	%
Transatlantic Re	A+	20,584		6.1	%
Swiss Re	AA-	17,574		5.2	%
XL Re	A	15,350		4.5	%
Tokio Millennium	AA+	13,439		4.0	%
Munich Re	AA-	12,478		3.6	%
Total		$	339,061	100.0	%

	December 31, 2012
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd’s Syndicates	A+	$	71,469	19.9	%
National Indemnity	AA+	59,941		16.6	%
Everest Re	A+	51,340		14.3	%
Fully Collateralized	NR	47,445		13.2	%
Hannover Re	AA-	40,552		11.3	%
Munich Re	AA-	20,954		5.8	%
Transatlantic Re	A+	20,320		5.6	%
Swiss Re	AA-	16,992		4.7	%
Allianz	AA-	16,367		4.5	%
XL Re	A	14,854		4.1	%
Total		$	360,234	100.0	%

NR: Not rated

At March 31, 2013 and December 31, 2012, the provision for uncollectible reinsurance relating to losses recoverable was $6,046 and $6,602, respectively. To estimate the provision for uncollectible reinsurance recoverable, the reinsurance recoverable is first allocated to applicable reinsurers. This determination is based on a process rather than an estimate, although an element of judgment is applied. As part of this process, ceded IBNR is allocated by reinsurer. Of the $445,083 reinsurance recoverable at March 31, 2013 (December 31, 2012: $486,402), $29,906 was fully collateralized (December 31, 2012: $47,445).

26

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The Company uses a default analysis to estimate uncollectible reinsurance. The primary components of the default analysis are reinsurance recoverable balances by reinsurer and default factors used to determine the portion of a reinsurer's balance deemed to be uncollectible. Default factors require considerable judgment and are determined using the current rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions.

10. Share capital

(a) Authorized and issued

The Company’s authorized share capital is 571,428,571 voting common shares with a par value of $0.175 per share. The holders of voting common shares are entitled to receive dividends. Holders of voting common shares are allocated one vote per share, provided that, if the controlled shares of any shareholder or group of related shareholders constitute more than 9.09 percent of the outstanding common shares of the Company, their voting power will be reduced to 9.09 percent.

The Company may from time to time repurchase its securities, including common shares, Junior Subordinated Deferrable Debentures, Junior Subordinated Deferrable Interest Notes and Senior Notes. On February 6, 2013, the Board of Directors of the Company announced an increase in the Company's common share purchase authorization to $500,000. This amount is in addition to the $1,206,845 of common shares repurchased by the Company through February 6, 2013 under its previously authorized share repurchase programs.

The Company has repurchased approximately 45,042,446 common shares for an aggregate purchase price of $1,276,536 from the inception of its share repurchase program to March 31, 2013. The Company had $430,309 remaining under its authorized share repurchase program as of March 31, 2013.

On November 30, 2012, the Company acquired all of the outstanding shares of Flagstone from a group of institutional and other investors. Pursuant to the Merger Agreement, the Company acquired all of Flagstone's outstanding common shares in exchange for the Company's common shares and cash. The Company issued 14,202,664 common shares, net of 87,725 shares withheld for income taxes, valued at $34.87 per share as partial consideration for the acquisition. In addition, 1,638,875 common shares recorded in treasury are owned by Flagstone (Bermuda) Holdings Limited, a wholly-owned subsidiary of Validus Holdings, Ltd. As part of the Flagstone Acquisition, warrants to acquire Flagstone shares were converted into 121,942 warrants to acquire the Company's common shares. In accordance with the merger agreement, these warrants have a $62.02 strike price and expire on December 31, 2013.

The Company expects the purchases under its share repurchase program to be made from time to time in the open market or in privately negotiated transactions. The timing, form and amount of the share repurchases under the program will depend on a variety of factors, including market conditions, the Company’s capital position relative to internal and rating agency targets, legal requirements and other factors. The repurchase program may be modified, extended or terminated by the Board of Directors at any time.

The following table is a summary of the common shares issued and outstanding:

	Common Shares
Common shares issued, December 31, 2012	152,698,191
Restricted share awards vested, net of shares withheld	130,637
Restricted share units vested, net of shares withheld	3,796
Options exercised	128,020
Direct issuance of common stock	183
Deferred share units vested, net of shares withheld	2,935
Common shares issued, March 31, 2013	152,963,762
Shares repurchased, March 31, 2013	(46,681,321	)
Common shares outstanding, March 31, 2013	106,282,441

27

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

	Common Shares
Common shares issued, December 31, 2011	134,503,065
Restricted share awards vested, net of shares withheld	229,688
Restricted share units vested, net of shares withheld	5,101
Options exercised	7,149
Common shares issued, March 31, 2012	134,745,003
Shares repurchased, March 31, 2012	(35,404,545	)
Common shares outstanding, March 31, 2012	99,340,458

(b) Warrants

During the three months ended March 31, 2013 and 2012, no warrants were exercised. No further warrants are anticipated to be issued. Holders of the outstanding warrants are entitled to exercise the warrants in whole or in part at any time until the expiration date.

(c) Deferred share units

Under the terms of the Company’s Director Stock Compensation Plan, non-management directors may elect to receive their director fees in deferred share units rather than cash.  The number of share units distributed in case of election under the plan is equal to the amount of the annual retainer fee otherwise payable to the director on such payment date divided by 100% of the fair market value of a share on such payment date. Additional deferred share units are issued in lieu of dividends that accrue on these deferred share units.  The total outstanding deferred share units at March 31, 2013 were nil (December 31, 2012: 5,001).

As of February 16, 2013, John Hendrickson became an employee director. As a result, his 5,039 deferred share units vested and 2,935 common shares were issued to him, net of shares withheld for taxes.

(d) Dividends

On February 6, 2013 the Company announced a special dividend in the amount of $2.00 per common share and $2.00 per common share equivalent for which each outstanding warrant is exercisable (the "2013 Special Dividend"). The 2013 Special Dividend was paid on February 26, 2013 to shareholders and warrant holders of record as of February 19, 2013.

In addition, the Company announced a quarterly cash dividend of $0.30 (2012: $0.25) per common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable. This dividend was paid on March 29, 2013 to holders of record on March 15, 2013.

11. Stock plans

Long Term Incentive Plan and Short Term Incentive Plan

The Company’s Amended and Restated 2005 Long Term Incentive Plan (“LTIP”) provides for grants to employees of options, stock appreciation rights (“SARs”), restricted shares, restricted share units, performance shares, dividend equivalents or other share-based awards. In addition, the Company may issue restricted share awards or restricted share units in connection with awards issued under its annual Short Term Incentive Plan (“STIP”). The total number of shares reserved for issuance under the LTIP and STIP are 13,126,896 shares of which 3,016,246 shares are remaining. The LTIP and STIP are administered by the Compensation Committee of the Board of Directors. No SARs have been granted to date. Grant prices are established at the fair market value of the Company’s common shares at the date of grant.

i.Options

Options may be exercised for voting common shares upon vesting. Options have a life of 10 years and vest either ratably or at the end of the required service period from the date of grant. Fair value of the option awards at the date of grant is determined using the Black-Scholes option-pricing model.

28

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Expected volatility is based on stock price volatility of comparable publicly-traded companies. The Company used the simplified method consistent with U.S. GAAP authoritative guidance on stock compensation expenses to estimate expected lives for options granted during the period as historical exercise data was not available and the options met the requirement as set out in the guidance.

The Company has not granted any stock options awards since September 4, 2009.

Share compensation expenses in respect of options of $nil were recorded for the three months ended March 31, 2013 (2012: $135). The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period.

A modification event was triggered as a result of the 2013 Special Dividend. In accordance with the terms of the LTIP under which the options were issued, an adjustment was required to protect the holders of such stock options from changes in the value of the stock options following the declaration of the special dividend. The modification of the options included a decrease in the exercise price of each stock option and an increase in the number of shares underlying each stock option. The fair value of the options before and after the modification was unchanged.

Activity with respect to options for the three months ended March 31, 2013 was as follows:

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2012	1,823,947		$	6.52	$	20.69
Options regranted (repriced)	1,833,414		6.76		19.02
Options granted	—		—		—
Options exercised	(128,020	)	3.40		28.98
Options cancelled (repriced)	(1,733,139	)	6.76		20.12
Options forfeited	—		—		—
Options outstanding, March 31, 2013	1,796,202		$	6.75	$	18.95
Options exercisable, March 31, 2013	1,796,202		$	6.75	$	18.95

Activity with respect to options for the three months ended March 31, 2012was as follows: 

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2011	2,263,012		$	6.69	$	20.12
Options granted	—		—		—
Options exercised	(7,149	)	6.90		24.69
Options forfeited	—		—		—
Options outstanding, March 31, 2012	2,255,863		$	6.69	$	20.10
Options exercisable, March 31, 2012	2,227,043		$	6.64	$	20.08

At March 31, 2013, there were $nil (December 31, 2012: $nil) of total unrecognized share compensation expenses in respect of options that are expected to be recognized over a weighted-average period of 0.0 years (December 31, 2012: 0.0 years).

29

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

ii.Restricted share awards

Restricted shares granted under the LTIP and STIP vest either ratably or at the end of the required service period and contain certain restrictions during the vesting period, relating to, among other things, forfeiture in the event of termination of employment and transferability. Share compensation expenses of $4,061 were recorded for the three months ended March 31, 2013 (2012: $5,940). The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period.

Activity with respect to unvested restricted share awards for the three months ended March 31, 2013 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2012	2,170,547		$	29.24
Restricted share awards granted	22,005		35.63
Restricted share awards vested	(148,304	)	25.97
Restricted share awards forfeited	(93,993	)	28.42
Restricted share awards outstanding, March 31, 2013	1,950,255		$	29.60

Activity with respect to unvested restricted share awards for the three months ended March 31, 2012 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2011	3,003,547		$	25.77
Restricted share awards granted	4,500		30.49
Restricted share awards vested	(259,017	)	25.52
Restricted share awards forfeited	(20,371	)	27.96
Restricted share awards outstanding, March 31, 2012	2,728,659		$	25.78

At March 31, 2013, there were $38,226 (December 31, 2012: $43,952) of total unrecognized share compensation expenses in respect of restricted share awards that are expected to be recognized over a weighted-average period of 2.5 years (December 31, 2012: 2.6 years ).

iii.Restricted share units

Restricted share units under the LTIP and STIP vest either ratably or at the end of the required service period and contain certain restrictions during the vesting period, relating to, among other things, forfeiture in the event of termination of employment and transferability. Share compensation expenses of $121 were recorded for the three months ended March 31, 2013 (2012: $120). The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period.

Activity with respect to unvested restricted share units for the three months ended March 31, 2013 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2012	47,238		$	29.61
Restricted share units vested	(5,468	)	25.27
Restricted share units issued in lieu of cash dividends	3,020		29.69
Restricted share units outstanding, March 31, 2013	44,790		$	30.15

30

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Activity with respect to unvested restricted share units for the three months ended March 31, 2012 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2011	53,312		$	27.60
Restricted share units vested	(7,314	)	24.27
Restricted share units issued in lieu of cash dividends	408		27.90
Restricted share units outstanding, March 31, 2012	46,406		$	28.13

At March 31, 2013, there were $861 (December 31, 2012: $978) of total unrecognized share compensation expenses in respect of restricted share units that are expected to be recognized over a weighted-average period of 2.5 years (December 31, 2012: 2.6 years).

iv.Performance share awards

The Performance Share Awards (“PSAs”) contain a performance based component. The performance component relates to the compounded growth in the Dividend Adjusted Diluted Book Value per Share over a three year period. For PSAs granted during the period, the grant date Diluted Book Value per Share (“DBVPS”) is based on the DBVPS at the end of the most recent financial reporting year. The Dividend Adjusted Performance Period End DBVPS will be the DBVPS three years after the grant date DBVPS. The fair value estimate earns over the requisite attribution period and the estimate will be reassessed at the end of each performance period which will reflect any adjustments in the consolidated statements of income in the period in which they are determined.

Share compensation expenses of ($1,864) were recorded for the three months ended March 31, 2013 (2012: ($757)). The negative expense is due to a reversal of expenses on unvested performance share awards based on a review of current and projected performance criteria.

Activity with respect to unvested performance share awards for the three months ended March 31, 2013 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2012	220,845		$	31.81
Performance share awards forfeited	(128,667	)	32.41
Performance share awards outstanding, March 31, 2013	92,178		$	30.99

Activity with respect to unvested performance share awards for the three months ended March 31, 2012 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2011	279,019		$	30.77
Performance share awards forfeited	(99,302	)	28.70
Performance share awards outstanding, March 31, 2012	179,717		$	31.91

At March 31, 2013, there were $1,148 (December 31, 2012: $3,328) of total unrecognized share compensation expenses in respect of PSAs that are expected to be recognized over a weighted-average period of 1.7 years (December 31, 2012: 1.7 years).

31

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Total share compensation expenses

The breakdown of share compensation expenses by award type was as follows:

	Three Months Ended
	March 31, 2013			March 31, 2012
Options	$	—		$	135
Restricted share awards	4,061			5,940
Restricted share units	121			120
Performance share awards	(1,864		)	(757		)
Total	$	2,318		$	5,438

12. Debt and financing arrangements

(a) Financing structure and finance expenses

The financing structure at March 31, 2013 was:

	Commitment		Outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
2010 Senior Notes due 2040	250,000		250,000		247,117
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		380,087		—
$500,000 bi-lateral secured letter of credit facility	500,000		89,511		—
Talbot FAL Facility (b)	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		258		—
IPC Bi-Lateral Facility	80,000		25,882		—
$550,000 Flagstone Bi-Lateral Facility	550,000		296,979		—
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	136,662		136,662		136,662
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	113,750		113,750		113,750
Total	$	2,940,412	$	1,607,929	$	787,329

32

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The financing structure at December 31, 2012 was:

	Commitment		Outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
2010 Senior Notes due 2040	250,000		250,000		247,090
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		376,570		—
$500,000 secured letter of credit facility	500,000		92,402		—
Talbot FAL Facility (b)	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		219		—
IPC Bi-Lateral Facility	80,000		40,613		—
$550,000 Flagstone Bi-Lateral Facility	550,000		381,019		—
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	137,159		137,159		137,159
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	113,750		113,750		113,750
Total	$	2,940,909	$	1,706,532	$	787,799

(a) Indicates utilization of commitment amount, not drawn borrowings.

(b) Talbot operates in the Lloyd’s market ("Lloyds") through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies.  Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

Finance expenses consist of interest on our junior subordinated deferrable debentures, junior subordinated deferrable interest notes, senior notes, AlphaCat variable funding notes, the amortization of debt offering costs, fees relating to our credit facilities, bank charges and the costs of FAL as follows:

	Three Months Ended
	March 31, 2013		March 31, 2012
2006 Junior Subordinated Deferrable Debentures	$	2,187	$	1,549
2007 Junior Subordinated Deferrable Debentures	1,809		3,029
2010 Senior Notes due 2040	5,597		5,597
AlphaCat Variable Funding Notes (a)	11,191		—
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	1,472		—
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	1,072		—
Credit facilities	954		6,016
Bank charges	133		57
Talbot FAL Facility	31		31
Total	$	24,446	$	16,279

(a) Refer to Note 13: "AlphaCat variable funding notes" for further details.

(b) $250,000 2010 Senior Notes due 2040

On January 21, 2010, the Company offered and sold $250,000 of Senior Notes due 2040 (the “2010 Senior Notes”) in a registered public offering. The 2010 Senior Notes mature on January 26, 2040, and are redeemable at the Company’s option in whole any time or in part from time to time at a make-whole redemption price. The Company may redeem the notes in whole, but not in part, at any time upon the occurrence of certain tax events as described in the prospectus supplement of the 2010 Senior Notes. The 2010 Senior Notes bear interest at the rate of 8.875% per annum from January 26, 2010 to maturity or early redemption. Interest on the 2010 Senior Notes is payable semi-annually in arrears on January 26 and July 26 of each year, commencing on

33

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

July 26, 2010.  The net proceeds of $243,967 from the sale of the 2010 Senior Notes, after the deduction of commissions paid to the underwriters in the transaction and other expenses, was used by the Company for general corporate purposes, which included the repurchase of its outstanding capital stock and payment of dividends to shareholders.  Debt issuance costs of $2,808 were deferred as an asset and amortized over the life of the 2010 Senior Notes. There were no redemptions made during the three months ended March 31, 2013 and 2012.

The 2010 Senior Notes are unsecured and unsubordinated obligations of the Company and rank equally in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness.  The 2010 Senior Notes will be effectively junior to all of the Company’s future secured debt, to the extent of the value of the collateral securing such debt, and will rank senior to all our existing and future subordinated debt.  The 2010 Senior Notes are structurally subordinated to all obligations of the Company’s subsidiaries.

Future expected payments of principal on the 2010 Senior Notes are as follows:

2013	$	—
2014	—
2015	—
2016	—
2017 and thereafter	250,000
Total minimum future payments	$	250,000

(c) Junior subordinated deferrable debentures and Junior subordinated deferrable interest notes

On June 15, 2006, the Company participated in a private placement of $150,000 of junior subordinated deferrable interest debentures due 2036 (the “2006 Junior Subordinated Deferrable Debentures”). The 2006 Junior Subordinated Deferrable Debentures mature on June 15, 2036, are redeemable at the Company’s option at par beginning June 15, 2011, and require quarterly interest payments by the Company to the holders of the 2006 Junior Subordinated Deferrable Debentures. Interest was payable at 9.069% per annum through June 15, 2011, and thereafter at a floating rate of three-month LIBOR plus 355 basis points, reset quarterly. The proceeds of $150,000 from the sale of the 2006 Junior Subordinated Deferrable Debentures, after the deduction of commissions paid to the placement agents in the transaction and other expenses, were used by the Company to fund Validus Re segment operations and for general working capital purposes. Debt issuance costs of $3,750 were deferred as an asset and were amortized to income over the five year optional redemption period. There were no redemptions made during the three months ended March 31, 2013 and 2012.

On June 21, 2007, the Company participated in a private placement of $200,000 of junior subordinated deferrable interest debentures due 2037 (the “2007 Junior Subordinated Deferrable Debentures”). The 2007 Junior Subordinated Deferrable Debentures mature on June 15, 2037, are redeemable at the Company’s option at par beginning June 15, 2012, and require quarterly interest payments by the Company to the holders of the 2007 Junior Subordinated Deferrable Debentures. Interest was payable at 8.480% per annum through June 15, 2012, and thereafter at a floating rate of three-month LIBOR plus 295 basis points, reset quarterly. The proceeds of $200,000 from the sale of the 2007 Junior Subordinated Deferrable Debentures, after the deduction of commissions paid to the placement agents in the transaction and other expenses, were used by the Company to fund the purchase of Talbot Holdings Ltd. Debt issuance costs of $2,000 were deferred as an asset and were amortized to income over the five year optional redemption period. There were no redemptions made during the three months ended March 31, 2013 and 2012.

As part of the acquisition of Flagstone, the Company assumed $136,662 of junior subordinated deferrable interest notes due 2036 (the “Flagstone 2006 Junior Subordinated Deferrable Interest Notes”). The Flagstone 2006 Junior Subordinated Deferrable Interest Notes mature on September 15, 2036, are redeemable at the Company's option at par beginning as of September 15, 2011, and require quarterly interest payments by the Company to the holders of the Flagstone 2006 Junior Subordinated Deferrable Interest Notes. Interest is payable at a floating rate of three-month LIBOR plus 354 basis points, reset quarterly. There were no redemptions made during the three months ended March 31, 2013 and 2012.

 As part of the acquisition of Flagstone, the Company assumed $113,750 of junior subordinated deferrable interest notes due 2037 (the “Flagstone 2007 Junior Subordinated Deferrable Interest Notes”). Of these, $88,750 of the Flagstone 2007 Junior Subordinated Deferrable Interest Notes mature on July 30, 2037, are redeemable at the Company's option at par as of July 30,

34

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

2012, and require quarterly interest payments by the Company to the holders of the Flagstone 2007 Junior Subordinated Deferrable Interest Notes. Interest is payable at a floating rate of three-month LIBOR plus 300 basis points, reset quarterly. The remaining $25,000 of the Flagstone 2007 Junior Subordinated Deferrable Interest Notes mature on September 15, 2037, are redeemable at the Company's option at par as of September 15, 2012, and require quarterly interest payments by the Company to the holders of the Flagstone 2007 Junior Subordinated Deferrable Interest Notes. Interest is payable at a floating rate of three-month LIBOR plus 310 basis points, reset quarterly. There were no redemptions made during the three months ended March 31, 2013 and 2012.

Future expected payments of principal on the 2006 and 2007 Junior Subordinated Deferrable Debentures and Flagstone 2006 and 2007 Junior Subordinated Deferrable Interest Notes are as follows:

2013	$	—
2014	—
2015	—
2016	—
2017 and thereafter	540,709
Total minimum future payments	$	540,709

(d) Credit facilities

(i) $400,000 syndicated unsecured letter of credit facility and $525,000 syndicated secured letter of credit facility

On March 9, 2012, the Company, Validus Re Americas, Ltd. ("Validus Re Americas"),PaCReand Validus Re entered into a $400,000 four year unsecured credit facility with Deutsche Bank Securities Inc., as syndication agent, JPMorgan Chase Bank, N.A. as administrative agent, Lloyds Securities Inc. and Suntrust Bank, as co-documentation agents and the lenders party thereto, which provides for letter of credit availability for the Company and certain designated subsidiaries of the Company and revolving credit availability for the Company (the "Four Year Unsecured Facility") (the full $400,000 of which is available for letters of credit and/or revolving loans). The Four Year Unsecured Facility was provided by a syndicate of commercial banks arranged by J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Lloyds Securities Inc. and SunTrust Robinson Humphrey, Inc. Letters of credit under the Four Year Unsecured Facility are available to support obligations in connection with the insurance business of the Company and its subsidiaries. Loans under the Four Year Unsecured Facility are available for the general corporate and working capital purposes of the Company. The Company may request that existing lenders under the Four Year Unsecured Facility or prospective additional lenders agree to make available additional commitments from time to time so long as the aggregate commitments under the Four Year Unsecured Facility do not exceed $500,000. Letter of credit fees are payable on account of each letter of credit issued under the Four Year Unsecured Facility at a rate per annum equal to an applicable rate. Borrowings under the Four Year Unsecured Facility bear interest, at the option of the Company, at the base rate (the higher of the prime rate announced by JPMorgan Chase Bank, N.A., the federal funds effective rate plus 0.5%, and the adjusted LIBOR rate plus 1.0%) or the adjusted LIBOR rate applicable to such loans, plus an applicable rate.

Also on March 9, 2012, the Company, Validus Re Americas and Validus Re entered into a $525,000 four-year secured credit facility with Deutsche Bank Securities Inc., as syndication agent, JPMorgan Chase Bank, N.A. as administrative agent, Lloyds Securities Inc. and Suntrust Bank, as co-documentation agents and the lenders party thereto, which provides for letter of credit availability for the Company and certain designated subsidiaries of the Company (the "Four Year Secured Facility" and together with the Four Year Unsecured Facility, the "Credit Facilities"). The Four Year Secured Facility was provided by a syndicate of commercial banks arranged by J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Lloyds Securities Inc. and SunTrust Robinson Humphrey, Inc. Letters of credit under the Four Year Secured Facility will be available to support obligations in connection with the insurance business of the Company and its subsidiaries. The Company may request that existing lenders under the Four Year Secured Facility or prospective additional lenders agree to make available additional commitments from time to time so long as the aggregate commitments under the Four Year Secured Facility do not exceed $700,000. The obligations of the Company and its designated subsidiaries under the Four Year Secured Facility are secured by cash and securities deposited into cash collateral accounts from time to time with The Bank of New York Mellon. Letter of credit fees are payable on account of each letter of credit issued under the Four Year Secured Facility at a rate per annum equal to an applicable rate. Borrowings under the Four Year Secured Facility bear interest at the base rate (the higher of the prime rate announced by JPMorgan Chase Bank, N.A., the federal funds effective rate plus 0.5%, and the adjusted LIBOR rate plus 1.0%).

35

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The Credit Facilities contain covenants that include, among other things (i) the requirement that the Company initially maintain a minimum level of consolidated net worth of at least $2,600,000 and, commencing with the end of the fiscal quarter ending March 31, 2013, to be increased quarterly by an amount equal to 50.0% of the Company's consolidated net income (if positive) for such quarter plus 50.0% of the aggregate increases in the consolidated shareholders' equity of the Company during such fiscal quarter by reason of the issuance and sale of common equity interests of the Company, including upon any conversion of debt securities of the Company into such equity interests, (ii) the requirement that the Company maintain at all times a consolidated total debt to consolidated total capital ratio not greater than 0.35:1.00, and (iii) the requirement that Validus Re and any other material insurance subsidiaries maintain a financial strength rating by A.M. Best of not less than "B++" (Fair). In addition, the Credit Facilities contain customary negative covenants applicable to the Company and its subsidiaries, including limitations on the ability to pay dividends and other payments in respect of equity interests at any time that the Company is otherwise in default with respect to certain provisions under the respective Credit Facilities, limitations on the ability to incur liens, sell assets, merge or consolidate with others, enter into transactions with affiliates, and limitations on the ability of its subsidiaries to incur indebtedness. The Credit Facilities also contain customary affirmative covenants, representations and warranties and events of default for credit facilities of its type.

As of March 31, 2013, there was $380,087 in outstanding letters of credit under the Four Year Secured Facility (December 31, 2012: $376,570) and $nil outstanding under the Four Year Unsecured Facility (December 31, 2012: $nil).

As of March 31, 2013, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Credit Facilities.

On March 9, 2012, upon entering into the Credit Facilities, the Company terminated its (a) three-year bi-lateral $60,000 unsecured revolving credit facility, dated March 12, 2010 with Lloyds TSB Bank plc, (b) $340,000 three-year unsecured credit facility, dated March 12, 2010 with Deutsche Bank Securities Inc., as syndication agent and JPMorgan Chase Bank, N.A. as administrative agent and (c) $500,000 five-year secured credit facility, dated March 12, 2007 with Deutsche Bank Securities Inc., as syndication agent and JPMorgan Chase Bank, N.A. as administrative agent. No early termination penalties were incurred.

(ii) Talbot FAL Facility

On November 28, 2007, Talbot entered into a $100,000 standby Letter of Credit facility (the “Talbot FAL Facility”) to provide Funds at Lloyd’s for the 2008 and 2009 underwriting years of account; this facility is guaranteed by the Company and is secured against the assets of Validus Re. The Talbot FAL Facility was provided by a syndicate of commercial banks arranged by Lloyds TSB Bank plc and ING Bank N.V., London Branch.

On November 19, 2009, the Company entered into an Amendment and Restatement of the Talbot FAL Facility to reduce the commitment from $100,000 to $25,000, and to extend the support to the 2010 and 2011 underwriting years of account. On November 18, 2011, the Company entered into an Amendment and Restatement of the Talbot FAL Facility to extend the support to the 2012 and 2013 underwriting years of account.

As amended, the Talbot FAL Facility contains affirmative covenants that include, among other things, (i) the requirement that the Company initially maintain a minimum level of consolidated net worth of at least $2,589,615, and commencing with the end of the fiscal quarter ended December 31, 2011 to be increased quarterly by an amount equal to 50% of our consolidated net income (if positive) for such quarter plus 50% of any net proceeds received from any issuance of common shares during such quarter, and (ii) the requirement that we maintain at all times a consolidated total debt to consolidated total capitalization ratio not greater than 0.35:1.00.

The Talbot FAL Facility also contains restrictions on our ability to incur debt at our subsidiaries, incur liens, sell assets and merge or consolidate with others. Other than in respect of existing and future preferred and hybrid securities, the payment of dividends and other payments in respect of equity interests are not permitted at any time that we are in default with respect to certain provisions under the Talbot FAL Facility. As of March 31, 2013, the Company had $25,000 (December 31, 2012: $25,000) in outstanding letters of credit under this facility.

As of March 31, 2013, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Talbot FAL Facility.

36

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

(iii) IPC Syndicated Facility and IPC Bi-Lateral Facility

IPC obtained letters of credit through the IPC Syndicated Facility and the IPC Bi-Lateral Facility. In July 2009, certain terms of these facilities were amended including suspending IPC’s ability to increase existing letters of credit or to issue new letters of credit. Effective March 31, 2010, the IPC Syndicated Facility was closed. As of March 31, 2013, $25,882 of outstanding letters of credit were issued under the IPC Bi-Lateral Facility (December 31, 2012: $40,613).

As of March 31, 2013, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the IPC Bi-Lateral Facility.

(iv) $500,000 secured bi-lateral letter of credit facility

On August 10, 2009, Validus Re entered into an uncommitted $500,000 secured bi-lateral letter of credit facility with Citibank Europe plc (the “Secured Bi-Lateral Letter of Credit Facility”). Letters of credit were first issued under the Secured Bi-Lateral Letter of Credit Facility during the first quarter of 2012. As of March 31, 2013, $89,511 of letters of credit were outstanding under the Secured Bi-Lateral Letter of Credit Facility (December 31, 2012: $92,402). The Secured Bi-Lateral Letter of Credit Facility has no fixed termination date and as of March 31, 2013, Validus Re is in compliance with all terms and covenants thereof.

(v) $10,000 PaCRe Senior secured letter of credit facility

On May 11, 2012, PaCRe (as Borrower) and its subsidiary, PaCRe Investments, Ltd. (as Guarantor) entered into a 364-Day secured revolving credit and letter of credit facility with JPMorgan Chase Bank, N.A. This facility provides for revolving borrowings by the Borrower and for letters of credit issued by the Borrower to be used to support its reinsurance obligations in aggregate amount of $10,000. As of March 31, 2013, $258 of letters of credit were outstanding under this facility (December 31, 2012: $219).

As of March 31, 2013, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the PaCRe Senior secured letter of credit facility.

(vi) $550,000 Flagstone Bi-Lateral Facility

As part of the Flagstone Acquisition, the Company assumed a Letters of Credit Master Agreement between Citibank Europe Plc and Flagstone Reassurance Suisse, S.A. (the “Flagstone Bi-Lateral Facility”). At March 31, 2013, the Flagstone Bi-Lateral Facility had $296,979 letters of credit issued and outstanding (December 31, 2012: $381,019).

As of March 31, 2013, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Flagstone Bi-Lateral Facility.

13. AlphaCat variable funding notes

AlphaCat Master Fund Ltd. (“Master Fund”), a Bermuda registered exempt mutual fund company and AlphaCat Reinsurance Ltd. (“AlphaCat Re”), a Bermuda Class 3 licensed insurance company, issued Variable Funding Notes (“VFNs”) to the AlphaCat ILS Funds ("ILS Funds") and AlphaCat 2013. 

The purpose of the VFNs is to enable the ILS Funds to invest in specific contracts or cat bonds through the market facing entities. The economic benefit of the investments is transferred to the ILS Funds and AlphaCat 2013 by way of interim payments, which accrue to the ILS Funds and sidecars according to the earnings in AlphaCat Re and Master Fund. 

The following table presents a summary of the AlphaCat VFNs on the balance sheet as at March 31, 2013: 

	March 31, 2013
AlphaCat 2013	$	161,439
AlphaCat ILS Funds	129,149
Total	$	290,588

37

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

For details on the AlphaCat VFNs interest expense which is included in the Company's Consolidated Statements of Comprehensive Income, refer to Note 12: "Debt and financing arrangements."

14. Commitments and contingencies

(a) Concentrations of credit risk

The Company's investments are managed following prudent standards of diversification. The Company attempts to limit its credit exposure by purchasing high quality fixed income investments to maintain an average portfolio, excluding bank loans, credit quality of AA- or higher, with mortgage and commercial mortgage-backed issues having an aggregate weighted average credit quality of AAA. In addition, the Company limits its exposure to any single issuer to 3% or less, excluding government and agency securities. With the exception of the Company's bank loan portfolio, which represents 11.1% of the Company's total investments as at March 31, 2013, the minimum credit rating of any security purchased is Baa3/BBB- and where investments are downgraded, the Company permits a holding of up to 2% in aggregate market value, or 10% with written pre-authorization. At March 31, 2013, 1.1% of the portfolio, excluding bank loans, had a split rating below Baa3/BBB- and the Company did not have an aggregate exposure to any single issuer of more than 0.7% of its investment portfolio, other than with respect to government and agency securities.

(b) Funds at Lloyd's

The amounts provided under the Talbot FAL Facility would become a liability of the Company in the event of Syndicate 1183 declaring a loss at a level between $403,700 and $428,700 which would call on this arrangement.

Talbot operates in Lloyd's through a corporate member, Talbot 2002 Underwriting Capital Ltd ("T02"), which is the sole participant in Syndicate 1183. Lloyd's sets T02's required capital annually based on Syndicate 1183's business plan, rating environment, reserving environment together with input arising from Lloyd's discussions with, inter alia, regulatory and rating agencies. Such capital, called Funds at Lloyd's (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks. The amounts of cash, investments and letters of credit at March 31, 2013 amounted to $428,700 (December 31, 2012: $428,700) of which $25,000 is provided under the Talbot FAL Facility (December 31, 2012: $25,000).

The amounts which the Company provides as FAL are not available for distribution to the Company for the payment of dividends. Talbot’s corporate member may also be required to maintain funds under the control of Lloyd’s in excess of its capital requirement and such funds also may not be available for distribution to the Company for the payment of dividends.

(c) Lloyd's Central Fund

Whenever a member of Lloyd's is unable to pay its debts to policyholders, such debts may be payable by the Lloyd's Central Fund. If Lloyd's determines that the Central Fund needs to be increased, it has the power to assess premium levies on current Lloyd's members up to 3% of a member's underwriting capacity in any one year. The Company does not believe that any assessment is likely in the foreseeable future and has not provided any allowance for such an assessment. However, based on the Company's 2013 estimated premium income at Lloyd's of £620,000, the March 31, 2013 exchange rate of £1 equals $1.5187 and assuming the maximum 3% assessment, the Company would be assessed approximately $28,248.

(d) Aquiline Commitment

On December 20, 2011, Validus Re entered into an Assignment and Assumption Agreement (the "Agreement") with Aquiline Capital Partners LLC, a Delaware limited liability company (the "Assignor") and Aquiline Capital Partners II GP (Offshore) Ltd., a Cayman Islands company limited by shares (the "General Partner") pursuant to which Validus Re has assumed 100% of the Assignor's interest in Aquiline Financial Services Fund II L.P. (the "Partnership") representing a total capital commitment of $50,000 (the "Commitment"), as a limited partner in the Partnership (the "Transferred Interest"). The Transferred Interest is governed by the terms of an Amended and Restated Exempted Limited Partnership Agreement dated as of July 2, 2010 (the "Limited Partnership Agreement"). Pursuant to the terms of the Limited Partnership Agreement, the Commitment will expire on July 2, 2015. The Company's remaining commitment at March 31, 2013 was $31,041.

38

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

15. Related party transactions

The transactions listed below are classified as related party transactions as each counter party has either a direct or indirect shareholding in the Company.

Aquiline Capital Partners, LLC and its related companies ("Aquiline"), which own 6,255,943 shares in the Company, hold warrants to purchase 2,756,088 shares, and have two employees on the Company's Board of Directors who do not receive compensation from the Company, are shareholders of Group Ark Insurance Holdings Ltd. ("Group Ark"). Christopher E. Watson, a director of the Company, also serves as a director of Group Ark. Pursuant to reinsurance agreements with a subsidiary of Group Ark, the Company recognized gross premiums written during the three months ended March 31, 2013 of $1,795 (2012: $297) of which $198 was included in premiums receivable at March 31, 2013 (December 31, 2012: $251). The Company also recognized reinsurance premiums ceded during the three months ended March 31, 2013 of $4 (2012: $nil) and recorded $4,417 of loss reserves recoverable at March 31, 2013 (December 31, 2012: $3,694). Earned premium adjustments of $719 (2012: $362) were recorded during the three months ended March 31, 2013.

Aquiline was previously a shareholder of Tiger Risk Partners LLC (“Tiger Risk”). Christopher E. Watson, a director of the Company serves as a director of Tiger Risk. As of March 31, 2013, Tiger Risk was no longer a related party due to Aquiline's disposal of its investment. Pursuant to certain reinsurance contracts, the Company recognized brokerage expenses paid to Tiger Risk for the three months ended March 31, 2012 of $290 of which $964 was included in accounts payable and accrued expenses at December 31, 2012.

On November 24, 2009, the Company entered into an Investment Management Agreement with Conning, Inc. ("Conning") to manage a portion of the Company's investment portfolio. Aquiline acquired Conning on June 16, 2009. Jeffrey W. Greenberg, a director of the Company, serves as a director of Conning Holdings Corp., the parent company of Conning and Michael Carpenter, the Chairman of Talbot Holdings Ltd. and a director of the Company, serves as a director of a subsidiary company of Conning Holdings Corp. Investment management fees earned by Conning for the three months ended March 31, 2013 were $191 (2012: $203) of which $196 was included in accounts payable and accrued expenses at March 31, 2013 (December 31, 2012: $201).

On December 20, 2011, Validus Re entered into an Assignment and Assumption Agreement (the "Agreement") with Aquiline Capital Partners LLC, a Delaware limited liability company (the "Assignor") and Aquiline Capital Partners II GP (Offshore) Ltd., a Cayman Islands company limited by shares (the "General Partner") pursuant to which Validus Re has assumed 100% of the Assignor's interest in Aquiline Financial Services Fund II L.P. (the "Partnership") representing a total capital commitment of $50,000 (the "Commitment"), as a limited partner in the Partnership (the "Transferred Interest"). Messrs. Greenberg and Watson, directors of the Company, serve as managing principal and senior principal, respectively, of Aquiline Capital Partners LLC. For the three months ended March 31, 2013, the Company incurred $120 (2012: $1,436) in partnership fees and made $1,341 (2012: $1,529) of capital contributions respectively, of which $nil were included in accounts payable and accrued expenses at March 31, 2013 (December 31, 2012: $nil).

Certain shareholders of the Company and their affiliates, as well as the employers of or entities otherwise associated with certain directors and officers or their affiliates, have purchased insurance and/or reinsurance from the Company in the ordinary course of business on terms the Company believes were no more favorable to these (re)insureds than those made available to other customers.

39

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

16. Earnings per share

The following table sets forth the computation of basic and diluted earnings per share for the three months endedMarch 31, 2013 and 2012: 

	Three Months Ended
	March 31, 2013			March 31, 2012
Basic earnings per share
Net income	$	220,694		$	124,234
Loss attributable to noncontrolling interest	2,549			—
Net income available to Validus	223,243			124,234
Less: Dividends and distributions declared on outstanding warrants	(14,464		)	(1,729		)
Income available to common shareholders	$	208,779		$	122,505
Weighted average number of common shares outstanding	107,386,438			99,425,140
Basic earnings per share available to common shareholders	$	1.94		$	1.23
Diluted earnings per share
Net income	$	220,694		$	124,234
Loss attributable to noncontrolling interest	2,549			—
Net income available to Validus	223,243			124,234
Less: Dividends and distributions declared on outstanding warrants	(14,464		)	—
Income available to common shareholders	$	208,779		$	124,234
Weighted average number of common shares outstanding	107,386,438			99,425,140
Share equivalents:
Warrants	—			3,022,971
Stock options	1,631,556			813,863
Unvested restricted shares	1,035,005			1,834,116
Weighted average number of diluted common shares outstanding	110,052,999			105,096,090
Diluted earnings per share available to common shareholders	$	1.90		$	1.18

Share equivalents that would result in the issuance of common shares of 104,405 (2012: 16,660) were outstanding for the three months endedMarch 31, 2013, but were not included in the computation of diluted earnings per share because the effect would be antidilutive.

17. Segment information

The Company conducts its operations worldwide through two wholly-owned subsidiaries, Validus Reinsurance, Ltd. and Talbot Holdings Ltd. from which three operating segments have been determined under U.S. GAAP segment reporting. During the first quarter of 2012, to better align the Company's operating and reporting structure with its current strategy, there was a change in the segment structure. This change included the AlphaCat group of companies as a separate operating segment. "AlphaCat segment" was included as an additional segment and includes the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013, PaCRe and the AlphaCat ILS funds. The Company's operating segments are strategic business units that offer different products and services. They are managed and have capital allocated separately because each business requires different strategies.

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Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Validus Re Segment

The Validus Re segment is focused on short-tail lines of reinsurance. The primary lines in which the segment conducts business are property, marine and specialty which includes agriculture, aerospace and aviation, financial lines of business, nuclear, terrorism, life, accident & health, workers' compensation, crisis management, contingency, motor, technical lines and composite.

AlphaCat Segment

The AlphaCat segment manages strategic relationships that leverage the Company's underwriting and investment expertise and earns management, performance and underwriting fees primarily from the Company's operating affiliates, AlphaCat Re 2011, AlphaCat Re 2012 and AlphaCat 2013 as well as investments in PaCRe and the AlphaCat ILS funds.

Talbot Segment

The Talbot segment focuses on a wide range of marine and energy, war, political violence, commercial property, financial institutions, contingency, accident & health and aviation classes of business on an insurance or facultative reinsurance basis and principally property, aerospace and marine classes of business on a treaty reinsurance basis.

Corporate and other reconciling items

The Company has a "Corporate" function, which includes the activities of the parent company, and which carries out certain functions for the group. "Corporate" includes non-core' underwriting expenses, predominantly general and administrative and stock compensation expenses. "Corporate" also denotes the activities of certain key executives such as the Chief Executive Officer and Chief Financial Officer. For internal reporting purposes, "Corporate" is reflected separately, however "Corporate" is not considered an operating segment under these circumstances. Other reconciling items include, but are not limited to, the elimination of intersegment revenues and expenses and unusual items that are not allocated to segments.

41

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following tables summarize the results of our operating segments and "Corporate":

Three Months Ended March 31, 2013	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	747,963		$	96,516		$	293,530		$	(33,249	)	$	1,104,760
Reinsurance premiums ceded	(125,728		)	—			(94,737		)	33,249			(187,216		)
Net premiums written	622,235			96,516			198,793			—			917,544
Change in unearned premiums	(319,101		)	(68,899		)	1,517			—			(386,483		)
Net premiums earned	303,134			27,617			200,310			—			531,061
Underwriting deductions
Losses and loss expenses	73,402			—			71,369			—			144,771
Policy acquisition costs	51,744			2,638			40,526			(1,297		)	93,611
General and administrative expenses	29,441			4,037			30,912			15,889			80,279
Share compensation expenses	1,413			77			1,405			(577		)	2,318
Total underwriting deductions	156,000			6,752			144,212			14,015			320,979
Underwriting income (loss)	$	147,134		$	20,865		$	56,098		$	(14,015	)	$	210,082
Net investment income	23,193			881			4,718			(3,143		)	25,649
Other income	13,490			6,633			—			(17,438		)	2,685
Finance expenses	(3,252		)	(11,325		)	(74		)	(9,795		)	(24,446		)
Operating income (loss) before taxes and income from operating affiliates	180,565			17,054			60,742			(44,391		)	213,970
Tax benefit (expense)	1,757			—			(1,054		)	(385		)	318
Income from operating affiliates	—			3,523			—			—			3,523
Net operating income (loss)	$	182,322		$	20,577		$	59,688		$	(44,776	)	$	217,811
Net realized gains on investments	1,593			—			128			—			1,721
Net unrealized (losses) on investments	(2,193		)	(4,788		)	(256		)	—			(7,237		)
Income from investment affiliate	1,477			—			—			—			1,477
Foreign exchange gains (losses)	11,162			(1,187		)	(3,918		)	865			6,922
Net income (loss)	$	194,361		$	14,602		$	55,642		$	(43,911	)	$	220,694
Net loss attributable to noncontrolling interest	—			2,549			—			—			2,549
Net income (loss) available (attributable) to Validus	$	194,361		$	17,151		$	55,642		$	(43,911	)	$	223,243
Selected ratios (a):
Net premiums written / Gross premiums written	83.2		%	100.0		%	67.7		%				83.1		%
Losses and loss expenses	24.2		%	0.0		%	35.6		%				27.3		%
Policy acquisition costs	17.1		%	9.6		%	20.2		%				17.6		%
General and administrative expenses (b)	10.2		%	14.9		%	16.1		%				15.6		%
Expense ratio	27.3		%	24.5		%	36.3		%				33.2		%
Combined ratio	51.5		%	24.5		%	71.9		%				60.5		%
Total assets	$	6,299,481		$	1,189,190		$	3,043,312		$	32,417		$	10,564,400

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

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Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Three Months Ended March 31, 2012	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	566,866		$	3,518		$	293,253		$	(26,348	)	$	837,289
Reinsurance premiums ceded	(30,001		)	—			(103,399		)	26,348			(107,052		)
Net premiums written	536,865			3,518			189,854			—			730,237
Change in unearned premiums	(283,856		)	(855		)	5,673			—			(279,038		)
Net premiums earned	253,009			2,663			195,527			—			451,199
Underwriting deductions
Losses and loss expenses	124,206			—			107,783			—			231,989
Policy acquisition costs	38,790			256			38,738			348			78,132
General and administrative expenses	17,252			1,032			33,348			14,743			66,375
Share compensation expenses	1,872			52			1,348			2,166			5,438
Total underwriting deductions	182,120			1,340			181,217			17,257			381,934
Underwriting income (loss)	$	70,889		$	1,323		$	14,310		$	(17,257	)	$	69,265
Net investment income	23,577			659			5,790			(2,266		)	27,760
Other income	2,219			7,974			1,026			(2,328		)	8,891
Finance expenses	(3,694		)	(2		)	(31		)	(12,552		)	(16,279		)
Operating income (loss) before taxes and income from operating affiliates	92,991			9,954			21,095			(34,403		)	89,637
Tax (expense)	(7		)	—			(132		)	—			(139		)
Income from operating affiliates	—			3,367			—			—			3,367
Net operating income (loss)	$	92,984		$	13,321		$	20,963		$	(34,403	)	$	92,865
Net realized gains on investments	6,242			—			1,290			—			7,532
Net unrealized gains (losses) on investments	19,865			(597		)	1,403			—			20,671
Foreign exchange (losses) gains	(262		)	(9		)	3,623			(186		)	3,166
Net income (loss)	$	118,829		$	12,715		$	27,279		$	(34,589	)	$	124,234
Net (income) attributable to noncontrolling interest	—			—			—			—			—
Net income (loss) available (attributable) to Validus	$	118,829		$	12,715		$	27,279		$	(34,589	)	$	124,234
Selected ratios (a):
Net premiums written / Gross premiums written	94.7		%	100.0		%	64.7		%				87.2		%
Losses and loss expenses	49.1		%	0.0		%	55.1		%				51.4		%
Policy acquisition costs	15.3		%	9.6		%	19.8		%				17.3		%
General and administrative expenses (b)	7.6		%	40.7		%	17.7		%				15.9		%
Expense ratio	22.9		%	50.3		%	37.5		%				33.2		%
Combined ratio	72.0		%	50.3		%	92.6		%				84.6		%
Total assets	$	4,940,727		$	237,528		$	2,929,817		$	13,797		$	8,121,869

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

43

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The Company’s exposures are generally diversified across geographic zones. The following tables set forth the gross premiums written allocated to the territory of coverage exposure for the periods indicated:

	Three Months Ended March 31, 2013
	Gross Premiums Written
	Validus Re		AlphaCat		Talbot		Eliminations			Total		%
United States	$	236,496	$	17,489	$	20,541	$	(6,864	)	$	267,662	24.2	%
Worldwide excluding United States (a)	50,308		14,689		39,458		(4,508		)	99,947		9.0	%
Australia and New Zealand	25,026		2,183		3,005		(230		)	29,984		2.7	%
Europe	40,870		1,964		18,311		(2,848		)	58,297		5.3	%
Latin America and Caribbean	8,418		—		42,000		(3,218		)	47,200		4.3	%
Japan	737		—		654		(50		)	1,341		0.1	%
Canada	2,642		318		2,706		(525		)	5,141		0.5	%
Rest of the world (b)	19,079		—		18,314		(1,403		)	35,990		3.3	%
Sub-total, non United States	147,080		19,154		124,448		(12,782		)	277,900		25.2	%
Worldwide including United States (a)	100,540		59,873		19,156		(3,689		)	175,880		15.9	%
Other location non-specific (c)	263,847		—		129,385		(9,914		)	383,318		34.7	%
Total	$	747,963	$	96,516	$	293,530	$	(33,249	)	$	1,104,760	100.0	%

	Three Months Ended March 31, 2012
	Gross Premiums Written
	Validus Re			AlphaCat		Talbot		Eliminations			Total			%
United States	$	106,936		$	1,326	$	18,426	$	(1,656	)	$	125,032		14.9	%
Worldwide excluding United States (a)	37,116			279		51,317		(4,611		)	84,101			10.0	%
Australia and New Zealand	24,785			—		3,534		(316		)	28,003			3.3	%
Europe	45,274			338		15,247		(1,370		)	59,489			7.1	%
Latin America and Caribbean	3,789			—		40,570		(3,645		)	40,714			4.9	%
Japan	(1,311		)	—		660		(59		)	(710		)	(0.1	)%
Canada	2,430			—		3,522		(318		)	5,634			0.7	%
Rest of the world (b)	17,397			—		20,482		(1,840		)	36,039			4.3	%
Sub-total, non United States	129,480			617		135,332		(12,159		)	253,270			30.2	%
Worldwide including United States (a)	103,575			1,575		14,797		(1,329		)	118,618			14.2	%
Other location non-specific (c)	226,875			—		124,698		(11,204		)	340,369			40.7	%
Total	$	566,866		$	3,518	$	293,253	$	(26,348	)	$	837,289		100.0	%

(a) Represents risks in two or more geographic zones.

(b) Represents risks in one geographic zone.

(c) The Other location non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable such as marine and aerospace risks and can span multiple geographic areas and are not fixed locations in some instances.

44

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

18. Subsequent events

(a)  Quarterly Dividend

On May 1, 2013, the Company announced a quarterly cash dividend of $0.30 per each common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable, payable on June 28, 2013 to holders of record on June 14, 2013.

(b)  Longhorn Re Acquisition

On April 25, 2013, the Company acquired Longhorn Re, Ltd., a single contract, Bermuda domiciled crop reinsurer.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of the Company's consolidated results of operations for the three months ended March 31, 2013 and 2012 and the Company's consolidated financial condition, liquidity and capital resources at March 31, 2013 and December 31, 2012. This discussion and analysis should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2012, the discussions of critical accounting policies and the qualitative and quantitative disclosure about market risk contained in the Company's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2012.

For a variety of reasons, the Company's historical financial results may not accurately indicate future performance. See "Cautionary Note Regarding Forward-Looking Statements." The Risk Factors set forth in Item 1A of the Company's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2012 present a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained herein.

Executive Overview

The Company conducts its operations worldwide through three operating segments which have been determined under U.S. GAAP segment reporting, Validus Re, Talbot and AlphaCat. The Company, provides reinsurance, insurance and insurance linked securities ("ILS") fund management. Validus Re is a Bermuda based reinsurer focused on short tail lines of reinsurance. Talbot is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd's insurance market through Syndicate 1183.  AlphaCat is a Bermuda based investment adviser, managing third-party capital in insurance linked securities and other investments in the property catastrophe reinsurance space. 

The Company’s strategy has been to concentrate primarily on short-tail risks, which has been an area where management believes current prices and terms provide an attractive risk adjusted return and the management team has proven expertise. The Company’s profitability in any given period is based upon premium and investment revenues, less net losses and loss expenses, acquisition expenses and operating expenses. Financial results in the insurance and reinsurance industry are influenced by the frequency and/or severity of claims and losses, including as a result of catastrophic events, changes in interest rates, financial markets and general economic conditions, the supply of insurance and reinsurance capacity and changes in legal, regulatory and judicial environments.

On April 2, 2012, the Company capitalized PaCRe, a new Class 4 Bermuda reinsurer formed for the purpose of writing high excess property catastrophe reinsurance.  PaCRe was funded with $500.0 million of contributed capital. Validus invested $50.0 million in PaCRe's common equity. The Company underwrites business for PaCRe, for which it paid a profit commission based on the company's underwriting results. As Validus Re holds a majority of PaCRe's outstanding voting rights, the financial statements of PaCRe are included in the consolidated financial statements for the Company. The portion of PaCRe's earnings attributable to third party investors for the three months ended March 31, 2013 is recorded in the consolidated Statements of Comprehensive Income (Loss) as "Net (income) loss attributable to noncontrolling interest."

On May 29, 2012, the Company announced that it has joined with other investors in capitalizing AlphaCat Re 2012. AlphaCat Re 2012 is a special purpose reinsurer formed for the purpose of writing collateralized reinsurance with a particular focus on windstorm risks for Florida domiciled insurance companies. AlphaCat Re 2012 was funded with $70.0 million of equity capital. The Company underwrites business for AlphaCat Re 2012, for which it is paid a commission for originating the business and a

45

profit commission based on underwriting results. Validus Re has an equity interest and voting rights in AlphaCat Re 2012 which is below 50%, therefore the investment in AlphaCat Re 2012 is included as an equity method investment in the consolidated financial statements of the Company.

On February 22, 2013, a partial return of investment was made to the investors of AlphaCat Re 2012. Validus Re's corresponding portion of the return of investment was $3.8 million.

On November 30, 2012, the Company acquired all of the outstanding shares of Flagstone Reinsurance Holdings S.A. ("Flagstone"), strengthening the Company's leading property catastrophe reinsurance and short-tail specialty insurance platform. For segmental reporting purposes, the results of Flagstone’s operations since the acquisition date have been included within the Validus Re segment in the consolidated financial statements.

