SC TO-I

As Filed with the Securities and Exchange Commission on July 9, 2007

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE TO

(Rule 13e-4)

Tender Offer Statement under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934

HCC INSURANCE HOLDINGS, INC.

(Name of Subject Company (Issuer) and Filing Person (Offeror))

Options to Purchase Shares of Common Stock, Par Value $1.00 Per Share
( Title of Class of Securities )

404132102
(CUSIP Number of Class of Securities Underlying Options to Purchase Company Stock)

Randy D. Rinicella, Esq.
Senior Vice President and General Counsel
13403 Northwest Freeway
Houston, Texas 77040
(713) 690-7300
(Name, address, and telephone numbers of person authorized to receive notices and communications on
behalf of filing persons )

with copies to:
Arthur S. Berner, Esq.
Haynes and Boone, LLP
1221 McKinney Street, Suite 2100
Houston, Texas 77010
(713) 547-2526

Calculation of Filing Fee

Transaction valuation*	Amount of filing fee**
$20,615,050.13	$632.88

*	Estimated solely for purposes of calculating the filing fee. This amount is based on the Black-Scholes option valuation model, and assumes that all eligible existing options to purchase 2,221,237 shares of common stock of HCC Insurance Holdings, Inc. will be amended pursuant to this offer, which may not occur.
**	The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, as modified by Fee Rate Advisory No. 6 for fiscal year 2007, equals $30.70 per $1,000,000 of the value of the transaction.
	Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid:	Not Applicable
Form or Registration No.:	Not Applicable
Filing Party:	Not Applicable
Date Filed:	Not Applicable

     Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

o third-party tender offer subject to Rule 14d-1.

þ issuer tender offer subject to Rule 13e-4.

o going-private transaction subject to Rule 13e-3.

o amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer:

TABLE OF CONTENTS

Offer to Amend, dated July 9, 2007

Announcement of Offer to Amend

Letter of Transmittal

Withdrawal Form

Form of Reminder of Expiration Date

Form of Notice of Amendment of Elegible Options and Cash Bonus

Form of Option Summary

Form of Option Amendment Agreement

SCHEDULE TO

     This Tender Offer Statement on Schedule TO (“Schedule TO”) relates to an offer by HCC Insurance Holdings, Inc., a Delaware corporation (the “Company”), to amend outstanding “Eligible Options” (as defined in the Offer to Amend) held by individuals subject to taxation in the United States so they may avoid potential adverse tax consequences under Section 409A of the Internal Revenue Code of 1986, as amended, upon the terms and subject to the conditions set forth in the Offer to Amend, dated July 9, 2007 (the “Offer to Amend”), a copy of which is filed herewith as Exhibit (a)(1)(A), and in the related Letter of Transmittal (the “Letter of Transmittal” which, together with the Offer to Amend, as each may be amended or supplemented from time to time, constitute the “Offer”), a copy of which is filed herewith as Exhibit (a)(1)(C). Each eligible participant in the Offer may elect to amend each of his or her Eligible Options to increase the exercise price per share of the Company’s common stock, par value $1.00 per share, purchasable thereunder and to receive from the Company a special Cash Bonus (as defined in the Offer to Amend), upon the terms and subject to the conditions set forth in the Offer to Amend and in the Letter of Transmittal. This Tender Offer Statement on Schedule TO is intended to satisfy the reporting requirements of Rule 13e-4(c)(2) under the Securities Exchange Act of 1934, as amended. The information contained in the Offer to Amend and the Letter of Transmittal is incorporated herein by reference in response to all of the items of this Schedule TO, as more particularly described below.

Item 1. Summary Term Sheet.

     The information set forth under “Summary Term Sheet” in the Offer to Amend is incorporated herein by reference.

Item 2. Subject Company Information.

     (a) The name of the issuer is HCC Insurance Holdings, Inc., a Delaware corporation, and the address of its principal executive offices is 13403 Northwest Freeway, Houston, Texas 77040. The telephone number of its principal executive offices is (713) 690-7300.

     (b) As of July 2, 2007, Eligible Options to purchase 2,221,237 shares of the Company’s common stock were outstanding. The information set forth in the Offer to Amend on the introductory pages and under “Summary Term Sheet,” “The Offer” — Section 1 (“Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations”), “The Offer” — Section 3 (“Status of Eligible Options Not Amended”), “The Offer” — Section 6 (“Acceptance of Eligible Options for Amendment”), “The Offer” — Section 9 (“Source and Amount of Consideration”) and “The Offer” — Section 10 (“Amended Eligible Options Will Not Differ from Eligible Options”) is incorporated herein by reference.