On December 17, 2012, the Company joined with other investors in capitalizing AlphaCat 2013, a special purpose vehicle formed for the purpose of investing in collateralized reinsurance. AlphaCat 2013 was funded with $230.0 million of contributed capital. Validus Re has an equity interest and voting rights in AlphaCat 2013 which is below 50%, therefore the investment in AlphaCat 2013 is included as an equity method investment in the consolidated financial statements of the Company.

On December 17, 2012, the Company also received $219.4 million of third party subscriptions for three AlphaCat ILS Funds. Validus Re holds a majority of participation rights in two of the funds, therefore the financial statements of these funds are included in the consolidated financial statements of the Company. The portion of the funds' earnings attributable to third party investors for the three months ended March 31, 2013 is recorded in the consolidated Statements of Comprehensive Income as "Net loss attributable to noncontrolling interest." The third fund is also a variable interest entity, however, it is not consolidated by the Company as Validus Re is not deemed to be the primary beneficiary. As a result, the investment in this fund is included in "Investments in affiliates" as at March 31, 2013. The Company's maximum exposure to loss with respect to this investment is limited to the investment carrying amount reported in the Company's Consolidated Balance Sheet.

AlphaCat Re 2011 is now considered "off-risk" as all reinsurance contracts written by the company have expired. As a result, on January 4, 2013 and January 23, 2013, a partial return of investment was made to the investors of AlphaCat Re 2011. Validus Re's corresponding portion of the return of investment was $46.4 million.

Business Outlook and Trends

We underwrite global specialty property insurance and reinsurance and have large aggregate exposures to natural and man-made disasters. The occurrence of claims from catastrophic events results in substantial volatility, and can have material adverse effects on the Company’s financial condition and results and ability to write new business. This volatility affects results for the period in which the loss occurs because U.S. accounting principles do not permit reinsurers to reserve for such catastrophic events until they occur. Catastrophic events of significant magnitude historically have been relatively infrequent, although management believes the property catastrophe reinsurance market has experienced a higher level of worldwide catastrophic losses in terms of both frequency and severity in the period from 1992 to the present. We also expect that increases in the values and concentrations of insured property will increase the severity of such occurrences in the future. The Company seeks to reflect these trends when pricing contracts.

Property and other reinsurance premiums have historically risen in the aftermath of significant catastrophic losses. As loss reserves are established, industry surplus is depleted and the industry’s capacity to write new business diminishes. At the same time, management believes that there is a heightened awareness of exposure to natural catastrophes on the part of cedants, rating agencies and catastrophe modeling firms, resulting in an increase in the demand for reinsurance protection. The global property and casualty insurance and reinsurance industry has historically been highly cyclical. Since 2007, increased capital provided by new entrants or by the commitment of capital by existing insurers and reinsurers increased the supply of insurance and reinsurance which resulted in a softening on rates on most lines. During 2010 there was an increased level of catastrophe activity, principally the Chilean earthquake and the Deepwater Horizon events but the Company continued to see increased competition and decreased premium rates in most classes of business.

 During the January 2012 renewal season, the Validus Re segment showed rate improvement relative to 2011. This improvement was largely due to the large catastrophe loss activity during 2011. During the first quarter of 2012, Talbot experienced rate increases in loss affected lines without seeing a systemic rise in rates across all lines. During the July 2012 renewal period, the Validus Re segment experienced rate improvements in the U.S. property lines while European and Latin American property rates were unchanged. The Talbot segment experienced a rate increase of 2.7% across the portfolio, with some lines performing in line with expectations and other lines either de-risking or reassessing the respective portfolio.

46

During the January 2013 renewal season, the Validus Re and AlphaCat segments underwrote $655.7 million in gross premiums written, an increase of 12.7% from the prior year period. This increase was driven primarily by an increase in gross premiums written in the specialty lines. This renewal data does not include Talbot’s operations as its business is distributed relatively evenly throughout the year. Talbot experienced a rate increase of 1.9% across the portfolio, driven largely by the marine and energy liability, onshore energy international, financial institutions and marine treaty accounts.

Financial Measures

The Company believes the following financial indicators are important in evaluating performance and measuring the overall growth in value generated for shareholders:

Annualized return on average equity represents the level of net income available to shareholders generated from the average shareholders’ equity during the period. Annualized return on average equity is calculated by dividing the net income available to Validus for the period by the average shareholders’ equity available to Validus during the period. Average shareholders’ equity available to Validus is the average of the beginning, ending and intervening quarter end shareholders’ equity available to Validus balances. Percentages for the quarter and interim periods are annualized. The Company’s objective is to generate superior returns on capital that appropriately reward shareholders for the risks assumed and to grow premiums written only when returns meet or exceed internal requirements. Details of annualized return on average equity are provided below.

	Three Months Ended March 31,				Year Ended December 31,
	2013		2012		2012
Annualized return on average equity	22.5	%	14.2	%	11.3	%

The increase in annualized return on average equity for the three months ended March 31, 2013 was driven primarily by an increase in net income. Net income available to Validus for the three months ended March 31, 2013 increased by $99.0 million, or 79.7% compared to the three months ended March 31, 2012. The increase in net income for the three months ended March 31, 2013 was primarily due to an increase in underwriting income of $140.8 million, partially offset by an unfavorable movement of $27.9 million in net unrealized gains (losses) on investments.

Diluted book value per common share is considered by management to be an appropriate measure of our returns to common shareholders, as we believe growth in our book value on a diluted basis ultimately translates into growth of our stock price. Diluted book value per common share decreased by $0.43, or 1.2%, from $35.22 at December 31, 2012 to $34.79 at March 31, 2013, primarily due to the special dividend of $2.00 per share and an increase in the quarterly dividend from $0.25 to $0.30 per share which was paid during the three months ended March 31, 2013. Diluted book value per common share is a Non-GAAP financial measure. The most comparable U.S. GAAP financial measure is book value per common share. Diluted book value per common share is calculated based on total shareholders’ equity plus the assumed proceeds from the exercise of outstanding options and warrants, divided by the sum of common shares, unvested restricted shares, options and warrants outstanding (assuming their exercise). A reconciliation of diluted book value per common share to book value per common share is presented below in the section entitled “Other Non-GAAP Financial Measures.”

Cash dividends per common shareare an integral part of the value created for shareholders. On May 1, 2013, the Company announced a quarterly cash dividend of $0.30 per each common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable, payable on June 28, 2013 to holders of record on June 14, 2013.

Underwriting income measures the performance of the Company’s core underwriting function, excluding revenues and expenses such as net investment income (loss), other income, finance expenses, net realized and unrealized gains (losses) on investments and foreign exchange gains (losses). The Company believes the reporting of underwriting income enhances the understanding of our results by highlighting the underlying profitability of the Company’s core insurance and reinsurance operations. Underwriting income for the three months ended March 31, 2013 and 2012 was $210.1 million and $69.3 million, respectively. Underwriting income is a non-GAAP financial measure as described in detail and reconciled in the section below entitled “Underwriting Income.”

Managed gross premiums written, a non-GAAP financial measure, represents gross premiums written by the Company and its operating affiliates.  Managed gross premiums written differs from total gross premiums written, which the Company believes is the most directly comparable GAAP measure, due to the inclusion of premiums written on behalf of the Company's operating affiliates, AlphaCat Re 2011 and AlphaCat Re 2012, which are accounted for under the equity method of accounting. A reconciliation

47

of managed gross premiums written to gross premiums written, the most comparable U.S. GAAP financial measure, is presented in below in the section entitled "Other Non-GAAP Financial Measures."

Critical Accounting Policies and Estimates

There are certain accounting policies that the Company considers to be critical due to the judgment and uncertainty inherent in the application of those policies. In calculating financial statement estimates, the use of different assumptions could produce materially different estimates. The Company believes the following critical accounting policies affect significant estimates used in the preparation of our consolidated financial statements:

• Reserve for losses and loss expenses;

• Premiums;

• Reinsurance premiums ceded and reinsurance recoverable; and

• Investment valuation.

Critical accounting policies and estimates are discussed further in Item 7, Management's Discussion and Analysis of Results of Operations and Financial Condition in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2012.

Segment Reporting

Management has determined that the Company operates in three reportable segments. These segments are its significant operating subsidiaries, Validus Re, AlphaCat and Talbot. For segmental reporting purposes, the results of Flagstone’s operations since the acquisition date have been included within the Validus Re segment in the consolidated financial statements.

Results of Operations

 Validus Re commenced operations on December 16, 2005. The Company’s fiscal year ends on December 31. Financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information.

48

The following table presents results of operations for the three months endedMarch 31, 2013 and 2012:  

	Three Months Ended March 31,
(Dollars in thousands)	2013			2012 (a)
Underwriting income
Gross premiums written	$	1,104,760		$	837,289
Reinsurance premiums ceded	(187,216		)	(107,052		)
Net premiums written	917,544			730,237
Change in unearned premiums	(386,483		)	(279,038		)
Net premiums earned	531,061			451,199
Underwriting deductions
Losses and loss expenses	144,771			231,989
Policy acquisition costs	93,611			78,132
General and administrative expenses	80,279			66,375
Share compensation expenses	2,318			5,438
Total underwriting deductions	320,979			381,934
Underwriting income (b)	210,082			69,265
Net investment income	25,649			27,760
Other income	2,685			8,891
Finance expenses	(24,446		)	(16,279		)
Operating income before taxes and income from operating affiliates (b)	213,970			89,637
Tax benefit (expense)	318			(139		)
Income from operating affiliates	3,523			3,367
Net operating income (b)	217,811			92,865
Net realized gains on investments	1,721			7,532
Net unrealized (losses) gains on investments	(7,237		)	20,671
Income from investment affiliate	1,477			—
Foreign exchange gains	6,922			3,166
Net income	220,694			124,234
Net loss attributable to noncontrolling interest	2,549			—
Net income available to Validus	$	223,243		$	124,234
Selected ratios:
Net premiums written / Gross premiums written	83.1		%	87.2		%
Losses and loss expenses	27.3		%	51.4		%
Policy acquisition costs	17.6		%	17.3		%
General and administrative expenses (c)	15.6		%	15.9		%
Expense ratio	33.2		%	33.2		%
Combined ratio	60.5		%	84.6		%

a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

b)      Non-GAAP Financial Measures: In presenting the Company's results, management has included and discussed underwriting income and net operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. A reconciliation of underwriting income to net income, the most comparable U.S. GAAP financial measure, is presented in the section below entitled "Underwriting Income."

 c)    The general and administrative expense ratio includes share compensation expenses.

49

	Three Months Ended March 31,
	2013			2012 (a)
Validus Re
Gross premiums written	$	747,963		$	566,866
Reinsurance premiums ceded	(125,728		)	(30,001		)
Net premiums written	622,235			536,865
Change in unearned premiums	(319,101		)	(283,856		)
Net premiums earned	303,134			253,009
Losses and loss expenses	73,402			124,206
Policy acquisition costs	51,744			38,790
General and administrative expenses	29,441			17,252
Share compensation expenses	1,413			1,872
Total underwriting deductions	156,000			182,120
Underwriting income (b)	$	147,134		$	70,889
AlphaCat
Gross premiums written	$	96,516		$	3,518
Reinsurance premiums ceded	—			—
Net premiums written	96,516			3,518
Change in unearned premiums	(68,899		)	(855		)
Net premiums earned	27,617			2,663
Policy acquisition costs	2,638			256
General and administrative expenses	4,037			1,032
Share compensation expenses	77			52
Total underwriting deductions	6,752			1,340
Underwriting income (b)	$	20,865		$	1,323
Talbot
Gross premiums written	$	293,530		$	293,253
Reinsurance premiums ceded	(94,737		)	(103,399		)
Net premiums written	198,793			189,854
Change in unearned premiums	1,517			5,673
Net premiums earned	200,310			195,527
Losses and loss expenses	71,369			107,783
Policy acquisition costs	40,526			38,738
General and administrative expenses	30,912			33,348
Share compensation expenses	1,405			1,348
Total underwriting deductions	144,212			181,217
Underwriting income (b)	$	56,098		$	14,310
Corporate & Eliminations
Gross premiums written	$	(33,249	)	$	(26,348	)
Reinsurance premiums ceded	33,249			26,348
Net premiums written	—			—
Policy acquisition costs	(1,297		)	348
General and administrative expenses	15,889			14,743
Share compensation expenses	(577		)	2,166
Total underwriting deductions	14,015			17,257
Underwriting (loss) (b)	$	(14,015	)	$	(17,257	)
Total underwriting income (b)	$	210,082		$	69,265

a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

b)       Non-GAAP Financial Measures: In presenting the Company's results, management has included and discussed underwriting income that is not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. A reconciliation of this measure to net income, the most comparable U.S. GAAP financial measure, is presented in the section below entitled "Underwriting Income."

50

Three Months Ended March 31, 2013 compared to Three Months Ended March 31, 2012

Net income available to Validus for the three months ended March 31, 2013 was $223.2 million compared to $124.2 million for the three months ended March 31, 2012, an increase of $99.0 million or 79.7%. The primary factors driving the increase in net income were:

• Increase in underwriting income of $140.8 million primarily due to:

• An increase in net premiums earned of $79.9 million;

• A decrease in underwriting deductions of $61.0 million due primarily to a decrease in losses and loss expenses of $87.2 million, partially offset by an increase in policy acquisition costs of $15.5 million; and

• A favorable movement in foreign exchange gains of $3.8 million.

The above factors were partially offset by the following:

• An unfavorable movement of $27.9 million in net unrealized gains (losses) on investments, of which $4.7 million is attributable to noncontrolling interest; and

• An increase in finance expenses of $8.2 million.

 The change in net income available to Validus for the three months ended March 31, 2013 of $99.0 million as compared to the three months ended March 31, 2012 is described in the following table:

	Three Months Ended March 31, 2013
	Increase (Decrease) Over the Three Months Ended March 31, 2012
(Dollars in thousands)	Validus Re			AlphaCat			Talbot			Corporate and Eliminations			Total
Notable losses - decrease in net loss and loss expenses (a)	$	85,497		$	—		$	13,413		—			$	98,910
Less: Notable losses - (decrease) increase in net reinstatement premiums (a)	(17,796		)	—			3,424			—			(14,372		)
Other underwriting income	8,544			19,542			24,951			3,242			56,279
Underwriting income (b)	76,245			19,542			41,788			3,242			140,817
Net investment income	(384		)	222			(1,072		)	(877		)	(2,111		)
Other income	11,271			(1,341		)	(1,026		)	(15,110		)	(6,206		)
Finance expenses	442			(11,323		)	(43		)	2,757			(8,167		)
Operating income (loss) before taxes and income from operating affiliates	87,574			7,100			39,647			(9,988		)	124,333
Tax benefit (expense)	1,764			—			(922		)	(385		)	457
Income from operating affiliates	—			156			—			—			156
Net operating income (loss)	89,338			7,256			38,725			(10,373		)	124,946
Net realized (losses) on investments	(4,649		)	—			(1,162		)	—			(5,811		)
Net unrealized (losses) on investments	(22,058		)	(4,191		)	(1,659		)	—			(27,908		)
Income from investment affilate	1,477			—			—			—			1,477
Foreign exchange gains (losses)	11,424			(1,178		)	(7,541		)	1,051			3,756
Net income (loss)	75,532			1,887			28,363			(9,322		)	96,460
Net loss attributable to noncontrolling interest	—			2,549			—			—			2,549
Net income (loss) available to Validus	$	75,532		$	4,436		$	28,363		$	(9,322	)	$	99,009

(a) There were no notable losses for the three months ended March 31, 2013. Notable losses for the three months ended March 31, 2012 included: Costa Concordia and Cat 67. Excludes the reserve for potential development on 2012 notable loss events.

(b)      Non-GAAP Financial Measures: In presenting the Company's results, management has included and discussed underwriting income (loss) that is not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. A reconciliation of this measure to net income, the most comparable U.S. GAAP financial measure, is presented in the section below entitled "Underwriting Income."

Gross Premiums Written

Gross premiums written for the three months ended March 31, 2013 were $1,104.8 million compared to $837.3 million for the three months ended March 31, 2012, an increase of $267.5 million or 31.9%. Details of gross premiums written by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Gross Premiums Written		Gross Premiums Written (%)		Gross Premiums Written		Gross Premiums Written (%)		% Change
Property	$	471,526	42.7	%	$	381,381	45.5	%	23.6	%
Marine	283,822		25.7	%	306,235		36.6	%	(7.3	)%
Specialty	349,412		31.6	%	149,673		17.9	%	133.5	%
Total	$	1,104,760	100.0	%	$	837,289	100.0	%	31.9	%

a)    The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Validus Re. Validus Re gross premiums written for the three months ended March 31, 2013 were $748.0 million compared to $566.9 million for the three months ended March 31, 2012, an increase of $181.1 million or 31.9%. Details of Validus Re gross premiums written by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Gross Premiums Written		Gross Premium Written (%)		Gross Premiums Written		Gross Premiums Written (%)		% Change
Property	$	326,024	43.6	%	$	318,485	56.2	%	2.4	%
Marine	161,432		21.6	%	198,427		35.0	%	(18.6	)%
Specialty	260,507		34.8	%	49,954		8.8	%	421.5	%
Total	$	747,963	100.0	%	$	566,866	100.0	%	31.9	%

a)    The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

The increase in gross premiums written in the property lines of $7.5 million was due primarily to an increase in catastrophe excess of loss treaties of $20.4 million and a $7.2 million increase in premiums relating to new business assumed through the Flagstone acquisition, offset by decreases in premiums assumed from Talbot of $4.0 million, proportional treaties of $4.8 million, per risk excess of loss treaties of $4.0 million and reinstatement premiums of $5.4 million. The decrease in gross premiums written of $37.0 million in the marine lines was due primarily to a $23.5 million decrease in proportional treaties due to the non-renewal of business that no longer met the Company's underwriting threshold and a $16.9 million decrease in reinstatement premiums primarily on Costa Concordia. The increase in gross premiums written in the specialty lines of $210.6 million was due primarily to an increase in proportional crop treaties of $187.2 million related to targeted growth in the agricultural class, as a result of the hiring of two experienced agriculture underwriters and an increase in catastrophe excess of loss treaties of $9.8 million.

Gross premiums written under the quota share, surplus treaty and excess of loss contracts with Talbot for the three months ended March 31, 2013 were $22.5 million compared to $26.3 million for the three months ended March 31, 2012, a decrease of $3.8 million on all lines, as compared to the three months ended March 31, 2012. These reinsurance agreements with Talbot are eliminated upon consolidation.

AlphaCat. AlphaCat gross premiums written for the three months ended March 31, 2013 were $96.5 million compared to $3.5 million for the three months ended March 31, 2012, an increase of $93.0 million. Details of AlphaCat gross premiums written by line of business are provided below.

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	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012
(Dollars in thousands)	Gross Premiums Written		Gross Premiums Written (%)		Gross Premiums Written		Gross Premiums Written (%)		% Change
Property	$	96,516	100.0	%	$	3,518	100.0	%	NM
Total	$	96,516	100.0	%	$	3,518	100.0	%	NM

NM: Not meaningful

The increase in gross premiums written in the property lines of $93.0 million was due primarily to the renewal of business through AlphaCat Reinsurance, Ltd., which is fully consolidated, whereas the comparable renewals are included within AlphaCat Re 2011 which was not consolidated in 2012, and was accounted for as an operating affiliate. The comparable renewals were included in gross managed premiums, a comparable measure. A reconciliation of managed gross premiums written to gross premiums written, the most comparable U.S. GAAP financial measure, is presented below in the section entitled "Other Non-GAAP Financial Measures."

Gross premiums written under the quota share contracts assumed from Validus Re for the three months ended March 31, 2013 were $10.8 million compared to $0.0 million for the three months ended March 31, 2012, an increase of $10.8 million on property lines, as compared to the three months ended March 31, 2012. These reinsurance agreements with Validus Re are eliminated upon consolidation.

Managed gross premiums written, including our non-consolidated affiliates, AlphaCat Re 2011 and AlphaCat Re 2012, for the three months ended March 31, 2013 were $96.0 million compared to $77.4 million for the three months ended March 31, 2012, an increase of $18.6 million or 24.1%. The increase in gross premiums written was due primarily to an increase in business written by PaCRe and AlphaCat Re on behalf of AlphaCat 2013 and the AlphaCat ILS funds.

Talbot. Talbot gross premiums written for the three months ended March 31, 2013 were $293.5 million compared to $293.3 million for the three months ended March 31, 2012, an increase of $0.3 million or 0.1%. The $293.5 million of gross premiums written translated at 2012 rates of exchange would have been $294.6 million for the three months ended March 31, 2013, resulting in an effective increase of $1.1 million or 0.4%. Details of Talbot gross premiums written by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012
(Dollars in thousands)	Gross Premiums Written		Gross Premiums Written (%)		Gross Premiums Written		Gross Premiums Written (%)		% Change
Property	$	77,975	26.6	%	$	81,534	27.8	%	(4.4	)%
Marine	124,726		42.5	%	109,998		37.5	%	13.4	%
Specialty	90,829		30.9	%	101,721		34.7	%	(10.7	)%
Total	$	293,530	100.0	%	$	293,253	100.0	%	0.1	%

The decrease in gross premiums written in the property lines of $3.6 million was due primarily to a $4.3 million decrease in premiums written in the property treaty lines which is mainly driven by a decrease in reinstatement premiums and a $3.0 million decrease in the energy onshore lines, partially offset by a $2.9 million increase in construction lines. The increase in gross premiums written in the marine lines of $14.7 million was due primarily to a $9.7 million increase in premiums written in the energy lines and a $7.3 million increase in the cargo lines, partially offset by a $4.1 million decrease in the other treaty lines, which was mainly driven by a decrease in reinstatement premiums. The decrease in gross premiums written in the specialty lines of $10.9 million was due primarily to a decrease in premiums written in the war and political risk lines of $5.8 million and $3.5 million, respectively, partially offset by an increase of $6.2 million of premiums written in the political violence lines. In addition, there was a $6.1 million decrease in the direct aviation and aviation treaty lines, of which $2.8 million relates to a reassessment of future reinstatement premiums.

Reinsurance Premiums Ceded

Reinsurance premiums ceded for the three months ended March 31, 2013 were $187.2 million compared to $107.1 million for the three months ended March 31, 2012, an increase of $80.2 million or 74.9%. Details of reinsurance premiums ceded by line of business are provided below.

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	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Reinsurance Premiums Ceded		Reinsurance Premiums Ceded (%)		Reinsurance Premiums Ceded		Reinsurance Premiums Ceded (%)		% Change
Property	$	103,478	55.3	%	$	56,605	52.9	%	82.8	%
Marine	15,992		8.5	%	20,109		18.8	%	(20.5	)%
Specialty	67,746		36.2	%	30,338		28.3	%	123.3	%
Total	$	187,216	100.0	%	$	107,052	100.0	%	74.9	%

a)    The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Validus Re. Validus Re reinsurance premiums ceded for the three months ended March 31, 2013 were $125.7 million compared to $30.0 million for the three months ended March 31, 2012, an increase of $95.7 million or 319.1%. Details of Validus Re reinsurance premiums ceded by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Reinsurance Premiums Ceded		Reinsurance Premiums Ceded (%)		Reinsurance Premiums Ceded		Reinsurance Premiums Ceded (%)		% Change
Property	$	84,058	66.9	%	$	29,344	97.8	%	186.5	%
Marine	2,972		2.4	%	125		0.4	%	NM
Specialty	38,698		30.7	%	532		1.8	%	NM
Total	$	125,728	100.0	%	$	30,001	100.0	%	319.1	%

a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

NM: Not meaningful

Reinsurance premiums ceded in the property lines increased by $54.7 million, due primarily to a $28.3 million increase in catastrophe bond coverage assumed through the Flagstone acquisition, an increase in non-proportional retrocessional coverage of $16.6 million due to the purchase of a new multi-pillared treaty and an increase in proportional variable quota share coverage of $10.7 million due to business ceded to AlphaCat Re. The increase in reinsurance premiums of $2.9 million ceded in the marine lines was due primarily to a $7.1 million increase in non-proportional retrocessional coverage, offset by a decrease of $4.2 million due to adjustments to coverage from prior periods. The increase in reinsurance premium ceded on the specialty lines of $38.2 million was due primarily to an increase in other proportional retrocessional coverage of $35.0 million related to the increase in agriculture business.

Reinsurance premiums ceded under the quota share contracts with AlphaCat for the three months ended March 31, 2013 were $10.8 million compared to $0.0 million for the three months ended March 31, 2012, an increase of $10.8 million. These reinsurance agreements with AlphaCat are eliminated upon consolidation.

AlphaCat.AlphaCat did not cede reinsurance premiums for the three months ended March 31, 2013 and 2012.

Talbot. Talbot reinsurance premiums ceded for the three months ended March 31, 2013 were $94.7 million compared to $103.4 million for the three months ended March 31, 2012, a decrease of $8.7 million or 8.4%. Details of Talbot reinsurance premiums ceded by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012
(Dollars in thousands)	Reinsurance Premiums Ceded		Reinsurance Premiums Ceded (%)		Reinsurance Premiums Ceded		Reinsurance Premiums Ceded (%)		% Change
Property	$	48,409	51.1	%	$	49,417	47.8	%	(2.0	)%
Marine	15,356		16.2	%	22,174		21.4	%	(30.7	)%
Specialty	30,972		32.7	%	31,808		30.8	%	(2.6	)%
Total	$	94,737	100.0	%	$	103,399	100.0	%	(8.4	)%

The decrease in reinsurance premiums ceded in the marine lines of $6.8 million was due primarily to a reassessment of reinstatement premiums resulting in a decrease in reinsurance premiums ceded of $7.2 million.

53

Reinsurance premiums ceded under the quota share, surplus treaty and excess of loss contracts with Validus Re for the three months ended March 31, 2013 were $22.5 million compared to $26.3 million for the three months ended March 31, 2012, a decrease of $3.8 million. These reinsurance agreements with Validus Re are eliminated upon consolidation.

Net Premiums Written

Net premiums written for the three months ended March 31, 2013 were $917.5 million compared to $730.2 million for the three months ended March 31, 2012, an increase of $187.3 million or 25.7%. The ratios of net premiums written to gross premiums written for the three months ended March 31, 2013 and 2012 were 83.1% and 87.2%, respectively. Details of net premiums written by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Net Premiums Written		Net Premiums Written (%)		Net Premiums Written		Net Premiums Written (%)		% Change
Property	$	368,048	40.1	%	$	324,776	44.5	%	13.3	%
Marine	267,830		29.2	%	286,126		39.2	%	(6.4	)%
Specialty	281,666		30.7	%	119,335		16.3	%	136.0	%
Total	$	917,544	100.0	%	$	730,237	100.0	%	25.7	%

a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Validus Re.Validus Re net premiums writtenfor the three months ended March 31, 2013 were $622.2 million compared to $536.9 million for the three months ended March 31, 2012, an increase of $85.4 million or 15.9%.  Details of Validus Re net premiums written by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Net Premiums Written		Net Premiums Written (%)		Net Premiums Written		Net Premiums Written (%)		% Change
Property	$	241,966	38.9	%	$	289,141	53.9	%	(16.3	)%
Marine	158,460		25.5	%	198,302		36.9	%	(20.1	)%
Specialty	221,809		35.6	%	49,422		9.2	%	348.8	%
Total	$	622,235	100.0	%	$	536,865	100.0	%	15.9	%

a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

The increase in Validus Re net premiums written was driven by the factors highlighted above in respect of gross premiums written and reinsurance premiums ceded. The ratios of net premiums written to gross premiums written were 83.2% and 94.7% for the three months ended March 31, 2013 and 2012, respectively.

AlphaCat. AlphaCat net premiums written for the three months ended March 31, 2013 were $96.5 million compared to $3.5 million for the three months ended March 31, 2012, an increase of $93.0 million. Details of AlphaCat net premiums written by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012
(Dollars in thousands)	Net Premiums Written		Net Premiums Written (%)		Net Premiums Written		Net Premiums Written (%)		% Change
Property	$	96,516	100.0	%	$	3,518	100.0	%	NM
Total	$	96,516	100.0	%	$	3,518	100.0	%	NM

NM: Not meaningful

The increase in AlphaCat net premiums written was driven by the factors highlighted above in respect of gross premiums written. The ratios of net premiums written to gross premiums written were 100.0% for the three months ended March 31, 2013 and 2012.

54

Talbot. Talbot net premiums written for the three months ended March 31, 2013 were $198.8 million compared to $189.9 million for the three months ended March 31, 2012, an increase of $8.9 million or 4.7%. Details of Talbot net premiums written by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012
(Dollars in thousands)	Net Premiums Written		Net Premiums Written (%)		Net Premiums Written		Net Premiums Written (%)		% Change
Property	$	29,566	14.9	%	$	32,117	16.9	%	(7.9	)%
Marine	109,370		55.0	%	87,824		46.3	%	24.5	%
Specialty	59,857		30.1	%	69,913		36.8	%	(14.4	)%
Total	$	198,793	100.0	%	$	189,854	100.0	%	4.7	%

The increase in net premiums written was driven by the factors highlighted above in respect of gross premiums written and reinsurance premiums ceded. The ratios of net premiums written to gross premiums written for the three months ended March 31, 2013 and 2012 were 67.7% and 64.7%, respectively.

Net Change in Unearned Premiums

Net change in unearned premiums for the three months ended March 31, 2013 was ($386.5) million compared to ($279.0) million for the three months ended March 31, 2012, a decrease of $107.4 million or 38.5%.

	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Net Change in Unearned Premiums			Net Change in Unearned Premiums			% Change
Change in gross unearned premiums	$	(487,467	)	$	(313,064	)	(55.7	)%
Change in prepaid reinsurance premiums	100,984			34,026			196.8	%
Net change in unearned premiums	$	(386,483	)	$	(279,038	)	(38.5	)%

a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Validus Re. Validus Re net change in unearned premiums for the three months ended March 31, 2013 was ($319.1) million compared to ($283.9) million for the three months ended March 31, 2012, a decrease of $35.2 million or 12.4%.

	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Net Change in Unearned Premiums			Net Change in Unearned Premiums			% Change
Change in gross unearned premiums	$	(372,940	)	$	(279,582	)	(33.4	)%
Change in prepaid reinsurance premiums	53,839			(4,274		)	NM
Net change in unearned premiums	$	(319,101	)	$	(283,856	)	(12.4	)%

a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

NM: Not meaningful

Validus Re net change in unearned premiums has decreased for the three months ended March 31, 2013 due primarily to the impact of the increase in gross premiums written for the three months ended March 31, 2013 as compared to the three months ended March 31, 2012.

AlphaCat. AlphaCat net change in unearned premiums for the three months ended March 31, 2013 was ($68.9) million compared to ($0.9) million for the three months ended March 31, 2012, a decrease of $68.0 million.

55

	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
(Dollars in thousands)	Net Change in Unearned Premiums			Net Change in Unearned Premiums			% Change
Change in gross unearned premiums	$	(68,899	)	$	(855	)	NM
Net change in unearned premiums	$	(68,899	)	$	(855	)	NM

NM: Not meaningful

AlphaCat net change in unearned premiums has decreased for the three months ended March 31, 2013 due to the earnings pattern of gross premiums written.

Talbot.Talbot net change in unearned premiums for the three months ended March 31, 2013 was $1.5 million compared to $5.7 million for the three months ended March 31, 2012, a decrease of $4.2 million or 73.3%.

	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
(Dollars in thousands)	Net Change in Unearned Premiums			Net Change in Unearned Premiums			% Change
Change in gross unearned premiums	$	(45,628	)	$	(32,627	)	(39.8	)%
Change in prepaid reinsurance premiums	47,145			38,300			23.1	%
Net change in unearned premiums	$	1,517		$	5,673		(73.3	)%

Talbot net change in unearned premium has decreased for the three months ended March 31, 2013 due to the earnings pattern of gross premiums written and reinsurance premiums ceded.

Net Premiums Earned

Net premiums earned for the three months ended March 31, 2013 were $531.1 million compared to $451.2 million for the three months ended March 31, 2012, an increase of $79.9 million or 17.7%. Details of net premiums earned by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Net Premiums Earned		Net Premiums Earned (%)		Net Premiums Earned		Net Premiums Earned (%)		% Change
Property	$	255,647	48.2	%	$	207,333	46.0	%	23.3	%
Marine	141,579		26.7	%	145,741		32.3	%	(2.9	)%
Specialty	133,835		25.1	%	98,125		21.7	%	36.4	%
Total	$	531,061	100.0	%	$	451,199	100.0	%	17.7	%

a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Validus Re. Validus Re net premiums earned for the three months ended March 31, 2013 were $303.1 million compared to $253.0 million for the three months ended March 31, 2012, an increase of $50.1 million or 19.8%. Details of Validus Re net premiums earned by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Net Premiums Earned		Net Premiums Earned (%)		Net Premiums Earned		Net Premiums Earned (%)		% Change
Property	$	184,482	60.9	%	$	160,048	63.3	%	15.3	%
Marine	56,601		18.7	%	71,877		28.4	%	(21.3	)%
Specialty	62,051		20.4	%	21,084		8.3	%	194.3	%
Total	$	303,134	100.0	%	$	253,009	100.0	%	19.8	%

a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

56

The increase in net premiums earned in the property lines of $24.4 million was due primarily to a $42.6 million increase in net premiums earned relating to business assumed through the Flagstone acquisition, partially offset by the decrease in premiums assumed from Talbot of $7.7 million which are eliminated upon consolidation, an increase in ceded earned premium of $8.4 million and a decrease in reinstatement premiums of $4.2 million. The decrease in premiums earned in the marine lines of $15.3 million was due primarily to a decrease in reinstatement premiums of $16.6 million, relating to Costa Concordia and a decrease in assumed earned premium of $5.0 million, partially offset by an $5.4 million increase in net premiums earned relating to Flagstone. The increase in premiums earned in the specialty lines of $40.9 million was due primarily to an increase in assumed earned premium of $50.7 million, relating to the increase in agriculture business, slightly offset by a decrease in ceded earned premium of $9.5 million. The increase in net premiums earned is consistent with the relevant pattern of net premiums written influencing the earned premiums for the three months ended March 31, 2013 compared to the three months ended March 31, 2012.

AlphaCat. AlphaCat net premiums earned for the three months ended March 31, 2013 were $27.6 million compared to $2.7 million for the three months ended March 31, 2012, an increase of $25.0 million or 937.1%. Details of AlphaCat net premiums earned by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012
(Dollars in thousands)	Net Premiums Earned		Net Premiums Earned (%)		Net Premiums Earned		Net Premiums Earned (%)		% Change
Property	$	27,617	100.0	%	$	2,663	100.0	%	937.1	%
Total	$	27,617	100.0	%	$	2,663	100.0	%	937.1	%

The increase in net premiums earned is consistent with the relevant pattern of net premiums written, influencing the earned premiums for the three months ended March 31, 2013 compared to the three months ended March 31, 2012.

Talbot. Talbot net premiums earned for the three months ended March 31, 2013 were $200.3 million compared to $195.5 million for the three months ended March 31, 2012, an increase of $4.8 million or 2.4%. Details of Talbot net premiums earned by line of business are provided below.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012
(Dollars in thousands)	Net Premiums Earned		Net Premiums Earned (%)		Net Premiums Earned		Net Premiums Earned (%)		% Change
Property	$	43,548	21.7	%	$	44,622	22.8	%	(2.4	)%
Marine	84,978		42.4	%	73,864		37.8	%	15.0	%
Specialty	71,784		35.9	%	77,041		39.4	%	(6.8	)%
Total	$	200,310	100.0	%	$	195,527	100.0	%	2.4	%

The increase in net premiums earned is consistent with the relevant patterns of net premiums written influencing the earned premiums for the three months ended March 31, 2013 compared to the three months ended March 31, 2012.

Losses and Loss Expenses

Losses and loss expenses for the three months ended March 31, 2013 were $144.8 million compared to $232.0 million for the three months ended March 31, 2012, a decrease of $87.2 million or 37.6%. The loss ratios, defined as losses and loss expenses divided by net premiums earned, for the three months ended March 31, 2013 and 2012 were 27.3% and 51.4%, respectively. Details of loss ratios by line of business are provided below.

	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012 (a)		Percentage Point Change
Property	5.4	%	27.5	%	(22.1	)
Marine	38.2	%	89.0	%	(50.8	)
Specialty	57.3	%	46.1	%	11.2
All lines	27.3	%	51.4	%	(24.1	)

a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

57

For the three months ended March 31, 2013, there were no notable loss events. For the three months ended March 31, 2012, the Company incurred $98.9 million of losses from notable loss events, which represented 21.9 percentage points of the loss ratio. Net of $14.4 million of reinstatement premiums, the effect of these events on first quarter 2012 net income was a decrease of $84.5 million. The Company's loss ratio, excluding notable loss events, reserve for potential development on notable loss events and prior year loss reserve development for the three months ended March 31, 2013 and 2012 was 39.7% and 36.2%, respectively.

Three Months Ended March 31, 2013

(Dollars in thousands)

First Quarter 2013 Notable Loss Events

Validus Re

Talbot

Total

Description

Net Losses and Loss Expenses

% of NPE

Net Losses and Loss Expenses

% of NPE

Net Losses and Loss Expenses

% of NPE

None

$

—

—

%

$

—

—

%

$

—

—

%

Total

$

—

—

%

—

%

$

—

—

%

		Three Months Ended March 31, 2012
		(Dollars in thousands)
First Quarter 2012 Notable Loss Events (b)		Validus Re (a)				Talbot				Total
Description		Net Losses and Loss Expenses (c)		% of NPE		Net Losses and Loss Expenses (c)		% of NPE		Net Losses and Loss Expenses (c)		% of NPE
Costa Concordia	Grounding	$	62,798	24.8	%	$	13,399	6.9	%	$	76,197	16.9	%
Cat 67	Tornadoes	22,699		9.0	%	14		—	%	22,713		5.0	%
Total		$	85,497	33.8	%	$	13,413	6.9	%	$	98,910	21.9	%

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

(b) These notable loss events and are based on management's estimates following a review of the Company's potential exposure and discussions with certain clients and brokers. Given the magnitude of these events, and other uncertainties inherent in loss estimation, meaningful uncertainty remains regarding losses from these events and the Company's actual ultimate net losses from these events may vary materially from these estimates.

(c)  Net of reinsurance but not net of reinstatement premiums. Total reinstatement premiums were $14.4 million for the three months ended March 31, 2012.

58

Details of loss ratios by line of business and period of occurrence are provided below.

	Three Months Ended March 31,
	2013		2012 (a)		Percentage Point Change
Property - current period - excluding items below	21.9	%	21.5	%	0.4
Property - current period - notable losses	0.0	%	11.0	%	(11.0	)
Property - change in prior accident years	(16.5	)%	(5.0	)%	(11.5	)
Property - loss ratio	5.4	%	27.5	%	(22.1	)
Marine - current period - excluding items below	47.2	%	44.2	%	3.0
Marine - current period - notable losses	0.0	%	52.3	%	(52.3	)
Marine - change in prior accident years	(9.0	)%	(7.5	)%	(1.5	)
Marine - loss ratio	38.2	%	89.0	%	(50.8	)
Specialty - current period - excluding items below	65.5	%	55.6	%	9.9
Specialty - current period - notable losses	0.0	%	0.0	%	0.0
Specialty - change in prior accident years	(8.2	)%	(9.5	)%	1.3
Specialty – loss ratio	57.3	%	46.1	%	11.2
All lines - current period - excluding items below	39.7	%	36.2	%	3.5
All lines - current period - notable losses	0.0	%	21.9	%	(21.9	)
All lines - change in prior accident years	(12.4	)%	(6.7	)%	(5.7	)
All lines - loss ratio	27.3	%	51.4	%	(24.1	)

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Validus Re.Validus Re losses and loss expenses for the three months ended March 31, 2013 were $73.4 million compared to $124.2 million for the three months ended March 31, 2012, a decrease of $50.8 million or 40.9%. The loss ratio, defined as losses and loss expenses divided by net premiums earned, were 24.2% and 49.1% for the three months ended March 31, 2013 and 2012, respectively. For the three months ended March 31, 2013, Validus Re incurred losses of $102.2 million related to current year losses and $28.8 million of favorable loss reserve development relating to prior accident years. For the three months ended March 31, 2013, favorable loss reserve development on prior accident years benefited the Validus Re loss ratio by 9.5 percentage points. For the three months ended March 31, 2012, Validus Re incurred losses of $142.5 million related to current year losses and $18.3 million of favorable loss reserve development relating to prior accident years. For the three months ended March 31, 2012, favorable loss reserve development on prior years benefited the Validus Re loss ratio by 7.2 percentage points.

For the three months ended March 31, 2013, Validus Re did not incur any notable losses. For the three months ended March 31, 2012, Validus Re incurred $85.5 million of losses from notable loss events, which represented 33.8 percentage points of the loss ratio, excluding the reserve for potential development on notable loss events. Net of reinstatement premiums of $17.8 million, the effect of these events on Validus Re segment income was a decrease of $67.7 million. Validus Re segment loss ratios excluding notable loss events, reserve for potential development on notable loss events and prior year loss reserve development for the three months ended March 31, 2013 and 2012 were 33.7% and 22.5%, respectively. Details of Validus Re loss ratios by line of business and period of occurrence are provided below.

59

	Three Months Ended March 31,
	2013		2012 (a)		Percentage Point Change
Property - current period excluding items below	18.3	%	12.9	%	5.4
Property - current period - notable losses	0.0	%	14.2	%	(14.2	)
Property - change in prior accident years	(17.7	)%	(7.2	)%	(10.5	)
Property - loss ratio	0.6	%	19.9	%	(19.3	)
Marine - current period excluding items below	36.8	%	39.7	%	(2.9	)
Marine - current period - notable losses	0.0	%	87.4	%	(87.4	)
Marine - change in prior accident years	10.3	%	(7.6	)%	17.9
Marine - loss ratio	47.1	%	119.5	%	(72.4	)
Specialty - current period excluding items below	76.8	%	37.8	%	39.0
Specialty - current period - notable losses	0.0	%	0.0	%	0.0
Specialty - change in prior accident years	(3.3	)%	(6.8	)%	3.5
Specialty – loss ratio	73.5	%	31.0	%	42.5
All lines - current period excluding items below	33.7	%	22.5	%	11.2
All lines - current period - notable losses	0.0	%	33.8	%	(33.8	)
All lines - change in prior accident years	(9.5	)%	(7.2	)%	(2.3	)
All lines - loss ratio	24.2	%	49.1	%	(24.9	)

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

For the three months ended March 31, 2013, Validus Re property lines losses and loss expenses included $33.7 million related to current year losses and $32.6 million of favorable loss reserve development relating to prior accident years. The favorable loss reserve development was driven primarily by favorable development on Hurricane Isaac and Cat 67 and lower than expected claims emergence on attritional losses. For the three months ended March 31, 2012, Validus Re property lines losses and loss expenses included $43.3 million related to current year losses and $11.5 million of favorable loss reserve development relating to prior accident years. The favorable loss reserve development was due primarily to a reduction in loss estimates on attritional losses.

For the three months ended March 31, 2013, Validus Re property lines did not incur any notable losses. For the three months ended March 31, 2012, Validus Re property lines incurred $22.7 million of losses from notable loss events, which represented 14.2 percentage points of the property lines loss ratio, excluding reserve for potential development on notable loss events. Validus Re property lines loss ratios, excluding notable loss events, reserve for potential development on notable loss events and prior year loss reserve development, for the three months ended March 31, 2013 and 2012 were 18.3% and 12.9%, respectively.

For the three months ended March 31, 2013, Validus Re marine lines losses and loss expenses included $20.8 million related to current year losses and $5.8 million of adverse loss reserve development relating to prior accident years. The adverse loss reserve development related primarily to notable loss events. For the three months ended March 31, 2012, Validus Re marine lines losses and loss expenses included $91.3 million related to current year losses and $5.4 million of favorable loss reserve development relating to prior accident years. The favorable loss reserve development was due primarily to a reduction in loss estimates on attritional losses.

For the three months ended March 31, 2013, Validus Re marine lines did not incur any notable losses. For the three months ended March 31, 2012, Validus Re marine lines incurred $62.8 million of losses from notable loss events, which represented 87.4 percentage points on the marine loss ratio. Validus Re marine lines loss ratios, excluding notable loss events, reserve for potential development on notable loss events and prior year loss reserve development, for the three months ended March 31, 2013 and 2012 were 36.8% and 39.7%, respectively.

For the three months ended March 31, 2013, Validus Re specialty lines losses and loss expenses included $47.7 million related to current year losses and $2.0 million of favorable loss reserve development relating to prior accident years. The favorable loss reserve development was due primarily to lower than expected claims emergence on attritional losses. For the three months ended March 31, 2012, Validus Re specialty lines losses and loss expenses included $8.0 million related to current year losses and $1.4 million of favorable loss reserve development relating to prior accident years. The favorable loss reserve development was due primarily to a reduction in loss estimates on attritional losses.

60

For the three months ended March 31, 2013 and 2012 Validus Re specialty lines did not incur any notable losses. Validus Re specialty lines loss ratios, excluding prior year loss reserve development, for the three months ended March 31, 2013 and 2012 were 76.8% and 37.8%, respectively.

AlphaCat.The AlphaCat segment did not incur any losses and loss expenses for the three months ended March 31, 2013 and 2012. Any losses incurred by our non-consolidated operating affiliates, AlphaCat Re 2011 and AlphaCat Re 2012, are included in "Income from operating affiliates."

Talbot.Talbot losses and loss expenses for the three months ended March 31, 2013 were $71.4 million compared to $107.8 million for the three months ended March 31, 2012, a decrease of $36.4 million or 33.8%. The loss ratio defined as losses and loss expenses divided by net premiums earned, was 35.6% and 55.1% for the three months ended March 31, 2013 and 2012, respectively.  For the three months ended March 31, 2013, Talbot incurred losses of $108.4 million related to current year losses and $37.0 million of favorable loss reserve development relating to prior accident years. For the three months ended March 31, 2013, favorable loss reserve development on prior accident years benefited the Talbot loss ratio by 18.5 percentage points. For the three months ended March 31, 2012, Talbot incurred losses of $119.9 million related to current year losses and $12.1 million in favorable loss reserve development relating to prior accident years. For the three months ended March 31, 2012, favorable loss reserve development on prior accident years benefited the Talbot loss ratio by 6.2 percentage points.

For the three months ended March 31, 2013, Talbot did not incur any notable losses. For the three months ended March 31, 2012, Talbot incurred $13.4 million of losses from notable loss events, which represented 6.9 percentage points of the Talbot loss ratio. Talbot loss ratios, excluding notable loss events and prior year loss reserve development, for the three months ended March 31, 2013 and 2012 were 54.1% and 54.4%, respectively. Details of Talbot loss ratios by line of business and period of occurrence are provided below.

	Three Months Ended March 31,
	2013		2012		Percentage Point Change
Property - current period excluding items below	51.3	%	53.9	%	(2.6	)
Property - current period - notable losses	0.0	%	0.0	%	0.0
Property - change in prior accident years	(21.9	)%	2.7	%	(24.6	)
Property - loss ratio	29.4	%	56.6	%	(27.2	)
Marine - current period excluding items below	54.1	%	48.5	%	5.6
Marine - current period - notable losses	0.0		18.1	%	(18.1	)
Marine - change in prior accident years	(21.8	)%	(7.3	)%	(14.5	)
Marine - loss ratio	32.3	%	59.3	%	(27.0	)
Specialty - current period excluding items below	55.9	%	60.5	%	(4.6	)
Specialty - current period - notable losses	0.0	%	0.0	%	0.0
Specialty - change in prior accident years	(12.5	)%	(10.2	)%	(2.3	)
Specialty – loss ratio	43.4	%	50.3	%	(6.9	)
All lines - current period excluding items below	54.1	%	54.4	%	(0.3	)
All lines - current period - notable losses	0.0	%	6.9	%	(6.9	)
All lines - change in prior accident years	(18.5	)%	(6.2	)%	(12.3	)
All lines - loss ratio	35.6	%	55.1	%	(19.5	)

For the three months ended March 31, 2013, Talbot property lines losses and loss expenses included $22.3 million related to current year losses and $9.5 million of favorable loss reserve development relating to prior accident years. The prior year favorable loss reserve development was driven primarily by favorable development on the Thailand floods. For the three months ended March 31, 2012, Talbot property lines losses and loss expenses included $24.1 million related to current year losses and $1.2 million of adverse loss reserve development relating to prior accident years. The prior year adverse loss reserve development was due to higher than expected claims development on large losses.

For the three months ended March 31, 2013 and 2012 Talbot property lines did not incur any notable losses. Talbot property line loss ratio, excluding notable loss events and prior year loss reserve development for the three months ended March 31, 2013 and 2012 were 51.3% and 53.9%, respectively.

61

For the three months ended March 31, 2013, Talbot marine lines losses and loss expenses included $46.0 million related to current year losses and $18.5 million of favorable loss reserve development relating to prior accident years. The prior year favorable loss reserve development was due to lower than expected claims emergence on attritional losses and low emergence of large losses. For the three months ended March 31, 2012, Talbot marine lines losses and loss expenses included $49.2 million related to current year losses and $5.4 million of favorable loss reserve development relating to prior accident years. The prior year favorable loss reserve development was due primarily to favorable development on attritional losses.

For the three months ended March 31, 2013, Talbot marine lines did not incur any notable losses. For the three months ended March 31, 2012, Talbot's marine lines incurred $13.4 million of losses from notable loss events, which represented 18.1 percentage points of the marine lines loss ratio. Talbot marine lines loss ratios, excluding notable loss events and prior year loss reserve development for the three months ended March 31, 2013 and 2012 were 54.1% and 48.5%, respectively.

For the three months ended March 31, 2013, Talbot specialty lines losses and loss expenses included $40.1 million relating to current year losses and $9.0 million of favorable loss reserve development relating to prior accident years. The prior year favorable loss reserve development was due to the low emergence of large losses. For the three months ended March 31, 2012, Talbot specialty lines losses and loss expenses included $46.6 million relating to current year losses and $7.9 million of favorable loss reserve development relating to prior accident years. The prior year favorable loss reserve development was attributable to lower than expected claims development.

For the three months ended March 31, 2013 and 2012 Talbot specialty lines did not incur any notable losses.Talbot specialty lines loss ratios, excluding notable loss events and prior year loss reserve development for the three months ended March 31, 2013 and 2012 were 55.9% and 60.5%, respectively.

Reserves for Losses and Loss Expenses

At March 31, 2013, gross and net reserves for losses and loss expenses were estimated using the methodology as outlined in the critical accounting policies and estimates as discussed in Item 7, Management's Discussion and Analysis of Results of Operations and Financial Condition in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2012. The Company did not make any significant changes in the assumptions or methodology used in its reserving process for the three months ended March 31, 2013.

	As at March 31, 2013
(Dollars in thousands)	Gross Case Reserves		Gross IBNR		Total Gross Reserve for Losses and Loss Expenses
Property	$	942,151	$	736,908	$	1,679,059
Marine	537,777		460,830		998,607
Specialty	272,804		407,221		680,025
Total	$	1,752,732	$	1,604,959	$	3,357,691

	As at March 31, 2013
(Dollars in thousands)	Net Case Reserves		Net IBNR		Total Net Reserve for Losses and Loss Expenses
Property	$	781,912	$	643,290	$	1,425,202
Marine	482,162		430,421		912,583
Specialty	240,569		350,085		590,654
Total	$	1,504,643	$	1,423,796	$	2,928,439

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The following table sets forth a reconciliation of gross and net reserves for losses and loss expenses by segment for the three months ended March 31, 2013:

	Three Months Ended March 31, 2013
(Dollars in thousands)	Validus Re Segment			AlphaCat Segment		Talbot Segment			Eliminations			Total
Gross reserves at period beginning	$	2,122,895		$	5,000	$	1,480,307		$	(90,629	)	$	3,517,573
Losses recoverable	(148,646		)	—		(381,950		)	90,629			(439,967		)
Net reserves at period beginning	1,974,249			5,000		1,098,357			—			3,077,606
Incurred losses - current year	102,184			—		108,385			—			210,569
Change in prior accident years	(28,782		)	—		(37,016		)	—			(65,798		)
Incurred losses	73,402			—		71,369			—			144,771
Foreign exchange	(16,890		)	—		(16,936		)	—			(33,826		)
Total net paid losses	(158,126		)	—		(101,986		)	—			(260,112		)
Net reserves at period end	1,872,635			5,000		1,050,804			—			2,928,439
Losses recoverable	142,828			—		369,332			(82,908		)	429,252
Gross reserves at period end	$	2,015,463		$	5,000	$	1,420,136		$	(82,908	)	$	3,357,691

The amount of recorded reserves represents management's best estimate of expected losses and loss expenses on premiums earned. For the three months ended March 31, 2013, favorable loss reserve development on prior accident years was $65.8 million, of which, $28.8 million of the favorable loss reserve development related to the Validus Re segment and $37.0 million related to the Talbot segment. Favorable loss reserve development benefited the Company's loss ratio by 12.4 percentage points for the three months ended March 31, 2013. For the three months ended March 31, 2012, favorable loss reserve development on prior accident years was $30.4 million, of which, $18.3 million related to the Validus Re segment and $12.1 million related to the Talbot segment. Favorable loss reserve development benefited the Company's loss ratio by 6.7 percentage points for the three months ended March 31, 2012.