     (c) The information set forth under “The Offer” — Section 8 (“Price Range of Common Stock Underlying the Options”) in the Offer to Amend is incorporated herein by reference.

Item 3. Identity and Background of Filing Person.

     (a) The Company is the filing person. The Company’s business address and telephone number are set forth in Item 2(a) above, which information is incorporated herein by reference. The information set forth under Schedule II (“Directors and Executive Officers of HCC”) and Schedule III (“Beneficial Ownership of HCC Securities by Directors and Executive Officers of HCC”) in the Offer to Amend is incorporated herein by reference.

Item 4. Terms of the Transaction.

     (a) The information set forth in the Offer to Amend on the introductory pages and under the following sections is incorporated herein by reference:

• “Summary Term Sheet”;

• “The Offer” — Section 1 (“Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations”);

• “The Offer” — Section 2 (“Purpose of the Offer”);

• “The Offer” — Section 3 (“Status of Eligible Options Not Amended”);

• “The Offer” — Section 4 (“Procedures for Accepting the Offer to Amend Eligible Options”);

• “The Offer” — Section 5 (“Withdrawal Rights”);

• “The Offer” — Section 6 (“Acceptance of Eligible Options for Amendment”);

• “The Offer” — Section 7 (“Conditions of the Offer”);

• “The Offer” — Section 9 (“Source and Amount of Consideration”);

• “The Offer” — Section 10 (“Amended Eligible Options Will Not Differ from Eligible Options”);

• “The Offer” — Section 12 (“Interests of Directors and Officers; Transactions and Arrangements Concerning the Options”);

• “The Offer” — Section 13 (“Status of Options Amended by Us in the Offer; Accounting Consequences of the Offer”);

• “The Offer” — Section 14 (“Legal Matters; Regulatory Approvals”);

• “The Offer” — Section 15 (“Material U.S. Federal Income Tax Consequences”);

• “The Offer” — Section 16 (“Extension of the Offer; Termination; Amendment”); and

• “The Offer” — Section 18 (“Forward-Looking Statements; Miscellaneous”).

     (b) The information set forth under “The Offer” — Section 12 (“Interests of Directors and Officers; Transactions and Arrangements Concerning the Options”) in the Offer to Amend is incorporated herein by reference.

Item 5. Past Contacts, Transactions, Negotiations and Agreements.

     (e) The information set forth under “The Offer” — Section 12 (“Interests of Directors and Officers; Transactions and Arrangements Concerning the Options”) in the Offer to Amend is incorporated herein by reference. The 1995 Flexible Incentive Plan, as amended and restated, the 1997 Flexible Incentive Plan, as amended and restated, the 2001 Flexible Incentive Plan, as amended and restated, and the 2004 Flexible Incentive Plan pursuant to which the Eligible Options have been granted contain information regarding the subject securities and are Exhibits (d)(1), (d)(2), (d)(3) and (d)(4) hereto, respectively, and are incorporated herein by reference.

Item 6. Purposes of the Transaction and Plans or Proposals.

     (a), (b) and (c) The information set forth under “The Offer” — Section 1 (“Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations”), “The Offer” — Section 2 (“Purpose of the Offer”), “The Offer” — Section 6 (“Acceptance of Eligible Options for Amendment”) and “The Offer” — Section 13 (“Status of Options Amended by Us in the Offer; Accounting Consequences of the Offer”) in the Offer to Amend is incorporated herein by reference.

Item 7. Source and Amount of Funds or Other Consideration.

     (a) The information set forth under “The Offer” — Section 9 (“Source and Amount of Consideration”) and “The Offer” — Section 17 (“Fees and Expenses”) in the Offer to Amend is incorporated herein by reference.

     (b) The information set forth under “The Offer” — Section 7 (“Conditions of the Offer”) and “The Offer” — Section 9 (“Source and Amount of Consideration”) in the Offer to Amend is incorporated herein by reference.

     (d) Not applicable.

Item 8. Interest in Securities of the Subject Company.

     (a) and (b) The information set forth under “The Offer” Section 12 (“Interests of Directors and Officers; Transactions and Arrangements Concerning the Options”) and Schedule III (“Beneficial Ownership of HCC Securities by Directors and Executive Officers of HCC”) in the Offer to Amend is incorporated herein by reference.

Item 9. Persons/Assets, Retained, Employed, Compensated or Used.

     (a) The information set forth under Section 17 (“Fees and Expenses”) in the Offer to Amend is incorporated herein by reference.

Item 10. Financial Statements.

     (a) The information set forth under “The Offer” Section 11 (“Information Concerning HCC”) in the Offer to Amend is incorporated herein by reference. Item 8 (“Financial Statements and Supplementary Data”) of the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2006 filed with the Securities and Exchange Commission on March 1, 2007, and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, filed with the Securities and Exchange Commission on May 10, 2007, including all material incorporated by reference therein, is incorporated herein by reference. The Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q can also be accessed electronically on the Securities and Exchange Commission’s website at http://www.sec.gov.

     (b) Not applicable.

Item 11. Additional Information.

     (a) The information set forth under “The Offer” Section 12 (“Interests of Directors and Officers; Transactions and Arrangements Concerning the Options”) and “The Offer” Section 14 (“Legal Matters; Regulatory Approvals”) in the Offer to Amend is incorporated herein by reference.

     (b) Not applicable.

Item 12. Exhibits.

(a)(1)(A)	Offer to Amend, dated July 9, 2007.
(a)(1)(B)	Announcement of Offer to Amend.
(a)(1)(C)	Letter of Transmittal.
(a)(1)(D)	Withdrawal Form.
(a)(2)	Not applicable.
(a)(3)	Not applicable.
(a)(4)	Not applicable.
(a)(5)(A)	Form of Reminder of Expiration Date.
(a)(5)(B)	Form of Notice of Amendment of Eligible Options and Eligibility for Cash Bonus.
(a)(5)(C)	Form of Option Summary.
(b)	Not applicable.
(d)(1)	HCC Insurance Holdings, Inc. 1995 Flexible Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999).

(d)(2)	HCC Insurance Holdings, Inc. 1997 Flexible Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999).
(d)(3)	HCC Insurance Holdings, Inc. 2001 Flexible Incentive Plan, as amended and restated (incorporated by reference to Attachment A to the Company’s Definitive Proxy Statement on Form DEF 14A for the May 23, 2002 Annual Meeting of Shareholders).
(d)(4)	HCC Insurance Holdings, Inc. 2004 Flexible Incentive Plan (incorporated by reference to Attachment B to the Company’s Definitive Proxy Statement on Form DEF 14A for the May 13, 2004 Annual Meeting of the Shareholders).
(d)(5)	Form of Option Amendment Agreement executed by certain executive officers of the Company.
(g)	Not applicable.
(h)	Not applicable.

Item 13. Information Required by Schedule 13E-3.

Not applicable.

SIGNATURE

     After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

HCC Insurance Holdings, Inc.
By:	/s/ Frank J. Bramanti
	Frank J. Bramanti
	Chief Executive Officer

Date: July 9, 2007

Exhibit
Number	Description
(a)(1)(A)	Offer to Amend, dated July 9, 2007.
(a)(1)(B)	Announcement of Offer to Amend.
(a)(1)(C)	Letter of Transmittal.
(a)(1)(D)	Withdrawal Form.
(a)(2)	Not applicable.
(a)(3)	Not applicable.
(a)(4)	Not applicable.
(a)(5)(A)	Form of Reminder of Expiration Date.
(a)(5)(B)	Form of Notice of Amendment of Eligible Options and Eligibility for Cash Bonus.
(a)(5)(C)	Form of Option Summary.
(b)	Not applicable.
(d)(1)	HCC Insurance Holdings, Inc. 1995 Flexible Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999).
(d)(2)	HCC Insurance Holdings, Inc. 1997 Flexible Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999).
(d)(3)	HCC Insurance Holdings, Inc. 2001 Flexible Incentive Plan, as amended and restated (incorporated by reference to Attachment A to the Company’s Definitive Proxy Statement on Form DEF 14A for the May 23, 2002 Annual Meeting of Shareholders).
(d)(4)	HCC Insurance Holdings, Inc. 2004 Flexible Incentive Plan (incorporated by reference to Attachment B to the Company’s Definitive Proxy Statement on Form DEF 14A for the May 13, 2004 Annual Meeting of the Shareholders).
(d)(5)	Form of Option Amendment Agreement executed by certain executive officers of the Company.
(g)	Not applicable.
(h)	Not applicable.