Management of insurance and reinsurance companies use significant judgment in the estimation of reserves for losses and loss expenses. Given the magnitude of recent loss events and other uncertainties inherent in loss estimation, meaningful uncertainty remains regarding the estimation for recent notable loss events. The Company's actual ultimate net loss may vary materially from these estimates. Ultimate losses for notable loss events are estimated through detailed review of contracts which are identified by the Company as potentially exposed to the specific notable loss event. However, there can be no assurance that the ultimate loss amount estimated for a specific contract will be accurate, or that all contracts with exposure to a specific notable loss event will be identified in a timely manner. Potential losses in excess of the estimated ultimate loss assigned to a contract on the basis of a specific review, or loss amounts from contracts not specifically included in the detailed review are reserved for in the reserve for potential development on notable loss events. The reserve for potential development on notable loss events (or “RDE”) is included as part of the Company's overall reserve requirement as defined and disclosed in the Critical Accounting Policies and Estimates section of the Company's Annual Report on Form 10-K/A.

As of December 31, 2012 the RDE on 2011 notable loss events was $42.2 million. During the three months ended March 31, 2013, the Company allocated $8.0 million of the 2011 reserve to the Christchurch earthquake and Gryphon Alpha mooring failure. Contract complexity, the nature and number of perils arising from these events, limits and sub limits exposed, the quality, flow and timing of information received by the Company, information regarding retrocessional covers, assumptions, both explicit and implicit, regarding future paid and reported loss development patterns, frequency and severity trends, claims settlement practices and potential changes in the legal environment continue to lead to complexity and volatility in the ultimate loss estimates for these events. As at March 31, 2013, the RDE on 2011 notable loss events was $34.2 million. No RDE was established for 2012 notable losses.

For disclosure purposes, only those notable loss events which had an initial ultimate loss estimate above $15.0 million are disclosed separately and included in the reserves for notable loss events and RDE tables. To the extent that there are continued complexity and volatility factors relating to notable loss events in the aggregate, additions to the RDE may be established for a specific accident year, as illustrated in the RDE roll forward table. The Company increased the threshold for disclosure for notable losses effective January 1, 2011, from $5.0 million to $15.0 million. The Company increased the threshold for disclosure for notable losses effective January 1, 2013 from $15.0 million to $30.0 million.

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RESERVES FOR NOTABLE LOSS EVENTS - USD (000's)
2011 NOTABLE LOSS EVENTS			Year Ended December 31, 2011								Year Ended December 31, 2012							Three Months Ended March 31, 2013
			Development						Closing		Development					Closing		Development					Closing
	Initial		(Favorable) /			Allocations			Estimate (c)		(Favorable) /			Allocations		Estimate (c)		(Favorable) /			Allocations		Estimate (c)
Notable Loss	Estimate (a)		Unfavorable (b)			of RDE			31-Dec-11		Unfavorable (b)			of RDE		31-Dec-12		Unfavorable (b)			of RDE		31-Mar-13
Tohoku earthquake	$	148,926	$	37,963		$	29,788		$	216,677	$	(6,652	)	$	16,342	$	226,367	$	(11	)	$	—	$	226,356
Thailand floods	54,148		—			—			54,148		10,704			14,262		79,114		(3,237		)	—		75,877
Gryphon Alpha	52,434		9,151			—			61,585		874			5,356		67,815		7			1,970		69,792
Cat 46	43,806		18,553			—			62,359		118			—		62,477		(895		)	—		61,582
Christchurch earthquake	41,881		16,854			20,212			78,947		(495		)	20,121		98,573		(5		)	6,031		104,599
Hurricane Irene (e)	32,451		3			—			32,454		(10,788		)	—		21,666					—		21,666
Cat 48	31,481		9,190			—			40,671		5,612			—		46,283		(2,548		)	—		43,735
Brisbane floods	31,023		4,848			—			35,871		(1,394		)	—		34,477					—		34,477
CNRL Horizon	19,500		(8,706		)	—			10,794		558			—		11,352					—		11,352
Danish flood	19,429		5,987			—			25,416		2,566			7,665		35,647					—		35,647
Jupiter 1	15,008		(73		)	—			14,935		(166		)	—		14,769		5			—		14,774
Total 2011 Notable Loss Events	$	490,087	$	93,770		$	50,000		$	633,857	$	937		$	63,746	$	698,540	$	(6,684	)	$	8,001	$	699,857
									Closing							Closing							Closing
						Paid Loss (Recovery)			Reserve (d)					Paid Loss (Recovery)		Reserve (d)					Paid Loss (Recovery)		Reserve (d)
Notable Loss									31-Dec-11							31-Dec-12							31-Mar-13
Tohoku earthquake						$	59,100		$	157,577				$	94,011	$	73,256				$	4,360	$	68,885
Thailand floods						1,748			52,400					13,017		64,349					9,988		51,124
Gryphon Alpha						8,686			52,899					19,487		39,641					10,727		30,892
Cat 46						51,429			10,930					1,700		9,348					1,865		6,588
Christchurch earthquake						(42		)	78,989					5,708		92,907					19,769		79,164
Hurricane Irene (e)						8,669			23,785					3,743		9,254					197		9,057
Cat 48						19,934			20,737					14,032		12,317					820		8,949
Brisbane floods						16,151			19,720					10,998		7,328					953		6,375
CNRL Horizon						5,600			5,194					5,746		6					—		6
Danish flood						7,872			17,544					15,099		12,676					723		11,953
Jupiter 1						14,342			593					245		182					1		186
Total 2011 Notable Loss Events						$	193,489		$	440,368				$	183,786	$	321,264				$	49,403	$	273,179

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RESERVES FOR NOTABLE LOSS EVENTS - USD (000's) CONTINUED
2012 NOTABLE LOSS EVENTS			Year Ended December 31, 2012							Three Months Ended March 31, 2013
			Development					Closing		Development						Closing
	Initial		(Favorable) /			Allocations		Estimate (c)		(Favorable) /			Allocations			Estimate (c)
Notable Loss	Estimate (a)		Unfavorable (b)			of RDE		31-Dec-12		Unfavorable (b)			of RDE			31-Mar-13
Hurricane Sandy	$	361,036	—			—		$	361,036	$	(977	)	—			$	360,059
Costa Concordia	76,197		(2,061		)	—		74,136		(267		)	—			73,869
Cat 67	22,713		5,377			—		28,090		(6,816		)	—			21,274
U.S. Drought	22,021		—			—		22,021		6,207			—			28,228
Hurricane Isaac	15,209		67			—		15,276		(9,829		)	—			5,447
Total 2012 Notable Loss Events	$	497,176	$	3,383		$	—	$	500,559	$	(11,682	)	$	—		$	488,877
								Closing								Closing
						Paid Loss (Recovery)		Reserve (d)					Paid Loss (Recovery)			Reserve (d)
Notable Loss								31-Dec-12								31-Mar-13
Hurricane Sandy						$	38,515	$	322,521				$	40,050		$	281,494
Costa Concordia						13,040		61,096					(7,136		)	67,965
Cat 67						13,432		14,658					1,651			6,191
U.S. Drought						12,346		9,675					8,654			7,228
Hurricane Isaac						313		14,963					254			4,880
Total 2012 Notable Loss Events						$	77,646	$	422,913				$	43,473		$	367,758

(a) Includes paid losses, case reserves and IBNR reserves.

(b) Development other than allocation of RDE.

(c) Excludes impact of movements in foreign exchange rates.

(d) Closing Reserve for the period equals Closing Estimate for the period less cumulative Paid Losses.

(e) As at March 31, 2013, the Company concluded that Hurricane Irene no longer remains eligible for potential allocations from the 2011 RDE.

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RESERVE FOR DEVELOPMENT ON EVENTS	Reserve for potential development on 2010 notable loss events			Reserve for potential development on 2011 notable loss events			Reserve for potential development on 2012 notable loss events		Reserve for potential development on 2013 notable loss events		Total Reserve for potential development on notable loss events
	($ in 000's)			($ in 000's)			($ in 000's)		($ in 000's)		($ in 000's)
As at December 31, 2009	$	—									$	—
Reserve for potential development additions	69,242			—			—		—		69,242
Reserve for potential development allocations (a)	(35,856		)	—			—		—		(35,856		)
Reserve for potential development releases	—			—			—		—		—
As at December 31, 2010 (b)	$	33,386		$	—		$	—	$	—	$	33,386
Reserve for potential development additions	—			128,000			—		—		128,000
Reserve for potential development allocations (a)	(14,769		)	(50,000		)	—		—		(64,769		)
Reserve for potential development releases	—			—			—		—		—
As at December 31, 2011 (b)	$	18,617		$	78,000		$	—	$	—	$	96,617
Reserve for potential development additions (c)	—			27,926			—		—		27,926
Reserve for potential development allocations (a)	(18,617		)	(63,746		)	—		—		(82,363		)
Reserve for potential development releases	—			—			—		—		—
As at December 31, 2012 (b)	$	—		$	42,180		$	—	$	—	$	42,180
Reserve for potential development additions	—			—			—		—		—
Reserve for potential development allocations (a)	—			(8,001		)	—		—		(8,001		)
Reserve for potential development releases	—			—			—		—		—
As at March 31, 2013 (b)	$	—		$	34,179		$	—	$	—	$	34,179

(a) During the year ended December 31, 2010, $19,242 was allocated to the Chilean earthquake and $16,614 was allocated to the New Zealand earthquake from the 2010 reserve for potential development on notable loss events.

During the year ended December 31, 2011, $14,769 was allocated to Deepwater Horizon from the 2010 reserve for potential development on notable loss events. During the same period, $29,788 was allocated to the Tohoku earthquake and $20,212 was allocated to the Christchurch earthquake from the 2011 reserve for potential development on notable loss events.

During the year ended December 31, 2012, $18,617 was allocated to Deepwater Horizon from the 2010 reserve for potential development on notable loss events. During the same period, $16,342 was allocated to the Tohoku earthquake, $20,121 was allocated to the Christchurch earthquake, $7,665 was allocated to the Danish flood, $14,262 was allocated to the Thailand floods and $5,356 was allocated to the Gryphon Alpha mooring failure from the 2011 reserve for potential development on notable loss events.

During the three months ended March 31, 2013, $6,031 was allocated to the Christchurch earthquake and $1,970 to the Gryphon Alpha mooring failure from the 2011 reserve for potential development on notable loss events.

(b) Notable losses for the year ended December 31, 2010 included Chilean earthquake, Melbourne hailstorm, Windstorm Xynthia, Deepwater Horizon, Aban Pearl, Bangkok riots, Perth hailstorm, New Zealand earthquake, Oklahoma windstorm, Political risk loss, Hurricane Karl, Queensland floods, Political violence loss, Satellite failure and Financial institution loss.

Notable losses for the year ended December 31, 2011 included Tohoku earthquake, Gryphon Alpha, Christchurch earthquake, Brisbane floods, CNRL Horizon, Cat 46, Cat 48, Jupiter 1, Danish flood, Hurricane Irene and Thailand floods. As at September 30, 2012, the Company concluded that CNRL Horizon and Jupiter 1 no longer remain eligible for potential allocations from the 2011 RDE. As at March 31, 2013, the Company concluded that Hurricane Irene no longer remains eligible for potential allocations from the 2011 RDE.

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Notable losses for the year ended December 31, 2012 included Costa Concordia, Cat 67, U.S. Drought, Hurricane Isaac and Hurricane Sandy.

(c) Contract complexity, the nature and number of perils arising from these events, limits and sub limits exposed, the quality, flow and timing of information received by the Company, information regarding retrocessional covers, assumptions, both explicit and implicit, regarding future paid and reported loss development patterns, frequency and severity trends, claims settlement practices and potential changes in the legal environment continue to lead to complexity and volatility in the ultimate loss estimates for these events. Given the potential that one or some of the 2011 notable loss events eligible for potential allocation from the 2011 RDE may experience adverse development, rather than all deteriorating proportionately, an addition to the 2011 RDE of $27.9 million was made during the year ended December 31, 2012.

(d) The reserve for potential development on notable loss events (or “RDE”) is included as part of the Company's overall reserve requirement as defined and disclosed in the Critical Accounting Policies and Estimates section of the Company's Annual Report on Form 10-K/A.

Policy Acquisition Costs

Policy acquisition costs for the three months ended March 31, 2013 were $93.6 million compared to $78.1 million for the three months ended March 31, 2012, an increase of $15.5 million or 19.8%. Policy acquisition costs as a percent of net premiums earned for the three months ended March 31, 2013 and 2012 were 17.6% and 17.3%, respectively. The changes in policy acquisition costs are due to the factors provided below.

	Three Months Ended March 31, 2013						Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Policy Acquisition Costs		Policy Acquisition Costs (%)		Acquisition Cost Ratio		Policy Acquisition Costs		Policy Acquisition Costs (%)		Acquisition Cost Ratio		% Change
Property	$	34,940	37.3	%	13.7	%	$	27,897	35.7	%	13.5	%	25.2	%
Marine	29,677		31.7	%	21.0	%	29,789		38.1	%	20.4	%	(0.4	)%
Specialty	28,994		31.0	%	21.7	%	20,446		26.2	%	20.8	%	41.8	%
Total	$	93,611	100.0	%	17.6	%	$	78,132	100.0	%	17.3	%	19.8	%

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Validus Re.Validus Re policy acquisition costs for the three months ended March 31, 2013 were $51.7 million compared to $38.8 million for the three months ended March 31, 2012, an increase of $13.0 million or 33.4%.

	Three Months Ended March 31, 2013						Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Policy Acquisition Costs		Policy Acquisition Costs (%)		Acquisition Cost Ratio		Policy Acquisition Costs		Policy Acquisition Costs (%)		Acquisition Cost Ratio		% Change
Property	$	28,532	55.2	%	15.5	%	$	23,914	61.7	%	14.9	%	19.3	%
Marine	11,604		22.4	%	20.5	%	11,521		29.7	%	16.0	%	0.7	%
Specialty	11,608		22.4	%	18.7	%	3,355		8.6	%	15.9	%	246.0	%
Total	$	51,744	100.0	%	17.1	%	$	38,790	100.0	%	15.3	%	33.4	%

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Policy acquisition costs include brokerage, commission and excise tax, are generally driven by contract terms, are normally a set percentage of premiums and are also net of ceding commission income on retrocessions. Items such as ceded premium, earned premium adjustments and reinstatement premiums that are recognized in the period have an effect on the policy acquisition cost ratio. Validus Re policy acquisition costs as a percent of net premiums earned (the policy acquisition cost ratio) for the three months ended March 31, 2013 and 2012 were 17.1% and 15.3%, respectively. The policy acquisition cost ratio on the marine line has increased by 4.5 percentage points due to effect of reinstatement premiums in the three months ended March 31, 2012 which attract little or no policy acquisition costs. The policy acquisition cost ratio on the specialty lines has increased by 2.8 percentage points due to additional ceded proportional reinsurance contracts that have higher policy acquisition ratios.

AlphaCat.AlphaCat policy acquisition costs for the three months ended March 31, 2013 were $2.6 million compared to $0.3 million for the three months ended March 31, 2012, an increase of $2.4 million or 930.5%.

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	Three Months Ended March 31, 2013						Three Months Ended March 31, 2012
(Dollars in thousands)	Policy Acquisition Costs		Policy Acquisition Costs (%)		Acquisition Cost Ratio		Policy Acquisition Costs		Policy Acquisition Costs (%)		Acquisition Cost Ratio		% Change
Property	$	2,638	100.0	%	9.6	%	$	256	100.0	%	9.6	%	930.5	%
Total	$	2,638	100.0	%	9.6	%	$	256	100.0	%	9.6	%	930.5	%

Policy acquisition costs as a percent of net premiums earned were 9.6% for the three months ended March 31, 2013 and 2012 .

Talbot.Talbot policy acquisition costs for the three months ended March 31, 2013 were $40.5 million compared to $38.7 million for the three months ended March 31, 2012, an increase of $1.8 million or 4.6%.

	Three Months Ended March 31, 2013						Three Months Ended March 31, 2012
(Dollars in thousands)	Policy Acquisition Costs		Policy Acquisition Costs (%)		Acquisition Cost Ratio		Policy Acquisition Costs		Policy Acquisition Costs (%)		Acquisition Cost Ratio		% Change
Property	$	5,024	12.4	%	11.5	%	$	3,372	8.7	%	7.6	%	49.0	%
Marine	18,095		44.7	%	21.3	%	18,285		47.2	%	24.8	%	(1.0	)%
Specialty	17,407		42.9	%	24.2	%	17,081		44.1	%	22.2	%	1.9	%
Total	$	40,526	100.0	%	20.2	%	$	38,738	100.0	%	19.8	%	4.6	%

Policy acquisition costs as a percent of net premiums earned for the three months ended March 31, 2013 and 2012 were 20.2% and 19.8%, respectively. The policy acquisition cost ratio on the property line has increased by 3.9 percentage points primarily due to a decrease in the ceding acquisition rates on the onshore energy lines.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2013 were $80.3 million compared to $66.4 million for the three months ended March 31, 2012, an increase of $13.9 million or 20.9%.

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	General and Administrative Expenses		General and Administrative Expenses (%)		General and Administrative Expenses		General and Administrative Expenses (%)		% Change
Validus Re (a)	$	29,441	36.7	%	$	17,252	26.0	%	70.7	%
AlphaCat	4,037		5.0	%	1,032		1.6	%	291.2	%
Talbot	30,912		38.5	%	33,348		50.2	%	(7.3	)%
Corporate & Eliminations	15,889		19.8	%	14,743		22.2	%	7.8	%
Total	$	80,279	100.0	%	$	66,375	100.0	%	20.9	%

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

General and administrative expenses of $80.3 million in the three months ended March 31, 2013 represents 15.2 percentage points of the expense ratio. Share compensation expense is discussed in the following section.

Validus Re. Validus Re general and administrative expenses for the three months ended March 31, 2013 were $29.4 million compared to $17.3 million for the three months ended March 31, 2012, an increase of $12.2 million or 70.7%. General and administrative expenses have increased primarily due to the acquisition of Flagstone, which accounted for $13.4 million of expenses for the three months ended March 31, 2013. General and administrative expenses include salaries and benefits, professional fees, rent and office expenses. Validus Re general and administrative expenses as a percent of net premiums earned for the three months ended March 31, 2013 and 2012 were 9.7% and 6.9%, respectively.

AlphaCat. AlphaCat general and administrative expenses for the three months ended March 31, 2013 were $4.0 million as compared to $1.0 million for the three months ended March 31, 2012, an increase of $3.0 million or 291.2%. General and administrative expenses have increased primarily due to an increase in management and performance fees during the quarter. AlphaCat's general

68

and administrative expenses as a percent of net premiums earned for the three months ended March 31, 2013 and 2012 were 14.6% and 38.7%, respectively. The AlphaCat segment's general and administrative ratio has been impacted by the increase in net premiums earned as the comparatives have a greater proportion of revenues generated in equity earnings from operating affiliates which is not included in the ratio calculation.

Talbot. Talbot general and administrative expenses for the three months ended March 31, 2013 were $30.9 million compared to $33.3 million for the three months ended March 31, 2012, a decrease of $2.4 million or 7.3%. General and administrative expenses have decreased primarily due to a decrease in performance bonus expense. Talbot's general and administrative expenses as a percent of net premiums earned for the three months ended March 31, 2013 and 2012 were 15.4% and 17.0%, respectively.

Corporate & Eliminations. Corporate general and administrative expenses for the three months ended March 31, 2013 were $15.9 million compared to $14.7 million for the three months ended March 31, 2012, an increase of $1.1 million or 7.8%. General and administrative expenses have increased primarily due to an increase in salaries and benefits due to an increase in headcount, as well as an increase in office costs. Corporate general and administrative expenses are comprised of executive and board expenses, internal and external audit expenses and other costs relating to the Company as a whole.

Share Compensation Expenses

Share compensation expenses for the three months ended March 31, 2013 were $2.3 million compared to $5.4 million for the three months ended March 31, 2012, a decrease of $3.1 million or 57.4%. This expense is non-cash and has no net effect on total shareholders' equity, as it is balanced by an increase in additional paid-in capital.

	Three Months Ended March 31, 2013					Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Share Compensation Expenses			Share Compensation Expenses (%)		Share Compensation Expenses		Share Compensation Expenses (%)		% Change
Validus Re (a)	$	1,413		61.0	%	$	1,872	34.4	%	(24.5	)%
AlphaCat	77			3.3	%	52		1.0	%	48.1	%
Talbot	1,405			60.6	%	1,348		24.8	%	4.2	%
Corporate & Eliminations	(577		)	(24.9	)%	2,166		39.8	%	(126.6	)%
Total	$	2,318		100.0	%	$	5,438	100.0	%	(57.4	)%

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Share compensation expenses of $2.3 million in the three months ended March 31, 2013 represents 0.4 percentage points of the general and administrative expense ratio. The decrease in share compensation expenses of $3.1 million was due to a reversal of $1.7 million of expenses related to performance shares based on a review of current and projected performance criteria. Also contributing to the decrease was the reversal of $1.8 million of expenses relating to the cancellation of unvested awards as a result of the resignation of the Company's former President and Chief Financial Officer, on February 15, 2013.

Validus Re.Validus Re share compensation expenses for the three months ended March 31, 2013 were $1.4 million compared to $1.9 million for the three months ended March 31, 2012, a decrease of $0.5 million or 24.5%. Share compensation expenses as a percent of net premiums earned for the three months ended March 31, 2013 and 2012 were 0.5% and 0.7%, respectively.

AlphaCat. AlphaCat share compensation expense as a percent of net premiums earned for the three months ended March 31, 2013 and 2012 were 0.3% and 2.0%, respectively.

Talbot. Talbot share compensation expenses for the three months ended March 31, 2013 was $1.4 million compared to $1.3 million for the three months ended March 31, 2012, an increase of $0.1 million or 4.2%. Share compensation expenses as a percent of net premiums earned for the three months ended March 31, 2013 and 2012 were 0.7% and 0.7%, respectively.

Corporate & Eliminations.Corporate share compensation expenses for the three months ended March 31, 2013 were ($0.6) million compared to $2.2 million for the three months ended March 31, 2012, a decrease of $2.7 million or 126.6%.

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Selected Ratios

The underwriting results of an insurance or reinsurance company are often measured by reference to its combined ratio, which is the sum of the loss ratio and the expense ratio. The net loss ratio is calculated by dividing losses and loss expenses incurred (including estimates for incurred but not reported losses) by net premiums earned. The expense ratio is calculated by dividing policy acquisition costs combined with general and administrative expenses (including share compensation expenses) by net premiums earned. The following table presents the losses and loss expenses ratio, policy acquisition cost ratio, general and administrative expense ratio, expense ratio and combined ratio for the three months ended March 31, 2013 and 2012.

Consolidated	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012 (a)		Percentage Point Change
Losses and loss expense ratio	27.3	%	51.4	%	(24.1	)
Policy acquisition cost ratio	17.6	%	17.3	%	0.3
General and administrative expense ratio (b)	15.6	%	15.9	%	(0.3	)
Expense ratio	33.2	%	33.2	%	—
Combined ratio	60.5	%	84.6	%	(24.1	)

Validus Re	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012 (a)		Percentage Point Change
Losses and loss expense ratio	24.2	%	49.1	%	(24.9	)
Policy acquisition cost ratio	17.1	%	15.3	%	1.8
General and administrative expense ratio (b)	10.2	%	7.6	%	2.6
Expense ratio	27.3	%	22.9	%	4.4
Combined ratio	51.5	%	72.0	%	(20.5	)

AlphaCat	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012		Percentage Point Change
Losses and loss expense ratio	0.0	%	0.0	%	—
Policy acquisition cost ratio	9.6	%	9.6	%	—
General and administrative expense ratio (b)	14.9	%	40.7	%	(25.8	)
Expense ratio	24.5	%	50.3	%	(25.8	)
Combined ratio	24.5	%	50.3	%	(25.8	)

Talbot	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012		Percentage Point Change
Losses and loss expense ratio	35.6	%	55.1	%	(19.5	)
Policy acquisition cost ratio	20.2	%	19.8	%	0.4
General and administrative expense ratio (a)	16.1	%	17.7	%	(1.6	)
Expense ratio	36.3	%	37.5	%	(1.2	)
Combined ratio	71.9	%	92.6	%	(20.7	)

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

(b) Includes general and administrative expenses and share compensation expenses.

General and administrative expense ratios for the three months ended March 31, 2013 and 2012 were 15.6% and 15.9%, respectively. General and administrative expense ratio is the sum of general and administrative expenses and share compensation expenses divided by net premiums earned.

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	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012 (a)
(Dollars in thousands)	Expenses		Expenses as % of Net Earned Premiums		Expenses		Expenses as % of Net Earned Premiums
General and administrative expenses	$	80,279	15.2	%	$	66,375	14.7	%
Share compensation expenses	2,318		0.4	%	5,438		1.2	%
Total	$	82,597	15.6	%	$	71,813	15.9	%

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Underwriting Income

Underwriting income for the three months ended March 31, 2013 was $210.1 million compared to $69.3 million for the three months ended March 31, 2012, an increase of $140.8 million, or 203.3%.

(Dollars in thousands)	Three Months Ended March 31, 2013			% of sub-total		Three Months Ended March 31, 2012 (a)			% of sub-total		% Change
Validus Re	$	147,134		65.6	%	$	70,889		82.0	%	107.6	%
AlphaCat	20,865			9.3	%	1,323			1.5	%	NM
Talbot	56,098			25.1	%	14,310			16.5	%	292.0	%
Sub-total	224,097			100.0	%	86,522			100.0	%	159.0	%
Corporate & Eliminations	(14,015		)			(17,257		)			18.8	%
Total	$	210,082				$	69,265				203.3	%

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

NM: Not meaningful

The underwriting results of an insurance or reinsurance company are also often measured by reference to its underwriting income, which is a non-GAAP measure as previously defined. Underwriting income, as set out in the table below, is reconciled to net income (the most directly comparable GAAP financial measure) by the addition or subtraction of net investment income, other income, finance expenses, net realized and unrealized gains (losses) on investments, foreign exchange gains (losses), tax expense and income from investment and operating affiliates, as illustrated below.

(Dollars in thousands)	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012 (a)
Underwriting income	$	210,082		$	69,265
Net investment income	25,649			27,760
Other income	2,685			8,891
Finance expenses	(24,446		)	(16,279		)
Net realized gains on investments	1,721			7,532
Net unrealized (losses) gains on investments	(7,237		)	20,671
Income from investment affiliate	1,477			—
Foreign exchange gains	6,922			3,166
Tax benefit (expense)	318			(139		)
Income from operating affiliates	3,523			3,367
Net income	$	220,694		$	124,234

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Underwriting income indicates the performance of the Company's core underwriting function, excluding revenues and expenses such as the reconciling items in the table above. The Company believes the reporting of underwriting income enhances the understanding of our results by highlighting the underlying profitability of the Company's core insurance and reinsurance business. Underwriting profitability is influenced significantly by earned premium growth, adequacy of the Company's pricing and loss frequency and severity. Underwriting profitability over time is also influenced by the Company's underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance and its ability to manage its expense ratio, which it accomplishes through its management of acquisition costs and other underwriting expenses. The Company believes that underwriting income provides investors with a valuable measure of profitability derived from underwriting activities.

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The Company excludes the U.S. GAAP income statement line items noted above, from its calculation of underwriting income. Net realized and unrealized gains (losses) on investments are excluded because the amount of these gains and losses is heavily influenced by, and fluctuates in part, according to availability of investment market opportunities. The Company believes the other line items excluded are largely independent of its underwriting business and including them distorts the analysis of trends in its operations. In addition to presenting net income determined in accordance with U.S. GAAP, the Company believes that showing underwriting income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the Company's results of operations in a manner similar to how management analyzes the Company's underlying business performance. The Company uses underwriting income as a primary measure of underwriting results in its analysis of historical financial information and when performing its budgeting and forecasting processes. Analysts, investors and rating agencies who follow the Company request this non-GAAP financial information on a regular basis. In addition, underwriting income is one of the factors considered by the compensation committee of our Board of Directors in determining the bonus component of the total annual incentive compensation.

Underwriting income should not be viewed as a substitute for U.S. GAAP net income as there are inherent material limitations associated with the use of underwriting income as compared to using net income, which is the most directly comparable U.S. GAAP financial measure. The most significant limitation is the ability of users of the financial information to make comparable assessments of underwriting income with other companies, particularly as underwriting income may be defined or calculated differently by other companies. Therefore, the Company provides more prominence in this filing to the use of the most comparable U.S. GAAP financial measure, net income, which includes the reconciling items in the table above. The Company compensates for these limitations by providing both clear and transparent disclosure of net income and reconciliation of underwriting income to net income.

Net Investment Income

Net investment income for the three months ended March 31, 2013 was $25.6 million compared to $27.8 million for the three months ended March 31, 2012, a decrease of $2.1 million or 7.6%. Net investment income decreased due to falling yields on fixed maturity investments. Net investment income includes accretion of premium or discount on fixed maturities, interest on coupon-paying bonds, short-term investments and cash and cash equivalents, partially offset by investment management fees. The components of net investment income for the three months ended March 31, 2013 and 2012 are as provided below.

(Dollars in thousands)	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012 (a)			% Change
Fixed maturities and short-term investments	$	27,531		$	27,276		0.9	%
Cash and cash equivalents	533			2,317			(77.0	)%
Securities lending income	—			5			(100.0	)%
Total gross investment income	28,064			29,598			(5.2	)%
Investment expenses	(2,415		)	(1,838		)	(31.4	)%
Net investment income	$	25,649		$	27,760		(7.6	)%

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Annualized investment yield is calculated by dividing net investment income (excluding other investments) by the average balance of the assets managed by our portfolio managers (excluding other investments). Average assets is the average of the beginning, ending and intervening quarter end asset balances. The Company's annualized effective investment yield was 1.38% and 1.81% for the three months ended March 31, 2013 and 2012 respectively, and the average duration of the portfolio at March 31, 2013 was 1.66 years (December 31, 2012- 1.34 years).

Other Income

Other income for the three months ended March 31, 2013 was $2.7 million compared to $8.9 million for the three months ended March 31, 2012, a decrease of $6.2 million or 69.8%. The decrease was due primarily to a $2.5 million write down of a Flagstone investment and a reduction in underwriting and performance fees of $1.3 million in the AlphaCat segment, earned from AlphaCat Re 2012, AlphaCat 2013, PaCRe and the AlphaCat ILS Funds.

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Finance Expenses

Finance expenses for the three months ended March 31, 2013 were $24.4 million compared to $16.3 million for the three months ended March 31, 2012, an increase of $8.2 million or 50.2%. Finance expenses consist of interest on our junior subordinated deferrable debentures, junior subordinated deferrable interest notes, senior notes, AlphaCat variable funding notes, the amortization of debt offering costs, fees relating to our credit facilities, bank charges and the costs of FAL.

	Three Months Ended March 31,
(Dollars in thousands)	2013		2012 (a)		% Change
2006 Junior Subordinated Deferrable Debentures	$	2,187	$	1,549	41.2	%
2007 Junior Subordinated Deferrable Debentures	1,809		3,029		(40.3	)%
2010 Senior Notes due 2040	5,597		5,597		0.0	%
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	1,472		—		NM
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	1,072		—		NM
Credit facilities	954		6,016		(84.1	)%
Bank charges	133		57		133.3	%
AlphaCat Variable Funding Notes (b)	11,191		—		NM
Talbot FAL Facility	31		31		0.0	%
Finance expenses	$	24,446	$	16,279	50.2	%

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

(b) Please refer to Note 13 "AlphaCat variable funding notes" in the unaudited Consolidated Financial Statements contained herein for further details.

NM: Not Meaningful

The increase in finance expenses of $8.2 million for the three months ended March 31, 2013 was due primarily to the interest expense related to the AlphaCat variable funding notes of $11.2 million and a $2.5 million increase in interest expenses related to the Flagstone Junior Subordinated Deferrable Interest Notes, partially offset by a reduction in credit facility fees of $5.1 million.

Tax Benefit (Expense)

Tax benefit for the three months ended March 31, 2013 was $0.3 million compared to tax expense of ($0.1) million for the three months ended March 31, 2012, an increase of $0.5 million or 328.8%.

The Company provides for income taxes based upon amounts reported in the financial statements and the provisions of currently enacted tax laws. The Company is registered in Bermuda and is subject to Bermuda law with respect to taxation. Under current Bermuda law, the Company is not taxed on any Bermuda income or capital gains and has received an undertaking from the Bermuda Minister of Finance that, in the event of any Bermuda income or capital gains taxes being imposed, the Company will be exempt from those taxes until March 31, 2035.

Within the segment information contained in the Financial Statements, gross premiums written allocated to the territory of coverage exposure are presented for the periods indicated. Gross premiums written allocated to the United States are written primarily through Validus Reinsurance, Ltd., a Bermuda Registered Reinsurance Company. As noted, under current Bermuda law, the Company is not taxed on any Bermuda income and therefore the premium disclosed in the segment information does not correlate to pre-tax income generated in the United States.

Income From Operating Affiliates

Income from operating affiliates for the three months ended March 31, 2013 was $3.5 million compared to $3.4 million for the three months ended March 31, 2012, an increase of $0.2 million or 4.6%. For the three months ended March 31, 2013, income from operating affiliates included $0.4 million in equity earnings relating to AlphaCat Re 2011 ($3.4 million - March 31, 2012), $1.8 million in equity earnings relating to AlphaCat Re 2012 ($0.0 million - March 31, 2012), $1.1 million in equity earnings relating to AlphaCat 2013 ($0.0 million - March 31, 2012) and $0.1 million relating to the ILS funds ($0.0 million - March 31, 2012).

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AlphaCat Re 2011 was formed on May 25, 2011. As at March 31, 2013, the Company owned 22.3% of AlphaCat Re 2011, therefore income from operating affiliates reflects the Company's share of AlphaCat Re 2011's net income for the three months ended March 31, 2013.

AlphaCat Re 2012 was formed on May 29, 2012, therefore there was no comparative information for the three months ended March 31, 2012. As at March 31, 2013, the Company owned 37.9% of AlphaCat Re 2012, therefore income from operating affiliates reflects the Company's share of AlphaCat Re 2012's net income for the three months ended March 31, 2013.

AlphaCat 2013 was formed on December 17, 2012, therefore there was no comparative information for the three months ended March 31, 2012. As at March 31, 2013, the Company owned 19.7% of AlphaCat 2013, therefore income from operating affiliates reflects the Company's share of AlphaCat 2013's net income for the three months ended March 31, 2013.

The Company received $219,400 of third party subscriptions in three of the AlphaCat ILS funds as of December 31, 2012. The AlphaCat ILS funds invest in instruments with returns linked to property catastrophe reinsurance, retrocession and ILS contracts. Two of the funds are variable interest entities and are consolidated by the Company as Validus Re is deemed to be the primary beneficiary. The third fund is also a variable interest entity, however, it is not consolidated by the Company as Validus Re is not deemed to be the primary beneficiary. As a result, the investment in this fund is included in "Investments in affiliates" as at March 31, 2013 and income from operating affiliates reflects the Company's share of this fund's net income for the three months ended March 31, 2013.

Net Realized Gains on Investments

Net realized gains on investments for the three months ended March 31, 2013 were $1.7 million compared to $7.5 million for the three months ended March 31, 2012, a decrease of $5.8 million or 77.2%.

Net Unrealized Gains on Investments

Net unrealized losses on fixed maturities and short term investments for the three months ended March 31, 2013 were ($6.4) million compared to gains of $21.6 million for the three months ended March 31, 2012, a decrease of $28.0 million or 129.6%.

Net unrealized losses on other investments for the three months ended March 31, 2013 were ($0.8) million compared to ($0.9) million for the three months ended March 31, 2012, an increase of $0.1 million. The amount of net unrealized losses attributable to noncontrolling interest was ($4.7) million for the three months ended March 31, 2013, leaving a net impact to the Company of $3.9 million.

Net unrealized gains (losses) on investments are recorded as a component of net income. The Company has adopted all authoritative guidance on U.S. GAAP fair value measurements in effect as of the balance sheet date. Consistent with these standards, certain market conditions allow for fair value measurements that incorporate unobservable inputs where active market transaction based measurements are unavailable.

Income From Investment Affiliate

The income from investment affiliate for the three months ended March 31, 2013 was $1.5 million compared to $nil for the three months ended March 31, 2012, an increase of $1.5 million or 100.0%. The income from investment affiliate relates to the income realized in the Company's investment in the Aquiline Financial Services Fund II L.P. for the three months ended March 31, 2013. As at March 31, 2012, the investment in the Aquiline Financial Services Fund II L.P was included in other investments.

Foreign Exchange Gains (Losses)

Our reporting currency is the U.S. dollar. Our subsidiaries have one of the following functional currencies: U.S. dollar, British pound sterling, Euro, Canadian dollar, Swiss franc, Indian rupee, South African rand and Singapore dollar. As a significant portion of our operations are transacted in foreign currencies, fluctuations in foreign exchange rates may affect period-to-period comparisons. To the extent that fluctuations in foreign currency exchange rates affect comparisons, their impact has been quantified, when possible, and discussed in each of the relevant sections.

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U.S. dollar strengthened (weakened) against:	Three Months Ended March 31, 2013		Year Ended December 31, 2012
British Pound sterling	6.9	%	(4.4	)%
Euro	3.2	%	(1.7	)%
Canadian Dollar	2.4	%	(2.7	)%
Swiss Franc	4.0	%	(2.4	)%
Indian Rupee	(1.3	)%	3.6	%
South African Rand	9.3	%	4.7	%
Singapore Dollar	1.7	%	(5.8	)%

Foreign exchange gains for the three months ended March 31, 2013 were $6.9 million compared to $3.2 million for the three months ended March 31, 2012, a favorable movement of $3.8 million or 118.6%. For the three months ended March 31, 2013, Validus Re recognized foreign exchange gains of $11.2 million while AlphaCat and Talbot recognized foreign exchange losses of ($1.2) million and ($3.9) million, respectively.

For the three months ended March 31, 2013, Validus Re segment foreign exchange gains were $11.2 million compared to foreign exchange losses of ($0.3) million for the three months ended March 31, 2012, a favorable movement of $11.4 million. The favorable movement was due primarily to gains on outstanding claims and investments acquired from the acquisition of Flagstone, partially offset by a $1.3 million loss due to the Japanese Yen, Euro and Danish Krone weakening during the quarter. Validus Re currently hedges foreign currency exposure by balancing assets (primarily cash and premium receivables) with liabilities (primarily case reserves and event IBNR) for certain major non-USD currencies. Consequently, Validus Re aims to have a limited exposure to foreign exchange fluctuations.

For the three months ended March 31, 2013, Talbot segment foreign exchange losses were ($3.9) million compared to gains of $3.6 million for the three months ended March 31, 2012, an unfavorable movement of ($7.5) million or 208.1%. The unfavorable movement in Talbot foreign exchange was primarily driven by a deferred acquisition costs and unearned premiums adjustment of $5.5 million offset by the revaluation of syndicate overseas deposits of $3.4 million due to the strengthening of British pound sterling relative to a number of currencies. During the three months ended March 31, 2013, the U.S. dollar to British pound sterling strengthened by 5.4% as compared to a strengthening of the U.S. dollar to British pound sterling of 0.1% during the three months ended March 31, 2012.

As at March 31, 2013, Talbot's balance sheet included net unearned premiums and deferred acquisition costs denominated in foreign currencies of approximately $121.8 million and $25.9 million, respectively. These balances consisted of British pound sterling and Canadian dollars of $85.7 million and $10.1 million, respectively. Net unearned premiums and deferred acquisition costs are classified as non-monetary items and are translated at historic exchange rates. All of Talbot's other balance sheet items are classified as monetary items and are translated at period end exchange rates. Additional foreign exchange gains (losses) may be incurred on the translation of net unearned premiums and deferred acquisition costs arising from insurance and reinsurance premiums written in future periods.

Net Loss Attributable to Noncontrolling Interest

On April 2, 2012, the Company capitalized PaCRe, a Class 4 Bermuda reinsurer formed for the purpose of writing high excess property catastrophe reinsurance. PaCRe was funded with $500.0 million of contributed capital. Validus invested $50.0 million in PaCRe's common equity and therefore effectively owns 10.0% of PaCRe. The net loss attributable to noncontrolling interest of $3.1 million for the three months ended March 31, 2013 is effectively 90.0% of the net income in PaCRe for the quarter.

The Company received $219.4 million of third party subscriptions in three of the AlphaCat ILS funds as of December 31, 2012. The AlphaCat ILS funds invest in instruments with returns linked to property catastrophe reinsurance, retrocession and ILS contracts. Two of the funds are variable interest entities and are consolidated by the Company as Validus Re is deemed to be the primary beneficiary. The net income attributable to noncontrolling interest was ($0.6) million for the three months ended March 31, 2013.

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Other Non-GAAP Financial Measures

In presenting the Company's results, management has included and discussed certain schedules containing net operating income, underwriting income (loss), managed gross premiums written, annualized return on average equity and diluted book value per common share that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. The calculation of annualized return on average equity is discussed in the section above entitled "Financial Measures." A reconciliation of underwriting income to net income, the most comparable U.S. GAAP financial measure, is presented above in the section entitled "Underwriting Income (Loss)." A reconciliation of diluted book value per share to book value per share, the most comparable U.S. GAAP financial measure, is presented below. Operating income is calculated based on net income (loss) excluding net realized gains (losses), net unrealized gains (losses) on investments, income (loss) from investment affiliates, gains (losses) arising from translation of non-US$ denominated balances and non-recurring items. A reconciliation of operating income to net income, the most comparable U.S. GAAP financial measure, is embedded in the table presenting results of operations for the three months ended March 31, 2013 and 2012 in the section above entitled "Results of Operations." Realized gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-U.S. dollar denominated balances are unrelated to our underlying business.

Managed gross premiums written represents gross premiums written by the Company and its operating affiliates.  Managed gross premiums written differs from total gross premiums written, which the Company believes is the most directly comparable GAAP measure, due to the inclusion of premiums written on behalf of the Company's operating affiliates, AlphaCat Re 2011 and AlphaCat Re 2012, which are accounted for under the equity method of accounting. A reconciliation of managed gross premiums written to gross premiums written, the most comparable U.S. GAAP financial measure, is presented in the section below.

The following tables present reconciliations of diluted book value per share to book value per share, the most comparable U.S. GAAP financial measure, at March 31, 2013 and December 31, 2012.

	As at March 31, 2013
	(unaudited)
	Equity Amount		Shares	Exercise Price		Book Value Per Share
Book value per common share
Total shareholders' equity available to Validus	$	3,903,890	106,282,441			$	36.73
Diluted book value per common share
Total shareholders' equity available to Validus	3,903,890		106,282,441
Assumed exercise of outstanding warrants	118,015		6,410,472	$	18.41
Assumed exercise of outstanding stock options	34,030		1,796,202	$	18.95
Unvested restricted shares	—		2,087,223
Diluted book value per common share	$	4,055,935	116,576,338			$	34.79

	As at December 31, 2012
	Equity Amount		Shares	Exercise Price		Book Value Per Share
Book value per common share
Total shareholders' equity available to Validus	$	4,020,827	107,921,259			$	37.26
Diluted book value per common share
Total shareholders' equity available to Validus	4,020,827		107,921,259
Assumed exercise of outstanding warrants	118,015		6,410,472	$	18.41
Assumed exercise of outstanding stock options	37,745		1,823,947	$	20.69
Unvested restricted shares	—		2,443,631
Diluted book value per common share	$	4,176,587	118,599,309			$	35.22

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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The following tables present reconciliations of total gross premiums written to total managed gross premiums written, the most comparable U.S. GAAP financial measure, at March 31, 2013 and March 31, 2012.

	Three Months Ended
	(unaudited)
	March 31,			March 31,
	2013			2012 (a)
Total gross premiums written	$	1,104,760		$	837,289
Adjustments for:
Gross premiums written on behalf of AlphaCat Re 2011	(110		)	73,875
Gross premiums written on behalf of AlphaCat Re 2012	(398		)	—
Total managed gross premiums written	$	1,104,252		$	911,164

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Financial Condition and Liquidity

Validus Holdings, Ltd. is a holding company and conducts no operations of its own. The Company relies primarily on cash

dividends and other permitted payments from Validus Re and Talbot to pay finance expenses and other holding company expenses. There are restrictions on the payment of dividends from Validus Re and Talbot to the Company. Please refer to Part II, Item 5, "Market for Registrants, Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities" in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2012 for further discussion of the Company's dividend policy.

Sources and Uses of Cash

Three main sources provide cash flows for the Company: operating activities, investing activities and financing activities. The movement in net cash provided by operating activities, net cash provided by (used in) investing activities, net cash (used in) financing activities and the effect of foreign currency rate changes on cash and cash equivalents for the three months ended March 31, 2013 and 2012 is provided in the following table.

	Three Months Ended March 31,
(Dollars in thousands)	2013			2012 (a)			% Change
Net cash provided by operating activities	$	60,683		$	164,905		(63.2	)%
Net cash provided by (used in) investing activities	218,734			(49,972		)	537.7	%
Net cash (used in) financing activities	(95,786		)	(46,926		)	(104.1	)%
Effect of foreign currency rate changes on cash and cash equivalents	(33,786		)	16,545			(304.2	)%
Net increase in cash	$	149,845		$	84,552		77.2	%

(a) The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

Operating Activities

Cash flow from operating activities is derived primarily from the net receipt of premiums less claims and expenses related to underwriting activities.

During the three months ended March 31, 2013, net cash provided by operating activities of $60.7 million was driven primarily by net income of $220.7 million, a $487.5 million increase in unearned premiums, partially offset by a $400.2 million increase in premiums receivable and a $138.6 million decrease in reserve for losses and loss expenses.

During the three months ended March 31, 2012, net cash provided by operating activities of $164.9 million was driven primarily by net income of $124.2 million, a $313.1 million increase in unearned premiums, partially offset by a $246.0 million increase in premiums receivable.

We anticipate that cash flows from operations will continue to be sufficient to cover cash outflows under our contractual commitments as well as most loss scenarios through the foreseeable future. Refer to the “Capital Resources” section below for further information on our anticipated obligations.

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Investing Activities

Cash flow from investing activities is derived primarily from the receipt of net proceeds on the Company’s investment portfolio. As at March 31, 2013, the Company's portfolio was composed of fixed income investments including short-term investments, agency securities and sovereign securities amounting to $6,577.0 million or 82.8% of total cash and investments.

During the three months ended March 31, 2013, net cash provided by investing activities of $218.7 million was driven primarily by proceeds on sales of investments of $2,186.1 million, proceeds on maturities of investments of $125.8 million and $50.2 million of redemptions from investment in operating affiliates, offset by purchases of fixed maturities of $2,140.4 million.

During the three months ended March 31, 2012, net cash used in investing activities of $50.0 million was driven primarily by a net purchase of investments of $57.3 million partially offset by a $7.4 million decrease in securities lending.

Investments in Affiliates

	Three Months Ended March 31,
Net cash used in:	2013			2012
Investments in operating affiliates, net	$	50,222		$	—
Investments in investment affiliates, net	(1,341		)	—

On January 4, 2013 and January 23, 2013, a partial return of investment was made to the investors of AlphaCat Re 2011. Validus Re's corresponding portion of the return of investment was $46.4 million. On February 22, 2013, a partial return of investment was made to the investors of AlphaCat Re 2012. Validus Re's corresponding portion of the return of investment was $3.8 million.

Financing Activities

Cash flow from financing activities is derived primarily from the issuance of common shares and debentures payable.

During the three months ended March 31, 2013, net cash used in financing activities of $95.8 million was driven primarily by a payment of $262.2 million in a special dividend and quarterly dividends, partially offset by net proceeds on the issuance of AlphaCat variable funding notes of $175.6 million and the third party investment in noncontrolling interest of $55.7 million.

During the three months ended March 31, 2012, net cash used in financing activities of $46.9 million was driven primarily by the payment of $27.0 million in quarterly dividends.

Details of the Company's debt and financing arrangements at March 31, 2013 are provided below.

(Dollars in thousands)	Maturity Date / Term	In Use/Outstanding
2006 Junior Subordinated Deferrable Debentures	June 15, 2036	$	150,000
2007 Junior Subordinated Deferrable Debentures	June 15, 2037	139,800
2010 Senior Notes due 2040	January 26, 2040	250,000
$400,000 syndicated unsecured letter of credit facility	March 9, 2016	—
$525,000 syndicated secured letter of credit facility	March 9, 2016	380,087
$500,000 bi-lateral secured letter of credit facility	Evergreen	89,511
Talbot FAL Facility	December 31, 2015	25,000
PaCRe senior secured letter of credit facility	May 10, 2013	258
IPC Bi-Lateral Facility	Evergreen	25,882
Flagstone Bi-Lateral Facility	Evergreen	296,979
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	September 15, 2037	136,662
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	September 15, 2036	113,750
Total		$	1,607,929

Equity Transactions

	Three Months Ended March 31,
Net cash used in:	2013			2012
Share repurchases	$	(69,691	)	$	(11,308	)
Dividends paid to shareholders	(262,232		)	(26,997		)

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Under share repurchase programs authorized by our Board of Directors, we purchased 1.9 million and 0.4 million shares on the open market during the three months ended March 31, 2013 and 2012, respectively, for $69.7 million and $11.3 million, respectively. At March 31, 2013, the Company had $430.3 million remaining for stock repurchases under the existing Board authorization.

During the three months ended March 31, 2013 and 2012, we paid cash dividends to shareholders of $262.2 million and $27.0 million, respectively, which included the $2.00 special dividend per share and a quarterly dividend of $0.30 for 2013 in comparison to $0.25 per share for 2012.

Capital Resources

Shareholders' equity at March 31, 2013 was $4,391.3 million.

On May 1, 2013, the Company announced a quarterly cash dividend of $0.30 per common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable, payable on June 28, 2013 to holders of record on June 14, 2013.

The timing and amount of any future cash dividends, however, will be at the discretion of the Board and will depend upon our results of operations and cash flows, our financial position and capital requirements, general business conditions, legal, tax, regulatory, rating agency and contractual constraints or restrictions and any other factors that the Board deems relevant.

On April 2, 2012, the Company capitalized PaCRe, a new Class 4 Bermuda reinsurer formed for the purpose of writing high excess property catastrophe reinsurance.  PaCRe was funded with $500.0 million of contributed capital. Validus invested $50.0 million in PaCRe's common equity. The Company will underwrite business for PaCRe, for which it will be paid a profit commission based on the company's underwriting results.

On May 29, 2012, the Company announced that it has joined with other investors in capitalizing AlphaCat Re 2012. AlphaCat Re 2012 is a new special purpose reinsurer formed for the purpose of writing collateralized reinsurance with a particular focus on windstorm risks for Florida domiciled insurance companies. AlphaCat Re 2012 was funded with $70.0 million of equity capital. The Company will underwrite business for AlphaCat Re 2012, for which it will be paid a commission for originating the business and a profit commission based on underwriting results.

On February 6, 2013, the Company announced an increase in the common share repurchase authorization to $500.0 million.

On February 6, 2013, the Company announced a special dividend amount of $2.00 per common share and common share equivalent. The dividend was payable in cash on February 26, 2013 to shareholders and warrant holders of record of February 19, 2013.

On February 6, 2013, the Company announced an increase in the regular quarterly dividend to $0.30 from $0.25 per common share and common share equivalent for which each outstanding warrant is exercisable. The Board also approved the payment of the regular quarterly dividend which was payable on March 29, 2013 to shareholders and warrant holders of record as of March 15, 2013.

The Company may from time to time repurchase its securities, including common shares, Junior Subordinated Deferrable Debentures and Senior Notes. The Company repurchased 47.0 million shares at a cost of $1,349.9 million under the share repurchase programs for the period November 4, 2009 through May 1, 2013. The Company had $357.0 million remaining under its authorized share repurchase program at May 1, 2013.

The Company expects the purchases under its share repurchase program to be made from time to time in the open market or in privately negotiated transactions. The timing, form and amount of the share repurchases under the program will depend on a variety of factors, including market conditions, the Company's capital position relative to internal and rating agency targets, legal requirements and other factors. The repurchase program may be modified, extended or terminated by the Board of Directors at any time.

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The following table details the capital resources of the Company's more significant subsidiaries on an unconsolidated basis.

	Capital at
(Dollars in thousands)	March 31, 2013
Validus Reinsurance, Ltd. (consolidated), excluding Validus Re Americas, Ltd. and Validus UPS, Ltd.	$	2,718,660
Validus Re Americas, Ltd. (formerly IPCRe, Ltd)	132,501
Validus UPS, Ltd. (formerly Flagstone)	1,055,541
Total Validus Reinsurance, Ltd. (consolidated)	3,906,702
Noncontrolling interest in PacRe, Ltd.	431,144
Noncontrolling interest in AlphaCat ILS Funds	56,278
Talbot Holdings, Ltd. (consolidated)	826,630
Other subsidiaries, net	48,442
Other, net	(90,556		)
Total consolidated capitalization	5,178,640
Senior notes payable	(247,117		)
Debentures payable	(540,212		)
Total shareholders' equity	$	4,391,311

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Ratings

The following table summarizes the financial strength ratings of the Company and its principal reinsurance and insurance subsidiaries from internationally recognized rating agencies as of May 6, 2013:

	A.M. Best (a)	S&P (b)	Moody’s (c)	Fitch (d)
Validus Holdings, Ltd.
Issuer credit rating	bbb	BBB+	Baa2	A-
Senior debt	bbb	BBB+	Baa2	BBB+
Subordinated debt	bbb-	BBB-	Baa3	BBB-
Preferred stock	bb+	BBB-	Ba1	—
Outlook on ratings	Stable	Stable	Stable	Stable
Validus Reinsurance, Ltd.
Financial strength rating	A	A	A3	A
Issuer credit rating	a	—	—	—
Outlook on ratings	Stable	Stable	Stable	Stable
Talbot
Financial strength rating applicable to all Lloyds syndicates	A	A+	—	A+
Flagstone Reassurance Suisse, SA
Financial strength rating	A-
Issuer credit rating	a-
Outlook on ratings	Stable

(a) The A.M. Best ratings were most recently affirmed on February 7, 2013

(b) The S&P ratings were most recently affirmed on August 30, 2012

(c) All Moody’s ratings were most recently affirmed on August 31, 2012

(d) All Fitch ratings were most recently affirmed on February 21, 2013

Recent accounting pronouncements

Please refer to Note 2 to the Consolidated Financial Statements (Part I, Item I) for further discussion of relevant recent accounting pronouncements.

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Debt and Financing Arrangements

The following table details the Company's borrowings and credit facilities as at March 31, 2013.

(Dollars in thousands)	Commitments (a)		In Use/Outstanding
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800
2010 Senior Notes due 2040	250,000		250,000
$400,000 syndicated unsecured letter of credit facility	400,000		—
$525,000 syndicated secured letter of credit facility	525,000		380,087
$500,000 bi-lateral secured letter of credit facility	500,000		89,511
Talbot FAL Facility (b)	25,000		25,000
PaCRe senior secured letter of credit facility	10,000		258
IPC Bi-Lateral Facility	80,000		25,882
Flagstone Bi-Lateral Facility	550,000		296,979
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	136,662		136,662
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	113,750		113,750
Total	$	2,940,412	$	1,607,929

(a) Indicates utilization of commitment amount, not drawn borrowings.

(b) Talbot operates in Lloyd’s through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies.  Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

Please refer to Note 12 to the Consolidated Financial Statements (Part I, Item I) for further discussion of the Company’s debt and financing arrangements.

Investments

A significant portion of contracts written provide short-tail reinsurance coverage for losses resulting mainly from natural and man-made catastrophes, which could result in a significant amount of losses on short notice. Accordingly, the Company's investment portfolio is structured to provide significant liquidity and preserve capital, which means the investment portfolio contains a significant amount of relatively short-term fixed maturity investments, such as U.S. government securities, U.S. government-sponsored enterprises securities, corporate debt securities and mortgage-backed and asset-backed securities.

Substantially all of the fixed maturity investments held at March 31, 2013 were publicly traded. At March 31, 2013 the average duration of the Company's fixed maturity portfolio was 1.66 years (December 31, 2012: 1.34 years) and the average rating of the portfolio was A+ (December 31, 2012: AA-). At March 31, 2013, the total fixed maturity portfolio was $5,676.6 million (December 31, 2012: $5,085.3 million), of which $820.7 million (December 31, 2012: $1,062.8 million) were rated AAA.

On November 30, 2012, as part of the Flagstone Acquisition, the Company assumed Flagstone's investment portfolio containing $910.3 million of cash and short term investments, $231.4 million of asset-backed securities, $90.0 million of non-agency residential mortgage-backed securities, $19.0 million of catastrophe bonds, $59.3 million fund of hedge funds and $13.0 million of private equity funds.

With the exception of the bank loan portfolio, the Company's investment guidelines require that investments be rated BBB- or higher at the time of purchase. The Company reports the ratings of its investment portfolio securities at the lower of Moody's or Standard & Poor's rating for each investment security. The Company's investment portfolio as at March 31, 2013, has $18.6 million of non-agency mortgage backed securities rated less than investment grade.

The other components of less than investment grade securities held by the Company at March 31, 2013 were $47.6 million of catastrophe bonds and $717.4 million of bank loans.

Cash and cash equivalents and investments in Talbot of $1,894.3 million at March 31, 2013 were held in trust for the benefit of cedants and policyholders and to facilitate the accreditation as an alien insurer/reinsurer by certain regulators (December 31, 2012: $1,901.5 million). Total cash and cash equivalents and investments in Talbot were $1,938.5 million at March 31, 2013 (December 31, 2012: $1,942.6 million).

Cash Flows

During the three months endedMarch 31, 2013 and 2012, the Company generated net cash from operating activities of $60.7 million and $164.9 million, respectively. Cash flows from operations generally represent premiums collected, less losses and loss expenses paid and underwriting and other expenses paid. Cash flows from operations may differ substantially from net income.

As of March 31, 2013 and December 31, 2012, the Company had cash and cash equivalents of $1,369.2 million and $1,219.4 million, respectively.

The Company has written certain business that has loss experience generally characterized as having low frequency and high severity. This results in volatility in both results and operational cash flows. The potential for large claims or a series of claims under one or more reinsurance contracts means that substantial and unpredictable payments may be required within relatively short periods of time. As a result, cash flows from operating activities may fluctuate, perhaps significantly, between individual quarters and years. Management believes the Company's unused credit facility amounts and highly liquid investment portfolio are sufficient to support any potential operating cash flow deficiencies. Please refer to the table detailing the Company's borrowings and credit facilities as at March 31, 2013, presented above.

In addition to relying on premiums received and investment income from the investment portfolio, the Company intends to meet these cash flow demands by carrying a substantial amount of short and medium term investments that would mature, or possibly be sold, prior to the settlement of expected liabilities. The Company cannot provide assurance, however, that it will successfully match the structure of its investments with its liabilities due to uncertainty related to the timing and severity of loss events.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. Any prospectus, prospectus supplement, the Company’s Annual Report to shareholders, any proxy statement, any other Form 10-K, Form 10-Q or Form 8-K of the Company or any other written or oral statements made by or on behalf of the Company may include forward-looking statements that reflect the Company’s current views with respect to future events and financial performance. Such statements include forward-looking statements both with respect to the Company in general, and to the insurance and reinsurance sectors in particular. Statements that include the words “expect”, “intend”, “plan”, “believe”, “project”, “anticipate”, “will”, “may”, and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the PSLRA or otherwise. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statement.

We believe that these factors include, but are not limited to, the following:

• unpredictability and severity of catastrophic events;

• our ability to obtain and maintain ratings, which may affect our ability to raise additional equity or debt financings, as well as other factors described herein;

• adequacy of the Company’s and Flagstone's risk management and loss limitation methods;

• cyclicality of demand and pricing in the insurance and reinsurance markets;

• the Company’s ability to implement its business strategy during “soft” as well as “hard” markets;

• adequacy of the Company’s and Flagstone's loss reserves;

• continued availability of capital and financing;

• the Company’s ability to identify, hire and retain, on a timely and unimpeded basis and on anticipated economic and other terms, experienced and capable senior management, as well as underwriters, claims professionals and support staff;

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• acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and (re)insureds;

• competition, including increased competition, on the basis of pricing, capacity, coverage terms or other factors;

• potential loss of business from one or more major insurance or reinsurance brokers;

• the Company’s ability to implement, successfully and on a timely basis, complex infrastructure, distribution capabilities, systems, procedures and internal controls, and to develop accurate actuarial data to support the business and regulatory and reporting requirements;

• general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates) and conditions specific to the insurance and reinsurance markets in which we operate;

• the integration of Flagstone and other businesses we may acquire or new business ventures, including overseas offices, we may start;

• accuracy of those estimates and judgments used in the preparation of the Company's and Flagstone's financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, taxes, contingencies, litigation and any determination to use the deposit method of accounting, which, for a relatively new insurance and reinsurance company like the Company and Flagstone, are even more difficult to make than those made in a mature company because of limited historical information;

• the effect on the Company’s and Flagstone's investment portfolio of changing financial market conditions including inflation, interest rates, liquidity and the possible downgrade of U.S. securities by credit rating agencies and the resulting effect on the value of securities in the Company’s and Flagstone's investment portfolio, as well as other factors;

• acts of terrorism, political unrest, outbreak of war and other hostilities or other non-forecasted and unpredictable events;

• availability and cost of reinsurance and retrocession coverage;

• the failure of reinsurers, retrocessionaires, producers or others to meet their obligations to us;

• the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;

• changes in domestic or foreign laws or regulations, or their interpretations;

• changes in accounting principles or the application of such principles by regulators;

• statutory or regulatory or rating agency developments, including as to tax policy and reinsurance and other regulatory matters such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers; and

• the other factors set forth herein under Part I Item 1A "Risk Factors" and under Part II Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the other sections of the Company's Annual Report on Form 10-K/A for the year ended December 31, 2012, as well as the risk and other factors set forth in the Company's other filings with the SEC, as well as management's response to any of the aforementioned factors.

In addition, other general factors could affect our results, including: (a) developments in the world’s financial and capital markets and our access to such markets; (b) changes in regulations or tax laws applicable to us, including, without limitation, any such changes resulting from the recent investigations relating to the insurance industry and any attendant litigation; and (c) the effects of business disruption or economic contraction due to terrorism or other hostilities.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein or elsewhere. Any forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or

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operations. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We believe we are principally exposed to five types of market risk:

• interest rate risk;

• foreign currency risk;

• credit risk;

• liquidity risk; and

• effects of inflation.

Interest Rate Risk:The Company's primary market risk exposure is to changes in interest rates. The Company's fixed maturity portfolio is exposed to interest rate risk. Fluctuations in interest rates have a direct impact on the market valuation of these investments. As interest rates rise, the market value of the Company's fixed maturity portfolio falls and the Company has the risk that cash outflows will have to be funded by selling assets, which will be trading at depreciated values. As interest rates decline, the market value of the Company's fixed income portfolio increases and the Company has reinvestment risk, as funds reinvested will earn less than is necessary to match anticipated liabilities. We manage interest rate risk by selecting investments with characteristics such as duration, yield, currency and liquidity tailored to the anticipated cash outflow characteristics of the insurance and reinsurance liabilities the Company assumes.

As atMarch 31, 2013, the impact on the Company's fixed maturity and short-term investments from an immediate 100 basis point increase in market interest rates (based on U.S. treasury yield) would have resulted in an estimated decrease in market value of 1.7%, or approximately $109.1 million. As at March 31, 2013, the impact on the Company's fixed maturity portfolio from an immediate 100 basis point decrease in market interest rates would have resulted in an estimated increase in market value of 1.3% or approximately $82.3 million.

As atMarch 31, 2012, the impact on the Company's fixed maturity and short-term investments from an immediate 100 basis point increase in market interest rates (based on U.S. treasury yield) would have resulted in an estimated decrease in market value of 1.7%, or approximately $91.1 million. As at March 31, 2012, the impact on the Company's fixed maturity portfolio from an immediate 100 basis point decrease in market interest rates would have resulted in an estimated increase in market value of 1.0% or approximately $55.0 million.

As at March 31, 2013, the Company held $913.1 million (December 31, 2012: $1,108.0 million), or 16.1% (December 31, 2012: 21.8%), of the Company's fixed maturity portfolio in asset-backed and mortgage-backed securities. These assets are exposed to prepayment risk, which occurs when holders of underlying loans increase the frequency with which they prepay the outstanding principal before the maturity date and refinance at a lower interest rate cost. The adverse impact of prepayment is more evident in a declining interest rate environment. As a result, the Company will be exposed to reinvestment risk, as cash flows received by the Company will be accelerated and will be reinvested at the prevailing interest rates.

Foreign Currency Risk:Certain of the Company's reinsurance contracts provide that ultimate losses may be payable in foreign currencies depending on the country of original loss. Foreign currency exchange rate risk exists to the extent that there is an increase in the exchange rate of the foreign currency in which losses are ultimately owed. Therefore, we attempt to manage our foreign currency risk by seeking to match our liabilities under insurance and reinsurance policies that are payable in foreign currencies with cash and investments that are denominated in such currencies. As of March 31, 2013, $1,105.9 million, or 10.5% of our total assets and $1,143.9 million, or 18.5% of our total liabilities were held in foreign currencies. As of March 31, 2013, $168.1 million, or 2.7% of our total liabilities held in foreign currencies was non-monetary items which do not require revaluation at each reporting date. As of March 31, 2012, $851.0 million, or 10.5% of our total assets and $879.5 million, or 19.1% of our total liabilities were held in foreign currencies. As of March 31, 2012, $108.4 million, or 2.4% of our total liabilities held in foreign currencies was non-monetary items which do not require revaluation at each reporting date.

Credit Risk:We are exposed to credit risk primarily from the possibility that counterparties may default on their obligations to us. We attempt to limit our credit exposure by purchasing high quality fixed income investments to maintain an average portfolio,

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excluding bank loans, credit quality of AA- or higher with mortgage and commercial mortgage-backed issues having an aggregate weighted average credit quality of AAA. In addition, we have limited our exposure to any single issuer to 3.0% or less of total investments, excluding treasury and agency securities. With the exception of the bank loan portfolio, the minimum credit rating of any security purchased is BBB-/Baa3 and where investments are downgraded below BBB-/Baa3, we permit our investment managers to hold up to 2.0% in aggregate market value, or up to 10.0% with written authorization of the Company. At March 31, 2013, 1.2% of the portfolio, excluding bank loans was below BBB-/Baa3 and we did not have an aggregate exposure to any single issuer of more than 1.2% of total investments, other than with respect to government and agency securities.

The amount of the maximum exposure to credit risk is indicated by the carrying value of the Company's financial assets. The Company's primary credit risks reside in investment in U.S. corporate bonds and recoverables from reinsurers. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. The reinsurance program is generally placed with reinsurers whose rating, at the time of placement, was A- or better rated by S & P or the equivalent with other rating agencies. Exposure to a single reinsurer is also controlled with restrictions dependent on rating. At March 31, 2013, 97.9% of reinsurance recoverables (which includes loss reserves recoverable and recoverables on paid losses) were from reinsurers rated A- or above, or from reinsurers posting full collateral (December 31, 2012: 97.9%, rated A-).

Liquidity risk:Certain of the Company's investments may become illiquid. Disruption in the credit markets may materially affect the liquidity of the Company's investments, including non-agency residential mortgage-backed securities and bank loans which represent 9.5% (December 31, 2012: 9.8%) of total cash and investments. If the Company requires significant amounts of cash on short notice in excess of normal cash requirements (which could include claims on a major catastrophic event) in a period of market illiquidity, the investments may be difficult to sell in a timely manner and may have to be disposed of for less than what may otherwise have been possible under other conditions. At March 31, 2013, the Company had $1,446.5 million of unrestricted, liquid assets, defined as unpledged cash and cash equivalents, short term investments, government and government agency securities. Details of the Company's debt and financing arrangements at March 31, 2013 are provided below.

(Dollars in thousands)	Maturity Date / Term	In Use / Outstanding
2006 Junior Subordinated Deferrable Debentures	June 15, 2036	$	150,000
2007 Junior Subordinated Deferrable Debentures	June 15, 2037	139,800
2010 Senior Notes due 2040	January 26, 2040	250,000
$400,000 syndicated unsecured letter of credit facility	March 9, 2016	—
$525,000 syndicated secured letter of credit facility	March 9, 2016	380,087
$500,000 bi-lateral secured letter of credit facility	Evergreen	89,511
Talbot FAL Facility	December 31, 2015	25,000
PaCRe senior secured letter of credit facility	May 10, 2013	258
IPC Bi-Lateral Facility	Evergreen	25,882
$550,000 Flagstone Bi-Lateral Facility	Evergreen	296,979
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	September 15, 2037	136,662
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	September 15, 2036	113,750
Total		$	1,607,929

Effects of Inflation: We do not believe that inflation has had or will have a material effect on our combined results of operations, except insofar as (a) inflation may affect interest rates, and (b) losses and loss expenses may be affected by inflation.

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report.

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to provide reasonable assurance that all material information relating to the Company required to be filed in this report has been recorded, processed, summarized and reported when required and the information is accumulated and communicated, as appropriate, to allow timely decisions regarding required disclosures.

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Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting identified in connection with the Company’s evaluation required pursuant to Rules 13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934, as amended, that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company anticipates that, similar to the rest of the insurance and reinsurance industry, it will be subject to litigation and arbitration in the ordinary course of business.

ITEM 1A.RISK FACTORS

Please refer to the discussion of Risk factors in Item 1A of the Company's Annual Report on Form 10-K/A for the year ended December 31, 2012.

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

On June 5, 2012, the Company announced the final results of its “modified Dutch auction” tender offer. Pursuant to this tender offer, the Company purchased 6,383,884 of its common shares at a price of $32.00 per common share for a total cost of $204.3 million, excluding fees and expenses relating to the tender offer. The Company funded the purchase of the shares in the tender offer using cash on hand.

The Company expects the purchases under its share repurchase program to be made from time to time in the open market or in privately negotiated transactions. The timing, form and amount of the share repurchases under the program will depend on a variety of factors, including market conditions, the Company's capital position relative to internal and rating agency targets, legal requirements and other factors. The repurchase program may be modified, extended or terminated by the Board of Directors at any time.

On February 6, 2013, the Company announced an increase in the common share repurchase authorization to $500.0 million.

The Company has repurchased approximately 47.0 million common shares for an aggregate purchase price of $1,349.9 million from the inception of the share repurchase program to May 1, 2013. The Company has $357.0 million remaining under its authorized share repurchase program as of May 1, 2013.

Share repurchases include repurchases by the Company of shares, from time to time, from employees in order to facilitate the payment of withholding taxes on restricted shares granted. We purchased these shares at their fair market value, as determined by reference to the closing price of our common shares on the day the restricted shares vested or the stock appreciation rights were exercised.

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	Share Repurchase Activity (Expressed in thousands of U.S. dollars except for share and per share information)
	As at December 31, 2012								Quarter ended
Effect of share repurchases:	(cumulative)		January		February		March		March 31, 2013
Aggregate purchase price (a)	$	1,206,845	$	—	$	36,559	$	33,132	$	69,691
Shares repurchased	43,138,057		$	—	$	1,017,380	$	887,009	$	1,904,389
Average price (a)	$	27.98	$	—	$	35.93	$	37.35	$	36.59
Estimated cumulative net accretive (dilutive) impact on:
Diluted BV per common share (b)									$	1.80
Diluted EPS - Quarter (c)									$	0.49

	Share Repurchase Activity (Expressed in thousands of U.S. dollars except for share and per share information)
Effect of share repurchases:	As at March 31, 2013 (cumulative)		April		As at May 1, 2013		Cumulative to Date Effect
Aggregate purchase price (a)	$	1,276,536	$	71,058	$	2,288	$	1,349,882
Shares repurchased	45,042,446		1,883,310		59,000		46,984,756
Average price (a)	$	28.34	$	37.73	$	38.78	$	28.73

(a) Share transactions are on a trade date basis through May 1, 2013 and are inclusive of commissions.  Average share price is rounded to two decimal places.

(b) As the average price per share repurchased during the periods 2010 to 2013 was lower than the book value per common share, the repurchase of shares increased the Company's period ending book value per share.

(c) The estimated impact on diluted earnings per share was calculated by comparing reported results versus i) net income per share plus an estimate of lost net investment income on the cumulative share repurchases divided by ii) weighted average diluted shares outstanding excluding the weighted average impact of cumulative share repurchases. The impact of cumulative share repurchases was accretive to diluted earnings per share.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5.OTHER INFORMATION

None.

87

ITEM 6.  EXHIBITS

Exhibit	Description
Exhibit 10.1 *	Employment Agreement dated as of April 2, 2013 between Validus America, Inc. and Romel Salam.
Exhibit 10.2 *	Amended and Restated Employment Agreement dated as of April 30, 2013 between Validus Services (Bermuda), Ltd. and Kean Driscoll.
Exhibit 31.1*	Certification of Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
Exhibit 31.2*	Certification of Chief Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
Exhibit 32*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
Exhibit 101.1 INS*	XBRL Instance Document
Exhibit 101.SCH*	XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

*Filed herewith

88

SIGNATURES

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

		VALIDUS HOLDINGS, LTD.
		(Registrant)
Date:	May 6, 2013	/s/ Edward J. Noonan
		Edward J. Noonan
		Chief Executive Officer
Date:	May 6, 2013	/s/ Jeffrey D. Sangster
		Jeffrey D. Sangster
		Executive Vice President and Chief Financial Officer

89

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (“Agreement”) dated as of 2 April 2013 between Validus America, Inc., a Delaware corporation (the “Company”), and Romel Salam (the “Executive”).

The parties hereto agree as follows:

ARTICLE 1                                                        DEFINITIONS

SECTION 1.01    Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:

“Affiliate” or “Affiliates” means Validus Holdings, Ltd., (“Parent”), any Subsidiary of Parent and any Subsidiary of the Company.

“Cause” means (a) theft or embezzlement by the Executive with respect to the Company or its Affiliates; (b) malfeasance or gross negligence in the performance of the Executive's duties; (c) the commission by the Executive of any felony or any crime involving moral turpitude; (d) willful or prolonged absence from work by the Executive (other than by reason of disability due to physical or mental illness or at the direction of the Company or its Affiliates) or failure, neglect or refusal by the Executive to perform his duties and responsibilities without the same being corrected within ten (10) days after being given written notice thereof; (e) failure by the Executive to adequately perform his duties and responsibilities hereunder without the same being corrected within thirty (30) days after being given written notice thereof, as determined by the Company in good faith; (f) continued and habitual use of alcohol by the Executive to an extent which materially impairs the Executive's performance of his duties without the same being corrected within ten (10) days after being given written notice thereof; (g) the Executive's use of illegal drugs without the same being corrected within ten (10) days after being given written notice thereof; (h) the Executive's failure to use his best efforts to maintain or renew the work permit described in Section 3.02 below in a timely manner, without the same being corrected within ten (10) days after being given written notice thereof; or (i) the material breach by the Executive of any of the covenants contained in this Agreement without, in the case of any breach capable of being corrected, the same being corrected within ten (10) days after being given written notice thereof.

“Confidential Information” means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Affiliates in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order, (b) lawfully obtainable from other sources or which is in the public domain through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Company.

“ Good Reason” means, without the Executive's written consent and subject to the timely notice requirement and the Company's opportunity to cure as set forth below, (a) a material breach of this Agreement by the Company; (b) a material reduction in the Executive's Base Salary or benefits; or (c) a material and adverse change by the Company in the Executive's duties and responsibilities set forth in Section 3.01 hereof, other than due to the Executive's failure to adequately perform such duties and responsibilities as determined by the Board in good faith; provided, however, that, it shall be a condition precedent to the Executive's right to terminate employment for Good Reason that (i) the Executive shall first have given the Company written notice that an event or condition constituting Good Reason has occurred within ninety (90) days after such occurrence, and any failure to give such written notice within such period will result in a waiver by the Executive of his right to terminate for Good Reason as a result of such event or condition, and (ii) a period of thirty (30) days from and after the giving of such written notice shall have elapsed without the Company having effectively cured or remedied such occurrence during such 30-day period; providedfurther,however, that the Executive's Notice of Termination (as defined below) for “Good Reason” must be given not later than one hundred fifty (150) days following the initial existence of the condition giving rise to 'Good Reason.'

“Permanent Disability” means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement for a period of six (6) months in any twelve (12) month period because of physical, mental or emotional incapacity resulting from injury, sickness or disease. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

“Subsidiary” or “Subsidiaries” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, twenty (20) percent or more of the total voting power of shares of stock entitled to vote in the election of directors thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, twenty (20) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.

ARTICLE 2

EMPLOYMENT

SECTION 2.01    Employment Period. The Company shall employ the Executive, and the Executive shall accept employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning 2 April 2013 (the “Start Date”) and ending on the Date of Termination as defined Section 5.01. The parties acknowledge and agree that the Executive's employment with the Validus Group of companies (the “Validus Group”) initially began on 15 February 2010 (“Initial Start Date”) and that the Executive's employment with the Validus Group has been and will be continuous from and through such date end on the Termination Date (cumulative, the “Employment Period”).

ARTICLE 3

POSITION AND DUTIES

SECTION 3.01    Position and Duties. Effective on the Start Date, the Executive shall serve as Executive Vice President Group Chief Risk Officer of the Company, render such services to the Company and its Affiliates which are consistent with Executive's position and have such responsibilities, powers and duties as may from time to time be prescribed by the senior executives of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company or its Affiliates. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company and its Affiliates. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person not related to the business of the Company or its Affiliates, whether for compensation or otherwise, without prior written consent of the Company. The Executive shall not engage in prohibited activities on behalf of Validus Reinsurance, Ltd. in accordance with the Validus Group Tax and Regulatory Guidelines dated as of September 30, 2011, while in the United States.

SECTION 3.02    Work Permits. The Executive shall use his best efforts to assist the Company in maintaining and renewing a suitable (for the purposes of the Executive's continued employment by the Company) work permit by the Bermuda government authorities and any other permits required by any Bermuda government authority. The Company shall be responsible for permit fees.

SECTION 3.03    Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere in the performance of his duties) at the offices of the Company in Princeton, New Jersey or at such other place as the Company may in its discretion from time to time direct. The Executive shall travel to such places outside of United States on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.

ARTICLE 4

BASE SALARY AND BENEFITS

SECTION 4.01    Base Salary. During the Employment Period, the Executive's base salary will be $512,500.00 per annum (the “Base Salary”). The Base Salary will be payable monthly on the last working day of each month in arrears in twenty four (24) equal installments. Annually during the Employment Period the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company or its delegate, in its discretion, the Executive's Base Salary may be increased.

SECTION 4.02    Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 125% of your annual salary for 2013 and 150% for the calendar year 2014 and beyond.

SECTION 4.03    Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:

(a)such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents;

(b)ten (10) paid days off for sick leave and a maximum of five (5) weeks of paid vacation annually during the term of the Employment Period, or as governed by the employee handbook;

(c)Benefits, including an annual pension contribution (or equivalent) equal to 10% of Base Salary, under any plan or arrangement available generally for similarly situated employees of the Company, subject to and consistent with the terms and conditions and overall administration of such plans as set forth from time to time in the applicable plan documents;

(d) A Cost of Living Allowance in the amount of $7,500 per month; and

(e)One club membership

SECTION 4.04    Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses (“Reimbursable Expenses”), subject to the Company's requirements with respect to reporting and documentation of expenses. Expenses shall include all travel expenses to and from Bermuda but will not include non-business food and lodging expenses.

SECTION 4.05    Long Term Incentive Plan. During the Employment Period the Executive shall be eligible to participate in the Validus Holdings, Ltd. 2005 Long Term Incentive Plan (or any successor plan) (“the Plan”) under which equity-based compensation awards may be made to the Executive, as determined in the sole discretion of the Compensation Committee of the Board of Directors of the Parent.

ARTICLE 5

TERM AND TERMINATION

SECTION 5.01    Date of Termination. The Employment Period shall end on the Date of Termination. For purposes of this Agreement, the “Date of Termination” shall mean the first to occur of the following: (a) the twelve (12) month anniversary of the Company providing Notice of Termination (as defined below) without Cause to the Executive; (b) immediately upon the Company providing Notice of Termination for Cause to the Executive; (c) the six (6) month anniversary of the Executive providing Notice of Termination to the Company with Good Reason, subject to the terms of section 5.03 below; (d) the six (6) month anniversary of the Executive providing Notice of Termination by the Executive without Good Reason to the Company; (e) the fifth (5th) day following the Company providing Notice of Termination to the Executive as a result of the Executive's Permanent Disability; or (f) the date of Executive's death. In the event that there are circumstances which would give rise to a termination by the Company for Cause, the Company may, in its sole and exclusive discretion, treat such termination as a termination without Cause.

SECTION 5.02    Resignation by the Executive Without Good Reason. If the Employment Period shall be terminated as a result of the Executive's resignation or leaving of his employment, other than for Good Reason, Executive shall continue to: (a) receive Base Salary and the benefits set forth in Section 4.03 through the Date of Termination, except that any amount payable after the Executive's “separation from service” (within the meaning of Treas. Reg. Section 1.409A 1(h)) with the Company will be subject to Section 12.14 below; and (b) receive reimbursement of all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. Notwithstanding any provision of this Agreement or any applicable plan or other agreement to the contrary, no shares of restricted stock of the Parent or stock options of Parent granted to the Executive shall vest on or following the date the Executive provides Notice the of Termination without Good Reason to the Company. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.

SECTION 5.03    Termination for Other Reasons. If the Employment Period shall be terminated by the Executive for Good Reason, by the Company with or without Cause, as a result of the Executive's Permanent Disability or upon the Executive's death, the Executive (or his estate, in the case of death) shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 above (i) in the case of termination by the Executive for Good Reason or by the Company with or without Cause, through the Date of Termination and (ii) in the case of termination due to the Executive's permanent disability or death, through the six-month anniversary of the Date of Termination, except that any amount payable after the Executive's “separation from service” (within the meaning of Treas. Reg. Section 1.409A 1(h)) with the Company will be subject to Section 12.14 below; (b) continue to vest in any shares of restricted stock of Parent and any Parent stock options granted to the Executive through the Date of Termination; and (c) receive reimbursement for all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder. Amounts described in clause (a) above will be paid, subject to Section 12.14 below, monthly on the last working day of each month in arrears in equal installments.

SECTION 5.04    Notice of Termination. Any termination by the Company for Permanent Disability or Cause or without Cause or by the Executive for Good Reason or without Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, with respect to termination by the Company for Permanent Disability or Cause or resignation by the Executive for Good Reason, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.

SECTION 5.05    Garden Leave. Following the provision of a Notice of Termination either by the Company or by the Executive, the Company may direct, in its sole and exclusive discretion, that the Executive perform no duties, exercise no powers and resign from any office held in connection with his employment with the Company or its Affiliates; provided, however, that, following any such direction, the Executive will continue to be required to comply with his other obligations under this Agreement (and will continue to have a duty of loyalty to the Company as an employee) through the end of the Employment Period.

ARTICLE 6

CONFIDENTIAL INFORMATION

SECTION 6.01    Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.

ARTICLE 7

INTELLECTUAL PROPERTY

SECTION 7.01    Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company or its Affiliates as now or hereinafter conducted (collectively, “Intellectual Property”), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed “a work made for hire” under Section 201(b) of the Copyright Act of 1976, as amended, and the Company will own all of the rights comprised in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Company to protect the Company's interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive's employment hereunder).

ARTICLE 8

DELIVERY OF MATERIAL UPON TERMINATION OF EMPLOYMENT

SECTION 8.01    Delivery of Materials upon Termination of Employment. As requested by the Company, from time to time and upon the termination of the Executive's employment with the Company for any reason, the Executive

will promptly deliver to the Company all property of the Company or its Affiliates, including, without limitation, all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that, to the best of his knowledge, all such materials have been delivered to the Company.

ARTICLE 9

NONCOMPETITION AND NONSOLICITATION

SECTION 9.01    Noncompetition. The Executive acknowledges that during his employment with the Company, he will become familiar with trade secrets and other Confidential Information concerning the Company or its Affiliates, and that his services will be of special, unique and extraordinary value to the Company. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period ending 12 months after the Date of Termination (the “Noncompetition Period”), he will not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Company or its Affiliates as such businesses exist or are in process or being planned as of the Date of Termination, within any geographical area in which the Company or its Affiliates engage or plan to engage in such businesses; provided, however, that the portion of the Noncompetition Period following the Date of Termination shall be reduced by the period of time, if any, between the date of Notice of Termination is given and the Date of Termination. It shall not be considered a violation of this Section 9.01 for the Executive to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation.

SECTION 9.02    Nonsolicitation of Employees. The Executive hereby agrees that during the Employment Period and for a period of twelve months after the Date of Termination (the “Nonsolicitation Period”) the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Affiliates to leave the employ of the Company or its Affiliates, or in any way interfere with the relationship between the Company or its Affiliates and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Company or its Affiliates at any time during such Nonsolicitation Period or within the six-month period prior thereto.

SECTION 9.03    Nonsolicitation of Customers. During the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured, reinsured, reinsurer, broker, licensee or other business relation of the Company or its Affiliates to cease doing business with the Company or its Affiliates.

SECTION 9.04    Enforcement. If, at the enforcement of Sections 9.01, 9.02 or 9.03, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Article 9 to cover the maximum duration, scope and area permitted by law.

ARTICLE 10

EQUITABLE RELIEF

SECTION 10.01    Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03 could cause irreparable harm to the Company for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03, the Company shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.

ARTICLE 11

EXECUTIVE REPRESENTATIONS AND INDEMNIFICATION

SECTION 11.01    Executive Representations. The Executive hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by the Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Executive is a

party or by which he is bound, (b) except for agreements provided to the Company by the Executive, the Executive is not a party to or bound by any employment agreement, noncompetition agreement, garden leave agreement or confidentiality agreement with any other Person, and (c) upon the execution and delivery of this Agreement by the Company, this Agreement will be the valid and binding obligation of the Executive, enforceable in accordance with its terms. Notwithstanding Section 11.02 below, in the event that any action is brought against Executive involving any breach of any employment agreement, noncompetition agreement or confidentiality agreement with any other Person, the Executive shall bear his own costs incurred in defending such action, including but not limited to, court fees, arbitration costs, mediation costs, attorneys' fees and disbursements.

SECTION 11.02    General Indemnification. The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a “Proceeding”), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and its organizational documents, against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company agrees to maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.

ATRICLE 12

MISCELLANEOUS

SECTION 12.01    Rights and Remedies. The Company will be entitled to enforce its rights and remedies under this Agreement specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.

SECTION 12.02    Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Company and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.

SECTION 12.03    Parties, Successors and Assigns. This Agreement is an agreement between the Executive and the Company. However, the obligations imposed upon the Company may be assigned to and/or satisfied by an Affiliate. Any payment made or action taken by an Affiliate shall be considered to be a payment made or action taken by the Company for purposes of determining whether the Company has satisfied its obligations under the Agreement. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Company.

SECTION 12.04    Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

SECTION 12.05    Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.

SECTION 12.06    Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

SECTION 12.07    Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return

receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Company at the addresses set forth below.

If to the Executive:	To the last address delivered to the Company by the Executive in the manner set forth herein.
If to the Company:	Validus Holdings, Ltd. 29 Richmond Road Pembroke, HM08 Bermuda Attn: General Counsel

or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.

SECTION 12.08    Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

SECTION 12.09    No Third Party Beneficiary. This Agreement will not confer any rights or remedies (or any obligations) upon any person other than the Company, the Executive and their respective heirs, executors, successors and assigns.

SECTION 12.10    Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof.

SECTION 12.11    Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word “including” in this Agreement means “including without limitation” and is intended by the parties to be by way of example rather than limitation.

SECTION 12.12    Survival. Sections 4.06, 6.01, 7.01, 8.01 and Articles 9 through 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.

SECTION 12.13    GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS, AND THE PARTIES HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF NEW YORK.

SECTION 12.14    409A.

(a)It is intended that this Agreement will comply with Section 409A and Section 457A of the Internal Revenue Code of 1986, as amended (the “Code”) and any regulations and guidelines promulgated thereunder (collectively, “Section 409A”), to the extent the Agreement is subject thereto, and the Agreement shall be interpreted on a basis consistent with such intent. If an amendment of the Agreement is necessary in order for it to comply with Section 409A or Section 457a, the parties hereto will negotiate in good faith to amend the Agreement in a manner that preserves the original intent of the parties to the extent reasonably possible. No action or failure to act pursuant to this Section 12.14 shall subject the Company to any claim, liability, or expense, and the Company shall not have any obligation to indemnify or otherwise protect the Executive from the obligation to pay any taxes, interest or penalties pursuant to Section 409A or Section 457A of the Code.

(b)Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed on the date of his or her “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the Company to be a “specified employee” (within the meaning of Treas. Reg. Section 1.409A-1(i)), then with regard to any payment or benefit that is considered deferred compensation under Section 409A payable on account of a “separation from service” that is required to be delayed pursuant to Section 409A(a)(2)(B) of the Code (after taking into account any applicable exceptions to such requirement), such payment or benefit shall be made or provided on the date that is the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executive's “separation from service,” or (ii) the date of the Executive's death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 12.14 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

(c)With respect to any reimbursement or in-kind benefit arrangements of the Company and its subsidiaries that constitute deferred compensation for purposes of Section 409A, except as otherwise permitted by Section 409A, the following conditions shall be applicable: (i) the amount eligible for reimbursement, or in-kind benefits provided, under any such arrangement in one calendar year may not affect the amount eligible for reimbursement, or in-kind benefits to be provided, under such arrangement in any other calendar year (except that the health and dental plans may impose a limit on the amount that may be reimbursed or paid), (ii) any reimbursement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred, and (iii) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days after termination of employment”), the actual date of payment within the specified period shall be within the sole discretion of the Company. Whenever payments under this Agreement are to be made in installments, each such installment shall be deemed to be a separate payment for purposes of Section 409A.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

VALIDUS AMERICA, INC.

By:/s/ Robert Kuzloski

Printed Name: Robert Kuzloski

Title: Director

By:/s/ Romel Salam

ROMEL SALAM

EX-10.2

Exhibit 10.2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (“Amendment”) dated as of April 30, 2013 between Validus Services (Bermuda), Ltd., a Bermuda corporation (the “Company”), and Mr. Kean Driscoll (the “Executive”).

WHEREAS, the Company and the Executive are parties to an Amended and Restated Employment Agreement dated as of November 23, 2009 as amended on June 15, 2012 and January 1, 2013 (the “Agreements”);

WHEREAS, the Company and the Executive wish to amend and restate the Agreements as set forth herein;

The parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

SECTION 1.01    Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:

“Affiliate” or “Affiliates” means Validus Holdings, Ltd., (“Parent”), any Subsidiary of Parent and any Subsidiary of the Company.

“Base Salary” has the meaning set forth in Section 4.01.

“Cause” means (a) theft or embezzlement by the Executive with respect to the Company or its Affiliates; (b) malfeasance or gross negligence in the performance of the Executive's duties; (c) the commission by the Executive of any felony or any crime involving moral turpitude; (d) willful or prolonged absence from work by the Executive (other than by reason of disability due to physical or mental illness or at the direction of the Company or its Affiliates) or failure, neglect or refusal by the Executive to perform his duties and responsibilities without the same being corrected within ten (10) days after being given written notice thereof; (e) failure by the Executive to adequately perform his duties and responsibilities hereunder without the same being corrected within thirty (30) days after being given written notice thereof, as determined by the Company in good faith; (f) continued and habitual use of alcohol by the Executive to an extent which materially impairs the Executive's performance of his duties without the same being corrected within ten (10) days after being given written notice thereof; (g) the Executive's use of illegal drugs without the same being corrected within ten (10) days after being given written notice thereof; or (h) the material breach by the Executive of any of the covenants contained in this Agreement without, in the case of any breach capable of being corrected, the same being corrected within ten (10) days after being given written notice thereof.

“Confidential Information” means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Affiliates in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order, (b) lawfully obtainable from other sources or which is in the public domain through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Company.

“Permanent Disability” means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement for a period of six (6) months in any twelve (12) month period because of physical, mental or emotional incapacity resulting from injury, sickness or disease. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

“Subsidiary” or “Subsidiaries” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, twenty (20) percent or more of the total

voting power of shares of stock entitled to vote in the election of directors thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, twenty (20) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.

“ Good Reason” means, without the Executive's written consent and subject to the timely notice requirement and the Company's opportunity to cure as set forth below, (a) a material breach of this Agreement by the Company; (b) a material reduction in the Executive's Base Salary or benefits; or (c) a material and adverse change by the Company in the Executive's duties and responsibilities set forth in Section 3.01 hereof, other than due to the Executive's failure to adequately perform such duties and responsibilities as determined by the Board in good faith; provided, however, that, it shall be a condition precedent to the Executive's right to terminate employment for Good Reason that (i) the Executive shall first have given the Company written notice that an event or condition constituting Good Reason has occurred within ninety (90) days after such occurrence, and any failure to give such written notice within such period will result in a waiver by the Executive of his right to terminate for Good Reason as a result of such event or condition, and (ii) a period of thirty (30) days from and after the giving of such written notice shall have elapsed without the Company having effectively cured or remedied such occurrence during such 30-day period; providedfurther,however, that the Executive's Notice of Termination (as defined below) for “Good Reason” must be given not later than one hundred fifty (150) days following the initial existence of the condition giving rise to 'Good Reason.'

ARTICLE 2

EMPLOYMENT

SECTION 2.01    Employment Period. The Company shall employ the Executive, and the Executive shall accept employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning 23 April 2013 (the “Start Date”) and ending on the Date of Termination as defined Section 5.01 below. The parties acknowledge and agree that the Executive's employment with the Validus Group of companies (the “Validus Group”) initially began on November 15, 2005 (the “Initial Start Date”) and that the Executive's employment with the Validus Group has been and will be continuous from and through such date ending on the Termination Date (cumulatively, the “Employment Period”).

ARTICLE 3

POSITION AND DUTIES

SECTION 3.01    Position and Duties. Effective on the Start Date, the Executive shall serve as Executive Vice President and Chief Executive Officer of Validus Reinsurance, Ltd. on behalf of the Company, and render such underwriting, administrative, financial and other executive and managerial services to the Company and to the Parent; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company.. The Company may direct, in its sole and exclusive discretion that the Executive perform no duties and exercise no powers or resign from any office held in connection with his employment with Company or its Affiliates. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company and its Affiliates. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Company or its Affiliates, whether for compensation or otherwise, without prior written consent of the Company.

SECTION 3.02    Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere in the performance of his duties) at the offices of the Company in Bermuda or at such other place as the Company may in its discretion from time to time direct. The Executive shall travel to such places outside of on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.

ARTICLE 4

BASE SALARY AND BENEFITS

SECTION 4.01    Base Salary. During the Employment Period, the Executive's base salary will be $625,000.00 per annum (the “Base Salary”). The Base Salary will be payable monthly on the last working day of each month in arrears in twelve (12) equal installments. Annually during the Employment Period the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company or its delegate, in its discretion, the Executive's Base Salary may be increased.

SECTION 4.02    Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 150% of his Base Salary.

SECTION 4.03    Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:

(a)such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents;

(b)in addition to the public holidays referenced in the Public Holidays Act of 1947 and fifteen (15) paid days off for sick leave five (5) weeks of paid vacation annually during the term of the Employment Period, or as governed by the employee handbook;

(c)Benefits, including an annual pension contribution (or equivalent) equal to 10% of Base Salary, under any plan or arrangement available generally for similarly situated employees of the Company, subject to and consistent with the terms and conditions and overall administration of such plans as set forth from time to time in the applicable plan documents;

(d)A housing allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $18,000.00 per month, payable monthly in advance;

(e)An automobile allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $450.00 per month;

(f)Membership for one (1) club in Bermuda during which the Executive's place of work is Bermuda;

(g)reimbursement for round-trip non-business trips by the Executive and each member of his family residing with him to and from Bermuda (the benefit under this Section 4.03(g) being in addition to any reimbursement of air fare described in Section 4.04, below) in accordance with the Company's policies and procedures for home leaves as in effect from time to time, in an aggregate amount not to exceed $15,000.00 per annum; and

(h)other fringe benefits customarily provided to similarly situated senior executives residing in Bermuda.

SECTION 4.04    Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses (“Reimbursable Expenses”), subject to the Company's requirements with respect to reporting and documentation of expenses.

SECTION 4.05    Long Term Incentive Plan. During the Employment Period the Executive shall be eligible to participate in the Validus Holdings, Ltd. 2005 Long Term Incentive Plan (or any successor plan) (“the Plan”) under which equity-based compensation awards may be made to the Executive, as determined in the sole discretion of the Compensation Committee of the Board of Directors of the Parent.

ARTICLE 5

TERM AND TERMINATION

SECTION 5.01    Date of Termination. The Employment Period shall end on the Date of Termination. For purposes of this Agreement, the “Date of Termination” shall mean the first to occur of the following: (a) the twelve (12) month anniversary of the Company providing Notice of Termination (as defined below) without Cause to the Executive; (b) immediately upon the Company providing Notice of Termination for Cause to the Executive; (c) the twelve (12) month anniversary of the Executive providing Notice of Termination to the Company with Good Reason, subject to the terms of section 5.03 below; (d) the twelve (12) month anniversary of the Executive providing Notice of Termination by the Executive without Good Reason to the Company; (e) the fifth (5th) day following the Company providing Notice of Termination to the Executive as a result of the Executive's Permanent Disability; or (f) the date of Executive's death. In the event that there are circumstances which would give rise to a termination by the Company for Cause, the Company may, in its sole and exclusive discretion, treat such termination as a termination without Cause.

SECTION 5.02    Resignation by the Executive Without Good Reason. If the Employment Period shall be terminated as a result of the Executive's resignation or leaving of his employment, other than for Good Reason, Executive shall continue to: (a) receive Base Salary and the benefits set forth in Section 4.03 through the Date of Termination, except that any amount payable after the Executive's “separation from service” (within the meaning of Treas. Reg. Section 1.409A 1(h)) with the Company will be subject to Section 12.14 below and (b) receive reimbursement of all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. Notwithstanding any provision of this Agreement or any applicable plan or other agreement to the contrary, no shares of restricted stock of the Parent or stock options of Parent granted to the Executive shall vest on or following the date the Executive provides Notice the of Termination without Good Reason to the Company. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.

SECTION 5.03    Termination for Other Reasons. If the Employment Period shall be terminated by the Executive for Good Reason, by the Company with or without Cause, as a result of the Executive's Permanent Disability or upon the Executive's death, the Executive (or his estate, in the case of death) shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 above (i) in the case of termination by the Executive for Good Reason or by the Company with or without Cause, through the Date of Termination and (ii) in the case of termination due to the Executive's permanent disability or death, through the six-month anniversary of the Date of Termination, except that any amount payable after the Executive's “separation from service” (within the meaning of Treas. Reg. Section 1.409A 1(h)) with the Company will be subject to Section 12.14 below; (b) continue to vest in any shares of restricted stock of Parent and any Parent stock options granted to the Executive through the Date of Termination; and (c) receive reimbursement for all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder. Amounts described in clause (a) above will be paid, subject to Section 12.14 below, monthly on the last working day of each month in arrears in equal installments.

SECTION 5.04    Notice of Termination. Any termination by the Company for Permanent Disability or Cause or without Cause or by the Executive for Good Reason or without Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, with respect to termination by the Company for Permanent Disability or Cause or resignation by the Executive for Good Reason, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.

SECTION 5.05    Garden Leave. Following the provision of a Notice of Termination either by the Company or by the Executive, the Company may direct, in its sole and exclusive discretion, that the Executive perform no duties, exercise no powers and resign from any office held in connection with his employment with the Company or its Affiliates; provided, however, that, following any such direction, the Executive will continue to be required to comply with his other obligations under this Agreement (and will continue to have a duty of loyalty to the Company as an employee) through the end of the Employment Period.

ARTICLE 6

CONFIDENTIAL INFORMATION

SECTION 6.01    Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.

ARTICLE 7

INTELLECTUAL PROPERTY

SECTION 7.01    Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company or its Affiliates as now or hereinafter conducted (collectively, “Intellectual Property”), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed “a work made for hire” under Section 201(b) of the Copyright Act of 1976, as amended, and the Company will own all of the rights comprised in the

copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Company to protect the Company's interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive's employment hereunder).

ARTICLE 8

DELIVERY OF MATERIALS UPON TERMINATIONOF EMPLOYMENT

SECTION 8.01    Delivery of Materials upon Termination of Employment. As requested by the Company, from time to time and upon the termination of the Executive's employment with the Company for any reason, the Executive will promptly deliver to the Company all property of the Company or its Affiliates, including, without limitation, all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that, to the best of his knowledge, all such materials have been delivered to the Company.

ARTICLE 9

NONCOMPETION AND NONSOLICITATION

SECTION 9.01    Noncompetition. The Executive acknowledges that during his employment with the Company, he will become familiar with trade secrets and other Confidential Information concerning the Company or its Affiliates, and that his services will be of special, unique and extraordinary value to the Company. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period ending twelve (12) months after the Date of Termination (the “Noncompetition Period”), he will not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Company or its Affiliates as such businesses exist or are in process or being planned as of the Date of Termination, within any geographical area in which the Company or its Affiliates engage or plan to engage in such businesses; provided, however, that the portion of the Noncompetition Period following the Date of Termination shall be reduced by the period of time, if any, between the date of Notice of Termination is given and the Date of Termination. It shall not be considered a violation of this Section 9.01 for the Executive to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation.

SECTION 9.02    Nonsolicitation of Employees. The Executive hereby agrees that during the Employment Period and for a period of twelve (12) months after the Date of Termination (the “Nonsolicitation Period”) the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Affiliates to leave the employ of the Company or its Affiliates, or in any way interfere with the relationship between the Company or its Affiliates and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Company or its Affiliates at any time during such Nonsolicitation Period or within the six-month period prior thereto.

SECTION 9.03    Nonsolicitation of Customers. During the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured, reinsured, reinsurer, broker, licensee or other business relation of the Company or its Affiliates to cease doing business with the Company or its Affiliates.

SECTION 9.04    Enforcement. If, at the enforcement of Sections 9.01, 9.02 or 9.03, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Article 9 to cover the maximum duration, scope and area permitted by law.

ARTICLE 10

EQUITABLE RELIEF

SECTION 10.01    Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03 could cause irreparable harm to the Company for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03, the Company shall have the absolute right to apply to any court of

competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.

ARTICLE 11

EXECUTIVE REPRESENTATIONS AND INDEMNIFICATION

SECTION 11.01    Executive Representations. The Executive hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by the Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Executive is a party or by which he is bound, (b) except for agreements provided to the Company by the Executive, the Executive is not a party to or bound by any employment agreement, noncompetition agreement, garden leave agreement or confidentiality agreement with any other Person, and (c) upon the execution and delivery of this Agreement by the Company, this Agreement will be the valid and binding obligation of the Executive, enforceable in accordance with its terms. Notwithstanding Section 11.02 below, in the event that any action is brought against Executive involving any breach of any employment agreement, noncompetition agreement or confidentiality agreement with any other Person, the Executive shall bear his own costs incurred in defending such action, including but not limited to, court fees, arbitration costs, mediation costs, attorneys' fees and disbursements.

SECTION 11.02    General Indemnification. The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a “Proceeding”), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and its organizational documents, against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company agrees to maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.

ARTICLE 12

MISCELLANEOUS

SECTION 12.01    Rights and Remedies. The Company will be entitled to enforce its rights and remedies under this Agreement specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.

SECTION 12.02    Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Company and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.

SECTION 12.03    Parties, Successors and Assigns. This Agreement is an agreement between the Executive and the Company. However, the obligations imposed upon the Company may be assigned to and/or satisfied by an Affiliate. Any payment made or action taken by an Affiliate shall be considered to be a payment made or action taken by the Company for purposes of determining whether the Company has satisfied its obligations under the Agreement. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Company.

SECTION 12.04    Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

SECTION 12.05    Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.

SECTION 12.06    Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

SECTION12.07    Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Company at the addresses set forth below.

If to the Executive:	To the last address delivered to the Company by the Executive in the manner set forth herein.
If to the Company:	Validus Holdings, Ltd. 29 Richmond Road Pembroke, HM08 Bermuda Attn: General Counsel

or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.

SECTION 12.08    Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

SECTION 12.09    No Third Party Beneficiary. This Agreement will not confer any rights or remedies (or any obligations) upon any person other than the Company, the Executive and their respective heirs, executors, successors and assigns.

SECTION 12.10    Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof.

SECTION 12.11    Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word “including” in this Agreement means “including without limitation” and is intended by the parties to be by way of example rather than limitation.

SECTION 12.12    Survival. Sections 4.06, 6.01, 7.01, 8.01 and Articles 9 through 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.

SECTION 12.13    GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS, AND THE PARTIES HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF BERMUDA.

SECTION 12.14    409A.

(a)    It is intended that this Agreement will comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and any regulations and guidelines promulgated thereunder (collectively, “Section 409A”), to the extent the Agreement is subject thereto, and the Agreement shall be interpreted on a basis consistent with such intent. If an amendment of the Agreement is necessary in order for it to comply with Section 409A, the parties hereto will negotiate in good faith to amend the Agreement in a manner that preserves the original intent of the parties to the extent reasonably possible. No action or failure to act pursuant to this Section 12.14 shall subject the Company to any claim, liability, or expense, and the

Company shall not have any obligation to indemnify or otherwise protect the Executive from the obligation to pay any taxes, interest or penalties pursuant to Section 409A or Section 457A of the Code.

(b)    Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed on the date of his or her “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the Company to be a “specified employee” (within the meaning of Treas. Reg. Section 1.409A-1(i)), then with regard to any payment or benefit that is considered deferred compensation under Section 409A payable on account of a “separation from service” that is required to be delayed pursuant to Section 409A(a)(2)(B) of the Code (after taking into account any applicable exceptions to such requirement), such payment or benefit shall be made or provided on the date that is the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executive's “separation from service,” or (ii) the date of the Executive's death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 12.14 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

(c)    With respect to any reimbursement or in-kind benefit arrangements of the Company and its subsidiaries that constitute deferred compensation for purposes of Section 409A, except as otherwise permitted by Section 409A, the following conditions shall be applicable: (i) the amount eligible for reimbursement, or in-kind benefits provided, under any such arrangement in one calendar year may not affect the amount eligible for reimbursement, or in-kind benefits to be provided, under such arrangement in any other calendar year (except that the health and dental plans may impose a limit on the amount that may be reimbursed or paid), (ii) any reimbursement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred, and (iii) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days after termination of employment”), the actual date of payment within the specified period shall be within the sole discretion of the Company. Whenever payments under this Agreement are to be made in installments, each such installment shall be deemed to be a separate payment for purposes of Section 409A.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

VALIDUS SERVICES (BERMUDA), LTD.