EX-99.(A)(1)(A)

Exhibit (a)(1)(A)

HCC INSURANCE HOLDINGS, INC.
Offer to Amend that Portion of Certain Outstanding Stock Options
That Were Unvested as of
December 31, 2004
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 11:59 p.m., CENTRAL TIME, ON August 7, 2007,
UNLESS THE OFFER IS EXTENDED
July 9, 2007

HCC Insurance Holdings, Inc., a Delaware corporation (“HCC,” “us” or “we” or “our”), is making this offer to amend certain stock options previously granted to our employees under our 1995 Flexible Incentive Plan, as amended and restated (the “1995 Plan”), our 1997 Flexible Incentive Plan, as amended and restated (the “1997 Plan”), our 2001 Flexible Incentive Plan, as amended and restated (the “2001 Plan”), and our 2004 Flexible Incentive Plan (the “2004 Plan” and together with the 1995 Plan, the 1997 Plan and the 2001 Plan, the “Plans”). We have recently determined that the closing share price of our common stock on the actual measurement date (“Actual Measurement Date”) for each such option was higher than the original exercise price of such option. The Actual Measurement Date was determined in connection with the restatement of our previously filed consolidated financial statements included in our Annual Report on Form 10-K/A for the year ended December 31, 2005. We are making this offer to mitigate the potential adverse tax consequences that apply to you as the holder of a stock option for which your exercise price is less than the closing share price of our common stock on the Actual Measurement Date for such option.

Under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”), options granted with an exercise price less than the fair market value of the underlying stock on the Actual Measurement Date for such options, to the extent they were not vested as of December 31, 2004, will be subject to adverse income taxation unless such options are amended either to be brought into compliance with, or made exempt from, Section 409A. We are now offering individuals who were granted options under one or more of the Plans with such a below-market exercise price, and who are subject to taxation in the United States, the opportunity to amend such options that remain outstanding and unexercised on the expiration date of this offer (an “Eligible Option”). Eligible Options that may be amended under this Offer consist of two parts: (i) the portion of your Eligible Options that were vested as of December 31, 2004 (the “Grandfathered Portion”) and (ii) each portion of your Eligible Options that vested or are scheduled to vest after December 31, 2004 (each an “Eligible Portion”) that were not exercised prior to our termination of this Offer. For various administrative reasons, we are unable to separate the Grandfathered Portion of an Eligible Option (which is not subject to adverse tax consequences under Section 409A) from the Eligible Portion of an Eligible Option (which is subject to adverse tax consequences under Section 409A). The effect of the proposed amendment would be to increase the exercise price per share of each Eligible Option to the closing share price of our common stock on the Actual Measurement Date for that option. The increased exercise price per share resulting from such amendment will apply to both the Grandfathered Portion and the Eligible Portion of your Eligible Options.

Each Eligible Option that we accept for amendment will be amended as of the first business day following the Expiration Date of the Offer. Each amended Eligible Option will otherwise continue to be subject to the same vesting schedule, exercise period, option term and other terms and conditions as in effect for that option immediately prior to its amendment. However, to the extent an Eligible Option was an incentive stock option prior to amendment pursuant to the Offer, such amended option will be deemed to be a non-qualified option as of the original grant date. In fact whether or not you accept this offer, or we accept your amendment, any Eligible Option you hold will be a non-qualified option.

We are providing each optionee who is eligible to participate in the offer with a personalized option summary (“Option Summary”) showing, for each Eligible Option held by such optionee, the original date of grant, the

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number of unexercised options, the original exercise price and the new exercise price as proposed to be amended (which will be the closing share price of our common stock on the Actual Measurement Date) if the optionee accepts this offer.

If you elect to participate in this Offer to have your Eligible Option amended, you will be eligible to receive a cash payment (the “Cash Bonus”) in a dollar amount determined by multiplying (i) the number of shares of our common stock subject to your Eligible Option by (ii) the amount by which the new exercise price per share exceeds the original exercise price per share of that Eligible Option. The Cash Bonus will be paid (i) with respect to the Grandfathered Portion and the Eligible Portion of an Eligible Option that vested or is scheduled to vest prior to January 1, 2008, on the first payroll date after January 1, 2008, and (ii) with respect to any Eligible Portion of an Eligible Option that is scheduled to vest following December 31, 2007, on the last business day of the calendar quarter in which such Eligible Portion of any such Eligible Option vests. Thus, if an Eligible Option vests in more than one installment, you will receive a Cash Bonus only for each portion of the Eligible Option as such portion vests. You must remain employed by us on the date each portion of your Eligible Option is scheduled to vest to receive the Cash Bonus payable with respect to such portion of your Eligible Option. We have structured the Cash Bonus payment with the continued employment requirement to serve our compensatory objective of retaining and motivating our employees.