By:/s/ Robert Kuzloski

Printed Name: Robert Kuzloski

Title: Director

KEAN DRISCOLL

By:/s/ Kean Driscoll

Printed Name: Kean Driscoll

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

VALIDUS HOLDINGS, LTD.

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(Chapter 98, Title 15 U.S.C. SS. 7241)

I, Edward J. Noonan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Validus Holdings, Ltd.;

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

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

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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

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

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

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

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

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

Dated: May 6, 2013

/s/ EDWARD J. NOONAN

Edward J. Noonan

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

VALIDUS HOLDINGS, LTD.

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(Chapter 98, Title 15 U.S.C. SS. 7241)

I, Jeffrey D. Sangster, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Validus Holdings, Ltd.;

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

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

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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

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

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

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

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

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

Dated: May 6, 2013

/s/ JEFFREY D. SANGSTER

Jeffrey D. Sangster

 Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION ACCOMPANYING FORM 10-Q REPORT

OF

VALIDUS HOLDINGS, LTD. PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

(Chapter 63, Title 18 U.S.C. SS.SS. 1350(a) and (b))

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chapter 63, Title 18 U.S.C. ss.ss. 1350(a) and (b)), each of the undersigned hereby certifies that the Quarterly Report on Form 10-Q for the period ended March 31, 2013 of Validus Holdings, Ltd. (the "Company") fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 6, 2013

/s/ EDWARD J. NOONAN

Edward J. Noonan

Chief Executive Officer

Validus Holdings, Ltd.

Dated: May 6, 2013

/s/ JEFFREY D. SANGSTER

Jeffrey D. Sangster

 Executive Vice President and Chief Financial Officer

Validus Holdings, Ltd.

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

XML

Basis of preparation and consolidation Basis of preparation and consolidation (Details) (Flagstone Reinsurance Holdings Sa [Member], USD $)	0 Months Ended
	Nov. 30, 2012
Flagstone Reinsurance Holdings Sa [Member]
Business Acquisition [Line Items]
Exchange Ratio	0.1935
Per share price paid by Company to acquire FSR common shares	$ 2.00

XML

Derivative instruments used in hedging activities (Amount and balance sheet location) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Not designated as hedging instruments | Foreign exchange contracts
Summary of amount of derivatives designated as hedging instruments
Notional amount	$ 147,398	$ 310,541
Not designated as hedging instruments | Foreign exchange contracts | Other assets
Summary of amount of derivatives designated as hedging instruments
Fair value, derivative assets	266	0
Not designated as hedging instruments | Foreign exchange contracts | Accounts payable and accrued expenses
Summary of amount of derivatives designated as hedging instruments
Fair value, derivative liabilities	2,646	394
Not designated as hedging instruments | Currency swap
Summary of amount of derivatives designated as hedging instruments
Notional amount		17,153
Not designated as hedging instruments | Currency swap | Other assets
Summary of amount of derivatives designated as hedging instruments
Fair value, derivative assets		0
Not designated as hedging instruments | Currency swap | Accounts payable and accrued expenses
Summary of amount of derivatives designated as hedging instruments
Fair value, derivative liabilities		772
Designated as hedging instruments | Interest rate swap contracts
Summary of amount of derivatives designated as hedging instruments
Notional amount	452,263	289,800
Designated as hedging instruments | Interest rate swap contracts | Other assets
Summary of amount of derivatives designated as hedging instruments
Fair value, derivative assets	0	0
Designated as hedging instruments | Interest rate swap contracts | Accounts payable and accrued expenses
Summary of amount of derivatives designated as hedging instruments
Fair value, derivative liabilities	447	220
Designated as hedging instruments | Foreign exchange contracts
Summary of amount of derivatives designated as hedging instruments
Notional amount	55,450	35,976
Designated as hedging instruments | Foreign exchange contracts | Other assets
Summary of amount of derivatives designated as hedging instruments
Fair value, derivative assets	701	0
Designated as hedging instruments | Foreign exchange contracts | Accounts payable and accrued expenses
Summary of amount of derivatives designated as hedging instruments
Fair value, derivative liabilities	$ 0	$ 223
Junior subordinated deferrable debentures | Interest rate swap contracts
Number of instruments held:
Number of derivative instruments held	2
Flagstone Junior subordinated deferrable debentures | Interest rate swap contracts
Number of instruments held:
Number of derivative instruments held	3
Flagstone Junior subordinated deferrable debentures | Cross currency interest rate swap
Number of instruments held:
Number of derivative instruments held	1

XML

Fair value measurements (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Dec. 31, 2012
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	$ 532,786		$ 564,448
Hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	506,768		538,526
Fund of hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	4,000		4,757
Investment Time Lag Reporting	1 month
Investments Assumed In Flagstone Acquisition [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other Investments Number Of Hedge Funds	3
Investment Time Lag Reporting	1 month
PaCRe funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other Investments Number Of Hedge Funds	4
Investment Time Lag Reporting	1 month
Fair Value, Measurements, Recurring [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	532,786		564,448
Fair Value, Measurements, Recurring [Member] | Hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	506,768	[1]	538,526
Fair Value, Measurements, Recurring [Member] | Fund of hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	$ 4,000		$ 4,757

[1] Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

XML

Commitments and contingencies (Aquiline commitment) (Details) (Aquiline Capital Partners II GP Offshore Ltd, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
Aquiline Capital Partners II GP Offshore Ltd
Related Party Transaction [Line Items]
Percentage of Assignor's interest assumed	100.00%
Total capital commitment	$ 50,000
Remaining capital commitment	$ 31,041

XML

Derivative instruments used in hedging activities (Amount included in statement of operations) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flow hedge | Interest rate swap contracts
Derivative instruments designated as a cash flow hedge
Amount of ineffective portion excluded from effectiveness testing	$ 0
Cash flow hedge | Interest rate swap contracts | Other comprehensive income
Derivative instruments designated as a cash flow hedge
Amount of effective portion recognized in other comprehensive income	1,608
Cash flow hedge | Interest rate swap contracts | Finance expenses
Derivative instruments designated as a cash flow hedge
Amount of effective portion subsequently reclassified to earnings	(1,608)
Fair value hedge | Foreign exchange contracts | Foreign exchange gains (losses)
Derivatives designated as fair value hedges and related hedged item
Amount of gain (loss) recognized in income on derivative	1,261	(3,319)
Amount of gain (loss) on hedged item recognized in income attributable to risk being hedged	(1,261)	3,319
Amount of gain (loss) recognized in income on derivative (ineffective portion)	$ 0	$ 0

XML

Fair value measurements (Fair value hierarchy) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	$ 5,676,552		$ 5,085,334
Short-term investments, at fair value	367,619		1,114,250
Other investments, at fair value	532,786		564,448
Total	6,576,957		6,764,032
Noncontrolling interest	(428,087)		(432,737)	[1]
Investments Excluding Noncontrolling Interest	6,148,870		6,331,295
U.S. government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,424,969		1,099,230
Non-US government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	396,201		302,279
States, municipalities, political subdivision
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	37,731		42,063
Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	384,496		388,874
Non-Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	26,284		106,456
U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,484,178		1,210,173
Non-U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	640,992		593,265
Bank loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	731,811		673,383
Catastrophe bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	47,572		56,947
Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	502,318		612,664
Fund of hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	4,000		4,757
Private equity investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	12,925		12,951
Hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	506,768		538,526
Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	9,093		8,214
PaCRe funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent	10.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	90.00%		90.00%
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	5,676,552		5,085,334
Short-term investments, at fair value	367,619		1,114,250
Other investments, at fair value	532,786		564,448
Total	6,576,957		6,764,032
Noncontrolling interest	(428,087)	[1]	(432,737)
Investments Excluding Noncontrolling Interest	6,148,870		6,331,295
Fair Value, Measurements, Recurring [Member] | U.S. government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,424,969		1,099,230
Fair Value, Measurements, Recurring [Member] | Non-US government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	396,201		302,279
Fair Value, Measurements, Recurring [Member] | States, municipalities, political subdivision
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	37,731		42,063
Fair Value, Measurements, Recurring [Member] | Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	384,496		388,874
Fair Value, Measurements, Recurring [Member] | Non-Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	26,284		106,456
Fair Value, Measurements, Recurring [Member] | U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,484,178		1,210,173
Fair Value, Measurements, Recurring [Member] | Non-U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	640,992		593,265
Fair Value, Measurements, Recurring [Member] | Bank loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	731,811		673,383
Fair Value, Measurements, Recurring [Member] | Catastrophe bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	47,572		56,947
Fair Value, Measurements, Recurring [Member] | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	502,318		612,664
Fair Value, Measurements, Recurring [Member] | Fund of hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	4,000		4,757
Fair Value, Measurements, Recurring [Member] | Private equity investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	12,925		12,951
Fair Value, Measurements, Recurring [Member] | Hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	506,768	[1]	538,526
Fair Value, Measurements, Recurring [Member] | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	9,093		8,214
Fair Value, Measurements, Recurring [Member] | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Short-term investments, at fair value	332,663		1,063,175
Other investments, at fair value	0		0
Total	332,663		1,063,175
Noncontrolling interest	0	[1]
Investments Excluding Noncontrolling Interest	332,663		1,063,175
Fair Value, Measurements, Recurring [Member] | Level 1 | U.S. government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Non-US government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | States, municipalities, political subdivision
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Non-Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Non-U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Bank loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Catastrophe bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Fund of hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Private equity investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0	[1]	0
Fair Value, Measurements, Recurring [Member] | Level 1 | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	5,676,552		5,085,334
Short-term investments, at fair value	34,956		51,075
Other investments, at fair value	9,093		8,214
Total	5,720,601		5,144,623
Noncontrolling interest	0	[1]
Investments Excluding Noncontrolling Interest	5,720,601		5,144,623
Fair Value, Measurements, Recurring [Member] | Level 2 | U.S. government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,424,969		1,099,230
Fair Value, Measurements, Recurring [Member] | Level 2 | Non-US government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	396,201		302,279
Fair Value, Measurements, Recurring [Member] | Level 2 | States, municipalities, political subdivision
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	37,731		42,063
Fair Value, Measurements, Recurring [Member] | Level 2 | Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	384,496		388,874
Fair Value, Measurements, Recurring [Member] | Level 2 | Non-Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	26,284		106,456
Fair Value, Measurements, Recurring [Member] | Level 2 | U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,484,178		1,210,173
Fair Value, Measurements, Recurring [Member] | Level 2 | Non-U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	640,992		593,265
Fair Value, Measurements, Recurring [Member] | Level 2 | Bank loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	731,811		673,383
Fair Value, Measurements, Recurring [Member] | Level 2 | Catastrophe bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	47,572		56,947
Fair Value, Measurements, Recurring [Member] | Level 2 | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	502,318		612,664
Fair Value, Measurements, Recurring [Member] | Level 2 | Fund of hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 2 | Private equity investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 2 | Hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0	[1]	0
Fair Value, Measurements, Recurring [Member] | Level 2 | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	9,093		8,214
Fair Value, Measurements, Recurring [Member] | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Short-term investments, at fair value	0		0
Other investments, at fair value	523,693		556,234
Total	523,693		556,234
Noncontrolling interest	(428,087)	[1]	(432,737)
Investments Excluding Noncontrolling Interest	95,606		123,497
Percentage Of Fair Value Assets Measured On Recurring Basis	1.60%		2.00%
Fair Value, Measurements, Recurring [Member] | Level 3 | U.S. government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Non-US government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | States, municipalities, political subdivision
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Non-Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Non-U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Bank loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Catastrophe bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Fund of hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	4,000		4,757
Fair Value, Measurements, Recurring [Member] | Level 3 | Private equity investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	12,925		12,951
Fair Value, Measurements, Recurring [Member] | Level 3 | Hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	506,768	[1]	538,526
Fair Value, Measurements, Recurring [Member] | Level 3 | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	$ 0		$ 0

[1] Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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Share capital (Tables)

3 Months Ended

Mar. 31, 2013

Stockholders' Equity Note [Abstract]

Summary of common shares issued and outstanding

The following table is a summary of the common shares issued and outstanding:

	Common Shares
Common shares issued, December 31, 2012	152,698,191
Restricted share awards vested, net of shares withheld	130,637
Restricted share units vested, net of shares withheld	3,796
Options exercised	128,020
Direct issuance of common stock	183
Deferred share units vested, net of shares withheld	2,935
Common shares issued, March 31, 2013	152,963,762
Shares repurchased, March 31, 2013	(46,681,321	)
Common shares outstanding, March 31, 2013	106,282,441

	Common Shares
Common shares issued, December 31, 2011	134,503,065
Restricted share awards vested, net of shares withheld	229,688
Restricted share units vested, net of shares withheld	5,101
Options exercised	7,149
Common shares issued, March 31, 2012	134,745,003
Shares repurchased, March 31, 2012	(35,404,545	)
Common shares outstanding, March 31, 2012	99,340,458

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Segment information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013 segments subsidiaries		Mar. 31, 2012		Dec. 31, 2012
Segment Reporting Information [Line Items]
Number of wholly owned subsidiaries	2
Number of operating segments	3
Underwriting income
Gross premiums written	$ 1,104,760		$ 837,289
Reinsurance premiums ceded	(187,216)		(107,052)
Net premiums written	917,544		730,237
Change in unearned premiums	(386,483)		(279,038)
Net premiums earned	531,061		451,199
Underwriting deductions
Losses and loss expenses	144,771		231,989
Policy acquisition costs	93,611		78,132
General and administrative expenses	80,279		66,375
Share compensation expenses	2,318		5,438
Total underwriting deductions	320,979		381,934
Underwriting income (loss)	210,082		69,265
Net investment income	25,649		27,760
Other income	2,685		8,891
Finance expenses	(24,446)		(16,279)
Operating income (loss) before taxes and income from operating affiliates	213,970		89,637
Tax benefit (expense)	318		(139)
Income from operating affilates	3,523		3,367
Net operating income (loss)	217,811		92,865
Net realized gains on investments	1,721		7,532
Net unrealized (losses) gains on investments	(7,237)		20,671
Income from investment affiliate	1,477		0
Foreign exchange gains (losses)	6,922		3,166
Net income	220,694		124,234
Net loss attributable to noncontrolling interest	2,549		0
Net income (loss) available (attributable) to Validus	223,243		124,234
Selected ratios:
Net premiums written / Gross premiums written	83.10%		87.20%
Losses and loss expenses	27.30%	[1]	51.40%	[1]
Policy acquisition costs	17.60%	[1]	17.30%	[1]
General and administrative expenses	15.60%	[1],[2]	15.90%	[1],[2]
Expense ratio	33.20%		33.20%
Combined ratio	60.50%		84.60%
Total assets	10,564,400		8,121,869		10,020,264
Validus Re Segment
Underwriting income
Gross premiums written	747,963		566,866
Reinsurance premiums ceded	(125,728)		(30,001)
Net premiums written	622,235		536,865
Change in unearned premiums	(319,101)		(283,856)
Net premiums earned	303,134		253,009
Underwriting deductions
Losses and loss expenses	73,402		124,206
Policy acquisition costs	51,744		38,790
General and administrative expenses	29,441		17,252
Share compensation expenses	1,413		1,872
Total underwriting deductions	156,000		182,120
Underwriting income (loss)	147,134		70,889
Net investment income	23,193		23,577
Other income	13,490		2,219
Finance expenses	(3,252)		(3,694)
Operating income (loss) before taxes and income from operating affiliates	180,565		92,991
Tax benefit (expense)	1,757		(7)
Income from operating affilates	0		0
Net operating income (loss)	182,322		92,984
Net realized gains on investments	1,593		6,242
Net unrealized (losses) gains on investments	(2,193)		19,865
Income from investment affiliate	1,477
Foreign exchange gains (losses)	11,162		(262)
Net income	194,361		118,829
Net loss attributable to noncontrolling interest	0		0
Net income (loss) available (attributable) to Validus	194,361		118,829
Selected ratios:
Net premiums written / Gross premiums written	83.20%		94.70%
Losses and loss expenses	24.20%	[1]	49.10%	[1]
Policy acquisition costs	17.10%	[1]	15.30%	[1]
General and administrative expenses	10.20%	[1],[2]	7.60%	[1],[2]
Expense ratio	27.30%		22.90%
Combined ratio	51.50%		72.00%
Total assets	6,299,481		4,940,727
AlphaCat Segment
Underwriting income
Gross premiums written	96,516		3,518
Reinsurance premiums ceded	0		0
Net premiums written	96,516		3,518
Change in unearned premiums	(68,899)		(855)
Net premiums earned	27,617		2,663
Underwriting deductions
Losses and loss expenses	0		0
Policy acquisition costs	2,638		256
General and administrative expenses	4,037		1,032
Share compensation expenses	77		52
Total underwriting deductions	6,752		1,340
Underwriting income (loss)	20,865		1,323
Net investment income	881		659
Other income	6,633		7,974
Finance expenses	(11,325)		(2)
Operating income (loss) before taxes and income from operating affiliates	17,054		9,954
Tax benefit (expense)	0		0
Income from operating affilates	3,523		3,367
Net operating income (loss)	20,577		13,321
Net realized gains on investments	0		0
Net unrealized (losses) gains on investments	(4,788)		(597)
Income from investment affiliate	0
Foreign exchange gains (losses)	(1,187)		(9)
Net income	14,602		12,715
Net loss attributable to noncontrolling interest	2,549		0
Net income (loss) available (attributable) to Validus	17,151		12,715
Selected ratios:
Net premiums written / Gross premiums written	100.00%		100.00%
Losses and loss expenses	0.00%	[1]	0.00%	[1]
Policy acquisition costs	9.60%	[1]	9.60%	[1]
General and administrative expenses	14.90%	[1],[2]	40.70%	[1],[2]
Expense ratio	24.50%		50.30%
Combined ratio	24.50%		50.30%
Total assets	1,189,190		237,528
Talbot Segment
Underwriting income
Gross premiums written	293,530		293,253
Reinsurance premiums ceded	(94,737)		(103,399)
Net premiums written	198,793		189,854
Change in unearned premiums	1,517		5,673
Net premiums earned	200,310		195,527
Underwriting deductions
Losses and loss expenses	71,369		107,783
Policy acquisition costs	40,526		38,738
General and administrative expenses	30,912		33,348
Share compensation expenses	1,405		1,348
Total underwriting deductions	144,212		181,217
Underwriting income (loss)	56,098		14,310
Net investment income	4,718		5,790
Other income	0		1,026
Finance expenses	(74)		(31)
Operating income (loss) before taxes and income from operating affiliates	60,742		21,095
Tax benefit (expense)	(1,054)		(132)
Income from operating affilates	0		0
Net operating income (loss)	59,688		20,963
Net realized gains on investments	128		1,290
Net unrealized (losses) gains on investments	(256)		1,403
Income from investment affiliate	0
Foreign exchange gains (losses)	(3,918)		3,623
Net income	55,642		27,279
Net loss attributable to noncontrolling interest	0		0
Net income (loss) available (attributable) to Validus	55,642		27,279
Selected ratios:
Net premiums written / Gross premiums written	67.70%		64.70%
Losses and loss expenses	35.60%	[1]	55.10%	[1]
Policy acquisition costs	20.20%	[1]	19.80%	[1]
General and administrative expenses	16.10%	[1],[2]	17.70%	[1],[2]
Expense ratio	36.30%		37.50%
Combined ratio	71.90%		92.60%
Total assets	3,043,312		2,929,817
Corporate & Eliminations
Underwriting income
Gross premiums written	(33,249)		(26,348)
Reinsurance premiums ceded	33,249		26,348
Net premiums written	0		0
Change in unearned premiums	0		0
Net premiums earned	0		0
Underwriting deductions
Losses and loss expenses	0		0
Policy acquisition costs	(1,297)		348
General and administrative expenses	15,889		14,743
Share compensation expenses	(577)		2,166
Total underwriting deductions	14,015		17,257
Underwriting income (loss)	(14,015)		(17,257)
Net investment income	(3,143)		(2,266)
Other income	(17,438)		(2,328)
Finance expenses	(9,795)		(12,552)
Operating income (loss) before taxes and income from operating affiliates	(44,391)		(34,403)
Tax benefit (expense)	(385)		0
Income from operating affilates	0		0
Net operating income (loss)	(44,776)		(34,403)
Net realized gains on investments	0		0
Net unrealized (losses) gains on investments	0		0
Income from investment affiliate	0
Foreign exchange gains (losses)	865		(186)
Net income	(43,911)		(34,589)
Net loss attributable to noncontrolling interest	0		0
Net income (loss) available (attributable) to Validus	(43,911)		(34,589)
Selected ratios:
Total assets	$ 32,417		$ 13,797

[1] Ratios are based on net premiums earned.

[2] The general and administrative expense ratio includes share compensation expenses.

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Reinsurance (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Reinsurance recoverables by reinsurer
Reinsurance recoverable	$ 445,083	$ 486,402
Percentage of reinsurance recoverables	100.00%	100.00%
Reinsurance (Textuals) [Abstract]
Incurred but not reported recoverable	181,163	185,255
Provision for uncollectible reinsurance relating to losses recoverable	6,046	6,602
A- or better rating
Reinsurance (Textuals) [Abstract]
Percentage of total (including loss reserves recoverable and recoverables on paid losses)	97.90%
Fully Collateralized Reinsurers
Reinsurance recoverables by reinsurer
Reinsurance recoverable	29,906	47,445
Top 10 reinsurers
Reinsurance recoverables by reinsurer
Reinsurance recoverable	339,061	360,234
Percentage of reinsurance recoverables	76.20%	74.10%
Percentage of top 10 reinsurers reinsurance recoverable	100.00%	100.00%
Top 10 reinsurers | Lloyd's Syndicates | A plus
Reinsurance recoverables by reinsurer
Reinsurance recoverable	69,769	71,469
Percentage of top 10 reinsurers reinsurance recoverable	20.60%	19.90%
Top 10 reinsurers | National Indemnity | AA plus
Reinsurance recoverables by reinsurer
Reinsurance recoverable	64,667	59,941
Percentage of top 10 reinsurers reinsurance recoverable	19.10%	16.60%
Top 10 reinsurers | Everest Re | A plus
Reinsurance recoverables by reinsurer
Reinsurance recoverable	52,863	51,340
Percentage of top 10 reinsurers reinsurance recoverable	15.60%	14.30%
Top 10 reinsurers | Hannover Re | AA-
Reinsurance recoverables by reinsurer
Reinsurance recoverable	42,431	40,552
Percentage of top 10 reinsurers reinsurance recoverable	12.50%	11.30%
Top 10 reinsurers | Fully Collateralized Reinsurers | NR
Reinsurance recoverables by reinsurer
Reinsurance recoverable	29,906	47,445
Percentage of top 10 reinsurers reinsurance recoverable	8.80%	13.20%
Top 10 reinsurers | Transatlantic Re | A plus
Reinsurance recoverables by reinsurer
Reinsurance recoverable	20,584	20,320
Percentage of top 10 reinsurers reinsurance recoverable	6.10%	5.60%
Top 10 reinsurers | Swiss Re | AA-
Reinsurance recoverables by reinsurer
Reinsurance recoverable	17,574	16,992
Percentage of top 10 reinsurers reinsurance recoverable	5.20%	4.70%
Top 10 reinsurers | XL Re | A
Reinsurance recoverables by reinsurer
Reinsurance recoverable	15,350	14,854
Percentage of top 10 reinsurers reinsurance recoverable	4.50%	4.10%
Top 10 reinsurers | Tokio Millennium | AA plus
Reinsurance recoverables by reinsurer
Reinsurance recoverable	13,439
Percentage of top 10 reinsurers reinsurance recoverable	4.00%
Top 10 reinsurers | Munich Re | AA-
Reinsurance recoverables by reinsurer
Reinsurance recoverable	12,478	20,954
Percentage of top 10 reinsurers reinsurance recoverable	3.60%	5.80%
Top 10 reinsurers | Allianz | AA-
Reinsurance recoverables by reinsurer
Reinsurance recoverable		16,367
Percentage of top 10 reinsurers reinsurance recoverable		4.50%
Other reinsurers' balances > $1 million
Reinsurance recoverables by reinsurer
Reinsurance recoverable	97,409	115,262
Percentage of reinsurance recoverables	21.90%	23.70%
Other reinsurers' balances less than $1 million
Reinsurance recoverables by reinsurer
Reinsurance recoverable	$ 8,613	$ 10,906
Percentage of reinsurance recoverables	1.90%	2.20%

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Related party transactions (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Aquiline Capital Partners LLC
Related Party Transaction [Line Items]
Shares owned by related party	6,255,943
Warrants to purchase shares	2,756,088
Group Ark Insurance Holdings Ltd
Related Party Transaction [Line Items]
Gross premiums written	$ 1,795	$ 297
Premiums receivable	198		251
Reinsurance premiums ceded	4	0
Loss reserves recoverable	4,417		3,694
Earned premium adjustments	719	362
Tiger Risk Partners LLC
Related Party Transaction [Line Items]
Brokerage expenses		290
Accounts payable and accrued expenses		964
Conning Inc
Related Party Transaction [Line Items]
Accounts payable and accrued expenses	196	201
Investment management fees	191	203
Aquiline Capital Partners II GP Offshore Ltd
Related Party Transaction [Line Items]
Accounts payable and accrued expenses	0		0
Percentage of Assignor's interest assumed	100.00%
Total capital commitment	50,000
Partnership fees incurred	120	1,436
Capital contributions	$ 1,341	$ 1,529

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Significant accounting policies (Policies)

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Basis of preparation

These unaudited consolidated financial statements include Validus Holdings, Ltd. and its subsidiaries (together, the "Company") and have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 in Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. This Quarterly Report should be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2012, as filed with the U.S. Securities and Exchange Commission (the "SEC").

In the opinion of management, these unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company's financial position and results of operations as at the end of and for the periods presented. Certain amounts in prior periods have been reclassified to conform to current period presentation. All significant intercompany accounts and transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates reflected in the Company's consolidated financial statements include the reserve for losses and loss expenses, premium estimates for business written on a line slip or proportional basis, the valuation of goodwill and intangible assets, reinsurance premiums ceded and reinsurance recoverable balances including the provision for unrecoverable reinsurance recoverable balances and investment valuation. Actual results could differ from those estimates.

Reserves for losses and loss expenses

Reserves for losses and loss expenses are based in part upon the estimation of case losses reported from brokers, insureds and ceding companies. The Company also uses statistical and actuarial methods to estimate ultimate expected losses and loss expenses. The period of time from the occurrence of a loss, the reporting of a loss to the Company and the settlement of the Company's liability may be several months or years. During this period, additional facts and trends may be revealed. As these factors become apparent, case reserves will be adjusted, sometimes requiring an increase or decrease in the overall reserves of the Company, and at other times requiring a reallocation of incurred but not reported reserves to specific case reserves. These estimates are reviewed and adjusted regularly, and such adjustments, if any, are reflected in earnings in the period in which they become known. While management believes that it has made a reasonable estimate of ultimate losses, there can be no assurances that ultimate losses and loss expenses will not exceed the total reserves.

Reinsurance

The Company uses a default analysis to estimate uncollectible reinsurance. The primary components of the default analysis are reinsurance recoverable balances by reinsurer and default factors used to determine the portion of a reinsurer's balance deemed to be uncollectible. Default factors require considerable judgment and are determined using the current rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions.

To estimate the provision for uncollectible reinsurance recoverable, the reinsurance recoverable is first allocated to applicable reinsurers. This determination is based on a process rather than an estimate, although an element of judgment is applied.

The Company enters into reinsurance and retrocession agreements in order to mitigate its accumulation of loss, reduce its liability on individual risks, enable it to underwrite policies with higher limits and increase its aggregate capacity. The cession of insurance and reinsurance does not legally discharge the Company from its primary liability for the full amount of the policies, and the Company is required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance or retrocession agreement. Amounts recoverable from reinsurers are estimated in a manner consistent with the underlying liabilities.

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Investments in affiliates (Operating affiliates - other details) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Investment:
Investment at cost	$ 86,888
Carrying value	90,263	137,111	56,398	53,031
AlphaCat Re 2011 Ltd
Investment:
Investment at cost	16,355
Voting ownership %	43.70%
Equity ownership %	22.30%
Carrying value	16,805	62,792	56,398	53,031
AlphaCat Re 2012 Ltd
Investment:
Investment at cost	25,533
Voting ownership %	49.00%
Equity ownership %	37.90%
Carrying value	27,358	29,319
AlphaCat 2013 Ltd
Investment:
Investment at cost	45,000
Voting ownership %	40.90%
Equity ownership %	19.70%
Carrying value	$ 46,100	$ 45,000

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Investments (Maturity profile of fixed maturity investments) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Maturity profile
Amortized cost	$ 5,616,693	$ 5,008,514
Estimated fair value	5,676,552	5,085,334
Fixed maturities trading securities allocated to contractual maturity
Maturity profile
Amortized cost	4,717,019	3,919,507
Estimated fair value	4,763,454	3,977,340
Due in one year or less | Fixed maturities trading securities allocated to contractual maturity
Maturity profile
Amortized cost	719,492	526,529
Estimated fair value	725,393	530,499
Due after one year through five years | Fixed maturities trading securities allocated to contractual maturity
Maturity profile
Amortized cost	3,626,561	2,971,118
Estimated fair value	3,661,494	3,018,544
Due after five years through ten years | Fixed maturities trading securities allocated to contractual maturity
Maturity profile
Amortized cost	367,885	418,377
Estimated fair value	373,504	424,304
Due after ten years | Fixed maturities trading securities allocated to contractual maturity
Maturity profile
Amortized cost	3,081	3,483
Estimated fair value	3,063	3,993
Asset backed and mortgaged backed securities | No single maturity date
Maturity profile
Amortized cost	899,674	1,089,007
Estimated fair value	$ 913,098	$ 1,107,994

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Subsequent events (Details) (USD $)	0 Months Ended
	May 01, 2013
Dividend declared | Common shares
Subsequent events (Textuals) [Abstract]
Subsequent event date	May 01, 2013
Subsequent event, dividends declared	$ 0.30
Dividend declared | Common share equivalents
Subsequent events (Textuals) [Abstract]
Subsequent event, dividends declared	$ 0.30
Longhorn Re acquisition
Subsequent events (Textuals) [Abstract]
Subsequent event date	Apr. 25, 2013

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Earnings per share (Tables)

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Computation of basic and diluted earnings per share

The following table sets forth the computation of basic and diluted earnings per share for the three months endedMarch 31, 2013 and 2012: 

	Three Months Ended
	March 31, 2013			March 31, 2012
Basic earnings per share
Net income	$	220,694		$	124,234
Loss attributable to noncontrolling interest	2,549			—
Net income available to Validus	223,243			124,234
Less: Dividends and distributions declared on outstanding warrants	(14,464		)	(1,729		)
Income available to common shareholders	$	208,779		$	122,505
Weighted average number of common shares outstanding	107,386,438			99,425,140
Basic earnings per share available to common shareholders	$	1.94		$	1.23
Diluted earnings per share
Net income	$	220,694		$	124,234
Loss attributable to noncontrolling interest	2,549			—
Net income available to Validus	223,243			124,234
Less: Dividends and distributions declared on outstanding warrants	(14,464		)	—
Income available to common shareholders	$	208,779		$	124,234
Weighted average number of common shares outstanding	107,386,438			99,425,140
Share equivalents:
Warrants	—			3,022,971
Stock options	1,631,556			813,863
Unvested restricted shares	1,035,005			1,834,116
Weighted average number of diluted common shares outstanding	110,052,999			105,096,090
Diluted earnings per share available to common shareholders	$	1.90		$	1.18

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Investments in affiliates (Text) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011
Schedule of Equity Method Investments [Line Items]
Return of investment	$ 50,222
Equity Method Investments Proportional Share Of Income	3,374	3,367
Carrying value	90,263	56,398	137,111	53,031
AlphaCat Re 2011 Ltd
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Voting Percentage	43.70%
Ownership percentage required for consolidation	50.00%
Return of investment	46,436
Equity ownership %	22.30%
Equity Method Investments Proportional Share Of Income	449	3,367
Carrying value	16,805	56,398	62,792	53,031
AlphaCat Re 2012 Ltd
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Voting Percentage	49.00%
Return of investment	3,786
Equity ownership %	37.90%
Equity Method Investments Proportional Share Of Income	1,825
Carrying value	27,358		29,319
AlphaCat 2013 Ltd
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Voting Percentage	40.90%
Return of investment	0
Equity ownership %	19.70%
Equity Method Investments Proportional Share Of Income	1,100
Carrying value	46,100		45,000
Investment in ILS Funds
Schedule of Equity Method Investments [Line Items]
Third party subscriptions			219,400
Equity Method Investments Proportional Share Of Income	149
Carrying value	20,149
Aquiline Financial Services Fund LP
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Voting Percentage	0.00%
Equity ownership %	6.70%
Investment Time Lag Reporting	3 months
Percentage of Assignor's interest assumed	100.00%
Total capital commitment	$ 50,000

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AlphaCat variable funding notes (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]
AlphaCat variable funding notes	$ 290,588	$ 0
Variable interest entity, not primary beneficiary
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]
AlphaCat variable funding notes	290,588
Variable interest entity, not primary beneficiary | AlphaCat 2013 Ltd
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]
AlphaCat variable funding notes	161,439
Variable interest entity, not primary beneficiary | AlphaCat ILS Funds
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]
AlphaCat variable funding notes	$ 129,149

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Stock plans (Components of share compensation expenses) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Total share compensation expenses
Share compensation expenses	$ 2,318	$ 5,438
Options
Total share compensation expenses
Share compensation expenses	0	135
Restricted share awards
Total share compensation expenses
Share compensation expenses	4,061	5,940
Restricted share units
Total share compensation expenses
Share compensation expenses	121	120
Performance shares
Total share compensation expenses
Share compensation expenses	$ (1,864)	$ (757)

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Fair value measurements (Level 3 rollforward) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012	Dec. 31, 2012
Reconciliation of beginning and ending balances for all investments measured at fair value on recurring basis
Noncontrolling interest	$ (428,087)			$ (432,737)	[1]
Fair Value, Measurements, Recurring [Member]
Reconciliation of beginning and ending balances for all investments measured at fair value on recurring basis
Noncontrolling interest	(428,087)	[1]		(432,737)
Level 3 | Fair Value, Measurements, Recurring [Member]
Reconciliation of beginning and ending balances for all investments measured at fair value on recurring basis
Level 3 investments - beginning of period	556,234		8,880
Purchases	459		1,529
Sales	(31,334)		(620)
Realized gains	40		28
Unrealized losses	(1,706)		(1,492)
Level 3 investments - end of period	523,693		8,325
Noncontrolling interest	(428,087)	[1]		(432,737)
Investments excluding noncontrolling interest level three rollforward	95,606
Level 3 | Fair Value, Measurements, Recurring [Member] | Other Investments
Reconciliation of beginning and ending balances for all investments measured at fair value on recurring basis
Level 3 investments - beginning of period	556,234		8,880
Purchases	459		1,529
Sales	(31,334)		(620)
Realized gains	40		28
Unrealized losses	(1,706)		(1,492)
Level 3 investments - end of period	523,693		8,325
Noncontrolling interest	(428,087)	[2]
Investments excluding noncontrolling interest level three rollforward	$ 95,606

[1] Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

[2] Includes Level 3 investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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Investments

3 Months Ended

Mar. 31, 2013

Investments [Abstract]

Investments

Investments

(a) Trading Securities

The Company's investments in fixed maturities, short-term investments and other investments are classified as trading and carried at fair value, with related net unrealized gains or losses included in earnings.

The amortized cost, gross unrealized gains and (losses) and estimated fair value of investments at March 31, 2013 were as follows:

	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,417,884		$	7,150		$	(65	)	$	1,424,969
Non-U.S. government and government agency	396,948			4,314			(5,061		)	396,201
States, municipalities, political subdivision	36,933			816			(18		)	37,731
Agency residential mortgage-backed securities	372,469			12,311			(284		)	384,496
Non-agency residential mortgage-backed securities	27,010			177			(903		)	26,284
U.S. corporate	1,466,941			17,990			(753		)	1,484,178
Non-U.S. corporate	632,880			9,027			(915		)	640,992
Bank loans	718,427			13,617			(233		)	731,811
Catastrophe bonds	47,006			748			(182		)	47,572
Asset-backed securities	500,195			2,750			(627		)	502,318
Total fixed maturities	5,616,693			68,900			(9,041		)	5,676,552
Total short-term investments	368,404			60			(845		)	367,619
Other investments
Fund of hedge funds	4,192			273			(465		)	4,000
Private equity investments	12,968			258			(301		)	12,925
Hedge funds (a)	528,874			45,037			(67,143		)	506,768
Mutual funds	6,199			2,894			—			9,093
Total other investments	552,233			48,462			(67,909		)	532,786
Total	$	6,537,330		$	117,422		$	(77,795	)	$	6,576,957
Noncontrolling interest (a)	$	(450,000	)	$	(38,441	)	$	60,354		$	(428,087	)
Total investments excluding noncontrolling interest	$	6,087,330		$	78,981		$	(17,441	)	$	6,148,870

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

The amortized cost, gross unrealized gains and (losses) and estimated fair value of investments at December 31, 2012 were as follows:

	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,091,357		$	7,957		$	(84	)	$	1,099,230
Non-U.S. government and government agency	295,602			6,904			(227		)	302,279
States, municipalities, political subdivision	41,286			800			(23		)	42,063
Agency residential mortgage-backed securities	375,368			13,708			(202		)	388,874
Non-agency residential mortgage-backed securities	106,536			1,266			(1,346		)	106,456
U.S. corporate	1,189,173			21,681			(681		)	1,210,173
Non-U.S. corporate	582,115			11,373			(223		)	593,265
Bank loans	663,217			10,593			(427		)	673,383
Catastrophe bonds	56,757			481			(291		)	56,947
Asset-backed securities	607,103			5,767			(206		)	612,664
Total fixed maturities	5,008,514			80,530			(3,710		)	5,085,334
Total short-term investments	1,112,929			1,349			(28		)	1,114,250
Other investments
Fund of hedge funds	4,677			299			(219		)	4,757
Private equity investments	12,857			94			—			12,951
Hedge funds (a)	559,335			21,814			(42,623		)	538,526
Mutual funds	6,199			2,015			—			8,214
Total other investments	583,068			24,222			(42,842		)	564,448
Total	$	6,704,511		$	106,101		$	(46,580	)	$	6,764,032
Noncontrolling interest (a)	(450,000		)	(19,427		)	36,690			(432,737		)
Total investments excluding noncontrolling interest	$	6,254,511		$	86,674		$	(9,890	)	$	6,331,295

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

The following table sets forth certain information regarding the investment ratings of the Company’s fixed maturities portfolio as at March 31, 2013 and December 31, 2012. Investment ratings are the lower of Moody’s or Standard & Poor’s rating for each investment security, presented in Standard & Poor’s equivalent rating. For investments where Moody’s and Standard & Poor’s ratings are not available, Fitch ratings are used and presented in Standard & Poor’s equivalent rating.

	March 31, 2013				December 31, 2012
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
AAA	$	820,687	14.5	%	$	1,062,794	20.9	%
AA	2,338,976		41.2	%	1,862,322		36.6	%
A	1,285,519		22.6	%	1,049,969		20.6	%
BBB	447,761		7.9	%	374,447		7.4	%
Investment grade	4,892,943		86.2	%	4,349,532		85.5	%
BB	355,124		6.3	%	373,907		7.4	%
B	397,877		7.0	%	330,416		6.5	%
CCC	4,374		0.1	%	4,483		0.1	%
CC	3,261		—	%	3,259		0.1	%
D/NR	22,973		0.4	%	23,737		0.4	%
Non-Investment grade	783,609		13.8	%	735,802		14.5	%
Total Fixed Maturities	$	5,676,552	100.0	%	$	5,085,334	100.0	%

The amortized cost and estimated fair value amounts for fixed maturity securities held at March 31, 2013 and December 31, 2012 are shown below by contractual maturity. Actual maturity may differ from contractual maturity because certain borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

	March 31, 2013				December 31, 2012
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	719,492	$	725,393	$	526,529	$	530,499
Due after one year through five years	3,626,561		3,661,494		2,971,118		3,018,544
Due after five years through ten years	367,885		373,504		418,377		424,304
Due after ten years	3,081		3,063		3,483		3,993
	4,717,019		4,763,454		3,919,507		3,977,340
Asset-backed and mortgage-backed securities	899,674		913,098		1,089,007		1,107,994
Total	$	5,616,693	$	5,676,552	$	5,008,514	$	5,085,334

(b)  Net investment income

Net investment income was derived from the following sources: 

	Three Months Ended
	March 31, 2013			March 31, 2012
Fixed maturities and short-term investments	$	27,531		$	27,276
Cash and cash equivalents	533			2,317
Securities lending income	—			5
Total gross investment income	28,064			29,598
Investment expenses	(2,415		)	(1,838		)
Net investment income	$	25,649		$	27,760

(c) Net realized gains (losses) and change in net unrealized gains (losses)

The following represents an analysis of net realized gains and the change in net unrealized (losses) gains on investments:

	Three Months Ended
	March 31, 2013			March 31, 2012
Fixed maturities, short-term and other investments and cash equivalents
Gross realized gains	$	10,720		$	10,008
Gross realized (losses)	(8,999		)	(2,476		)
Net realized gains on investments	1,721			7,532
Net unrealized gains on securities lending	—			37
Change in net unrealized (losses) gains on investments	(7,237		)	20,634
Net change in unrealized (losses) gains on investments	$	(7,237	)	$	20,671
Total net realized gains and change in net unrealized (losses) gains on investments	$	(5,516	)	$	28,203
Noncontrolling interest (a)	4,651			—
Total net realized gains and change in net unrealized (losses) gains on investments excluding noncontrolling interest	$	(865	)	$	28,203

(a) Includes change in net unrealized (losses) on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

(d) Pledged investments

The following tables outline investments pledged as collateral under the Company's credit facilities. For further details of the credit facilities, please refer to Note 12: “Debt and financing arrangements.”

	March 31, 2013
Description	Commitment		Issued and Outstanding		Investments pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		380,087		524,195
$500,000 secured bi-lateral letter of credit facility	500,000		89,511		126,146
Talbot FAL Facility	25,000		25,000		36,830
PaCRe senior secured letter of credit facility	10,000		258		—
IPC Bi-lateral facility	80,000		25,882		98,771
$550,000 Flagstone Bi-lateral facility	550,000		296,979		487,127
	$	2,090,000	$	817,717	$	1,273,069

	December 31, 2012
Description	Commitment		Issued and Outstanding		Investments pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		376,570		517,210
$500,000 secured bi-lateral letter of credit facility	500,000		92,402		125,991
Talbot FAL Facility	25,000		25,000		41,372
PaCRe senior secured letter of credit facility	10,000		219		—
IPC Bi-lateral facility	80,000		40,613		98,593
$550,000 Flagstone Bi-lateral facility	550,000		381,019		416,414
	$	2,090,000	$	915,823	$	1,199,580

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Stock plans (Text) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Stock plans (other details)
Number of shares reserved for issuance under the LTIP and STIP	13,126,896
Remaining number of shares reserved for issuance	3,016,246
Share compensation expenses	$ 2,318	$ 5,438
Options
Stock plans (other details)
Life of options	10 years
Share compensation expenses	0	135
Unrecognized share compensation expenses	0		0
Weighted average period of recognizing share based compensation expenses	0 years		0 years
Restricted share awards
Stock plans (other details)
Share compensation expenses	4,061	5,940
Unrecognized share compensation expenses	38,226		43,952
Weighted average period of recognizing share based compensation expenses	2 years 6 months		2 years 7 months 6 days
Restricted share units
Stock plans (other details)
Share compensation expenses	121	120
Unrecognized share compensation expenses	861		978
Weighted average period of recognizing share based compensation expenses	2 years 6 months		2 years 7 months 6 days
Performance shares
Stock plans (other details)
Share compensation expenses	(1,864)	(757)
Unrecognized share compensation expenses	$ 1,148		$ 3,328
Performance share awards performance period	P3Y
Weighted average period of recognizing share based compensation expenses	1 year 8 months 12 days		1 year 8 months 12 days

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Investments (Components of net investment income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Net investment income
Total gross investment income	$ 28,064	$ 29,598
Investment expenses	(2,415)	(1,838)
Net investment income	25,649	27,760
Fixed maturities and short term investments
Net investment income
Total gross investment income	27,531	27,276
Cash and cash equivalents
Net investment income
Total gross investment income	533	2,317
Securities lending income
Net investment income
Total gross investment income	$ 0	$ 5

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Noncontrolling interest (Tables)

3 Months Ended

Mar. 31, 2013

Noncontrolling Interest [Abstract]

Noncontrolling interest

The following table presents a reconciliation of the beginning and ending balances of noncontrolling interest for the three months ended March 31, 2013:

	Three Months Ended March 31, 2013
	PaCRe			AlphaCat ILS Funds		Total
As at December 31, 2012	$	434,280		$	—	$	434,280
Purchase of shares by noncontrolling interest	—			55,690		55,690
Net (loss) income attributable to noncontrolling interest	(3,135		)	586		(2,549		)
As at March 31, 2013	$	431,145		$	56,276	$	487,421

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Investments in affiliates (Tables)

3 Months Ended

Mar. 31, 2013

Equity Method Investments and Joint Ventures [Abstract]

Reconciliation of the beginning and ending non-consolidated affiliate balance

The following table presents a reconciliation of the beginning and ending investment in operating affiliates balances for the three months ended March 31, 2013: 

	Three Months Ended March 31, 2013
	Investment in operating affiliate (AlphaCat Re 2011)			Investment in operating affiliate (AlphaCat Re 2012)			Investment in operating affiliate (AlphaCat 2013)		Total
As at December 31, 2012	$	62,792		$	29,319		$	45,000	$	137,111
Return of investment	(46,436		)	(3,786		)	—		(50,222		)
Income from operating affiliates	449			1,825			1,100		3,374
As at March 31, 2013	$	16,805		$	27,358		$	46,100	$	90,263

The following table presents a reconciliation of the beginning and ending investment in operating affiliate balances for the three months ended March 31, 2012: 

	Three Months Ended March 31, 2012
	Investment in operating affiliate (AlphaCat Re 2011)		Total
As at December 31, 2011	$	53,031	$	53,031
Income from operating affiliates	3,367		3,367
As at March 31, 2012	$	56,398	$	56,398

The following table presents a reconciliation of the beginning and ending investment in the Company's investment affiliate balance for the three months ended March 31, 2013:

	Three Months Ended March 31, 2013
	Investment in limited partnership (Aquiline Financial Services Fund II L.P) (a)
As at December 31, 2012	$	15,218
Capital contributions	1,341
Income from investment affiliate	1,477
As at March 31, 2013	$	18,036

(a) As at March 31, 2012, this investment was included in "Other investments" as a Level 3 investment in the fair value hierarchy.

Schedule of equity method investments

The following table presents the Company's investment in the Aquiline Financial Services Fund II L.P. as at March 31, 2013:

	Investment in non-consolidated affiliate
	Investment at cost		Voting ownership %		Equity Ownership		Carrying Value
Aquiline Financial Services Fund II L.P	$	18,959	—	%	6.7	%	$	18,036

The following table presents the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012 and AlphaCat 2013 as at March 31, 2013:

	Investment in operating affiliates
	Investment at cost		Voting ownership %		Equity ownership %		Carrying value
AlphaCat Re 2011	$	16,355	43.7	%	22.3	%	$	16,805
AlphaCat Re 2012	25,533		49.0	%	37.9	%	27,358
AlphaCat 2013	45,000		40.9	%	19.7	%	46,100
Total	$	86,888					$	90,263

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Reserve for losses and loss expenses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Reserve for paid losses and unpaid loss expenses
Reserve for losses and loss expenses, beginning of period	$ 3,517,573	$ 2,631,143
Losses and loss expenses recoverable	(439,967)	(372,485)
Net reserves for losses and loss expenses, beginning of period	3,077,606	2,258,658
Increase (decrease) in net losses and loss expenses incurred in respect of losses occurring in:
Current year	210,569	262,413
Prior years	(65,798)	(30,424)
Total incurred losses and loss expenses	144,771	231,989
Total net paid losses	(260,112)	(204,223)
Foreign exchange	(33,826)	11,894
Net reserve for losses and loss expenses, end of period	2,928,439	2,298,318
Losses and loss expenses recoverable	429,252	351,292
Reserve for losses and loss expenses, end of period	$ 3,357,691	$ 2,649,610

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Investments (Realized and unrealized gains) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Fixed maturities, short-term and other investments and cash equivalents
Gross realized gains	$ 10,720		$ 10,008
Gross realized (losses)	(8,999)		(2,476)
Net realized gains on investments	1,721		7,532
Change in net unrealized gains (losses) on investments	(7,237)		20,671
Total net realized gains and change in net unrealized gains (losses) on investments	(5,516)		28,203
Noncontrolling interest	4,651	[1]	0	[1]
Total net realized gains and change in net unrealized gains (losses) on investments excluding noncontrolling interest	(865)		28,203
Securities lending
Fixed maturities, short-term and other investments and cash equivalents
Change in net unrealized gains (losses) on investments	0		37
Investments excluding securities lending
Fixed maturities, short-term and other investments and cash equivalents
Change in net unrealized gains (losses) on investments	$ (7,237)		$ 20,634

[1] Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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Derivative instruments used in hedging activities (Tables)

3 Months Ended

Mar. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Location and fair value amount of derivative instruments reported on the balance sheet

The following table summarizes information on the location and amount of the fair value of derivatives not designated as hedging instruments on the consolidated balance sheet at March 31, 2013:

			Asset derivatives			Liability derivatives
Derivatives not designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Foreign currency forward contracts	$	147,398	Other assets	$	266	Accounts payable and accrued expenses	$	2,646

The following table summarizes information on the location and amount of the fair value of derivatives designated as hedging instruments on the consolidated balance sheet at March 31, 2013:

			Asset derivatives			Liability derivatives
Derivatives designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Foreign currency forward contracts	$	55,450	Other assets	$	701	Accounts payable and accrued expenses	$	—
Interest rate swap contracts	$	452,263	Other assets	$	—	Accounts payable and accrued expenses	$	447

The following table summarizes information on the location and amount of the fair value of derivatives not designated as hedging instruments on the consolidated balance sheet at December 31, 2012:

			Asset derivatives			Liability derivatives
Derivatives not designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Currency swaps	$	17,153	Other assets	$	—	Accounts payable and accrued expenses	$	772
Foreign currency forward contracts	$	310,541	Other assets	$	—	Accounts payable and accrued expenses	$	394

The following table summarizes information on the location and amount of the fair value of derivatives designated as hedging instruments on the consolidated balance sheet at December 31, 2012:

			Asset derivatives			Liability derivatives
Derivatives designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Foreign currency forward contracts	$	35,976	Other assets	$	—	Accounts payable and accrued expenses	$	223
Interest rate swap contracts	$	289,800	Other assets	$	—	Accounts payable and accrued expenses	$	220

Location and amount of gains and losses related to derivative instruments reported on in the income statement

The following table provides the total impact on earnings relating to the derivative instruments formally designated as fair value hedges along with the impact of the related hedged items for the three months ended March 31, 2013 and 2012:

		Three Months Ended March 31, 2013
Derivatives designated as fair value hedges and related hedged item:	Location of gain (loss) recognized in income	Amount of gain (loss) recognized in income on derivative			Amount of gain (loss) on hedged item recognized in income attributable to risk being hedged			Amount of gain (loss) recognized in income on derivative (ineffective portion)
Foreign currency forward contracts	Foreign exchange gains (losses)	$	1,261		$	(1,261	)	$	—
		Three Months Ended March 31, 2012
Derivatives designated as fair value hedges and related hedged item:	Location of gain (loss) recognized in income	Amount of gain (loss) recognized in income on derivative			Amount of gain (loss) on hedged item recognized in income attributable to risk being hedged			Amount of gain (loss) recognized in income on derivative (ineffective portion)
Foreign currency forward contracts	Foreign exchange gains (losses)	$	(3,319	)	$	3,319		$	—

The following table provides the total impact on other comprehensive income and earnings relating to the derivative instruments formally designated as cash flow hedges along with the impact of the related hedged items for the three months ended March 31, 2013:

		Three Months Ended March 31, 2013
Derivatives designated as cash flow hedges and related hedged item:	Location of the effective portion recognized in other comprehensive (loss) recognized in income	Location of the effective portion subsequently reclassified to earnings and the ineffective portion excluded from effectiveness testing	Amount of effective portion recognized in other comprehensive income		Amount of effective portion subsequently reclassified to earnings			Amount of ineffective portion excluded from effectiveness testing
Interest rate swap contracts	Other comprehensive income	Finance expenses	$	1,608	$	(1,608	)	$	—

There was no interest rate swap contract activity for the three months ended March 31, 2012.

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Reserve for losses and loss expenses (Tables)

3 Months Ended

Mar. 31, 2013

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Reserve for losses and loss expenses

The following table represents an analysis of paid and unpaid losses and loss expenses incurred and a reconciliation of the beginning and ending unpaid losses and loss expenses for the three months ended March 31, 2013 and 2012:

	Three Months Ended
	March 31, 2013			March 31, 2012
Reserve for losses and loss expenses, beginning of period	$	3,517,573		$	2,631,143
Losses and loss expenses recoverable	(439,967		)	(372,485		)
Net reserves for losses and loss expenses, beginning of period	3,077,606			2,258,658
Increase (decrease) in net losses and loss expenses incurred in respect of losses occurring in:
Current year	210,569			262,413
Prior years	(65,798		)	(30,424		)
Total incurred losses and loss expenses	144,771			231,989
Total net paid losses	(260,112		)	(204,223		)
Foreign exchange	(33,826		)	11,894
Net reserve for losses and loss expenses, end of period	2,928,439			2,298,318
Losses and loss expenses recoverable	429,252			351,292
Reserve for losses and loss expenses, end of period	$	3,357,691		$	2,649,610

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Recent accounting pronouncements

3 Months Ended

Mar. 31, 2013

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent accounting pronouncements

Recent accounting pronouncements

(a) Adoption of new accounting standards

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued Accounting Standards Update No. 2011-11, "Disclosures about Offsetting Assets and Liabilities" ("ASU 2011-11"). The objective of ASU 2011-11 is to enhance disclosures by requiring improved information about financial instruments and derivative instruments in relation to netting arrangements.

In January 2013, the FASB issued Accounting Standards Update No. 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU 2013-01”). The objective of ASU 2013-01 is to address implementation issues about the scope of ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. The amendments clarify that the scope of ASU 2011-11 applies to derivatives, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either or subject to an enforceable master netting arrangement or similar agreement. Entities with other types of financial assets and financial liabilities subject to a master netting arrangement or similar agreement also are affected because these amendments make them no longer subject to the disclosure requirements in ASU 2011-11. ASU 2011-11 and 2013-01 became effective for fiscal periods beginning on or after January 1, 2013, and as a result, the Company adopted ASU 2011-11 and 2013-01 effective January 1, 2013. The adoption of these new accounting standards impacts disclosures only; therefore they did not have an impact on the Company's consolidated financial statements. Please refer to Note 7: "Derivative instruments used in hedging activities."

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income

In February 2013, the FASB issued Accounting Standard Update No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). The objective of this update is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The amendments became effective for reporting periods beginning after December 15, 2012, and as a result, the Company adopted ASU 2013-02 effective January 1, 2013. The adoption of this new accounting standard did not have an impact on the Company's consolidated financial statements.

(b) Recently issued accounting standards not yet adopted

In March 2013, the FASB issued Accounting Standard Update No. 2013-05, “Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (“ASU 2013-05”). The objective of this update is to resolve the diversity in practice about whether Subtopic 810-10, Consolidation-Overall, or Subtopic 830-30, Foreign Currency Matters-Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary within a foreign entity. The amendments in this Update are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact of this guidance; however it is not expected to have a material impact on the Company's consolidated financial statements.

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Reinsurance (Tables)

3 Months Ended

Mar. 31, 2013

Reinsurance Disclosures [Abstract]

Reinsurance recoverables by reinsurer

Reinsurance recoverables by reinsurer are as follows:

	March 31, 2013				December 31, 2012
	Reinsurance Recoverable		% of Total		Reinsurance Recoverable		% of Total
Top 10 reinsurers	$	339,061	76.2	%	$	360,234	74.1	%
Other reinsurers’ balances > $1 million	97,409		21.9	%	115,262		23.7	%
Other reinsurers’ balances < $1 million	8,613		1.9	%	10,906		2.2	%
Total	$	445,083	100.0	%	$	486,402	100.0	%

	March 31, 2013
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd’s Syndicates	A+	$	69,769	20.6	%
National Indemnity	AA+	64,667		19.1	%
Everest Re	A+	52,863		15.6	%
Hannover Re	AA-	42,431		12.5	%
Fully Collateralized	NR	29,906		8.8	%
Transatlantic Re	A+	20,584		6.1	%
Swiss Re	AA-	17,574		5.2	%
XL Re	A	15,350		4.5	%
Tokio Millennium	AA+	13,439		4.0	%
Munich Re	AA-	12,478		3.6	%
Total		$	339,061	100.0	%

	December 31, 2012
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd’s Syndicates	A+	$	71,469	19.9	%
National Indemnity	AA+	59,941		16.6	%
Everest Re	A+	51,340		14.3	%
Fully Collateralized	NR	47,445		13.2	%
Hannover Re	AA-	40,552		11.3	%
Munich Re	AA-	20,954		5.8	%
Transatlantic Re	A+	20,320		5.6	%
Swiss Re	AA-	16,992		4.7	%
Allianz	AA-	16,367		4.5	%
XL Re	A	14,854		4.1	%
Total		$	360,234	100.0	%

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Investments (Gross unrealized gains and losses on fixed maturities) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	$ 5,616,693	$ 5,008,514
Short-term investments, at amortized cost	368,404	1,112,929
Other investments, at amortized cost	552,233	583,068
Amortized cost	6,537,330	6,704,511
Noncontrolling interest, cost or amortized cost	(450,000)	(450,000)	[1]
Total investments excluding non-controlling interest, cost or amortized cost	6,087,330	6,254,511
Fixed maturities, gross unrealized gains	68,900	80,530
Short term investments, gross unrealized gains	60	1,349
Other investments, gross unrealized gains	48,462	24,222
Gross unrealized gains	117,422	106,101
Noncontrolling interest share of unrealized gains other investments	(38,441)	(19,427)	[1]
Total investments excluding non-controlling interest, unrealized gains	78,981	86,674
Fixed maturities, gross unrealized losses	(9,041)	(3,710)
Short term investments, gross unrealized losses	(845)	(28)
Other investments, gross unrealized losses	(67,909)	(42,842)
Gross unrealized losses	77,795	46,580
Noncontrolling interest share of unrealized losses	60,354	36,690	[1]
Total investments excluding non-controlling interest, unrealized losses	(17,441)	(9,890)
Total fixed maturities	5,676,552	5,085,334
Short-term investments	367,619	1,114,250
Other investments	532,786	564,448
Total	6,576,957	6,764,032
Noncontrolling interest	(428,087)	(432,737)	[1]
Total investments excluding noncontrolling interest	6,148,870	6,331,295
U.S. government and government agency
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	1,417,884	1,091,357
Fixed maturities, gross unrealized gains	7,150	7,957
Fixed maturities, gross unrealized losses	(65)	(84)
Total fixed maturities	1,424,969	1,099,230
Non-US government and government agency
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	396,948	295,602
Fixed maturities, gross unrealized gains	4,314	6,904
Fixed maturities, gross unrealized losses	(5,061)	(227)
Total fixed maturities	396,201	302,279
States, municipalities, political subdivision
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	36,933	41,286
Fixed maturities, gross unrealized gains	816	800
Fixed maturities, gross unrealized losses	(18)	(23)
Total fixed maturities	37,731	42,063
Agency residential mortgage-backed securities
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	372,469	375,368
Fixed maturities, gross unrealized gains	12,311	13,708
Fixed maturities, gross unrealized losses	(284)	(202)
Total fixed maturities	384,496	388,874
Non-Agency residential mortgage-backed securities
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	27,010	106,536
Fixed maturities, gross unrealized gains	177	1,266
Fixed maturities, gross unrealized losses	(903)	(1,346)
Total fixed maturities	26,284	106,456
U.S. corporate
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	1,466,941	1,189,173
Fixed maturities, gross unrealized gains	17,990	21,681
Fixed maturities, gross unrealized losses	(753)	(681)
Total fixed maturities	1,484,178	1,210,173
Non-U.S. corporate
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	632,880	582,115
Fixed maturities, gross unrealized gains	9,027	11,373
Fixed maturities, gross unrealized losses	(915)	(223)
Total fixed maturities	640,992	593,265
Bank loans
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	718,427	663,217
Fixed maturities, gross unrealized gains	13,617	10,593
Fixed maturities, gross unrealized losses	(233)	(427)
Total fixed maturities	731,811	673,383
Catastrophe bonds
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	47,006	56,757
Fixed maturities, gross unrealized gains	748	481
Fixed maturities, gross unrealized losses	(182)	(291)
Total fixed maturities	47,572	56,947
Asset-backed securities
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost	500,195	607,103
Fixed maturities, gross unrealized gains	2,750	5,767
Fixed maturities, gross unrealized losses	(627)	(206)
Total fixed maturities	502,318	612,664
Fund of hedge funds
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Other investments, at amortized cost	4,192	4,677
Other investments, gross unrealized gains	273	299
Other investments, gross unrealized losses	(465)	(219)
Other investments	4,000	4,757
Private equity investments
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Other investments, at amortized cost	12,968	12,857
Other investments, gross unrealized gains	258	94
Other investments, gross unrealized losses	(301)	0
Other investments	12,925	12,951
Hedge funds
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Other investments, at amortized cost	528,874	559,335
Other investments, gross unrealized gains	45,037	21,814
Other investments, gross unrealized losses	(67,143)	(42,623)
Other investments	506,768	538,526
Mutual funds
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Other investments, at amortized cost	6,199	6,199
Other investments, gross unrealized gains	2,894	2,015
Other investments, gross unrealized losses	0	0
Other investments	$ 9,093	$ 8,214
PaCRe funds
Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments
Noncontrolling Interest, Ownership Percentage by Parent	10.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	90.00%	90.00%

[1] Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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Noncontrolling interest (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013 PaCRe, Ltd	Mar. 31, 2013 AlphaCat ILS Funds	Dec. 31, 2012 Investment in ILS Funds	Mar. 31, 2013 PaCRe funds	Dec. 31, 2012 PaCRe funds
Noncontrolling Interest [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent						10.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners						90.00%	90.00%
Third party subscriptions					$ 219,400
Activity in net income attributable to noncontrolling interest
Balance - Beginning of Period	434,280		434,280	0
Purchase of shares by noncontrolling interest	55,690		0	55,690
Net (loss) income attributable to noncontrolling interest	(2,549)	0	(3,135)	586
Balance - End of Period	$ 487,421	$ 0	$ 431,145	$ 56,276

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Earnings per share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Basic earnings per share
Net income	$ 220,694	$ 124,234
Loss attributable to noncontrolling interest	2,549	0
Net income available to Validus	223,243	124,234
less: Dividends and distributions declared on outstanding warrants	(14,464)	(1,729)
Income available to common shareholders	208,779	122,505
Weighted average number of common shares outstanding	107,386,438	99,425,140
Basic earnings per share available to common shareholders	$ 1.94	$ 1.23
Diluted earnings per share
Net income	220,694	124,234
Loss attributable to noncontrolling interest	2,549	0
Net income available to Validus	223,243	124,234
less: Dividends and distributions declared on outstanding warrants	(14,464)	0
Income available to common shareholders	$ 208,779	$ 124,234
Weighted average number of common shares outstanding	107,386,438	99,425,140
Weighted average number of common shares outstanding, diluted	110,052,999	105,096,090
Diluted earnings per share available to common shareholders	$ 1.90	$ 1.18
Other details:
Anti-dilutive securities excluded from the calculation of diluted earnings per share	104,405	16,660
Warrants
Diluted earnings per share
Weighted average number diluted shares outstanding adjustment	0	3,022,971
Stock options
Diluted earnings per share
Weighted average number diluted shares outstanding adjustment	1,631,556	813,863
Unvested restricted shares
Diluted earnings per share
Weighted average number diluted shares outstanding adjustment	1,035,005	1,834,116

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Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Assets
Fixed maturities, at fair value (amortized cost: 2013 - $5,616,693; 2012 - $5,008,514)	$ 5,676,552	$ 5,085,334
Short-term investments, at fair value (amortized cost: 2013 - $368,404; 2012 - $1,112,929)	367,619	1,114,250
Other investments, at fair value (amortized cost: 2013 - $552,233; 2012 - $583,068)	532,786	564,448
Cash and cash equivalents	1,369,224	1,219,379
Total investments and cash	7,946,181	7,983,411
Investments in affiliates	128,448	172,329
Premiums receivable	1,195,430	802,159
Deferred acquisition costs	219,504	146,588
Prepaid reinsurance premiums	200,577	99,593
Securities lending collateral	1,914	225
Loss reserves recoverable	429,252	439,967
Paid losses recoverable	15,831	46,435
Income taxes recoverable	2,203	0
Intangible assets	109,529	110,569
Goodwill	20,393	20,393
Accrued investment income	19,708	21,321
Other assets	275,430	177,274
Total assets	10,564,400	10,020,264
Liabilities
Reserve for losses and loss expenses	3,357,691	3,517,573
Unearned premiums	1,381,829	894,362
Reinsurance balances payable	187,048	138,550
Securities lending payable	2,380	691
Deferred income taxes	21,800	20,259
Net payable for investments purchased	33,101	38,346
Accounts payable and accrued expenses	111,323	167,577
AlphaCat variable funding notes	290,588	0
Senior notes payable	247,117	247,090
Debentures payable	540,212	540,709
Total liabilities	6,173,089	5,565,157
Commitments and contingent liabilities
Shareholders' equity
Common shares, 571,428,571 authorized, par value $0.175 (Issued: 2013 - 152,963,762; 2012 - 152,698,191; Outstanding: 2013 - 106,282,441; 2012 - 107,921,259)	26,769	26,722
Treasury shares (2013 - 46,681,321; 2012 - 44,776,932)	(8,169)	(7,836)
Additional paid-in-capital	2,096,512	2,160,478
Accumulated other comprehensive (loss)	(12,738)	(2,953)
Retained earnings	1,801,516	1,844,416
Total shareholders' equity attributable to Validus	3,903,890	4,020,827
Noncontrolling interest	487,421	434,280
Total shareholders' equity	4,391,311	4,455,107
Total liabilities and shareholders' equity	$ 10,564,400	$ 10,020,264

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Investments (Investments pledged as collateral) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Dec. 31, 2012
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	$ 2,090,000		$ 2,090,000
Letters of credit issued and outstanding	817,717		915,823
Investments pledged as collateral	1,273,069		1,199,580
$400,000 syndicated unsecured letter of credit facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	400,000		400,000
Letters of credit issued and outstanding	0		0
Investments pledged as collateral	0		0
$525,000 syndicated secured letter of credit facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	525,000		525,000
Letters of credit issued and outstanding	380,087		376,570
Investments pledged as collateral	524,195		517,210
$500,000 secured bi-lateral letter of credit facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	500,000		500,000
Letters of credit issued and outstanding	89,511		92,402
Investments pledged as collateral	126,146		125,991
Talbot FAL Facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	25,000	[1]	25,000	[1]
Letters of credit issued and outstanding	25,000		25,000
Investments pledged as collateral	36,830		41,372
PaCRe Senior secured letter of credit facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	10,000		10,000
Letters of credit issued and outstanding	258		219
Investments pledged as collateral	0		0
IPC Bi Lateral Facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	80,000		80,000
Letters of credit issued and outstanding	25,882		40,613
Investments pledged as collateral	98,771		98,593
$550,000 Flagstone Bi-lateral facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	550,000		550,000
Letters of credit issued and outstanding	296,979		381,019
Investments pledged as collateral	$ 487,127		$ 416,414

[1] Talbot operates in the Lloyd’s market ("Lloyds") through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies. Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows provided by (used in) operating activities
Net income	$ 220,694	$ 124,234
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Share compensation expenses	2,318	5,438
Amortization of discount on senior notes	27	27
(Income) from investment affiliate	(1,477)	0
Net realized (gains) on investments	(1,721)	(7,532)
Net unrealized losses (gains) on investments	7,237	(20,671)
Amortization of intangible assets	1,040	1,040
(Income) from operating affiliates	(3,523)	(3,367)
Foreign exchange losses (gains) included in net income	18,906	(13,070)
Amortization of premium on fixed maturities	5,059	7,517
Change in:
Premiums receivable	(400,153)	(246,039)
Deferred acquisition costs	(72,916)	(49,217)
Prepaid reinsurance premiums	(100,984)	(34,026)
Loss reserves recoverable	6,447	22,916
Paid losses recoverable	30,438	42,903
Income taxes recoverable	(2,132)	(1,004)
Accrued investment income	1,532	1,565
Other assets	8,020	(10,880)
Reserve for losses and loss expenses	(138,633)	8,702
Unearned premiums	487,467	313,064
Reinsurance balances payable	51,300	31,701
Deferred income taxes	1,250	1,029
Accounts payable and accrued expenses	(59,513)	(9,425)
Net cash provided by operating activities	60,683	164,905
Cash flows provided by (used in) investing activities
Proceeds on sales of investments	1,410,509	939,646
Proceeds on maturities of investments	125,841	108,360
Purchases of fixed maturities	(2,140,447)	(1,080,442)
Sales (purchases) of short-term investments, net	744,518	(23,943)
Sales (purchases) of other investments	31,121	(947)
(Increase) decrease in securities lending collateral	(1,689)	7,354
Redemption from investment in operating affiliates	50,222	0
Purchase of investment in investment affiliate	(1,341)	0
Net cash provided by (used in) investing activities	218,734	(49,972)
Cash flows provided by (used in) financing activities
Net proceeds on issuance of AlphaCat variable funding notes	175,637	0
Issuance (redemption) of common shares, net	3,121	(1,267)
Purchases of common shares under share repurchase program	(69,691)	(11,308)
Dividends paid	(262,232)	(26,997)
Increase (decrease) in securities lending payable	1,689	(7,354)
Third party investment in noncontrolling interest	55,690	0
Net cash (used in) financing activities	(95,786)	(46,926)
Effect of foreign currency rate changes on cash and cash equivalents	(33,786)	16,545
Net increase in cash	149,845	84,552
Cash and cash equivalents - beginning of period	1,219,379	832,844
Cash and cash equivalents - end of period	1,369,224	917,396
Taxes paid during the period	693	3,194
Interest paid during the period	$ 17,819	$ 15,611

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Stock plans (Options activity) (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Options Activities
Options outstanding, beginning balance	1,823,947	2,263,012
Options regranted (repriced)	1,833,414
Options granted	0	0
Options exercised	(128,020)	(7,149)
Options cancelled (repriced)	(1,733,139)
Options forfeited	0	0
Options outstanding, ending balance	1,796,202	2,255,863
Options exercisable	1,796,202	2,227,043
Weighted Average Grant Date Fair Value
Weighted average grant date fair value, beginning balance	$ 6.52	$ 6.69
Weighted average grant date fair value, options regranted (repriced)	$ 6.76
Weighted average grant date fair value, options granted	$ 0.00	$ 0.00
Weighted average grant date fair value, options exercised	$ 3.40	$ 6.90
Weighted average grant date fair value, options cancelled (repriced)	$ 6.76
Weighted average grant date fair value, options forfeited	$ 0.00	$ 0.00
Weighted average grant date fair value, ending balance	$ 6.75	$ 6.69
Weighted average grant date fair value, options exercisable	$ 6.75	$ 6.64
Weighted Average Grant Date Exercise Price
Weighted average grant date exercise price, beginning balance	$ 20.69	$ 20.12
Weighted average grant date exercise price, options regranted (repriced)	$ 19.02
Weighted average grant date exercise price, options granted	$ 0.00	$ 0.00
Weighted average grant date exercise price, options exercised	$ 28.98	$ 24.69
Weighted average grant date exercise price, options cancelled (repriced)	$ 20.12
Weighted average grant date exercise price, options forfeited	$ 0.00	$ 0.00
Weighted average grant date exercise price, ending balance	$ 18.95	$ 20.10
Weighted average grant date exercise price, options exercisable	$ 18.95	$ 20.08

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Debt and financing arrangements (Tables)

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Schedule of financing structure

The financing structure at March 31, 2013 was:

	Commitment		Outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
2010 Senior Notes due 2040	250,000		250,000		247,117
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		380,087		—
$500,000 bi-lateral secured letter of credit facility	500,000		89,511		—
Talbot FAL Facility (b)	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		258		—
IPC Bi-Lateral Facility	80,000		25,882		—
$550,000 Flagstone Bi-Lateral Facility	550,000		296,979		—
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	136,662		136,662		136,662
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	113,750		113,750		113,750
Total	$	2,940,412	$	1,607,929	$	787,329

The financing structure at December 31, 2012 was:

	Commitment		Outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
2010 Senior Notes due 2040	250,000		250,000		247,090
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		376,570		—
$500,000 secured letter of credit facility	500,000		92,402		—
Talbot FAL Facility (b)	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		219		—
IPC Bi-Lateral Facility	80,000		40,613		—
$550,000 Flagstone Bi-Lateral Facility	550,000		381,019		—
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	137,159		137,159		137,159
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	113,750		113,750		113,750
Total	$	2,940,909	$	1,706,532	$	787,799

(a) Indicates utilization of commitment amount, not drawn borrowings.

(b) Talbot operates in the Lloyd’s market ("Lloyds") through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies.  Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

Components of finance expenses

Finance expenses consist of interest on our junior subordinated deferrable debentures, junior subordinated deferrable interest notes, senior notes, AlphaCat variable funding notes, the amortization of debt offering costs, fees relating to our credit facilities, bank charges and the costs of FAL as follows:

	Three Months Ended
	March 31, 2013		March 31, 2012
2006 Junior Subordinated Deferrable Debentures	$	2,187	$	1,549
2007 Junior Subordinated Deferrable Debentures	1,809		3,029
2010 Senior Notes due 2040	5,597		5,597
AlphaCat Variable Funding Notes (a)	11,191		—
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	1,472		—
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	1,072		—
Credit facilities	954		6,016
Bank charges	133		57
Talbot FAL Facility	31		31
Total	$	24,446	$	16,279

(a) Refer to Note 13: "AlphaCat variable funding notes" for further details.

Future expected payments of principal

Future expected payments of principal on the 2006 and 2007 Junior Subordinated Deferrable Debentures and Flagstone 2006 and 2007 Junior Subordinated Deferrable Interest Notes are as follows:

2013	$	—
2014	—
2015	—
2016	—
2017 and thereafter	540,709
Total minimum future payments	$	540,709

Future expected payments of principal on the 2010 Senior Notes are as follows:

2013	$	—
2014	—
2015	—
2016	—
2017 and thereafter	250,000
Total minimum future payments	$	250,000

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Debt and financing Arrangements (Future payments of principal) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013
2010 Senior Notes Due 2040
Future expected payments of principal
2013	$ 0
2014	0
2015	0
2016	0
2017 and thereafter	250,000
Total minimum future payments	250,000
Junior subordinated deferrable debentures
Future expected payments of principal
2013	0
2014	0
2015	0
2016	0
2017 and thereafter	540,709
Total minimum future payments	$ 540,709

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Earnings per share

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Earnings per share

Earnings per share

The following table sets forth the computation of basic and diluted earnings per share for the three months endedMarch 31, 2013 and 2012: 

	Three Months Ended
	March 31, 2013			March 31, 2012
Basic earnings per share
Net income	$	220,694		$	124,234
Loss attributable to noncontrolling interest	2,549			—
Net income available to Validus	223,243			124,234
Less: Dividends and distributions declared on outstanding warrants	(14,464		)	(1,729		)
Income available to common shareholders	$	208,779		$	122,505
Weighted average number of common shares outstanding	107,386,438			99,425,140
Basic earnings per share available to common shareholders	$	1.94		$	1.23
Diluted earnings per share
Net income	$	220,694		$	124,234
Loss attributable to noncontrolling interest	2,549			—
Net income available to Validus	223,243			124,234
Less: Dividends and distributions declared on outstanding warrants	(14,464		)	—
Income available to common shareholders	$	208,779		$	124,234
Weighted average number of common shares outstanding	107,386,438			99,425,140
Share equivalents:
Warrants	—			3,022,971
Stock options	1,631,556			813,863
Unvested restricted shares	1,035,005			1,834,116
Weighted average number of diluted common shares outstanding	110,052,999			105,096,090
Diluted earnings per share available to common shareholders	$	1.90		$	1.18

Share equivalents that would result in the issuance of common shares of 104,405 (2012: 16,660) were outstanding for the three months endedMarch 31, 2013, but were not included in the computation of diluted earnings per share because the effect would be antidilutive.

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AlphaCat variable funding notes (Tables)

3 Months Ended

Mar. 31, 2013

Variable Funding Notes Disclosure [Abstract]

Summary of variable funding notes

The following table presents a summary of the AlphaCat VFNs on the balance sheet as at March 31, 2013: 

	March 31, 2013
AlphaCat 2013	$	161,439
AlphaCat ILS Funds	129,149
Total	$	290,588

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Subsequent events

3 Months Ended

Mar. 31, 2013

Subsequent Events [Abstract]

Subsequent events

Subsequent events

(a)  Quarterly Dividend

On May 1, 2013, the Company announced a quarterly cash dividend of $0.30 per each common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable, payable on June 28, 2013 to holders of record on June 14, 2013.

(b)  Longhorn Re Acquisition

On April 25, 2013, the Company acquired Longhorn Re, Ltd., a single contract, Bermuda domiciled crop reinsurer.

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Commitments and contingencies (Investment portfolio) (Details) (Concentrations of credit risk)	3 Months Ended
	Mar. 31, 2013
Investment portfolio excluding government and agency securities
Concentrations Of Credit Risk [Abstract]
Maximum aggregate exposure to single issuer, allowed	3.00%
Aggregate exposure to single issuer, actual	0.70%
Investment portfolio excluding bank loans
Concentrations Of Credit Risk [Abstract]
Minimum credit rating of any security purchased	Baa3/BBB-
Allowable percentage holding in downgraded investments	2.00%
Holding in aggregate market value permitted with written pre-authorization	10.00%
Percent of investment portfolio with a credit rating below the minimum required credit rating of Baa3/BBB-	1.10%
Total investment portfolio | Bank loans
Concentrations Of Credit Risk [Abstract]
Total investment portfolio, fair value	11.10%

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Basis of preparation and consolidation

3 Months Ended

Mar. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation and consolidation

Basis of preparation and consolidation

These unaudited consolidated financial statements include Validus Holdings, Ltd. and its subsidiaries (together, the "Company") and have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 in Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. This Quarterly Report should be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2012, as filed with the U.S. Securities and Exchange Commission (the "SEC").

In the opinion of management, these unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company's financial position and results of operations as at the end of and for the periods presented. Certain amounts in prior periods have been reclassified to conform to current period presentation. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates reflected in the Company's consolidated financial statements include the reserve for losses and loss expenses, premium estimates for business written on a line slip or proportional basis, the valuation of goodwill and intangible assets, reinsurance premiums ceded and reinsurance recoverable balances including the provision for unrecoverable reinsurance recoverable balances and investment valuation. Actual results could differ from those estimates. The results of operations for any interim period are not necessarily indicative of the results for a full year. The term "ASC" used in these notes refers to Accounting Standard Codifications issued by the United States Financial Accounting Standards Board ("FASB").

On November 30, 2012, the Company acquired all of the outstanding common shares of Flagstone Reinsurance Holdings, S.A. ("Flagstone") in exchange for 0.1935 Company common shares and $2.00 cash per Flagstone common share (the "Flagstone Acquisition"). For segmental reporting purposes, the results of Flagstone’s operations since the acquisition date have been included within the Validus Re segment in the consolidated financial statements.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Assets
Fixed maturities, at amortized cost	$ 5,616,693	$ 5,008,514
Short-term investments, at amortized cost	368,404	1,112,929
Other investments, at amortized cost	$ 552,233	$ 583,068
Shareholders' equity
Common shares, shares authorized	571,428,571	571,428,571
Common shares, par value	$ 0.175	$ 0.175
Common shares, shares issued	152,963,762	152,698,191
Common shares, shares outstanding	106,282,441	107,921,259
Treasury stock, common shares	46,681,321	44,776,932

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Stock plans

3 Months Ended

Mar. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock plans

Stock plans

Long Term Incentive Plan and Short Term Incentive Plan

The Company’s Amended and Restated 2005 Long Term Incentive Plan (“LTIP”) provides for grants to employees of options, stock appreciation rights (“SARs”), restricted shares, restricted share units, performance shares, dividend equivalents or other share-based awards. In addition, the Company may issue restricted share awards or restricted share units in connection with awards issued under its annual Short Term Incentive Plan (“STIP”). The total number of shares reserved for issuance under the LTIP and STIP are 13,126,896 shares of which 3,016,246 shares are remaining. The LTIP and STIP are administered by the Compensation Committee of the Board of Directors. No SARs have been granted to date. Grant prices are established at the fair market value of the Company’s common shares at the date of grant.

i.Options

Options may be exercised for voting common shares upon vesting. Options have a life of 10 years and vest either ratably or at the end of the required service period from the date of grant. Fair value of the option awards at the date of grant is determined using the Black-Scholes option-pricing model.

Expected volatility is based on stock price volatility of comparable publicly-traded companies. The Company used the simplified method consistent with U.S. GAAP authoritative guidance on stock compensation expenses to estimate expected lives for options granted during the period as historical exercise data was not available and the options met the requirement as set out in the guidance.

The Company has not granted any stock options awards since September 4, 2009.

Share compensation expenses in respect of options of $nil were recorded for the three months ended March 31, 2013 (2012: $135). The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period.

A modification event was triggered as a result of the 2013 Special Dividend. In accordance with the terms of the LTIP under which the options were issued, an adjustment was required to protect the holders of such stock options from changes in the value of the stock options following the declaration of the special dividend. The modification of the options included a decrease in the exercise price of each stock option and an increase in the number of shares underlying each stock option. The fair value of the options before and after the modification was unchanged.

Activity with respect to options for the three months ended March 31, 2013 was as follows:

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2012	1,823,947		$	6.52	$	20.69
Options regranted (repriced)	1,833,414		6.76		19.02
Options granted	—		—		—
Options exercised	(128,020	)	3.40		28.98
Options cancelled (repriced)	(1,733,139	)	6.76		20.12
Options forfeited	—		—		—
Options outstanding, March 31, 2013	1,796,202		$	6.75	$	18.95
Options exercisable, March 31, 2013	1,796,202		$	6.75	$	18.95

Activity with respect to options for the three months ended March 31, 2012was as follows: 

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2011	2,263,012		$	6.69	$	20.12
Options granted	—		—		—
Options exercised	(7,149	)	6.90		24.69
Options forfeited	—		—		—
Options outstanding, March 31, 2012	2,255,863		$	6.69	$	20.10
Options exercisable, March 31, 2012	2,227,043		$	6.64	$	20.08

At March 31, 2013, there were $nil (December 31, 2012: $nil) of total unrecognized share compensation expenses in respect of options that are expected to be recognized over a weighted-average period of 0.0 years (December 31, 2012: 0.0 years).

ii.Restricted share awards

Restricted shares granted under the LTIP and STIP vest either ratably or at the end of the required service period and contain certain restrictions during the vesting period, relating to, among other things, forfeiture in the event of termination of employment and transferability. Share compensation expenses of $4,061 were recorded for the three months ended March 31, 2013 (2012: $5,940). The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period.

Activity with respect to unvested restricted share awards for the three months ended March 31, 2013 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2012	2,170,547		$	29.24
Restricted share awards granted	22,005		35.63
Restricted share awards vested	(148,304	)	25.97
Restricted share awards forfeited	(93,993	)	28.42
Restricted share awards outstanding, March 31, 2013	1,950,255		$	29.60

Activity with respect to unvested restricted share awards for the three months ended March 31, 2012 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2011	3,003,547		$	25.77
Restricted share awards granted	4,500		30.49
Restricted share awards vested	(259,017	)	25.52
Restricted share awards forfeited	(20,371	)	27.96
Restricted share awards outstanding, March 31, 2012	2,728,659		$	25.78

At March 31, 2013, there were $38,226 (December 31, 2012: $43,952) of total unrecognized share compensation expenses in respect of restricted share awards that are expected to be recognized over a weighted-average period of 2.5 years (December 31, 2012: 2.6 years ).

iii.Restricted share units

Restricted share units under the LTIP and STIP vest either ratably or at the end of the required service period and contain certain restrictions during the vesting period, relating to, among other things, forfeiture in the event of termination of employment and transferability. Share compensation expenses of $121 were recorded for the three months ended March 31, 2013 (2012: $120). The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period.

Activity with respect to unvested restricted share units for the three months ended March 31, 2013 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2012	47,238		$	29.61
Restricted share units vested	(5,468	)	25.27
Restricted share units issued in lieu of cash dividends	3,020		29.69
Restricted share units outstanding, March 31, 2013	44,790		$	30.15

Activity with respect to unvested restricted share units for the three months ended March 31, 2012 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2011	53,312		$	27.60
Restricted share units vested	(7,314	)	24.27
Restricted share units issued in lieu of cash dividends	408		27.90
Restricted share units outstanding, March 31, 2012	46,406		$	28.13

At March 31, 2013, there were $861 (December 31, 2012: $978) of total unrecognized share compensation expenses in respect of restricted share units that are expected to be recognized over a weighted-average period of 2.5 years (December 31, 2012: 2.6 years).

iv.Performance share awards

The Performance Share Awards (“PSAs”) contain a performance based component. The performance component relates to the compounded growth in the Dividend Adjusted Diluted Book Value per Share over a three year period. For PSAs granted during the period, the grant date Diluted Book Value per Share (“DBVPS”) is based on the DBVPS at the end of the most recent financial reporting year. The Dividend Adjusted Performance Period End DBVPS will be the DBVPS three years after the grant date DBVPS. The fair value estimate earns over the requisite attribution period and the estimate will be reassessed at the end of each performance period which will reflect any adjustments in the consolidated statements of income in the period in which they are determined.

Share compensation expenses of ($1,864) were recorded for the three months ended March 31, 2013 (2012: ($757)). The negative expense is due to a reversal of expenses on unvested performance share awards based on a review of current and projected performance criteria.

Activity with respect to unvested performance share awards for the three months ended March 31, 2013 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2012	220,845		$	31.81
Performance share awards forfeited	(128,667	)	32.41
Performance share awards outstanding, March 31, 2013	92,178		$	30.99

Activity with respect to unvested performance share awards for the three months ended March 31, 2012 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2011	279,019		$	30.77
Performance share awards forfeited	(99,302	)	28.70
Performance share awards outstanding, March 31, 2012	179,717		$	31.91

At March 31, 2013, there were $1,148 (December 31, 2012: $3,328) of total unrecognized share compensation expenses in respect of PSAs that are expected to be recognized over a weighted-average period of 1.7 years (December 31, 2012: 1.7 years).

Total share compensation expenses

The breakdown of share compensation expenses by award type was as follows:

	Three Months Ended
	March 31, 2013			March 31, 2012
Options	$	—		$	135
Restricted share awards	4,061			5,940
Restricted share units	121			120
Performance share awards	(1,864		)	(757		)
Total	$	2,318		$	5,438

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2013	May 01, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	VALIDUS HOLDINGS LTD
Entity Central Index Key	0001348259
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		104,353,625

XML

Debt and financing arrangements

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Debt and financing arrangements

Debt and financing arrangements

(a) Financing structure and finance expenses

The financing structure at March 31, 2013 was:

	Commitment		Outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
2010 Senior Notes due 2040	250,000		250,000		247,117
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		380,087		—
$500,000 bi-lateral secured letter of credit facility	500,000		89,511		—
Talbot FAL Facility (b)	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		258		—
IPC Bi-Lateral Facility	80,000		25,882		—
$550,000 Flagstone Bi-Lateral Facility	550,000		296,979		—
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	136,662		136,662		136,662
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	113,750		113,750		113,750
Total	$	2,940,412	$	1,607,929	$	787,329

The financing structure at December 31, 2012 was:

	Commitment		Outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
2010 Senior Notes due 2040	250,000		250,000		247,090
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		376,570		—
$500,000 secured letter of credit facility	500,000		92,402		—
Talbot FAL Facility (b)	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		219		—
IPC Bi-Lateral Facility	80,000		40,613		—
$550,000 Flagstone Bi-Lateral Facility	550,000		381,019		—
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	137,159		137,159		137,159
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	113,750		113,750		113,750
Total	$	2,940,909	$	1,706,532	$	787,799

(a) Indicates utilization of commitment amount, not drawn borrowings.

(b) Talbot operates in the Lloyd’s market ("Lloyds") through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies.  Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

Finance expenses consist of interest on our junior subordinated deferrable debentures, junior subordinated deferrable interest notes, senior notes, AlphaCat variable funding notes, the amortization of debt offering costs, fees relating to our credit facilities, bank charges and the costs of FAL as follows:

	Three Months Ended
	March 31, 2013		March 31, 2012
2006 Junior Subordinated Deferrable Debentures	$	2,187	$	1,549
2007 Junior Subordinated Deferrable Debentures	1,809		3,029
2010 Senior Notes due 2040	5,597		5,597
AlphaCat Variable Funding Notes (a)	11,191		—
Flagstone 2006 Junior Subordinated Deferrable Interest Notes	1,472		—
Flagstone 2007 Junior Subordinated Deferrable Interest Notes	1,072		—
Credit facilities	954		6,016
Bank charges	133		57
Talbot FAL Facility	31		31
Total	$	24,446	$	16,279

(a) Refer to Note 13: "AlphaCat variable funding notes" for further details.

(b) $250,000 2010 Senior Notes due 2040

On January 21, 2010, the Company offered and sold $250,000 of Senior Notes due 2040 (the “2010 Senior Notes”) in a registered public offering. The 2010 Senior Notes mature on January 26, 2040, and are redeemable at the Company’s option in whole any time or in part from time to time at a make-whole redemption price. The Company may redeem the notes in whole, but not in part, at any time upon the occurrence of certain tax events as described in the prospectus supplement of the 2010 Senior Notes. The 2010 Senior Notes bear interest at the rate of 8.875% per annum from January 26, 2010 to maturity or early redemption. Interest on the 2010 Senior Notes is payable semi-annually in arrears on January 26 and July 26 of each year, commencing on July 26, 2010.  The net proceeds of $243,967 from the sale of the 2010 Senior Notes, after the deduction of commissions paid to the underwriters in the transaction and other expenses, was used by the Company for general corporate purposes, which included the repurchase of its outstanding capital stock and payment of dividends to shareholders.  Debt issuance costs of $2,808 were deferred as an asset and amortized over the life of the 2010 Senior Notes. There were no redemptions made during the three months ended March 31, 2013 and 2012.

The 2010 Senior Notes are unsecured and unsubordinated obligations of the Company and rank equally in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness.  The 2010 Senior Notes will be effectively junior to all of the Company’s future secured debt, to the extent of the value of the collateral securing such debt, and will rank senior to all our existing and future subordinated debt.  The 2010 Senior Notes are structurally subordinated to all obligations of the Company’s subsidiaries.

Future expected payments of principal on the 2010 Senior Notes are as follows:

2013	$	—
2014	—
2015	—
2016	—
2017 and thereafter	250,000
Total minimum future payments	$	250,000

(c) Junior subordinated deferrable debentures and Junior subordinated deferrable interest notes

On June 15, 2006, the Company participated in a private placement of $150,000 of junior subordinated deferrable interest debentures due 2036 (the “2006 Junior Subordinated Deferrable Debentures”). The 2006 Junior Subordinated Deferrable Debentures mature on June 15, 2036, are redeemable at the Company’s option at par beginning June 15, 2011, and require quarterly interest payments by the Company to the holders of the 2006 Junior Subordinated Deferrable Debentures. Interest was payable at 9.069% per annum through June 15, 2011, and thereafter at a floating rate of three-month LIBOR plus 355 basis points, reset quarterly. The proceeds of $150,000 from the sale of the 2006 Junior Subordinated Deferrable Debentures, after the deduction of commissions paid to the placement agents in the transaction and other expenses, were used by the Company to fund Validus Re segment operations and for general working capital purposes. Debt issuance costs of $3,750 were deferred as an asset and were amortized to income over the five year optional redemption period. There were no redemptions made during the three months ended March 31, 2013 and 2012.

On June 21, 2007, the Company participated in a private placement of $200,000 of junior subordinated deferrable interest debentures due 2037 (the “2007 Junior Subordinated Deferrable Debentures”). The 2007 Junior Subordinated Deferrable Debentures mature on June 15, 2037, are redeemable at the Company’s option at par beginning June 15, 2012, and require quarterly interest payments by the Company to the holders of the 2007 Junior Subordinated Deferrable Debentures. Interest was payable at 8.480% per annum through June 15, 2012, and thereafter at a floating rate of three-month LIBOR plus 295 basis points, reset quarterly. The proceeds of $200,000 from the sale of the 2007 Junior Subordinated Deferrable Debentures, after the deduction of commissions paid to the placement agents in the transaction and other expenses, were used by the Company to fund the purchase of Talbot Holdings Ltd. Debt issuance costs of $2,000 were deferred as an asset and were amortized to income over the five year optional redemption period. There were no redemptions made during the three months ended March 31, 2013 and 2012.

As part of the acquisition of Flagstone, the Company assumed $136,662 of junior subordinated deferrable interest notes due 2036 (the “Flagstone 2006 Junior Subordinated Deferrable Interest Notes”). The Flagstone 2006 Junior Subordinated Deferrable Interest Notes mature on September 15, 2036, are redeemable at the Company's option at par beginning as of September 15, 2011, and require quarterly interest payments by the Company to the holders of the Flagstone 2006 Junior Subordinated Deferrable Interest Notes. Interest is payable at a floating rate of three-month LIBOR plus 354 basis points, reset quarterly. There were no redemptions made during the three months ended March 31, 2013 and 2012.

 As part of the acquisition of Flagstone, the Company assumed $113,750 of junior subordinated deferrable interest notes due 2037 (the “Flagstone 2007 Junior Subordinated Deferrable Interest Notes”). Of these, $88,750 of the Flagstone 2007 Junior Subordinated Deferrable Interest Notes mature on July 30, 2037, are redeemable at the Company's option at par as of July 30, 2012, and require quarterly interest payments by the Company to the holders of the Flagstone 2007 Junior Subordinated Deferrable Interest Notes. Interest is payable at a floating rate of three-month LIBOR plus 300 basis points, reset quarterly. The remaining $25,000 of the Flagstone 2007 Junior Subordinated Deferrable Interest Notes mature on September 15, 2037, are redeemable at the Company's option at par as of September 15, 2012, and require quarterly interest payments by the Company to the holders of the Flagstone 2007 Junior Subordinated Deferrable Interest Notes. Interest is payable at a floating rate of three-month LIBOR plus 310 basis points, reset quarterly. There were no redemptions made during the three months ended March 31, 2013 and 2012.

Future expected payments of principal on the 2006 and 2007 Junior Subordinated Deferrable Debentures and Flagstone 2006 and 2007 Junior Subordinated Deferrable Interest Notes are as follows:

2013	$	—
2014	—
2015	—
2016	—
2017 and thereafter	540,709
Total minimum future payments	$	540,709

(d) Credit facilities

(i) $400,000 syndicated unsecured letter of credit facility and $525,000 syndicated secured letter of credit facility

On March 9, 2012, the Company, Validus Re Americas, Ltd. ("Validus Re Americas"),PaCReand Validus Re entered into a $400,000 four year unsecured credit facility with Deutsche Bank Securities Inc., as syndication agent, JPMorgan Chase Bank, N.A. as administrative agent, Lloyds Securities Inc. and Suntrust Bank, as co-documentation agents and the lenders party thereto, which provides for letter of credit availability for the Company and certain designated subsidiaries of the Company and revolving credit availability for the Company (the "Four Year Unsecured Facility") (the full $400,000 of which is available for letters of credit and/or revolving loans). The Four Year Unsecured Facility was provided by a syndicate of commercial banks arranged by J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Lloyds Securities Inc. and SunTrust Robinson Humphrey, Inc. Letters of credit under the Four Year Unsecured Facility are available to support obligations in connection with the insurance business of the Company and its subsidiaries. Loans under the Four Year Unsecured Facility are available for the general corporate and working capital purposes of the Company. The Company may request that existing lenders under the Four Year Unsecured Facility or prospective additional lenders agree to make available additional commitments from time to time so long as the aggregate commitments under the Four Year Unsecured Facility do not exceed $500,000. Letter of credit fees are payable on account of each letter of credit issued under the Four Year Unsecured Facility at a rate per annum equal to an applicable rate. Borrowings under the Four Year Unsecured Facility bear interest, at the option of the Company, at the base rate (the higher of the prime rate announced by JPMorgan Chase Bank, N.A., the federal funds effective rate plus 0.5%, and the adjusted LIBOR rate plus 1.0%) or the adjusted LIBOR rate applicable to such loans, plus an applicable rate.

Also on March 9, 2012, the Company, Validus Re Americas and Validus Re entered into a $525,000 four-year secured credit facility with Deutsche Bank Securities Inc., as syndication agent, JPMorgan Chase Bank, N.A. as administrative agent, Lloyds Securities Inc. and Suntrust Bank, as co-documentation agents and the lenders party thereto, which provides for letter of credit availability for the Company and certain designated subsidiaries of the Company (the "Four Year Secured Facility" and together with the Four Year Unsecured Facility, the "Credit Facilities"). The Four Year Secured Facility was provided by a syndicate of commercial banks arranged by J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Lloyds Securities Inc. and SunTrust Robinson Humphrey, Inc. Letters of credit under the Four Year Secured Facility will be available to support obligations in connection with the insurance business of the Company and its subsidiaries. The Company may request that existing lenders under the Four Year Secured Facility or prospective additional lenders agree to make available additional commitments from time to time so long as the aggregate commitments under the Four Year Secured Facility do not exceed $700,000. The obligations of the Company and its designated subsidiaries under the Four Year Secured Facility are secured by cash and securities deposited into cash collateral accounts from time to time with The Bank of New York Mellon. Letter of credit fees are payable on account of each letter of credit issued under the Four Year Secured Facility at a rate per annum equal to an applicable rate. Borrowings under the Four Year Secured Facility bear interest at the base rate (the higher of the prime rate announced by JPMorgan Chase Bank, N.A., the federal funds effective rate plus 0.5%, and the adjusted LIBOR rate plus 1.0%).

The Credit Facilities contain covenants that include, among other things (i) the requirement that the Company initially maintain a minimum level of consolidated net worth of at least $2,600,000 and, commencing with the end of the fiscal quarter ending March 31, 2013, to be increased quarterly by an amount equal to 50.0% of the Company's consolidated net income (if positive) for such quarter plus 50.0% of the aggregate increases in the consolidated shareholders' equity of the Company during such fiscal quarter by reason of the issuance and sale of common equity interests of the Company, including upon any conversion of debt securities of the Company into such equity interests, (ii) the requirement that the Company maintain at all times a consolidated total debt to consolidated total capital ratio not greater than 0.35:1.00, and (iii) the requirement that Validus Re and any other material insurance subsidiaries maintain a financial strength rating by A.M. Best of not less than "B++" (Fair). In addition, the Credit Facilities contain customary negative covenants applicable to the Company and its subsidiaries, including limitations on the ability to pay dividends and other payments in respect of equity interests at any time that the Company is otherwise in default with respect to certain provisions under the respective Credit Facilities, limitations on the ability to incur liens, sell assets, merge or consolidate with others, enter into transactions with affiliates, and limitations on the ability of its subsidiaries to incur indebtedness. The Credit Facilities also contain customary affirmative covenants, representations and warranties and events of default for credit facilities of its type.

As of March 31, 2013, there was $380,087 in outstanding letters of credit under the Four Year Secured Facility (December 31, 2012: $376,570) and $nil outstanding under the Four Year Unsecured Facility (December 31, 2012: $nil).

As of March 31, 2013, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Credit Facilities.

On March 9, 2012, upon entering into the Credit Facilities, the Company terminated its (a) three-year bi-lateral $60,000 unsecured revolving credit facility, dated March 12, 2010 with Lloyds TSB Bank plc, (b) $340,000 three-year unsecured credit facility, dated March 12, 2010 with Deutsche Bank Securities Inc., as syndication agent and JPMorgan Chase Bank, N.A. as administrative agent and (c) $500,000 five-year secured credit facility, dated March 12, 2007 with Deutsche Bank Securities Inc., as syndication agent and JPMorgan Chase Bank, N.A. as administrative agent. No early termination penalties were incurred.

(ii) Talbot FAL Facility

On November 28, 2007, Talbot entered into a $100,000 standby Letter of Credit facility (the “Talbot FAL Facility”) to provide Funds at Lloyd’s for the 2008 and 2009 underwriting years of account; this facility is guaranteed by the Company and is secured against the assets of Validus Re. The Talbot FAL Facility was provided by a syndicate of commercial banks arranged by Lloyds TSB Bank plc and ING Bank N.V., London Branch.

On November 19, 2009, the Company entered into an Amendment and Restatement of the Talbot FAL Facility to reduce the commitment from $100,000 to $25,000, and to extend the support to the 2010 and 2011 underwriting years of account. On November 18, 2011, the Company entered into an Amendment and Restatement of the Talbot FAL Facility to extend the support to the 2012 and 2013 underwriting years of account.

As amended, the Talbot FAL Facility contains affirmative covenants that include, among other things, (i) the requirement that the Company initially maintain a minimum level of consolidated net worth of at least $2,589,615, and commencing with the end of the fiscal quarter ended December 31, 2011 to be increased quarterly by an amount equal to 50% of our consolidated net income (if positive) for such quarter plus 50% of any net proceeds received from any issuance of common shares during such quarter, and (ii) the requirement that we maintain at all times a consolidated total debt to consolidated total capitalization ratio not greater than 0.35:1.00.

The Talbot FAL Facility also contains restrictions on our ability to incur debt at our subsidiaries, incur liens, sell assets and merge or consolidate with others. Other than in respect of existing and future preferred and hybrid securities, the payment of dividends and other payments in respect of equity interests are not permitted at any time that we are in default with respect to certain provisions under the Talbot FAL Facility. As of March 31, 2013, the Company had $25,000 (December 31, 2012: $25,000) in outstanding letters of credit under this facility.

As of March 31, 2013, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Talbot FAL Facility.

(iii) IPC Syndicated Facility and IPC Bi-Lateral Facility

IPC obtained letters of credit through the IPC Syndicated Facility and the IPC Bi-Lateral Facility. In July 2009, certain terms of these facilities were amended including suspending IPC’s ability to increase existing letters of credit or to issue new letters of credit. Effective March 31, 2010, the IPC Syndicated Facility was closed. As of March 31, 2013, $25,882 of outstanding letters of credit were issued under the IPC Bi-Lateral Facility (December 31, 2012: $40,613).

As of March 31, 2013, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the IPC Bi-Lateral Facility.

(iv) $500,000 secured bi-lateral letter of credit facility

On August 10, 2009, Validus Re entered into an uncommitted $500,000 secured bi-lateral letter of credit facility with Citibank Europe plc (the “Secured Bi-Lateral Letter of Credit Facility”). Letters of credit were first issued under the Secured Bi-Lateral Letter of Credit Facility during the first quarter of 2012. As of March 31, 2013, $89,511 of letters of credit were outstanding under the Secured Bi-Lateral Letter of Credit Facility (December 31, 2012: $92,402). The Secured Bi-Lateral Letter of Credit Facility has no fixed termination date and as of March 31, 2013, Validus Re is in compliance with all terms and covenants thereof.

(v) $10,000 PaCRe Senior secured letter of credit facility

On May 11, 2012, PaCRe (as Borrower) and its subsidiary, PaCRe Investments, Ltd. (as Guarantor) entered into a 364-Day secured revolving credit and letter of credit facility with JPMorgan Chase Bank, N.A. This facility provides for revolving borrowings by the Borrower and for letters of credit issued by the Borrower to be used to support its reinsurance obligations in aggregate amount of $10,000. As of March 31, 2013, $258 of letters of credit were outstanding under this facility (December 31, 2012: $219).

As of March 31, 2013, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the PaCRe Senior secured letter of credit facility.

(vi) $550,000 Flagstone Bi-Lateral Facility

As part of the Flagstone Acquisition, the Company assumed a Letters of Credit Master Agreement between Citibank Europe Plc and Flagstone Reassurance Suisse, S.A. (the “Flagstone Bi-Lateral Facility”). At March 31, 2013, the Flagstone Bi-Lateral Facility had $296,979 letters of credit issued and outstanding (December 31, 2012: $381,019).

As of March 31, 2013, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Flagstone Bi-Lateral Facility.

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Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Revenues
Gross premiums written	$ 1,104,760	$ 837,289
Reinsurance premiums ceded	(187,216)	(107,052)
Net premiums written	917,544	730,237
Change in unearned premiums	(386,483)	(279,038)
Net premiums earned	531,061	451,199
Net investment income	25,649	27,760
Net realized gains on investments	1,721	7,532
Net unrealized (losses) gains on investments	(7,237)	20,671
Income from investment affiliate	1,477	0
Other income	2,685	8,891
Foreign exchange gains	6,922	3,166
Total revenues	562,278	519,219
Expenses
Losses and loss expenses	144,771	231,989
Policy acquisition costs	93,611	78,132
General and administrative expenses	80,279	66,375
Share compensation expenses	2,318	5,438
Finance expenses	24,446	16,279
Total expenses	345,425	398,213
Net income before taxes and income from operating affiliates	216,853	121,006
Tax benefit (expense)	318	(139)
Income from operating affilates	3,523	3,367
Net income	220,694	124,234
Net loss attributable to noncontrolling interest	2,549	0
Net income available to Validus	223,243	124,234
Other comprehensive (loss) income
Foreign currency translation adjustments	(9,785)	1,393
Other comprehensive (loss) income	(9,785)	1,393
Comprehensive income available to Validus	$ 213,458	$ 125,627
Weighted average number of common shares and common share equivalents outstanding
Basic	107,386,438	99,425,140
Diluted	110,052,999	105,096,090
Basic earnings per share available to common shareholders	$ 1.94	$ 1.23
Diluted earnings per share available to common shareholders	$ 1.90	$ 1.18
Cash dividends declared per share	$ 2.30	$ 0.25

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Noncontrolling interest

3 Months Ended

Mar. 31, 2013

Noncontrolling Interest [Abstract]

Noncontrolling interest

Noncontrolling interest

 On April 2, 2012, the Company joined with other investors in capitalizing PaCRe a new Class 4 Bermuda reinsurer formed for the purpose of writing high excess property catastrophe reinsurance. Validus Re has a majority voting equity interest in PaCRe and as a result, the financial statements of PaCRe are included in the consolidated financial statements of the Company. The portion of PaCRe's earnings attributable to third party investors for the three months ended March 31, 2013 is recorded in the Consolidated Statements of Comprehensive Income as net loss attributable to noncontrolling interest. The Company has an equity interest of 10% and the remaining 90% interest is held by third party investors.