We may, at our discretion, accelerate the payment to any recipient of all or any portion of the Cash Bonus, but in no case earlier than January 1, 2008. We do not undertake, and will not be obligated, to treat all recipients of Cash Bonuses in the same manner with respect to any discretionary acceleration of the payment of any portion of any Cash Bonus.

The Offer set forth in this document (the “Offer to Amend”), the related Letter of Transmittal and other offer documents (which together with the Letter of Transmittal and the Offer to Amend, as they may be amended or supplemented from time to time, constitute the “Offer”) will expire on August 7, 2007, unless extended (the “Expiration Date”).

You are not required to accept the Offer. The Offer is not conditioned upon the acceptance of the Offer by the holders of any minimum number of Eligible Options.

As of July 2, 2007, options to purchase 8,667,825 shares of our common stock were issued and outstanding under the Plans, including Eligible Options to purchase up to 2,221,237 shares of our common stock.

Each of our executive officers and directors, and certain terminated employees, who held any options that would have constituted Eligible Options have already agreed with us in writing to amend those options to increase the exercise prices of such options to the closing share price of our common stock on the Actual Measurement Dates for such options and the Board of Directors has determined that such persons will not receive any cash payment in connection with such amendment. As a result, none of our executive officers or directors is eligible to participate in this Offer.

Although our board of directors has approved the Offer, neither we nor our board of directors has made or will make any recommendation as to whether or not you should accept the Offer to amend any Eligible Option. You must make your own decision whether or not to accept the Offer, after taking into account your own personal circumstances and preferences. You should be aware that adverse tax consequences under Section 409A may apply to the Eligible Portion of an Eligible Option if it is not amended pursuant to the Offer and if you do not amend any such Eligible Option, you will be solely responsible for Section 409A taxes and any comparable state taxes after the Expiration Date of this Offer.

Shares of our common stock are listed on the New York Stock Exchange (“NYSE”) and trade under the symbol “HCC”. On July 5, 2007, the last reported sale price of our common stock on the NYSE was $33.66.

You should direct questions about the Offer or requests for additional copies of this Offer to Amend or the Letter of Transmittal to James L. Simmons or Randy D. Rinicella of HCC at (713) 690-7300; provided, however, that neither Mr. Simmons, Mr. Rinicella, nor any other employee of HCC may render tax, financial or legal advice to you in connection with the Offer or advise you on whether or not you should accept the Offer.

ii

You should rely only on the representations and information contained in or incorporated by reference into this Offer to Amend, the related Tender Offer Statement on Schedule TO and the related Letter of Transmittal. We have not authorized anyone to give you any different information. If anyone makes any representation or gives you any information that is different from the representations and information contained in this Offer to Amend, the related Tender Offer Statement on Schedule TO and the related Letter of Transmittal, you must not rely upon that representation or information as having been authorized by us.

This Offer to Amend has not been approved or disapproved by the United States Securities and Exchange Commission (the “Securities and Exchange Commission”) or any state or foreign securities commission, nor has the Securities and Exchange Commission or any state or foreign securities commission passed upon the accuracy or adequacy of the information contained in this Offer to Amend. Any representation to the contrary is a criminal offense. We recommend that you consult with your tax advisors to determine the tax consequences of electing or not electing to participate in the Offer.

See “Certain Risks of Participating in the Offer” beginning on page 9 for a discussion of risks that you should consider before participating in this Offer.

IMPORTANT INFORMATION

We are sending you a personalized Option Summary containing a list of each Eligible Option you currently hold, including the original date of grant, the number of unexercised options, the original exercise price and the new exercise price that will apply to each such Eligible Option if you accept the Offer. If you wish to accept the Offer to amend any Eligible Option, you must timely complete and sign the Letter of Transmittal in accordance with its instructions and (i) fax the completed Letter of Transmittal and any other required documents to James L. Simmons, facsimile number (713) 744-9648, (ii) send the completed Letter of Transmittal and any other required documents via U.S. mail, Federal Express or other nationally-recognized commercial delivery service to James L. Simmons c/o HCC Insurance Holdings, Inc., 13403 Northwest Freeway, Houston, Texas 77040 or (iii) email the completed Letter of Transmittal and any other required documents to JLSimmons@hcc.com. Submission by any other means, including hand delivery, is not permitted.