The Company received $219,400 of third party subscriptions in three of the AlphaCat ILS funds as of December 31, 2012. The AlphaCat ILS funds invest in instruments with returns linked to property catastrophe reinsurance, retrocession and ILS contracts. Two of the funds are variable interest entities and are consolidated by the Company as Validus Re is deemed to be the primary beneficiary. Validus Re has a majority participating interest in these funds and as a result, the financial statements of these funds are included in the consolidated financial statements of the Company. The portion of the AlphaCat ILS funds' earnings attributable to third party investors for the three months ended March 31, 2013 is recorded in the Consolidated Statements of Comprehensive Income within net loss/income attributable to noncontrolling interest.

The following table presents a reconciliation of the beginning and ending balances of noncontrolling interest for the three months ended March 31, 2013:

	Three Months Ended March 31, 2013
	PaCRe			AlphaCat ILS Funds		Total
As at December 31, 2012	$	434,280		$	—	$	434,280
Purchase of shares by noncontrolling interest	—			55,690		55,690
Net (loss) income attributable to noncontrolling interest	(3,135		)	586		(2,549		)
As at March 31, 2013	$	431,145		$	56,276	$	487,421

There was no noncontrolling interest activity for the three months ended March 31, 2012.

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Investments in affilates

3 Months Ended

Mar. 31, 2013

Equity Method Investments and Joint Ventures [Abstract]

Investment in AlphaCat Re 2011, Ltd.

Investments in affiliates

(a) Operating affiliates

AlphaCat Re 2011, Ltd.

On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011, Ltd. ("AlphaCat Re 2011"), a special purpose reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. At the time of formation, Validus Reinsurance, Ltd. ("Validus Re"), a wholly owned subsidiary of the Company, had a majority voting equity interest in AlphaCat Re 2011 and as a result the financial statements of AlphaCat Re 2011 were included in the consolidated financial statements of the Company.

On December 23, 2011, AlphaCat Re 2011 completed a secondary offering of its common shares to third party investors, along with a partial sale of Validus Re's common shares to one of the third party investors.

As a result of these transactions, Validus Re maintained an equity interest in AlphaCat Re 2011, however its share of AlphaCat Re 2011's outstanding voting rights decreased to 43.7%. As a result of the Company's voting interest falling below 50%, the individual assets and liabilities and corresponding noncontrolling interest of AlphaCat Re 2011 were derecognized from the consolidated balance sheet of the Company as at December 31, 2011 and the remaining investment in AlphaCat Re 2011 has been treated as an equity method investment effective December 31, 2011.

AlphaCat Re 2011 is now considered "off-risk" as all reinsurance contracts written by the company have expired. As a result, on January 4, 2013 and January 23, 2013, a partial return of investment was made to the investors of AlphaCat Re 2011. Validus Re's corresponding portion of the return of investment was $46,436.

AlphaCat Re 2012, Ltd.

On May 29, 2012, the Company joined with other investors in capitalizing AlphaCat Re 2012, Ltd. ("AlphaCat Re 2012"), a special purpose reinsurer formed for the purpose of writing collateralized reinsurance with a particular focus on windstorm risks for Florida domiciled insurance companies. The Company holds an equity interest of 37.9% and a voting interest of 49.0% in AlphaCat Re 2012, therefore the investment has been treated as an equity method investment as at March 31, 2013.

On February 22, 2013, a partial return of investment was made to the investors of AlphaCat Re 2012. Validus Re's corresponding portion of the return of investment was $3,786.

AlphaCat 2013, Ltd.

On December 17, 2012, the Company joined with other investors in capitalizing AlphaCat 2013, Ltd. ("AlphaCat 2013"), a special purpose vehicle formed for the purpose of investing in collateralized reinsurance. The Company holds an equity interest of 19.7% and a voting interest of 40.9% in AlphaCat 2013, therefore the investment has been treated as an equity method investment as at March 31, 2013.

The following table presents a reconciliation of the beginning and ending investment in operating affiliates balances for the three months ended March 31, 2013: 

	Three Months Ended March 31, 2013
	Investment in operating affiliate (AlphaCat Re 2011)			Investment in operating affiliate (AlphaCat Re 2012)			Investment in operating affiliate (AlphaCat 2013)		Total
As at December 31, 2012	$	62,792		$	29,319		$	45,000	$	137,111
Return of investment	(46,436		)	(3,786		)	—		(50,222		)
Income from operating affiliates	449			1,825			1,100		3,374
As at March 31, 2013	$	16,805		$	27,358		$	46,100	$	90,263

The following table presents a reconciliation of the beginning and ending investment in operating affiliate balances for the three months ended March 31, 2012: 

	Three Months Ended March 31, 2012
	Investment in operating affiliate (AlphaCat Re 2011)		Total
As at December 31, 2011	$	53,031	$	53,031
Income from operating affiliates	3,367		3,367
As at March 31, 2012	$	56,398	$	56,398

The following table presents the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012 and AlphaCat 2013 as at March 31, 2013:

	Investment in operating affiliates
	Investment at cost		Voting ownership %		Equity ownership %		Carrying value
AlphaCat Re 2011	$	16,355	43.7	%	22.3	%	$	16,805
AlphaCat Re 2012	25,533		49.0	%	37.9	%	27,358
AlphaCat 2013	45,000		40.9	%	19.7	%	46,100
Total	$	86,888					$	90,263

(b) Investment in Insurance Linked Securities ("ILS")

The Company received $219,400 of third party subscriptions in three of the AlphaCat ILS funds as of December 31, 2012. The AlphaCat ILS funds invest in instruments with returns linked to property catastrophe reinsurance, retrocession and ILS contracts. Two of the funds are variable interest entities and are consolidated by the Company as Validus Re is deemed to be the primary beneficiary. The third fund is also a variable interest entity, however, it is not consolidated by the Company as Validus Re is not deemed to be the primary beneficiary. As a result, the investment in this fund is included in "Investments in affiliates" as at March 31, 2013. Income from this ILS fund was $149 for the three months ended March 31, 2013. The Company's investment in this fund amounted to $20,149 as at March 31, 2013. The Company's maximum exposure to loss with respect to this investment is limited to the investment carrying amount reported in the Company's Consolidated Balance Sheet.

(c) Investment affiliate

Aquiline Financial Services Fund II L.P.

On December 20, 2011, Validus Re entered into an Assignment and Assumption Agreement (the "Agreement") with Aquiline Capital Partners LLC, a Delaware limited liability company (the "Assignor") and Aquiline Capital Partners II GP (Offshore) Ltd., a Cayman Islands company limited by shares (the "General Partner") pursuant to which Validus Re has assumed 100% of the Assignor's interest in Aquiline Financial Services Fund II L.P. (the "Partnership") representing a total capital commitment of $50,000 (the "Commitment"), as a limited partner in the Partnership (the "Transferred Interest"). The Transferred Interest is governed by the terms of an Amended and Restated Exempted Limited Partnership Agreement dated as of July 2, 2010 (the "Limited Partnership Agreement"). Pursuant to the terms of the Limited Partnership Agreement, the Commitment will expire on July 2, 2015.

The private equity limited partnership provides quarterly capital account statements with a three-month delay in its valuation. As a result, the limited partnership's December 31, 2012 capital account statement was used as a basis for calculation of the Company's share of partnership income for the period.

The following table presents a reconciliation of the beginning and ending investment in the Company's investment affiliate balance for the three months ended March 31, 2013:

	Three Months Ended March 31, 2013
	Investment in limited partnership (Aquiline Financial Services Fund II L.P) (a)
As at December 31, 2012	$	15,218
Capital contributions	1,341
Income from investment affiliate	1,477
As at March 31, 2013	$	18,036

(a) As at March 31, 2012, this investment was included in "Other investments" as a Level 3 investment in the fair value hierarchy.

The following table presents the Company's investment in the Aquiline Financial Services Fund II L.P. as at March 31, 2013:

	Investment in non-consolidated affiliate
	Investment at cost		Voting ownership %		Equity Ownership		Carrying Value
Aquiline Financial Services Fund II L.P	$	18,959	—	%	6.7	%	$	18,036

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Segment information

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Segment information

Segment information

The Company conducts its operations worldwide through two wholly-owned subsidiaries, Validus Reinsurance, Ltd. and Talbot Holdings Ltd. from which three operating segments have been determined under U.S. GAAP segment reporting. During the first quarter of 2012, to better align the Company's operating and reporting structure with its current strategy, there was a change in the segment structure. This change included the AlphaCat group of companies as a separate operating segment. "AlphaCat segment" was included as an additional segment and includes the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013, PaCRe and the AlphaCat ILS funds. The Company's operating segments are strategic business units that offer different products and services. They are managed and have capital allocated separately because each business requires different strategies.

Validus Re Segment

The Validus Re segment is focused on short-tail lines of reinsurance. The primary lines in which the segment conducts business are property, marine and specialty which includes agriculture, aerospace and aviation, financial lines of business, nuclear, terrorism, life, accident & health, workers' compensation, crisis management, contingency, motor, technical lines and composite.

AlphaCat Segment

The AlphaCat segment manages strategic relationships that leverage the Company's underwriting and investment expertise and earns management, performance and underwriting fees primarily from the Company's operating affiliates, AlphaCat Re 2011, AlphaCat Re 2012 and AlphaCat 2013 as well as investments in PaCRe and the AlphaCat ILS funds.

Talbot Segment

The Talbot segment focuses on a wide range of marine and energy, war, political violence, commercial property, financial institutions, contingency, accident & health and aviation classes of business on an insurance or facultative reinsurance basis and principally property, aerospace and marine classes of business on a treaty reinsurance basis.

Corporate and other reconciling items

The Company has a "Corporate" function, which includes the activities of the parent company, and which carries out certain functions for the group. "Corporate" includes non-core' underwriting expenses, predominantly general and administrative and stock compensation expenses. "Corporate" also denotes the activities of certain key executives such as the Chief Executive Officer and Chief Financial Officer. For internal reporting purposes, "Corporate" is reflected separately, however "Corporate" is not considered an operating segment under these circumstances. Other reconciling items include, but are not limited to, the elimination of intersegment revenues and expenses and unusual items that are not allocated to segments.

The following tables summarize the results of our operating segments and "Corporate":

Three Months Ended March 31, 2013	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	747,963		$	96,516		$	293,530		$	(33,249	)	$	1,104,760
Reinsurance premiums ceded	(125,728		)	—			(94,737		)	33,249			(187,216		)
Net premiums written	622,235			96,516			198,793			—			917,544
Change in unearned premiums	(319,101		)	(68,899		)	1,517			—			(386,483		)
Net premiums earned	303,134			27,617			200,310			—			531,061
Underwriting deductions
Losses and loss expenses	73,402			—			71,369			—			144,771
Policy acquisition costs	51,744			2,638			40,526			(1,297		)	93,611
General and administrative expenses	29,441			4,037			30,912			15,889			80,279
Share compensation expenses	1,413			77			1,405			(577		)	2,318
Total underwriting deductions	156,000			6,752			144,212			14,015			320,979
Underwriting income (loss)	$	147,134		$	20,865		$	56,098		$	(14,015	)	$	210,082
Net investment income	23,193			881			4,718			(3,143		)	25,649
Other income	13,490			6,633			—			(17,438		)	2,685
Finance expenses	(3,252		)	(11,325		)	(74		)	(9,795		)	(24,446		)
Operating income (loss) before taxes and income from operating affiliates	180,565			17,054			60,742			(44,391		)	213,970
Tax benefit (expense)	1,757			—			(1,054		)	(385		)	318
Income from operating affiliates	—			3,523			—			—			3,523
Net operating income (loss)	$	182,322		$	20,577		$	59,688		$	(44,776	)	$	217,811
Net realized gains on investments	1,593			—			128			—			1,721
Net unrealized (losses) on investments	(2,193		)	(4,788		)	(256		)	—			(7,237		)
Income from investment affiliate	1,477			—			—			—			1,477
Foreign exchange gains (losses)	11,162			(1,187		)	(3,918		)	865			6,922
Net income (loss)	$	194,361		$	14,602		$	55,642		$	(43,911	)	$	220,694
Net loss attributable to noncontrolling interest	—			2,549			—			—			2,549
Net income (loss) available (attributable) to Validus	$	194,361		$	17,151		$	55,642		$	(43,911	)	$	223,243
Selected ratios (a):
Net premiums written / Gross premiums written	83.2		%	100.0		%	67.7		%				83.1		%
Losses and loss expenses	24.2		%	0.0		%	35.6		%				27.3		%
Policy acquisition costs	17.1		%	9.6		%	20.2		%				17.6		%
General and administrative expenses (b)	10.2		%	14.9		%	16.1		%				15.6		%
Expense ratio	27.3		%	24.5		%	36.3		%				33.2		%
Combined ratio	51.5		%	24.5		%	71.9		%				60.5		%
Total assets	$	6,299,481		$	1,189,190		$	3,043,312		$	32,417		$	10,564,400

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

Three Months Ended March 31, 2012	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	566,866		$	3,518		$	293,253		$	(26,348	)	$	837,289
Reinsurance premiums ceded	(30,001		)	—			(103,399		)	26,348			(107,052		)
Net premiums written	536,865			3,518			189,854			—			730,237
Change in unearned premiums	(283,856		)	(855		)	5,673			—			(279,038		)
Net premiums earned	253,009			2,663			195,527			—			451,199
Underwriting deductions
Losses and loss expenses	124,206			—			107,783			—			231,989
Policy acquisition costs	38,790			256			38,738			348			78,132
General and administrative expenses	17,252			1,032			33,348			14,743			66,375
Share compensation expenses	1,872			52			1,348			2,166			5,438
Total underwriting deductions	182,120			1,340			181,217			17,257			381,934
Underwriting income (loss)	$	70,889		$	1,323		$	14,310		$	(17,257	)	$	69,265
Net investment income	23,577			659			5,790			(2,266		)	27,760
Other income	2,219			7,974			1,026			(2,328		)	8,891
Finance expenses	(3,694		)	(2		)	(31		)	(12,552		)	(16,279		)
Operating income (loss) before taxes and income from operating affiliates	92,991			9,954			21,095			(34,403		)	89,637
Tax (expense)	(7		)	—			(132		)	—			(139		)
Income from operating affiliates	—			3,367			—			—			3,367
Net operating income (loss)	$	92,984		$	13,321		$	20,963		$	(34,403	)	$	92,865
Net realized gains on investments	6,242			—			1,290			—			7,532
Net unrealized gains (losses) on investments	19,865			(597		)	1,403			—			20,671
Foreign exchange (losses) gains	(262		)	(9		)	3,623			(186		)	3,166
Net income (loss)	$	118,829		$	12,715		$	27,279		$	(34,589	)	$	124,234
Net (income) attributable to noncontrolling interest	—			—			—			—			—
Net income (loss) available (attributable) to Validus	$	118,829		$	12,715		$	27,279		$	(34,589	)	$	124,234
Selected ratios (a):
Net premiums written / Gross premiums written	94.7		%	100.0		%	64.7		%				87.2		%
Losses and loss expenses	49.1		%	0.0		%	55.1		%				51.4		%
Policy acquisition costs	15.3		%	9.6		%	19.8		%				17.3		%
General and administrative expenses (b)	7.6		%	40.7		%	17.7		%				15.9		%
Expense ratio	22.9		%	50.3		%	37.5		%				33.2		%
Combined ratio	72.0		%	50.3		%	92.6		%				84.6		%
Total assets	$	4,940,727		$	237,528		$	2,929,817		$	13,797		$	8,121,869

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

The Company’s exposures are generally diversified across geographic zones. The following tables set forth the gross premiums written allocated to the territory of coverage exposure for the periods indicated:

	Three Months Ended March 31, 2013
	Gross Premiums Written
	Validus Re		AlphaCat		Talbot		Eliminations			Total		%
United States	$	236,496	$	17,489	$	20,541	$	(6,864	)	$	267,662	24.2	%
Worldwide excluding United States (a)	50,308		14,689		39,458		(4,508		)	99,947		9.0	%
Australia and New Zealand	25,026		2,183		3,005		(230		)	29,984		2.7	%
Europe	40,870		1,964		18,311		(2,848		)	58,297		5.3	%
Latin America and Caribbean	8,418		—		42,000		(3,218		)	47,200		4.3	%
Japan	737		—		654		(50		)	1,341		0.1	%
Canada	2,642		318		2,706		(525		)	5,141		0.5	%
Rest of the world (b)	19,079		—		18,314		(1,403		)	35,990		3.3	%
Sub-total, non United States	147,080		19,154		124,448		(12,782		)	277,900		25.2	%
Worldwide including United States (a)	100,540		59,873		19,156		(3,689		)	175,880		15.9	%
Other location non-specific (c)	263,847		—		129,385		(9,914		)	383,318		34.7	%
Total	$	747,963	$	96,516	$	293,530	$	(33,249	)	$	1,104,760	100.0	%

	Three Months Ended March 31, 2012
	Gross Premiums Written
	Validus Re			AlphaCat		Talbot		Eliminations			Total			%
United States	$	106,936		$	1,326	$	18,426	$	(1,656	)	$	125,032		14.9	%
Worldwide excluding United States (a)	37,116			279		51,317		(4,611		)	84,101			10.0	%
Australia and New Zealand	24,785			—		3,534		(316		)	28,003			3.3	%
Europe	45,274			338		15,247		(1,370		)	59,489			7.1	%
Latin America and Caribbean	3,789			—		40,570		(3,645		)	40,714			4.9	%
Japan	(1,311		)	—		660		(59		)	(710		)	(0.1	)%
Canada	2,430			—		3,522		(318		)	5,634			0.7	%
Rest of the world (b)	17,397			—		20,482		(1,840		)	36,039			4.3	%
Sub-total, non United States	129,480			617		135,332		(12,159		)	253,270			30.2	%
Worldwide including United States (a)	103,575			1,575		14,797		(1,329		)	118,618			14.2	%
Other location non-specific (c)	226,875			—		124,698		(11,204		)	340,369			40.7	%
Total	$	566,866		$	3,518	$	293,253	$	(26,348	)	$	837,289		100.0	%

(a) Represents risks in two or more geographic zones.

(b) Represents risks in one geographic zone.

(c) The Other location non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable such as marine and aerospace risks and can span multiple geographic areas and are not fixed locations in some instances.

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AlphaCat variable funding notes (Notes)

3 Months Ended

Mar. 31, 2013

Variable Funding Notes Disclosure [Abstract]

AlphaCat variable funding notes

AlphaCat variable funding notes

AlphaCat Master Fund Ltd. (“Master Fund”), a Bermuda registered exempt mutual fund company and AlphaCat Reinsurance Ltd. (“AlphaCat Re”), a Bermuda Class 3 licensed insurance company, issued Variable Funding Notes (“VFNs”) to the AlphaCat ILS Funds ("ILS Funds") and AlphaCat 2013. 

The purpose of the VFNs is to enable the ILS Funds to invest in specific contracts or cat bonds through the market facing entities. The economic benefit of the investments is transferred to the ILS Funds and AlphaCat 2013 by way of interim payments, which accrue to the ILS Funds and sidecars according to the earnings in AlphaCat Re and Master Fund. 

The following table presents a summary of the AlphaCat VFNs on the balance sheet as at March 31, 2013: 

	March 31, 2013
AlphaCat 2013	$	161,439
AlphaCat ILS Funds	129,149
Total	$	290,588

For details on the AlphaCat VFNs interest expense which is included in the Company's Consolidated Statements of Comprehensive Income, refer to Note 12: "Debt and financing arrangements."

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Reinsurance

3 Months Ended

Mar. 31, 2013

Reinsurance Disclosures [Abstract]

Reinsurance

Reinsurance

The Company enters into reinsurance and retrocession agreements in order to mitigate its accumulation of loss, reduce its liability on individual risks, enable it to underwrite policies with higher limits and increase its aggregate capacity. The cession of insurance and reinsurance does not legally discharge the Company from its primary liability for the full amount of the policies, and the Company is required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance or retrocession agreement. Amounts recoverable from reinsurers are estimated in a manner consistent with the underlying liabilities.

Credit risk

The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. The reinsurance program is generally placed with reinsurers whose rating, at the time of placement, was A- or better rated by Standard & Poor's or the equivalent with other rating agencies. Exposure to a single reinsurer is also controlled with restrictions dependent on rating. At March 31, 2013, 97.9% of reinsurance recoverables (which includes loss reserves recoverable and recoverables on paid losses) were from reinsurers rated A- or better and included $181,163 of IBNR recoverable (December 31, 2012: $185,255). Reinsurance recoverables by reinsurer are as follows:

	March 31, 2013				December 31, 2012
	Reinsurance Recoverable		% of Total		Reinsurance Recoverable		% of Total
Top 10 reinsurers	$	339,061	76.2	%	$	360,234	74.1	%
Other reinsurers’ balances > $1 million	97,409		21.9	%	115,262		23.7	%
Other reinsurers’ balances < $1 million	8,613		1.9	%	10,906		2.2	%
Total	$	445,083	100.0	%	$	486,402	100.0	%

	March 31, 2013
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd’s Syndicates	A+	$	69,769	20.6	%
National Indemnity	AA+	64,667		19.1	%
Everest Re	A+	52,863		15.6	%
Hannover Re	AA-	42,431		12.5	%
Fully Collateralized	NR	29,906		8.8	%
Transatlantic Re	A+	20,584		6.1	%
Swiss Re	AA-	17,574		5.2	%
XL Re	A	15,350		4.5	%
Tokio Millennium	AA+	13,439		4.0	%
Munich Re	AA-	12,478		3.6	%
Total		$	339,061	100.0	%

	December 31, 2012
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd’s Syndicates	A+	$	71,469	19.9	%
National Indemnity	AA+	59,941		16.6	%
Everest Re	A+	51,340		14.3	%
Fully Collateralized	NR	47,445		13.2	%
Hannover Re	AA-	40,552		11.3	%
Munich Re	AA-	20,954		5.8	%
Transatlantic Re	A+	20,320		5.6	%
Swiss Re	AA-	16,992		4.7	%
Allianz	AA-	16,367		4.5	%
XL Re	A	14,854		4.1	%
Total		$	360,234	100.0	%

NR: Not rated

At March 31, 2013 and December 31, 2012, the provision for uncollectible reinsurance relating to losses recoverable was $6,046 and $6,602, respectively. To estimate the provision for uncollectible reinsurance recoverable, the reinsurance recoverable is first allocated to applicable reinsurers. This determination is based on a process rather than an estimate, although an element of judgment is applied. As part of this process, ceded IBNR is allocated by reinsurer. Of the $445,083 reinsurance recoverable at March 31, 2013 (December 31, 2012: $486,402), $29,906 was fully collateralized (December 31, 2012: $47,445).

The Company uses a default analysis to estimate uncollectible reinsurance. The primary components of the default analysis are reinsurance recoverable balances by reinsurer and default factors used to determine the portion of a reinsurer's balance deemed to be uncollectible. Default factors require considerable judgment and are determined using the current rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions.

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Stock plans (Other awards activity) (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Restricted share awards
Activities
Beginning balance	2,170,547	3,003,547
Granted	22,005	4,500
Vested	(148,304)	(259,017)
Forfeited	(93,993)	(20,371)
Ending balance	1,950,255	2,728,659
Weighted average grant date fair value
Weighted average grant date fair value, beginning balance	$ 29.24	$ 25.77
Weighted average grant date fair value, granted	$ 35.63	$ 30.49
Weighted average grant date fair value, vested	$ 25.97	$ 25.52
Weighted average grant date fair value, forfeited	$ 28.42	$ 27.96
Weighted average grant date fair value, ending balance	$ 29.60	$ 25.78
Restricted share units
Activities
Beginning balance	47,238	53,312
Vested	(5,468)	(7,314)
Issued in lieu of cash dividends	3,020	408
Ending balance	44,790	46,406
Weighted average grant date fair value
Weighted average grant date fair value, beginning balance	$ 29.61	$ 27.60
Weighted average grant date fair value, vested	$ 25.27	$ 24.27
Weighted average grant date fair value, issued in lieu of cash dividends	$ 29.69	$ 27.90
Weighted average grant date fair value, ending balance	$ 30.15	$ 28.13
Performance shares
Activities
Beginning balance	220,845	279,019
Forfeited	(128,667)	(99,302)
Ending balance	92,178	179,717
Weighted average grant date fair value
Weighted average grant date fair value, beginning balance	$ 31.81	$ 30.77
Weighted average grant date fair value, forfeited	$ 32.41	$ 28.70
Weighted average grant date fair value, ending balance	$ 30.99	$ 31.91

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Derivative instruments used in hedging activities

3 Months Ended

Mar. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative instruments used in hedging activities

Derivative instruments used in hedging activities

The Company enters into derivative instruments for risk management purposes, specifically to hedge unmatched foreign currency exposures and interest rate exposures. As at March 31, 2013 the Company held a foreign currency forward contract to mitigate the risk of foreign currency exposure of unpaid losses denominated in Chilean Pesos (CLP) as well as foreign currency forward contracts to mitigate the risk of fluctuations in the Euro to U.S. dollar exchange rates. As at March 31, 2013, the Company held two interest rate swap contracts to mitigate the risk of interest rate exposure on the payment of interest on the Company's 2006 and 2007 Junior Subordinated Deferrable Debentures, as well as three interest rate swaps and one cross-currency interest rate swap to mitigate the risk of interest rate and foreign exchange rate exposure on the payment of interest on the Flagstone's 2006 and 2007 Junior Subordinated Deferrable Interest Notes.

As part of the Flagstone Acquisition, the Company assumed foreign currency forward contracts which are not designated as hedging instruments.

The following table summarizes information on the location and amount of the fair value of derivatives not designated as hedging instruments on the consolidated balance sheet at March 31, 2013:

			Asset derivatives			Liability derivatives
Derivatives not designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Foreign currency forward contracts	$	147,398	Other assets	$	266	Accounts payable and accrued expenses	$	2,646

The following table summarizes information on the location and amount of the fair value of derivatives designated as hedging instruments on the consolidated balance sheet at March 31, 2013:

			Asset derivatives			Liability derivatives
Derivatives designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Foreign currency forward contracts	$	55,450	Other assets	$	701	Accounts payable and accrued expenses	$	—
Interest rate swap contracts	$	452,263	Other assets	$	—	Accounts payable and accrued expenses	$	447

The following table summarizes information on the location and amount of the fair value of derivatives not designated as hedging instruments on the consolidated balance sheet at December 31, 2012:

			Asset derivatives			Liability derivatives
Derivatives not designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Currency swaps	$	17,153	Other assets	$	—	Accounts payable and accrued expenses	$	772
Foreign currency forward contracts	$	310,541	Other assets	$	—	Accounts payable and accrued expenses	$	394

The following table summarizes information on the location and amount of the fair value of derivatives designated as hedging instruments on the consolidated balance sheet at December 31, 2012:

			Asset derivatives			Liability derivatives
Derivatives designated as hedging instruments:	Notional amount		Balance Sheet location	Fair value		Balance Sheet location	Fair value
Foreign currency forward contracts	$	35,976	Other assets	$	—	Accounts payable and accrued expenses	$	223
Interest rate swap contracts	$	289,800	Other assets	$	—	Accounts payable and accrued expenses	$	220

(a) Classification within the fair value hierarchy

As described in Note 4: "Fair value measurements", under U.S. GAAP, a company must determine the appropriate level in the fair value hierarchy for each fair value measurement. The assumptions used within the valuation are observable in the marketplace, can be derived from observable data or are supported by observable levels at which other similar transactions are executed in the marketplace. Accordingly, these derivatives were classified within Level 2 of the fair value hierarchy.

(b) Derivative instruments designated as a fair value hedge

The Company designates its derivative instruments as fair value hedges and formally and contemporaneously documents all relationships between the hedging instruments and hedged items and links the hedging derivatives to specific assets and liabilities. The Company assesses the effectiveness of the hedges, both at inception and on an on-going basis and determines whether the hedges are highly effective in offsetting changes in fair value of the linked hedged items.

The following table provides the total impact on earnings relating to the derivative instruments formally designated as fair value hedges along with the impact of the related hedged items for the three months ended March 31, 2013 and 2012:

		Three Months Ended March 31, 2013
Derivatives designated as fair value hedges and related hedged item:	Location of gain (loss) recognized in income	Amount of gain (loss) recognized in income on derivative			Amount of gain (loss) on hedged item recognized in income attributable to risk being hedged			Amount of gain (loss) recognized in income on derivative (ineffective portion)
Foreign currency forward contracts	Foreign exchange gains (losses)	$	1,261		$	(1,261	)	$	—
		Three Months Ended March 31, 2012
Derivatives designated as fair value hedges and related hedged item:	Location of gain (loss) recognized in income	Amount of gain (loss) recognized in income on derivative			Amount of gain (loss) on hedged item recognized in income attributable to risk being hedged			Amount of gain (loss) recognized in income on derivative (ineffective portion)
Foreign currency forward contracts	Foreign exchange gains (losses)	$	(3,319	)	$	3,319		$	—

(c) Derivative instruments designated as a cash flow hedge

The Company designates its interest rate derivative instruments as cash flow hedges and formally and contemporaneously documents all relationships between the hedging instruments and hedged items and links the hedging derivatives to specific assets and liabilities. The Company assesses the effectiveness of the hedges, both at inception and on an on-going basis (as required) and determines whether the hedges are highly effective in offsetting changes in fair value of the linked hedged items. The Company currently applies the long haul method when assessing the hedge's effectiveness.

The following table provides the total impact on other comprehensive income and earnings relating to the derivative instruments formally designated as cash flow hedges along with the impact of the related hedged items for the three months ended March 31, 2013:

		Three Months Ended March 31, 2013
Derivatives designated as cash flow hedges and related hedged item:	Location of the effective portion recognized in other comprehensive (loss) recognized in income	Location of the effective portion subsequently reclassified to earnings and the ineffective portion excluded from effectiveness testing	Amount of effective portion recognized in other comprehensive income		Amount of effective portion subsequently reclassified to earnings			Amount of ineffective portion excluded from effectiveness testing
Interest rate swap contracts	Other comprehensive income	Finance expenses	$	1,608	$	(1,608	)	$	—

There was no interest rate swap contract activity for the three months ended March 31, 2012.

(d) Balance sheet offsetting

There was no balance sheet offsetting activity as at March 31, 2013 or December 31, 2012.

The Company currently provides cash collateral as security for interest rate swap contracts. The Company does not provide cash collateral or financial instruments as security for foreign currency forward contracts. Our derivative instruments are generally traded under International Swaps and Derivatives Association master netting agreements, which establish terms that apply to all transactions. On a periodic basis, the amounts receivable from or payable to the counterparties are settled in cash. The Company has not elected to settle multiple transactions with an individual counterparty on a net basis.

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Reserve for losses and loss expenses

3 Months Ended

Mar. 31, 2013

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Reserve for losses and loss expenses

Reserve for losses and loss expenses

Reserves for losses and loss expenses are based in part upon the estimation of case losses reported from brokers, insureds and ceding companies. The Company also uses statistical and actuarial methods to estimate ultimate expected losses and loss expenses. The period of time from the occurrence of a loss, the reporting of a loss to the Company and the settlement of the Company's liability may be several months or years. During this period, additional facts and trends may be revealed. As these factors become apparent, case reserves will be adjusted, sometimes requiring an increase or decrease in the overall reserves of the Company, and at other times requiring a reallocation of incurred but not reported reserves to specific case reserves. These estimates are reviewed and adjusted regularly, and such adjustments, if any, are reflected in earnings in the period in which they become known. While management believes that it has made a reasonable estimate of ultimate losses, there can be no assurances that ultimate losses and loss expenses will not exceed the total reserves.

 The following table represents an analysis of paid and unpaid losses and loss expenses incurred and a reconciliation of the beginning and ending unpaid losses and loss expenses for the three months ended March 31, 2013 and 2012:

	Three Months Ended
	March 31, 2013			March 31, 2012
Reserve for losses and loss expenses, beginning of period	$	3,517,573		$	2,631,143
Losses and loss expenses recoverable	(439,967		)	(372,485		)
Net reserves for losses and loss expenses, beginning of period	3,077,606			2,258,658
Increase (decrease) in net losses and loss expenses incurred in respect of losses occurring in:
Current year	210,569			262,413
Prior years	(65,798		)	(30,424		)
Total incurred losses and loss expenses	144,771			231,989
Total net paid losses	(260,112		)	(204,223		)
Foreign exchange	(33,826		)	11,894
Net reserve for losses and loss expenses, end of period	2,928,439			2,298,318
Losses and loss expenses recoverable	429,252			351,292
Reserve for losses and loss expenses, end of period	$	3,357,691		$	2,649,610

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Share capital

3 Months Ended

Mar. 31, 2013

Stockholders' Equity Note [Abstract]

Share capital

Share capital

(a) Authorized and issued

The Company’s authorized share capital is 571,428,571 voting common shares with a par value of $0.175 per share. The holders of voting common shares are entitled to receive dividends. Holders of voting common shares are allocated one vote per share, provided that, if the controlled shares of any shareholder or group of related shareholders constitute more than 9.09 percent of the outstanding common shares of the Company, their voting power will be reduced to 9.09 percent.

The Company may from time to time repurchase its securities, including common shares, Junior Subordinated Deferrable Debentures, Junior Subordinated Deferrable Interest Notes and Senior Notes. On February 6, 2013, the Board of Directors of the Company announced an increase in the Company's common share purchase authorization to $500,000. This amount is in addition to the $1,206,845 of common shares repurchased by the Company through February 6, 2013 under its previously authorized share repurchase programs.

The Company has repurchased approximately 45,042,446 common shares for an aggregate purchase price of $1,276,536 from the inception of its share repurchase program to March 31, 2013. The Company had $430,309 remaining under its authorized share repurchase program as of March 31, 2013.

On November 30, 2012, the Company acquired all of the outstanding shares of Flagstone from a group of institutional and other investors. Pursuant to the Merger Agreement, the Company acquired all of Flagstone's outstanding common shares in exchange for the Company's common shares and cash. The Company issued 14,202,664 common shares, net of 87,725 shares withheld for income taxes, valued at $34.87 per share as partial consideration for the acquisition. In addition, 1,638,875 common shares recorded in treasury are owned by Flagstone (Bermuda) Holdings Limited, a wholly-owned subsidiary of Validus Holdings, Ltd. As part of the Flagstone Acquisition, warrants to acquire Flagstone shares were converted into 121,942 warrants to acquire the Company's common shares. In accordance with the merger agreement, these warrants have a $62.02 strike price and expire on December 31, 2013.

The Company expects the purchases under its share repurchase program to be made from time to time in the open market or in privately negotiated transactions. The timing, form and amount of the share repurchases under the program will depend on a variety of factors, including market conditions, the Company’s capital position relative to internal and rating agency targets, legal requirements and other factors. The repurchase program may be modified, extended or terminated by the Board of Directors at any time.

The following table is a summary of the common shares issued and outstanding:

	Common Shares
Common shares issued, December 31, 2012	152,698,191
Restricted share awards vested, net of shares withheld	130,637
Restricted share units vested, net of shares withheld	3,796
Options exercised	128,020
Direct issuance of common stock	183
Deferred share units vested, net of shares withheld	2,935
Common shares issued, March 31, 2013	152,963,762
Shares repurchased, March 31, 2013	(46,681,321	)
Common shares outstanding, March 31, 2013	106,282,441

	Common Shares
Common shares issued, December 31, 2011	134,503,065
Restricted share awards vested, net of shares withheld	229,688
Restricted share units vested, net of shares withheld	5,101
Options exercised	7,149
Common shares issued, March 31, 2012	134,745,003
Shares repurchased, March 31, 2012	(35,404,545	)
Common shares outstanding, March 31, 2012	99,340,458

(b) Warrants

During the three months ended March 31, 2013 and 2012, no warrants were exercised. No further warrants are anticipated to be issued. Holders of the outstanding warrants are entitled to exercise the warrants in whole or in part at any time until the expiration date.

(c) Deferred share units

Under the terms of the Company’s Director Stock Compensation Plan, non-management directors may elect to receive their director fees in deferred share units rather than cash.  The number of share units distributed in case of election under the plan is equal to the amount of the annual retainer fee otherwise payable to the director on such payment date divided by 100% of the fair market value of a share on such payment date. Additional deferred share units are issued in lieu of dividends that accrue on these deferred share units.  The total outstanding deferred share units at March 31, 2013 were nil (December 31, 2012: 5,001).

As of February 16, 2013, John Hendrickson became an employee director. As a result, his 5,039 deferred share units vested and 2,935 common shares were issued to him, net of shares withheld for taxes.

(d) Dividends

On February 6, 2013 the Company announced a special dividend in the amount of $2.00 per common share and $2.00 per common share equivalent for which each outstanding warrant is exercisable (the "2013 Special Dividend"). The 2013 Special Dividend was paid on February 26, 2013 to shareholders and warrant holders of record as of February 19, 2013.

In addition, the Company announced a quarterly cash dividend of $0.30 (2012: $0.25) per common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable. This dividend was paid on March 29, 2013 to holders of record on March 15, 2013.

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Debt and financing Arrangements (Components of finance expenses) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Components of financial expenses
Finance expenses	$ 24,446		$ 16,279
AlphaCat Variable Funding Notes
Components of financial expenses
Finance expenses	11,191	[1]	0
Credit Facilities
Components of financial expenses
Finance expenses	954		6,016
Bank charges
Components of financial expenses
Finance expenses	133		57
Talbot FAL Facility
Components of financial expenses
Finance expenses	31		31
2006 Junior Subordinated Deferrable Debentures
Components of financial expenses
Finance expenses	2,187		1,549
2007 Junior Subordinated Deferrable Debentures
Components of financial expenses
Finance expenses	1,809		3,029
2010 Senior Notes Due 2040
Components of financial expenses
Finance expenses	5,597		5,597
Flagstone 2006 Junior Subordinated Deferrable Interest Notes
Components of financial expenses
Finance expenses	1,472		0
Flagstone 2007 Junior Subordinated Deferrable Interest Notes
Components of financial expenses
Finance expenses	$ 1,072		$ 0

[1] Refer to Note 13: "AlphaCat variable funding notes" for further details.

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Debt and financing Arrangements (Text) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Dec. 31, 2012
Senior Notes and Junior Debentures
Long-term debt, drawn	$ 787,329		$ 787,799
Credit Facilities
Credit facility, commitment	2,090,000		2,090,000
Credit Facilities
Credit Facilities
Minimum level of consolidated net worth	2,600,000
Percent of consolidated net income quarterly increase under covenant	50.00%
Percent of any net proceeds from issuance of common shares	50.00%
Ratio consolidated total debt to net worth under covenant	0.35:1.00
Four-year syndicated unsecured credit facility
Credit Facilities
Credit facility, commitment	400,000		400,000
Letter of credit facility period	4 years
Letter of credit facility amount issued and outstanding	0	[1]	0	[1]
Line of credit facility initiation date	Mar. 09, 2012
Description of interest rate basis	The borrowings bear interest, at the option of the Company, at the base rate (the higher of the prime rate announced by JPMorgan Chase Bank, the federal funds effective rate plus 0.50%, and the adjusted LIBOR rate plus 1.0%) or the adjusted LIBOR rate applicable to such loans, plus an applicable rate.
Four-year syndicated secured credit facility
Credit Facilities
Credit facility, commitment	525,000		525,000
Letter of credit facility period	4 years
Aggregate commitments, maximum	700,000
Letter of credit facility amount issued and outstanding	380,087	[1]	376,570	[1]
Line of credit facility initiation date	Mar. 09, 2012
Description of interest rate basis	The borrowings bear interest at the base rate (the higher of the prime rate announced by JPMorgan Chase Bank, NA, the federal funds effective rate plus 0,50%, and the adjusted LIBOR rate plus 1.0%).
Four-year syndicated secured credit facility | Maximum
Credit Facilities
Basis spread on variable rate	0.010
Four-year syndicated secured credit facility | Minimum
Credit Facilities
Basis spread on variable rate	0.005
Syndicated unsecured letter of credit facility
Credit Facilities
Credit facility, commitment	400,000		400,000
Aggregate commitments, maximum	500,000
Syndicated unsecured letter of credit facility | Maximum
Credit Facilities
Basis spread on variable rate	0.010
Syndicated unsecured letter of credit facility | Minimum
Credit Facilities
Basis spread on variable rate	0.005
Bilateral unsecured letter of credit facility | Terminated Credit Facilities [Member]
Credit Facilities
Credit facility, commitment	60,000
Letter of credit facility period	3 years
Three year unsecured letter of credit facility | Terminated Credit Facilities [Member]
Credit Facilities
Credit facility, commitment	340,000
Letter of credit facility period	3 years
Five year secured letter of credit facility
Credit Facilities
Credit facility, commitment	525,000		525,000
Five year secured letter of credit facility | Terminated Credit Facilities [Member]
Credit Facilities
Credit facility, commitment	500,000
Letter of credit facility period	5 years
Talbot FAL Facility
Credit Facilities
Credit facility, commitment	25,000	[2]	25,000	[2]
Letter of credit facility amount issued and outstanding	25,000	[1],[2]	25,000	[1],[2]
Letter of credit facility, original commitment amount	100,000
Line of credit facility initiation date	Nov. 28, 2007
Minimum level of consolidated net worth	2,589,615
Percent of consolidated net income quarterly increase under covenant	50.00%
Percent of any net proceeds from issuance of common shares	50.00%
Ratio consolidated total debt to net worth under covenant	0.35:1.00
IPC Bi Lateral Facility
Credit Facilities
Credit facility, commitment	80,000		80,000
Letter of credit facility amount issued and outstanding	25,882	[1]	40,613	[1]
Bi-lateral secured facility
Credit Facilities
Credit facility, commitment	500,000		500,000
Letter of credit facility amount issued and outstanding	89,511	[1]	92,402	[1]
Line of credit facility initiation date	Aug. 10, 2009
PaCRe Senior secured letter of credit facility
Credit Facilities
Credit facility, commitment	10,000		10,000
Letter of credit facility period	364 days
Letter of credit facility amount issued and outstanding	258	[1]	219	[1]
Line of credit facility initiation date	May 11, 2012
Flagstone BiLateral Facility
Credit Facilities
Credit facility, commitment	550,000		550,000
Letter of credit facility amount issued and outstanding	296,979	[1]	381,019	[1]
2006 Junior Subordinated Deferrable Debentures
Senior Notes and Junior Debentures
Debt instrument issuance date	Jun. 15, 2006
Debt instrument maturity date	Jun. 15, 2036
Frequency of required payments	quarterly
Debt issuance cost	3,750
Length of optional redemption period	5 years
Debt instrument, outstanding	150,000	[1]	150,000	[1]
Debt instrument, commitment	150,000		150,000
Long-term debt, drawn	150,000		150,000
Start of optional redemption period	Jun. 15, 2011
Gross proceeds on issuance of junior subordinated deferrable debentures	150,000
2007 Junior Subordinated Deferrable Debentures
Senior Notes and Junior Debentures
Debt instrument issuance date	Jun. 21, 2007
Debt instrument maturity date	Jun. 15, 2037
Frequency of required payments	quarterly
Debt issuance cost	2,000
Length of optional redemption period	5 years
Debt instrument, outstanding	139,800	[1]	139,800	[1]
Debt instrument, commitment	200,000		200,000
Long-term debt, drawn	139,800		139,800
Start of optional redemption period	Jun. 15, 2012
Gross proceeds on issuance of junior subordinated deferrable debentures	200,000
2010 Senior Notes Due 2040
Senior Notes and Junior Debentures
Debt instrument issuance date	Jan. 21, 2010
Debt instrument maturity date	Jan. 26, 2040
Interest rate	8.875%
Frequency of required payments	semi-annually
Net proceeds on issuance of senior notes	243,967
Debt issuance cost	2,808
Debt instrument, outstanding	250,000	[1]	250,000	[1]
Date of first required payment	Jul. 26, 2010
Debt instrument, commitment	250,000		250,000
Long-term debt, drawn	247,117		247,090
Flagstone 2006 Junior Subordinated Deferrable Interest Notes
Senior Notes and Junior Debentures
Debt instrument maturity date	Sep. 15, 2036
Frequency of required payments	quarterly
Description of variable rate basis	three-month LIBOR
Basis spread on variable rate	3.54%
Debt instrument, outstanding	136,662	[1]	137,159	[1]
Debt instrument, commitment	136,662		137,159
Long-term debt, drawn	136,662		137,159
Start of optional redemption period	Sep. 15, 2011
Flagstone 2007 Junior Subordinated Deferrable Interest Notes
Senior Notes and Junior Debentures
Debt instrument, outstanding	113,750	[1]	113,750	[1]
Debt instrument, commitment	113,750		113,750
Long-term debt, drawn	113,750		113,750
Jun 15 2006 - Jun 15 2011 | 2006 Junior Subordinated Deferrable Debentures
Senior Notes and Junior Debentures
Interest rate	9.069%
Jun 21 2007 - Jun 15 2012 | 2007 Junior Subordinated Deferrable Debentures
Senior Notes and Junior Debentures
Interest rate	8.48%
Jun 15 2011 - Jun 15 2036 | 2006 Junior Subordinated Deferrable Debentures
Senior Notes and Junior Debentures
Description of variable rate basis	three-month LIBOR
Basis spread on variable rate	3.55%
Jun 15 2012 - Jun 15 2037 | 2007 Junior Subordinated Deferrable Debentures
Senior Notes and Junior Debentures
Description of variable rate basis	three-month LIBOR
Basis spread on variable rate	2.95%
Flagstone 2007 Due July 30 2037 | Flagstone 2007 Junior Subordinated Deferrable Interest Notes
Senior Notes and Junior Debentures
Frequency of required payments	quarterly
Description of variable rate basis	three-month LIBOR
Basis spread on variable rate	3.00%
Debt instrument, commitment	88,750
Debt Instrument, September 15, 2037 Maturity Date	Jul. 30, 2037
Start of optional redemption period	Jul. 30, 2012
Flagstone 2007 Debt Due September 15 2037 | Flagstone 2007 Junior Subordinated Deferrable Interest Notes
Senior Notes and Junior Debentures
Frequency of required payments	quarterly
Description of variable rate basis	three-month LIBOR
Basis spread on variable rate	3.10%
Debt instrument, commitment	$ 25,000
Start of optional redemption period	Sep. 15, 2012
Debt Instrument, July 30, 2037 Maturity Date	Sep. 15, 2037

[1] Indicates utilization of commitment amount, not drawn borrowings.

[2] Talbot operates in the Lloyd’s market ("Lloyds") through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies. Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

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Debt and financing arrangements (Schedule of finance structure) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Dec. 31, 2012
Schedule of financing structure and finance expenses
Long-term debt, drawn	$ 787,329		$ 787,799
Credit facility, commitment	2,090,000		2,090,000
Debt instrument and line of credit facility amount committed, total	2,940,412		2,940,909
Debt instrument and line of credit facility outstanding, total	1,607,929	[1]	1,706,532	[1]
Four-year syndicated unsecured credit facility
Schedule of financing structure and finance expenses
Credit facility, commitment	400,000		400,000
Credit facility, outstanding	0	[1]	0	[1]
Four-year syndicated secured credit facility
Schedule of financing structure and finance expenses
Credit facility, commitment	525,000		525,000
Credit facility, outstanding	380,087	[1]	376,570	[1]
Bi-lateral secured facility
Schedule of financing structure and finance expenses
Credit facility, commitment	500,000		500,000
Credit facility, outstanding	89,511	[1]	92,402	[1]
Talbot FAL Facility
Schedule of financing structure and finance expenses
Credit facility, commitment	25,000	[2]	25,000	[2]
Credit facility, outstanding	25,000	[1],[2]	25,000	[1],[2]
PaCRe Senior secured letter of credit facility
Schedule of financing structure and finance expenses
Credit facility, commitment	10,000		10,000
Credit facility, outstanding	258	[1]	219	[1]
IPC Bi Lateral Facility
Schedule of financing structure and finance expenses
Credit facility, commitment	80,000		80,000
Credit facility, outstanding	25,882	[1]	40,613	[1]
Flagstone BiLateral Facility
Schedule of financing structure and finance expenses
Credit facility, commitment	550,000		550,000
Credit facility, outstanding	296,979	[1]	381,019	[1]
2006 Junior Subordinated Deferrable Debentures
Schedule of financing structure and finance expenses
Debt instrument, commitment	150,000		150,000
Debt instrument, outstanding	150,000	[1]	150,000	[1]
Long-term debt, drawn	150,000		150,000
2007 Junior Subordinated Deferrable Debentures
Schedule of financing structure and finance expenses
Debt instrument, commitment	200,000		200,000
Debt instrument, outstanding	139,800	[1]	139,800	[1]
Long-term debt, drawn	139,800		139,800
2010 Senior Notes Due 2040
Schedule of financing structure and finance expenses
Debt instrument, commitment	250,000		250,000
Debt instrument, outstanding	250,000	[1]	250,000	[1]
Long-term debt, drawn	247,117		247,090
Flagstone 2006 Junior Subordinated Deferrable Interest Notes
Schedule of financing structure and finance expenses
Debt instrument, commitment	136,662		137,159
Debt instrument, outstanding	136,662	[1]	137,159	[1]
Long-term debt, drawn	136,662		137,159
Flagstone 2007 Junior Subordinated Deferrable Interest Notes
Schedule of financing structure and finance expenses
Debt instrument, commitment	113,750		113,750
Debt instrument, outstanding	113,750	[1]	113,750	[1]
Long-term debt, drawn	$ 113,750		$ 113,750

[1] Indicates utilization of commitment amount, not drawn borrowings.

[2] Talbot operates in the Lloyd’s market ("Lloyds") through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies. Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

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Stock plans (Tables)

3 Months Ended

Mar. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Options, activity during the period

Activity with respect to options for the three months ended March 31, 2013 was as follows:

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2012	1,823,947		$	6.52	$	20.69
Options regranted (repriced)	1,833,414		6.76		19.02
Options granted	—		—		—
Options exercised	(128,020	)	3.40		28.98
Options cancelled (repriced)	(1,733,139	)	6.76		20.12
Options forfeited	—		—		—
Options outstanding, March 31, 2013	1,796,202		$	6.75	$	18.95
Options exercisable, March 31, 2013	1,796,202		$	6.75	$	18.95

Activity with respect to options for the three months ended March 31, 2012was as follows: 

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2011	2,263,012		$	6.69	$	20.12
Options granted	—		—		—
Options exercised	(7,149	)	6.90		24.69
Options forfeited	—		—		—
Options outstanding, March 31, 2012	2,255,863		$	6.69	$	20.10
Options exercisable, March 31, 2012	2,227,043		$	6.64	$	20.08

Other awards, activity during the period

Activity with respect to unvested restricted share units for the three months ended March 31, 2013 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2012	47,238		$	29.61
Restricted share units vested	(5,468	)	25.27
Restricted share units issued in lieu of cash dividends	3,020		29.69
Restricted share units outstanding, March 31, 2013	44,790		$	30.15

Activity with respect to unvested restricted share units for the three months ended March 31, 2012 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2011	53,312		$	27.60
Restricted share units vested	(7,314	)	24.27
Restricted share units issued in lieu of cash dividends	408		27.90
Restricted share units outstanding, March 31, 2012	46,406		$	28.13

Activity with respect to unvested performance share awards for the three months ended March 31, 2013 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2012	220,845		$	31.81
Performance share awards forfeited	(128,667	)	32.41
Performance share awards outstanding, March 31, 2013	92,178		$	30.99

Activity with respect to unvested performance share awards for the three months ended March 31, 2012 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2011	279,019		$	30.77
Performance share awards forfeited	(99,302	)	28.70
Performance share awards outstanding, March 31, 2012	179,717		$	31.91

Activity with respect to unvested restricted share awards for the three months ended March 31, 2013 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2012	2,170,547		$	29.24
Restricted share awards granted	22,005		35.63
Restricted share awards vested	(148,304	)	25.97
Restricted share awards forfeited	(93,993	)	28.42
Restricted share awards outstanding, March 31, 2013	1,950,255		$	29.60

Activity with respect to unvested restricted share awards for the three months ended March 31, 2012 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2011	3,003,547		$	25.77
Restricted share awards granted	4,500		30.49
Restricted share awards vested	(259,017	)	25.52
Restricted share awards forfeited	(20,371	)	27.96
Restricted share awards outstanding, March 31, 2012	2,728,659		$	25.78

Total share compensation expenses

The breakdown of share compensation expenses by award type was as follows:

	Three Months Ended
	March 31, 2013			March 31, 2012
Options	$	—		$	135
Restricted share awards	4,061			5,940
Restricted share units	121			120
Performance share awards	(1,864		)	(757		)
Total	$	2,318		$	5,438

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Investments in affiliates (Investment affiliate) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Schedule of Equity Method Investments [Line Items]
Income from investment affiliate	$ 1,477		$ 0
Aquiline Financial Services Fund LP
Schedule of Equity Method Investments [Line Items]
Investment in limited partnership (Aquiline Financial Services Fund II L.P.), beginning of period	15,218	[1]
Capital contributions	1,341	[1]
Income from investment affiliate	1,477	[1]
Investment in limited partnership (Aquiline Financial Services Fund II L.P.), end of period	18,036	[1]
Investment in Aquiline - other details
Investment at cost	18,959
Voting ownership %	0.00%
Equity ownership %	6.70%
Carrying value	$ 18,036	[1]

[1] As at March 31, 2012, this investment was included in "Other investments" as a Level 3 investment in the fair value hierarchy.

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Related party transactions

3 Months Ended

Mar. 31, 2013

Related Party Transactions [Abstract]

Related party transactions

Related party transactions

The transactions listed below are classified as related party transactions as each counter party has either a direct or indirect shareholding in the Company.

Aquiline Capital Partners, LLC and its related companies ("Aquiline"), which own 6,255,943 shares in the Company, hold warrants to purchase 2,756,088 shares, and have two employees on the Company's Board of Directors who do not receive compensation from the Company, are shareholders of Group Ark Insurance Holdings Ltd. ("Group Ark"). Christopher E. Watson, a director of the Company, also serves as a director of Group Ark. Pursuant to reinsurance agreements with a subsidiary of Group Ark, the Company recognized gross premiums written during the three months ended March 31, 2013 of $1,795 (2012: $297) of which $198 was included in premiums receivable at March 31, 2013 (December 31, 2012: $251). The Company also recognized reinsurance premiums ceded during the three months ended March 31, 2013 of $4 (2012: $nil) and recorded $4,417 of loss reserves recoverable at March 31, 2013 (December 31, 2012: $3,694). Earned premium adjustments of $719 (2012: $362) were recorded during the three months ended March 31, 2013.

Aquiline was previously a shareholder of Tiger Risk Partners LLC (“Tiger Risk”). Christopher E. Watson, a director of the Company serves as a director of Tiger Risk. As of March 31, 2013, Tiger Risk was no longer a related party due to Aquiline's disposal of its investment. Pursuant to certain reinsurance contracts, the Company recognized brokerage expenses paid to Tiger Risk for the three months ended March 31, 2012 of $290 of which $964 was included in accounts payable and accrued expenses at December 31, 2012.

On November 24, 2009, the Company entered into an Investment Management Agreement with Conning, Inc. ("Conning") to manage a portion of the Company's investment portfolio. Aquiline acquired Conning on June 16, 2009. Jeffrey W. Greenberg, a director of the Company, serves as a director of Conning Holdings Corp., the parent company of Conning and Michael Carpenter, the Chairman of Talbot Holdings Ltd. and a director of the Company, serves as a director of a subsidiary company of Conning Holdings Corp. Investment management fees earned by Conning for the three months ended March 31, 2013 were $191 (2012: $203) of which $196 was included in accounts payable and accrued expenses at March 31, 2013 (December 31, 2012: $201).

On December 20, 2011, Validus Re entered into an Assignment and Assumption Agreement (the "Agreement") with Aquiline Capital Partners LLC, a Delaware limited liability company (the "Assignor") and Aquiline Capital Partners II GP (Offshore) Ltd., a Cayman Islands company limited by shares (the "General Partner") pursuant to which Validus Re has assumed 100% of the Assignor's interest in Aquiline Financial Services Fund II L.P. (the "Partnership") representing a total capital commitment of $50,000 (the "Commitment"), as a limited partner in the Partnership (the "Transferred Interest"). Messrs. Greenberg and Watson, directors of the Company, serve as managing principal and senior principal, respectively, of Aquiline Capital Partners LLC. For the three months ended March 31, 2013, the Company incurred $120 (2012: $1,436) in partnership fees and made $1,341 (2012: $1,529) of capital contributions respectively, of which $nil were included in accounts payable and accrued expenses at March 31, 2013 (December 31, 2012: $nil).

Certain shareholders of the Company and their affiliates, as well as the employers of or entities otherwise associated with certain directors and officers or their affiliates, have purchased insurance and/or reinsurance from the Company in the ordinary course of business on terms the Company believes were no more favorable to these (re)insureds than those made available to other customers.

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Investments (Tables)

3 Months Ended

Mar. 31, 2013

Investments [Abstract]

Amortized cost, gross unrealized gains and (losses) and estimated fair value of investments

The amortized cost, gross unrealized gains and (losses) and estimated fair value of investments at March 31, 2013 were as follows:

	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,417,884		$	7,150		$	(65	)	$	1,424,969
Non-U.S. government and government agency	396,948			4,314			(5,061		)	396,201
States, municipalities, political subdivision	36,933			816			(18		)	37,731
Agency residential mortgage-backed securities	372,469			12,311			(284		)	384,496
Non-agency residential mortgage-backed securities	27,010			177			(903		)	26,284
U.S. corporate	1,466,941			17,990			(753		)	1,484,178
Non-U.S. corporate	632,880			9,027			(915		)	640,992
Bank loans	718,427			13,617			(233		)	731,811
Catastrophe bonds	47,006			748			(182		)	47,572
Asset-backed securities	500,195			2,750			(627		)	502,318
Total fixed maturities	5,616,693			68,900			(9,041		)	5,676,552
Total short-term investments	368,404			60			(845		)	367,619
Other investments
Fund of hedge funds	4,192			273			(465		)	4,000
Private equity investments	12,968			258			(301		)	12,925
Hedge funds (a)	528,874			45,037			(67,143		)	506,768
Mutual funds	6,199			2,894			—			9,093
Total other investments	552,233			48,462			(67,909		)	532,786
Total	$	6,537,330		$	117,422		$	(77,795	)	$	6,576,957
Noncontrolling interest (a)	$	(450,000	)	$	(38,441	)	$	60,354		$	(428,087	)
Total investments excluding noncontrolling interest	$	6,087,330		$	78,981		$	(17,441	)	$	6,148,870

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

The amortized cost, gross unrealized gains and (losses) and estimated fair value of investments at December 31, 2012 were as follows:

	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,091,357		$	7,957		$	(84	)	$	1,099,230
Non-U.S. government and government agency	295,602			6,904			(227		)	302,279
States, municipalities, political subdivision	41,286			800			(23		)	42,063
Agency residential mortgage-backed securities	375,368			13,708			(202		)	388,874
Non-agency residential mortgage-backed securities	106,536			1,266			(1,346		)	106,456
U.S. corporate	1,189,173			21,681			(681		)	1,210,173
Non-U.S. corporate	582,115			11,373			(223		)	593,265
Bank loans	663,217			10,593			(427		)	673,383
Catastrophe bonds	56,757			481			(291		)	56,947
Asset-backed securities	607,103			5,767			(206		)	612,664
Total fixed maturities	5,008,514			80,530			(3,710		)	5,085,334
Total short-term investments	1,112,929			1,349			(28		)	1,114,250
Other investments
Fund of hedge funds	4,677			299			(219		)	4,757
Private equity investments	12,857			94			—			12,951
Hedge funds (a)	559,335			21,814			(42,623		)	538,526
Mutual funds	6,199			2,015			—			8,214
Total other investments	583,068			24,222			(42,842		)	564,448
Total	$	6,704,511		$	106,101		$	(46,580	)	$	6,764,032
Noncontrolling interest (a)	(450,000		)	(19,427		)	36,690			(432,737		)
Total investments excluding noncontrolling interest	$	6,254,511		$	86,674		$	(9,890	)	$	6,331,295

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

Investment ratings on fixed maturities

	March 31, 2013				December 31, 2012
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
AAA	$	820,687	14.5	%	$	1,062,794	20.9	%
AA	2,338,976		41.2	%	1,862,322		36.6	%
A	1,285,519		22.6	%	1,049,969		20.6	%
BBB	447,761		7.9	%	374,447		7.4	%
Investment grade	4,892,943		86.2	%	4,349,532		85.5	%
BB	355,124		6.3	%	373,907		7.4	%
B	397,877		7.0	%	330,416		6.5	%
CCC	4,374		0.1	%	4,483		0.1	%
CC	3,261		—	%	3,259		0.1	%
D/NR	22,973		0.4	%	23,737		0.4	%
Non-Investment grade	783,609		13.8	%	735,802		14.5	%
Total Fixed Maturities	$	5,676,552	100.0	%	$	5,085,334	100.0	%

Fixed maturities investments by contractual maturity

	March 31, 2013				December 31, 2012
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	719,492	$	725,393	$	526,529	$	530,499
Due after one year through five years	3,626,561		3,661,494		2,971,118		3,018,544
Due after five years through ten years	367,885		373,504		418,377		424,304
Due after ten years	3,081		3,063		3,483		3,993
	4,717,019		4,763,454		3,919,507		3,977,340
Asset-backed and mortgage-backed securities	899,674		913,098		1,089,007		1,107,994
Total	$	5,616,693	$	5,676,552	$	5,008,514	$	5,085,334

Net investment income

Net investment income was derived from the following sources: 

	Three Months Ended
	March 31, 2013			March 31, 2012
Fixed maturities and short-term investments	$	27,531		$	27,276
Cash and cash equivalents	533			2,317
Securities lending income	—			5
Total gross investment income	28,064			29,598
Investment expenses	(2,415		)	(1,838		)
Net investment income	$	25,649		$	27,760

Analysis of net realized gains and change in unrealized (losses) gains on investments

The following represents an analysis of net realized gains and the change in net unrealized (losses) gains on investments:

	Three Months Ended
	March 31, 2013			March 31, 2012
Fixed maturities, short-term and other investments and cash equivalents
Gross realized gains	$	10,720		$	10,008
Gross realized (losses)	(8,999		)	(2,476		)
Net realized gains on investments	1,721			7,532
Net unrealized gains on securities lending	—			37
Change in net unrealized (losses) gains on investments	(7,237		)	20,634
Net change in unrealized (losses) gains on investments	$	(7,237	)	$	20,671
Total net realized gains and change in net unrealized (losses) gains on investments	$	(5,516	)	$	28,203
Noncontrolling interest (a)	4,651			—
Total net realized gains and change in net unrealized (losses) gains on investments excluding noncontrolling interest	$	(865	)	$	28,203

(a) Includes change in net unrealized (losses) on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

Investments pledged as collateral under credit facilities

The following tables outline investments pledged as collateral under the Company's credit facilities. For further details of the credit facilities, please refer to Note 12: “Debt and financing arrangements.”

	March 31, 2013
Description	Commitment		Issued and Outstanding		Investments pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		380,087		524,195
$500,000 secured bi-lateral letter of credit facility	500,000		89,511		126,146
Talbot FAL Facility	25,000		25,000		36,830
PaCRe senior secured letter of credit facility	10,000		258		—
IPC Bi-lateral facility	80,000		25,882		98,771
$550,000 Flagstone Bi-lateral facility	550,000		296,979		487,127
	$	2,090,000	$	817,717	$	1,273,069

	December 31, 2012
Description	Commitment		Issued and Outstanding		Investments pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		376,570		517,210
$500,000 secured bi-lateral letter of credit facility	500,000		92,402		125,991
Talbot FAL Facility	25,000		25,000		41,372
PaCRe senior secured letter of credit facility	10,000		219		—
IPC Bi-lateral facility	80,000		40,613		98,593
$550,000 Flagstone Bi-lateral facility	550,000		381,019		416,414
	$	2,090,000	$	915,823	$	1,199,580

XML

Investments in affiliates (Operating affiliates rollforward) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Activity in non-consolidated affiliate balances for the period:
Balance, beginning of period	$ 137,111	$ 53,031
Return of investment	(50,222)
Income from operating affiliates	3,374	3,367
Balance, end of period	90,263	56,398
AlphaCat Re 2011 Ltd
Activity in non-consolidated affiliate balances for the period:
Balance, beginning of period	62,792	53,031
Return of investment	(46,436)
Income from operating affiliates	449	3,367
Balance, end of period	16,805	56,398
AlphaCat Re 2012 Ltd
Activity in non-consolidated affiliate balances for the period:
Balance, beginning of period	29,319
Return of investment	(3,786)
Income from operating affiliates	1,825
Balance, end of period	27,358
AlphaCat 2013 Ltd
Activity in non-consolidated affiliate balances for the period:
Balance, beginning of period	45,000
Return of investment	0
Income from operating affiliates	1,100
Balance, end of period	$ 46,100

XML

Investments (Fixed maturities by investment rating) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Fixed Maturities
Estimated fair value	$ 5,676,552	$ 5,085,334
Percentage of total	100.00%	100.00%
AAA
Fixed Maturities
Estimated fair value	820,687	1,062,794
Percentage of total	14.50%	20.90%
AA
Fixed Maturities
Estimated fair value	2,338,976	1,862,322
Percentage of total	41.20%	36.60%
A
Fixed Maturities
Estimated fair value	1,285,519	1,049,969
Percentage of total	22.60%	20.60%
BBB
Fixed Maturities
Estimated fair value	447,761	374,447
Percentage of total	7.90%	7.40%
Investment Grade
Fixed Maturities
Estimated fair value	4,892,943	4,349,532
Percentage of total	86.20%	85.50%
BB
Fixed Maturities
Estimated fair value	355,124	373,907
Percentage of total	6.30%	7.40%
B
Fixed Maturities
Estimated fair value	397,877	330,416
Percentage of total	7.00%	6.50%
CCC
Fixed Maturities
Estimated fair value	4,374	4,483
Percentage of total	0.10%	0.10%
CC
Fixed Maturities
Estimated fair value	3,261	3,259
Percentage of total	0.00%	0.10%
D/NR
Fixed Maturities
Estimated fair value	22,973	23,737
Percentage of total	0.40%	0.40%
Non Investment Grade
Fixed Maturities
Estimated fair value	$ 783,609	$ 735,802
Percentage of total	13.80%	14.50%

XML

Consolidated Statements of Shareholders' Equity (Unaudited) (USD $) In Thousands	Total	Common shares	Treasury shares	Additional paid-in capital	Accumulated other comprehensive (loss)	Retained earnings
Beginning balance at Dec. 31, 2011		$ 23,538	$ (6,131)	$ 1,893,890	$ (6,601)	$ 1,543,729
Common shares issued (redeemed), net		42		(1,309)
Repurchase of common shares			(65)	(11,243)
Share compensation expenses				5,438
Other comprehensive (loss) income	1,393				1,393
Dividends						(27,404)
Net income	124,234					124,234
Net loss attributable to noncontrolling interest	0					0
Noncontrolling interest	0
Total shareholders' equity	3,539,511
Ending balance at Mar. 31, 2012	3,539,511	23,580	(6,196)	1,886,776	(5,208)	1,640,559
Beginning balance at Dec. 31, 2012	4,020,827	26,722	(7,836)	2,160,478	(2,953)	1,844,416
Common shares issued (redeemed), net		47		3,074
Repurchase of common shares			(333)	(69,358)
Share compensation expenses				2,318
Other comprehensive (loss) income	(9,785)				(9,785)
Dividends						(266,143)
Net income	220,694					220,694
Net loss attributable to noncontrolling interest	2,549					2,549
Noncontrolling interest	487,421
Total shareholders' equity	4,391,311
Ending balance at Mar. 31, 2013	$ 3,903,890	$ 26,769	$ (8,169)	$ 2,096,512	$ (12,738)	$ 1,801,516

XML

Fair value measurements

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Fair value measurements

Fair Value Measurements

The Company has adopted all authoritative guidance in effect as of the balance sheet date regarding certain market conditions that allow for fair value measurements that incorporate unobservable inputs where active market transaction based measurements are unavailable.

(a) Classification within the fair value hierarchy

Under U.S. GAAP, a company must determine the appropriate level in the fair value hierarchy for each fair value measurement. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or liability, into three levels. It gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The three levels of the fair value hierarchy are described below:

• Level 1 - Fair values are measured based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access.

• Level 2 - Fair values are measured based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

• Level 3 - Fair values are measured based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect our own judgments about assumptions where there is little, if any, market activity for that asset or liability that market participants might use.

The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment.

Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This may lead us to change the selection of our valuation technique (from market to cash flow approach) or may cause us to use multiple valuation techniques to estimate the fair value of a financial instrument. This circumstance could cause an instrument to be reclassified between levels within the fair value hierarchy.

There have been no material changes in the Company's valuation techniques during the period represented by these consolidated financial statements. The following methods and assumptions were used in estimating the fair value of each class of financial instrument recorded in the Consolidated Balance Sheets.

(b) Level 1 and Level 2 assets measured at fair value

Fixed maturity investments

Fixed maturity investments included in Level 2 are U.S. government and government agency, non-U.S. government and government agency, states, municipalities, political subdivision, agency residential mortgage-backed, non-agency residential mortgage-backed, U.S. corporate, non-U.S. corporate, bank loans, catastrophe bonds and asset backed securities.

In general, the Company's fixed maturity investment portfolios are priced using pricing services, such as index providers and pricing vendors, as well as broker quotations. The pricing vendors provide pricing for a high volume of liquid securities that are actively traded. For securities that do not trade on an exchange, the pricing services generally utilize market data and other observable inputs in matrix pricing models to determine month end prices. Prices are generally verified using third party data. Securities which are priced by an index provider are generally included in the index.

In general, broker-dealers value securities through their trading desks based on observable inputs. The methodologies include mapping securities based on trade data, bids or offers, observed spreads, and performance on newly issued securities. Broker-dealers also determine valuations by observing secondary trading of similar securities. Prices obtained from broker quotations are considered non-binding, however they are based on observable inputs and by observing secondary trading of similar securities obtained from active, non-distressed markets.

The Company considers these Level 2 inputs as they are corroborated with other market observable inputs. The techniques generally used to determine the fair value of the Company's fixed maturity investments are detailed below by asset class.

U.S. government and government agency

Level 2 - U.S. government and agency securities consist primarily of debt securities issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. Fixed maturity investments included in U.S. government and government agency securities are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources and integrate other observations from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The fair value of each security is individually computed using analytical models which incorporate option adjusted spreads and other daily interest rate data.

Non-U.S. government and government agency

Level 2 - Non-U.S. government and government agency securities consist of debt securities issued by non-U.S. governments and their agencies along with supranational organizations (also known as sovereign debt securities). Securities held in these sectors are primarily priced by pricing services who employ proprietary discounted cash flow models to value the securities. Key quantitative inputs for these models are daily observed benchmark curves for treasury, swap and high issuance credits. The pricing services then apply a credit spread for each security which is developed by in-depth and real time market analysis. For securities in which trade volume is low, the pricing services utilize data from more frequently traded securities with similar attributes. These models may also be supplemented by daily market and credit research for international markets.

States, municipalities, political subdivision

Level 2 - The Company's states, municipal and political subdivision portfolio contains debt securities issued by U.S. domiciled state and municipal entities. These securities are generally priced by independent pricing services using the techniques described for U.S. government and government agency securities described above.

Agency residential mortgage-backed securities

Level 2 - The Company's agency residential mortgage-backed investments are primarily priced by pricing services using a mortgage pool specific model which utilizes daily inputs from the active to be announced ("TBA") market which is very liquid, as well as the U.S. treasury market. The model also utilizes additional information, such as the weighted average maturity, weighted average coupon and other available pool level data which is provided by the sponsoring agency. Valuations are also corroborated with daily active market quotes.

Non-agency residential mortgage-backed securities

Level 2 - The Company's non-agency mortgage-backed investments include non-agency prime residential mortgage-backed fixed maturity investments. The Company has no fixed maturity investments classified as sub-prime held in its fixed maturity investments portfolio. Securities held in these sectors are primarily priced by pricing services using an option adjusted spread ("OAS") model or other relevant models, which principally utilize inputs including benchmark yields, available trade information or broker quotes, and issuer spreads. The pricing services also review collateral prepayment speeds, loss severity and delinquencies among other collateral performance indicators for the securities valuation, when applicable.

U.S. corporate

Level 2 - Corporate debt securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The Company's corporate fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk. In certain instances, securities are individually evaluated using a spread which is added to the U.S. treasury curve or a security specific swap curve as appropriate.

Non - U.S. corporate

Level 2 - Non - U.S. corporate debt securities consist primarily of investment-grade debt of a wide variety of non-U.S. corporate issuers and industries. The Company's non - U.S. corporate fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk.

Bank loans

Level 2 - The Company's bank loan investments consist primarily of below-investment-grade debt of a wide variety of corporate issuers and industries. The Company's bank loans are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk.

Catastrophe bonds

Level 2 - Catastrophe bonds are recorded at fair value and are based on broker or underwriter bid indications.

Asset-backed securities

Level 2 - Asset backed securities include mostly investment-grade debt securities backed by pools of loans with a variety of underlying collateral, including automobile loan receivables, student loans, credit card receivables, and CLO debt originated by a variety of financial institutions. Securities held in these sectors are primarily priced by pricing services. The pricing services apply dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The pricing services determine the expected cash flows for each security held in this sector using historical prepayment and default projections for the underlying collateral and current market data. In addition, a spread is applied to the relevant benchmark and used to discount the cash flows noted above to determine the fair value of the securities held in this sector.

Short term investments

Level 1 & Level 2 - Short term investments consist primarily of highly liquid securities with maturities less than one year from the date of purchase. The fair value of the Company's portfolio of short term investments are generally determined using amortized cost which approximates fair value. These securities are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their amortized cost approximates fair value. The Company determined that certain of its short-term investments held in highly liquid money market-type funds would be included in Level 1 as their fair values are based on quoted market prices in active markets.

Mutual funds

Level 2 -Mutual funds consist of two investment funds which are invested in various quoted investments. The fair value of units in the mutual funds is based on the net asset value of the fund as reported by the fund manager.

(c) Level 3 assets measured at fair value

Other investments

Level 3 includes financial instruments that are valued using market approach and income approach valuation techniques. These models incorporate both observable and unobservable inputs. The Company's hedge funds, a fund of hedge funds and private equity investments are the only financial instruments in this category as at March 31, 2013. For each respective hedge fund investment, the Company obtains and reviews the valuation methodology used by the fund administrators and investment managers to ensure that the hedge fund investments are following fair value principles consistent with U.S. GAAP in determining the net asset value (“NAV”).

Other investments in Level 3 consist of hedge funds, a fund of hedge funds and private equity investments. Within the hedge fund industry, there is a general lack of transparency necessary to facilitate a detailed independent assessment of the values placed on the securities underlying the NAV provided by the fund manager or fund administrator. To address this, on a quarterly basis, we perform a number of monitoring procedures designed to assist us in the assessment of the quality of the information provided by managers and administrators. These procedures include, but are not limited to, regular review and discussion of each fund's performance with its manager and regular evaluation of fund performance against applicable benchmarks.

Hedge funds

The hedge funds were valued at $506,768 at March 31, 2013. The hedge funds consist of an investment in four Paulson & Co. managed funds (the "Paulson hedge funds") and three investment funds assumed from the Flagstone Acquisition (the "Flagstone investment funds"). The Paulson hedge funds' administrator provides monthly reported NAVs with a one-month delay in its valuation. As a result, the funds' administrator's February 28, 2013 NAV was used as a partial basis for fair value measurement in the Company's March 31, 2013 balance sheet. The fund manager provides an estimate of the NAV at March 31, 2013 based on estimated performance. The Company adjusts fair value to the fund manager's estimated NAV that incorporates relevant valuation sources on a timely basis. To determine the reasonableness of the estimated NAV, the Company assesses the variance between the fund manager's estimated NAV and the fund administrator's NAV. Material variances are recorded in the current reporting period while immaterial variances are recorded in the following reporting period. Historically, our valuation estimates have not materially differed from the subsequent NAVs. The Flagstone investment fund administrators provide either monthly or quarterly reported NAVs with a one-month or one-quarter delay in its valuation, respectively. As a result, the February 28, 2013 NAV or the December 31, 2012 NAV was used as a basis for fair value measurement in the Company's March 31, 2013 balance sheet. As these valuation techniques incorporate both observable and significant unobservable inputs, both the Paulson hedge funds and the Flagstone investment funds are classified as Level 3 assets. The Paulson hedge funds noted above are subject to quarterly liquidity.

Private equity investments

Private equity investments consist of an investment in three private equity funds assumed from the Flagstone Acquisition. The private equity investments respective fund administrator provides either monthly or quarterly NAVs with a one-month or one-quarter delay in its valuation, respectively. As a result, the February 28, 2013 NAV or the December 31, 2012 NAV was used as a basis for fair value measurement in the Company's March 31, 2013 balance sheet. As this valuation technique incorporates both observable and significant unobservable inputs, the private equity investments are classified as Level 3 assets.

Fund of hedge funds

The fund of hedge funds includes a side pocket. While a redemption request has been submitted, the timing of receipt of proceeds on the side pocket is unknown. The fund's administrator provides a monthly reported NAV with a one-month delay in its valuation. As a result, the fund administrator's February 28, 2013 NAV was used as a basis for fair value measurement in the Company's March 31, 2013 balance sheet. The fund manager provides an estimate of the fund NAV at March 31, 2013 based on the estimated performance provided from the underlying third-party funds. To determine the reasonableness of the NAV, the Company compares the one-month delayed fund administrator's NAV to the fund manager's estimated NAV that incorporates relevant valuation sources on a timely basis. Material variances are recorded in the current reporting period while immaterial variances are recorded in the following reporting period. As this valuation technique incorporates both observable and significant unobservable inputs, the fund of hedge funds is classified as a Level 3 asset.

At March 31, 2013, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1		Level 2		Level 3			Total
U.S. government and government agency	$	—	$	1,424,969	$	—		$	1,424,969
Non-U.S. government and government agency	—		396,201		—			396,201
States, municipalities, political subdivision	—		37,731		—			37,731
Agency residential mortgage-backed securities	—		384,496		—			384,496
Non-agency residential mortgage-backed securities	—		26,284		—			26,284
U.S. corporate	—		1,484,178		—			1,484,178
Non-U.S. corporate	—		640,992		—			640,992
Bank loans	—		731,811		—			731,811
Catastrophe bonds	—		47,572		—			47,572
Asset-backed securities	—		502,318		—			502,318
Total fixed maturities	—		5,676,552		—			5,676,552
Short-term investments	332,663		34,956		—			367,619
Other investments
Fund of hedge funds	—		—		4,000			4,000
Private equity investments	—		—		12,925			12,925
Hedge funds (a)	—		—		506,768			506,768
Mutual funds	—		9,093		—			9,093
Total other investments	—		9,093		523,693			532,786
Total	$	332,663	$	5,720,601	$	523,693		$	6,576,957
Noncontrolling interest (a)	—		—		(428,087		)	(428,087		)
Total investments excluding noncontrolling interest	$	332,663	$	5,720,601	$	95,606		$	6,148,870

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

At December 31, 2012, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1		Level 2		Level 3			Total
U.S. government and government agency	$	—	$	1,099,230	$	—		$	1,099,230
Non-U.S. government and government agency	—		302,279		—			302,279
States, municipalities, political subdivision	—		42,063		—			42,063
Agency residential mortgage-backed securities	—		388,874		—			388,874
Non-agency residential mortgage-backed securities	—		106,456		—			106,456
U.S. corporate	—		1,210,173		—			1,210,173
Non-U.S. corporate	—		593,265		—			593,265
Bank loans	—		673,383		—			673,383
Catastrophe bonds	—		56,947		—			56,947
Asset-backed securities	—		612,664		—			612,664
Total fixed maturities	—		5,085,334		—			5,085,334
Short-term investments	1,063,175		51,075		—			1,114,250
Other investments
Fund of hedge funds	—		—		4,757			4,757
Private equity investments	—		—		12,951			12,951
Hedge funds (a)	—		—		538,526			538,526
Mutual funds	—		8,214		—			8,214
Total other investments	—		8,214		556,234			564,448
Total	$	1,063,175	$	5,144,623	$	556,234		$	6,764,032
Noncontrolling interest (a)					(432,737		)	(432,737		)
Total investments excluding noncontrolling interest	$	1,063,175	$	5,144,623	$	123,497		$	6,331,295

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

At March 31, 2013, Level 3 investments excluding the noncontrolling interest totaled $95,606 (December 31, 2012: $123,497), representing 1.6% (December 31, 2012: 2.0%) of total investments, excluding noncontrolling interest, measured at fair value on a recurring basis.

The following tables present a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31, 2013
		Other Investments			Estimated Fair Value
Level 3 investments - Beginning of period		$	556,234		$	556,234
Purchases		459			459
Sales		(31,334		)	(31,334		)
Realized gains		40			40
Unrealized (losses)		(1,706		)	(1,706		)
Level 3 investments - End of period		$	523,693		$	523,693
Noncontrolling interest (a)		(428,087		)	(428,087		)
Level 3 investments excluding noncontrolling interest		$	95,606		$	95,606

	Three Months Ended March 31, 2012
		Other Investments			Estimated Fair Value
Level 3 investments - Beginning of period		$	8,880		$	8,880
Purchases		1,529			1,529
Sales		(620		)	(620		)
Realized gains		28			28
Unrealized (losses)		(1,492		)	(1,492		)
Level 3 investments - End of period		$	8,325		$	8,325

(a) Includes Level 3 investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

There have not been any transfers between Levels 1 and 2 during the three months ended March 31, 2013 or 2012. There have not been any transfers into or out of Level 3 during the three months ended March 31, 2013 or 2012.

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Share capital (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				0 Months Ended	3 Months Ended	0 Months Ended	3 Months Ended		0 Months Ended	3 Months Ended							0 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Feb. 06, 2013	Dec. 31, 2012	Nov. 30, 2012 Flagstone Reinsurance Holdings Sa [Member]	Mar. 31, 2013 Common shares	Feb. 06, 2013 Common shares Special dividend declared	Mar. 31, 2013 Common shares Dividend declared	Mar. 31, 2012 Common shares Dividend declared	Feb. 06, 2013 Common share equivalents Special dividend declared	Mar. 31, 2013 Common share equivalents Dividend declared	Mar. 31, 2013 Deferred share units	Mar. 31, 2013 Restricted share awards	Mar. 31, 2012 Restricted share awards	Mar. 31, 2013 Restricted Stock Units (RSUs) [Member]	Mar. 31, 2012 Restricted Stock Units (RSUs) [Member]	Mar. 31, 2013 Employee director Deferred share units	Feb. 06, 2013 Share Repurchase Authorization [Member]
Summary of common shares issued and outstanding
Common shares issued, beginning balance	152,698,191	134,503,065
Vested, net of shares withheld													130,637	229,688	3,796	5,101
Options exercised	128,020	7,149
Direct issuance of common stock	183
Deferred share units vested, net of shares withheld												2,935					2,935
Common shares issued, ending balance	152,963,762	134,745,003
Shares repurchased, ending balance	(46,681,321)	(35,404,545)
Common shares outstanding, ending balance	106,282,441	99,340,458		107,921,259
Share repurchases
Share repurchase program, cumulative shares repurchased						45,042,446
Shares repurchased, cumulative						$ 1,276,536												$ 1,206,845
Remaining share repurchase authorization amount	430,309
Treasury Stock, Shares, Acquired					1,638,875
Share Capital (Texts)
Common shares, shares authorized	571,428,571			571,428,571
Common shares, par value	$ 0.175			$ 0.175
Common stock voting rights	one vote per share
Restriction on percentage of voting power	9.09%
Stock Repurchase Program, Authorized Amount																		$ 500,000
Business Acquisition Equity Interests Issued Or Issuable Number Of Shares Issued Net Of Shares Withheld					14,202,664
Business Acquisition, Cost of Acquired Entity, Equity Interests Withheld For Income Taxes					87,725
Treasury Stock, Shares, Acquired					1,638,875
Closing Price Per Share Of Companys Stock					$ 34.87
Business Combination Acquired Warrants					121,942
Warrant strike price					62.02
Deferred share units, adjustment factor	100.00%
Total outstanding deferred share units	0			5,001
Vested													148,304	259,017	5,468	7,314	5,039
Date of dividend declaration			February 6, 2013
Cash dividends declared per share	$ 2.30	$ 0.25					$ 2.00	$ 0.30	$ 0.25	$ 2.00	$ 0.30

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Commitments and contingencies (Lloyd's syndicate) (Details) In Thousands, unless otherwise specified			3 Months Ended							3 Months Ended
	Mar. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Mar. 31, 2013 Lloyd's Syndicate 1183 USD ($)	Mar. 31, 2013 Lloyd's Syndicate 1183 GBP (£)	Dec. 31, 2012 Lloyd's Syndicate 1183 USD ($)	Mar. 31, 2013 Talbot FAL Facility USD ($)		Dec. 31, 2012 Talbot FAL Facility USD ($)		Mar. 31, 2013 Talbot FAL Facility Lloyd's Syndicate 1183 Minimum USD ($)	Mar. 31, 2013 Talbot FAL Facility Lloyd's Syndicate 1183 Maximum USD ($)
Components Of Required Capital [Abstract]
Loss contingency, loss level amount										$ 403,700	$ 428,700
Cash, investments and letters of credit amount			428,700		428,700
Credit facility, commitment	2,090,000	2,090,000				25,000	[1]	25,000	[1]
Funds at Lloyd's and Lloyd's Central Fund
Maximum premium levies assessable, percent			3.00%	3.00%
Estimated underwriting capacity				620,000
Exchange rate			£1 equals $1.5187	£1 equals $1.5187
Maximum premium levies assessable, amount			$ 28,248

[1] Talbot operates in the Lloyd’s market ("Lloyds") through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies. Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

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Fair value measurements (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Fair value hierarchy - allocation of investments

At March 31, 2013, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1		Level 2		Level 3			Total
U.S. government and government agency	$	—	$	1,424,969	$	—		$	1,424,969
Non-U.S. government and government agency	—		396,201		—			396,201
States, municipalities, political subdivision	—		37,731		—			37,731
Agency residential mortgage-backed securities	—		384,496		—			384,496
Non-agency residential mortgage-backed securities	—		26,284		—			26,284
U.S. corporate	—		1,484,178		—			1,484,178
Non-U.S. corporate	—		640,992		—			640,992
Bank loans	—		731,811		—			731,811
Catastrophe bonds	—		47,572		—			47,572
Asset-backed securities	—		502,318		—			502,318
Total fixed maturities	—		5,676,552		—			5,676,552
Short-term investments	332,663		34,956		—			367,619
Other investments
Fund of hedge funds	—		—		4,000			4,000
Private equity investments	—		—		12,925			12,925
Hedge funds (a)	—		—		506,768			506,768
Mutual funds	—		9,093		—			9,093
Total other investments	—		9,093		523,693			532,786
Total	$	332,663	$	5,720,601	$	523,693		$	6,576,957
Noncontrolling interest (a)	—		—		(428,087		)	(428,087		)
Total investments excluding noncontrolling interest	$	332,663	$	5,720,601	$	95,606		$	6,148,870

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

At December 31, 2012, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1		Level 2		Level 3			Total
U.S. government and government agency	$	—	$	1,099,230	$	—		$	1,099,230
Non-U.S. government and government agency	—		302,279		—			302,279
States, municipalities, political subdivision	—		42,063		—			42,063
Agency residential mortgage-backed securities	—		388,874		—			388,874
Non-agency residential mortgage-backed securities	—		106,456		—			106,456
U.S. corporate	—		1,210,173		—			1,210,173
Non-U.S. corporate	—		593,265		—			593,265
Bank loans	—		673,383		—			673,383
Catastrophe bonds	—		56,947		—			56,947
Asset-backed securities	—		612,664		—			612,664
Total fixed maturities	—		5,085,334		—			5,085,334
Short-term investments	1,063,175		51,075		—			1,114,250
Other investments
Fund of hedge funds	—		—		4,757			4,757
Private equity investments	—		—		12,951			12,951
Hedge funds (a)	—		—		538,526			538,526
Mutual funds	—		8,214		—			8,214
Total other investments	—		8,214		556,234			564,448
Total	$	1,063,175	$	5,144,623	$	556,234		$	6,764,032
Noncontrolling interest (a)					(432,737		)	(432,737		)
Total investments excluding noncontrolling interest	$	1,063,175	$	5,144,623	$	123,497		$	6,331,295

(a) Included in the Hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

Reconciliation of beginning and ending balances for all Level 3 investments measured at fair value on recurring basis

The following tables present a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31, 2013
		Other Investments			Estimated Fair Value
Level 3 investments - Beginning of period		$	556,234		$	556,234
Purchases		459			459
Sales		(31,334		)	(31,334		)
Realized gains		40			40
Unrealized (losses)		(1,706		)	(1,706		)
Level 3 investments - End of period		$	523,693		$	523,693
Noncontrolling interest (a)		(428,087		)	(428,087		)
Level 3 investments excluding noncontrolling interest		$	95,606		$	95,606

	Three Months Ended March 31, 2012
		Other Investments			Estimated Fair Value
Level 3 investments - Beginning of period		$	8,880		$	8,880
Purchases		1,529			1,529
Sales		(620		)	(620		)
Realized gains		28			28
Unrealized (losses)		(1,492		)	(1,492		)
Level 3 investments - End of period		$	8,325		$	8,325

(a) Includes Level 3 investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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Segment information (Segment geographic) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	$ 1,104,760		$ 837,289
Percent of gross premiums written	100.00%		100.00%
United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	267,662		125,032
Percent of gross premiums written	24.20%		14.90%
Worldwide excluding United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	99,947	[1]	84,101	[1]
Percent of gross premiums written	9.00%	[1]	10.00%	[1]
Australia and New Zealand
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	29,984		28,003
Percent of gross premiums written	2.70%		3.30%
Europe
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	58,297		59,489
Percent of gross premiums written	5.30%		7.10%
Latin America and Caribbean
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	47,200		40,714
Percent of gross premiums written	4.30%		4.90%
Japan
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	1,341		(710)
Percent of gross premiums written	0.10%		(0.10%)
Canada
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	5,141		5,634
Percent of gross premiums written	0.50%		0.70%
Rest of the world
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	35,990	[2]	36,039	[2]
Percent of gross premiums written	3.30%	[2]	4.30%	[2]
Sub-total, non United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	277,900		253,270
Percent of gross premiums written	25.20%		30.20%
Worldwide including United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	175,880	[1]	118,618	[1]
Percent of gross premiums written	15.90%	[1]	14.20%	[1]
Other location non-specific
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	383,318	[3]	340,369	[3]
Percent of gross premiums written	34.70%	[3]	40.70%	[3]
Validus Re Segment
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	747,963		566,866
Validus Re Segment | United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	236,496		106,936
Validus Re Segment | Worldwide excluding United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	50,308	[1]	37,116	[1]
Validus Re Segment | Australia and New Zealand
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	25,026		24,785
Validus Re Segment | Europe
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	40,870		45,274
Validus Re Segment | Latin America and Caribbean
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	8,418		3,789
Validus Re Segment | Japan
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	737		(1,311)
Validus Re Segment | Canada
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	2,642		2,430
Validus Re Segment | Rest of the world
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	19,079	[2]	17,397	[2]
Validus Re Segment | Sub-total, non United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	147,080		129,480
Validus Re Segment | Worldwide including United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	100,540	[1]	103,575	[1]
Validus Re Segment | Other location non-specific
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	263,847	[3]	226,875	[3]
AlphaCat Segment
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	96,516		3,518
AlphaCat Segment | United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	17,489		1,326
AlphaCat Segment | Worldwide excluding United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	14,689	[1]	279	[1]
AlphaCat Segment | Australia and New Zealand
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	2,183		0
AlphaCat Segment | Europe
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	1,964		338
AlphaCat Segment | Latin America and Caribbean
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	0		0
AlphaCat Segment | Japan
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	0		0
AlphaCat Segment | Canada
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	318		0
AlphaCat Segment | Rest of the world
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	0	[2]	0	[2]
AlphaCat Segment | Sub-total, non United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	19,154		617
AlphaCat Segment | Worldwide including United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	59,873	[1]	1,575	[1]
AlphaCat Segment | Other location non-specific
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	0	[3]	0	[3]
Talbot Segment
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	293,530		293,253
Talbot Segment | United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	20,541		18,426
Talbot Segment | Worldwide excluding United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	39,458	[1]	51,317	[1]
Talbot Segment | Australia and New Zealand
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	3,005		3,534
Talbot Segment | Europe
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	18,311		15,247
Talbot Segment | Latin America and Caribbean
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	42,000		40,570
Talbot Segment | Japan
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	654		660
Talbot Segment | Canada
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	2,706		3,522
Talbot Segment | Rest of the world
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	18,314	[2]	20,482	[2]
Talbot Segment | Sub-total, non United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	124,448		135,332
Talbot Segment | Worldwide including United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	19,156	[1]	14,797	[1]
Talbot Segment | Other location non-specific
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	129,385	[3]	124,698	[3]
Eliminations | United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(6,864)		(1,656)
Eliminations | Worldwide excluding United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(4,508)	[1]	(4,611)	[1]
Eliminations | Australia and New Zealand
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(230)		(316)
Eliminations | Europe
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(2,848)		(1,370)
Eliminations | Latin America and Caribbean
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(3,218)		(3,645)
Eliminations | Japan
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(50)		(59)
Eliminations | Canada
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(525)		(318)
Eliminations | Rest of the world
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(1,403)	[2]	(1,840)	[2]
Eliminations | Sub-total, non United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(12,782)		(12,159)
Eliminations | Worldwide including United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(3,689)	[1]	(1,329)	[1]
Eliminations | Other location non-specific
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(9,914)	[3]	(11,204)	[3]
Eliminations
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	$ (33,249)		$ (26,348)

[1] Represents risks in two or more geographic zones.

[2] Represents risks in one geographic zone.

[3] The Other location non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable such as marine and aerospace risks and can span multiple geographic areas and are not fixed locations in some instances.

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Segment information (Tables)

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Summary of results of operating segments and corporate

The following tables summarize the results of our operating segments and "Corporate":

Three Months Ended March 31, 2013	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	747,963		$	96,516		$	293,530		$	(33,249	)	$	1,104,760
Reinsurance premiums ceded	(125,728		)	—			(94,737		)	33,249			(187,216		)
Net premiums written	622,235			96,516			198,793			—			917,544
Change in unearned premiums	(319,101		)	(68,899		)	1,517			—			(386,483		)
Net premiums earned	303,134			27,617			200,310			—			531,061
Underwriting deductions
Losses and loss expenses	73,402			—			71,369			—			144,771
Policy acquisition costs	51,744			2,638			40,526			(1,297		)	93,611
General and administrative expenses	29,441			4,037			30,912			15,889			80,279
Share compensation expenses	1,413			77			1,405			(577		)	2,318
Total underwriting deductions	156,000			6,752			144,212			14,015			320,979
Underwriting income (loss)	$	147,134		$	20,865		$	56,098		$	(14,015	)	$	210,082
Net investment income	23,193			881			4,718			(3,143		)	25,649
Other income	13,490			6,633			—			(17,438		)	2,685
Finance expenses	(3,252		)	(11,325		)	(74		)	(9,795		)	(24,446		)
Operating income (loss) before taxes and income from operating affiliates	180,565			17,054			60,742			(44,391		)	213,970
Tax benefit (expense)	1,757			—			(1,054		)	(385		)	318
Income from operating affiliates	—			3,523			—			—			3,523
Net operating income (loss)	$	182,322		$	20,577		$	59,688		$	(44,776	)	$	217,811
Net realized gains on investments	1,593			—			128			—			1,721
Net unrealized (losses) on investments	(2,193		)	(4,788		)	(256		)	—			(7,237		)
Income from investment affiliate	1,477			—			—			—			1,477
Foreign exchange gains (losses)	11,162			(1,187		)	(3,918		)	865			6,922
Net income (loss)	$	194,361		$	14,602		$	55,642		$	(43,911	)	$	220,694
Net loss attributable to noncontrolling interest	—			2,549			—			—			2,549
Net income (loss) available (attributable) to Validus	$	194,361		$	17,151		$	55,642		$	(43,911	)	$	223,243
Selected ratios (a):
Net premiums written / Gross premiums written	83.2		%	100.0		%	67.7		%				83.1		%
Losses and loss expenses	24.2		%	0.0		%	35.6		%				27.3		%
Policy acquisition costs	17.1		%	9.6		%	20.2		%				17.6		%
General and administrative expenses (b)	10.2		%	14.9		%	16.1		%				15.6		%
Expense ratio	27.3		%	24.5		%	36.3		%				33.2		%
Combined ratio	51.5		%	24.5		%	71.9		%				60.5		%
Total assets	$	6,299,481		$	1,189,190		$	3,043,312		$	32,417		$	10,564,400

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

Three Months Ended March 31, 2012	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	566,866		$	3,518		$	293,253		$	(26,348	)	$	837,289
Reinsurance premiums ceded	(30,001		)	—			(103,399		)	26,348			(107,052		)
Net premiums written	536,865			3,518			189,854			—			730,237
Change in unearned premiums	(283,856		)	(855		)	5,673			—			(279,038		)
Net premiums earned	253,009			2,663			195,527			—			451,199
Underwriting deductions
Losses and loss expenses	124,206			—			107,783			—			231,989
Policy acquisition costs	38,790			256			38,738			348			78,132
General and administrative expenses	17,252			1,032			33,348			14,743			66,375
Share compensation expenses	1,872			52			1,348			2,166			5,438
Total underwriting deductions	182,120			1,340			181,217			17,257			381,934
Underwriting income (loss)	$	70,889		$	1,323		$	14,310		$	(17,257	)	$	69,265
Net investment income	23,577			659			5,790			(2,266		)	27,760
Other income	2,219			7,974			1,026			(2,328		)	8,891
Finance expenses	(3,694		)	(2		)	(31		)	(12,552		)	(16,279		)
Operating income (loss) before taxes and income from operating affiliates	92,991			9,954			21,095			(34,403		)	89,637
Tax (expense)	(7		)	—			(132		)	—			(139		)
Income from operating affiliates	—			3,367			—			—			3,367
Net operating income (loss)	$	92,984		$	13,321		$	20,963		$	(34,403	)	$	92,865
Net realized gains on investments	6,242			—			1,290			—			7,532
Net unrealized gains (losses) on investments	19,865			(597		)	1,403			—			20,671
Foreign exchange (losses) gains	(262		)	(9		)	3,623			(186		)	3,166
Net income (loss)	$	118,829		$	12,715		$	27,279		$	(34,589	)	$	124,234
Net (income) attributable to noncontrolling interest	—			—			—			—			—
Net income (loss) available (attributable) to Validus	$	118,829		$	12,715		$	27,279		$	(34,589	)	$	124,234
Selected ratios (a):
Net premiums written / Gross premiums written	94.7		%	100.0		%	64.7		%				87.2		%
Losses and loss expenses	49.1		%	0.0		%	55.1		%				51.4		%
Policy acquisition costs	15.3		%	9.6		%	19.8		%				17.3		%
General and administrative expenses (b)	7.6		%	40.7		%	17.7		%				15.9		%
Expense ratio	22.9		%	50.3		%	37.5		%				33.2		%
Combined ratio	72.0		%	50.3		%	92.6		%				84.6		%
Total assets	$	4,940,727		$	237,528		$	2,929,817		$	13,797		$	8,121,869

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

Gross premiums written allocated to the territory of coverage exposure

The following tables set forth the gross premiums written allocated to the territory of coverage exposure for the periods indicated:

	Three Months Ended March 31, 2013
	Gross Premiums Written
	Validus Re		AlphaCat		Talbot		Eliminations			Total		%
United States	$	236,496	$	17,489	$	20,541	$	(6,864	)	$	267,662	24.2	%
Worldwide excluding United States (a)	50,308		14,689		39,458		(4,508		)	99,947		9.0	%
Australia and New Zealand	25,026		2,183		3,005		(230		)	29,984		2.7	%
Europe	40,870		1,964		18,311		(2,848		)	58,297		5.3	%
Latin America and Caribbean	8,418		—		42,000		(3,218		)	47,200		4.3	%
Japan	737		—		654		(50		)	1,341		0.1	%
Canada	2,642		318		2,706		(525		)	5,141		0.5	%
Rest of the world (b)	19,079		—		18,314		(1,403		)	35,990		3.3	%
Sub-total, non United States	147,080		19,154		124,448		(12,782		)	277,900		25.2	%
Worldwide including United States (a)	100,540		59,873		19,156		(3,689		)	175,880		15.9	%
Other location non-specific (c)	263,847		—		129,385		(9,914		)	383,318		34.7	%
Total	$	747,963	$	96,516	$	293,530	$	(33,249	)	$	1,104,760	100.0	%

	Three Months Ended March 31, 2012
	Gross Premiums Written
	Validus Re			AlphaCat		Talbot		Eliminations			Total			%
United States	$	106,936		$	1,326	$	18,426	$	(1,656	)	$	125,032		14.9	%
Worldwide excluding United States (a)	37,116			279		51,317		(4,611		)	84,101			10.0	%
Australia and New Zealand	24,785			—		3,534		(316		)	28,003			3.3	%
Europe	45,274			338		15,247		(1,370		)	59,489			7.1	%
Latin America and Caribbean	3,789			—		40,570		(3,645		)	40,714			4.9	%
Japan	(1,311		)	—		660		(59		)	(710		)	(0.1	)%
Canada	2,430			—		3,522		(318		)	5,634			0.7	%
Rest of the world (b)	17,397			—		20,482		(1,840		)	36,039			4.3	%
Sub-total, non United States	129,480			617		135,332		(12,159		)	253,270			30.2	%
Worldwide including United States (a)	103,575			1,575		14,797		(1,329		)	118,618			14.2	%
Other location non-specific (c)	226,875			—		124,698		(11,204		)	340,369			40.7	%
Total	$	566,866		$	3,518	$	293,253	$	(26,348	)	$	837,289		100.0	%

(a) Represents risks in two or more geographic zones.

(b) Represents risks in one geographic zone.

(c) The Other location non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable such as marine and aerospace risks and can span multiple geographic areas and are not fixed locations in some instances.

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Commitments and contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Commitments and contingencies

(a) Concentrations of credit risk

The Company's investments are managed following prudent standards of diversification. The Company attempts to limit its credit exposure by purchasing high quality fixed income investments to maintain an average portfolio, excluding bank loans, credit quality of AA- or higher, with mortgage and commercial mortgage-backed issues having an aggregate weighted average credit quality of AAA. In addition, the Company limits its exposure to any single issuer to 3% or less, excluding government and agency securities. With the exception of the Company's bank loan portfolio, which represents 11.1% of the Company's total investments as at March 31, 2013, the minimum credit rating of any security purchased is Baa3/BBB- and where investments are downgraded, the Company permits a holding of up to 2% in aggregate market value, or 10% with written pre-authorization. At March 31, 2013, 1.1% of the portfolio, excluding bank loans, had a split rating below Baa3/BBB- and the Company did not have an aggregate exposure to any single issuer of more than 0.7% of its investment portfolio, other than with respect to government and agency securities.

(b) Funds at Lloyd's

The amounts provided under the Talbot FAL Facility would become a liability of the Company in the event of Syndicate 1183 declaring a loss at a level between $403,700 and $428,700 which would call on this arrangement.

Talbot operates in Lloyd's through a corporate member, Talbot 2002 Underwriting Capital Ltd ("T02"), which is the sole participant in Syndicate 1183. Lloyd's sets T02's required capital annually based on Syndicate 1183's business plan, rating environment, reserving environment together with input arising from Lloyd's discussions with, inter alia, regulatory and rating agencies. Such capital, called Funds at Lloyd's (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks. The amounts of cash, investments and letters of credit at March 31, 2013 amounted to $428,700 (December 31, 2012: $428,700) of which $25,000 is provided under the Talbot FAL Facility (December 31, 2012: $25,000).

The amounts which the Company provides as FAL are not available for distribution to the Company for the payment of dividends. Talbot’s corporate member may also be required to maintain funds under the control of Lloyd’s in excess of its capital requirement and such funds also may not be available for distribution to the Company for the payment of dividends.

(c) Lloyd's Central Fund

Whenever a member of Lloyd's is unable to pay its debts to policyholders, such debts may be payable by the Lloyd's Central Fund. If Lloyd's determines that the Central Fund needs to be increased, it has the power to assess premium levies on current Lloyd's members up to 3% of a member's underwriting capacity in any one year. The Company does not believe that any assessment is likely in the foreseeable future and has not provided any allowance for such an assessment. However, based on the Company's 2013 estimated premium income at Lloyd's of £620,000, the March 31, 2013 exchange rate of £1 equals $1.5187 and assuming the maximum 3% assessment, the Company would be assessed approximately $28,248.

(d) Aquiline Commitment

On December 20, 2011, Validus Re entered into an Assignment and Assumption Agreement (the "Agreement") with Aquiline Capital Partners LLC, a Delaware limited liability company (the "Assignor") and Aquiline Capital Partners II GP (Offshore) Ltd., a Cayman Islands company limited by shares (the "General Partner") pursuant to which Validus Re has assumed 100% of the Assignor's interest in Aquiline Financial Services Fund II L.P. (the "Partnership") representing a total capital commitment of $50,000 (the "Commitment"), as a limited partner in the Partnership (the "Transferred Interest"). The Transferred Interest is governed by the terms of an Amended and Restated Exempted Limited Partnership Agreement dated as of July 2, 2010 (the "Limited Partnership Agreement"). Pursuant to the terms of the Limited Partnership Agreement, the Commitment will expire on July 2, 2015. The Company's remaining commitment at March 31, 2013 was $31,041.