We are not making the Offer to, nor will we accept any submitted acceptance of the Offer to amend Eligible Options from or on behalf of, option holders in any jurisdiction in which the Offer or the acceptance of the Offer would not be in compliance with the laws of such jurisdiction. However, we may, at our discretion, take any actions necessary for us to legally make the Offer to option holders in any such jurisdiction.

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TABLE OF CONTENTS

			Page
SUMMARY TERM SHEET				1
CERTAIN RISKS OF PARTICIPATING IN THE OFFER				9
THE OFFER				10
	1.	Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations		10
	2.	Purpose of the Offer		12
	3.	Status of Eligible Options Not Amended		14
	4.	Procedures for Accepting the Offer to Amend Eligible Options		14
	5.	Withdrawal Rights		15
	6.	Acceptance of Eligible Options for Amendment		16
	7.	Conditions of the Offer		16
	8.	Price Range of Common Stock Underlying the Options		18
	9.	Source and Amount of Consideration		19
	10.	Amended Eligible Options Will Not Differ from Eligible Options		20
	11.	Information Concerning HCC		20
	12.	Interests of Directors and Officers; Transactions and Arrangements Concerning the Options		24
	13.	Status of Options Amended by Us in the Offer; Accounting Consequences of the Offer		26
	14.	Legal Matters; Regulatory Approvals		26
	15.	Material U.S. Federal Income Tax Consequences		26
	16.	Extension of the Offer; Termination; Amendment		27
	17.	Fees and Expenses		28
	18.	Forward-Looking Statements; Miscellaneous		28
SCHEDULE I Directors and Executive Officers of HCC				29
SCHEDULE II Beneficial Ownership of HCC Securities by Directors and Executive Officers of HCC				30

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SUMMARY TERM SHEET

The following are answers to some of the questions that you may have about the Offer. We urge you to carefully read the remainder of this Offer to Amend and the accompanying Letter of Transmittal and other offer documents (which together, as they may be amended or supplemented from time to time, constitute the “Offer”) because the information in this summary and in the introductory pages preceding this summary is not complete and may not contain all of the information that is important to you. Additional important information is contained in the remainder of this Offer to Amend, the Letter of Transmittal and the other offer documents. We have included references to the sections of this Offer to Amend, under the heading “The Offer,” where you will find a more complete description of the topics in this summary.

Q.   Why is HCC making the Offer?

HCC Insurance Holdings, Inc. (“HCC,” “us” or “ we” or “our”) is making the Offer to amend certain stock options granted to our employees at a price that we recently determined was less than the fair market value of our common stock on the actual measurement date (“Actual Measurement Date”) for these options, to mitigate the potential adverse tax consequences that may apply to the holders of these options.

Q.   What options are subject to the Offer?

An option to purchase our common stock is an “Eligible Option” and subject to the Offer if the following conditions are met:

•  the options were issued under our 1995 Flexible Incentive Plan, as amended and restated (the “1995 Plan”), our 1997 Flexible Incentive Plan, as amended and restated (the “1997 Plan”), our 2001 Flexible Incentive Plan , as amended and restated (the “2001 Plan”), or our 2004 Flexible Incentive Plan (the “2004 Plan” and together with the 1995 Plan, the 1997 Plan and the 2001 Plan, the “Plans”);

•  the option has an exercise price that we recently determined to be less than the fair market value of our common stock on the Actual Measurement Date for these options; and

•  the options remain outstanding as of the expiration date of this Offer.

Eligible Options consist of two parts: (i) the portion of your Eligible Options that vested as of December 31, 2004 (the “Grandfathered Portion”) and (ii) each portion of your Eligible Options that vested or are scheduled to vest after December 31, 2004 (each an “Eligible Portion”) and which were not exercised prior to termination of this Offer. For various administrative reasons, we are unable to separate the Grandfathered Portion of an Eligible Option (which is not subject to adverse tax consequences under Section 409A) from the Eligible Portion of an Eligible Option (which is subject to adverse tax consequences under Section 409A).

For your convenience, we will provide you with a personalized option summary (“Option Summary”) of each Eligible Option that you currently hold, including the date of grant, the number of option shares, the original exercise price and the new exercise price that will apply to each such Eligible Option if you accept the Offer. See Section 1 — “Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations” of this Offer to Amend for a more detailed discussion.

Q:   Who is eligible to participate in the Offer?

You are eligible to participate in the Offer if:

•  you are our employee or an employee of one of our subsidiaries on the expiration date of the Offer;

•  you hold Eligible Options; and

•  you are subject to taxation in the United States.

None of our executive officers and none of the members of our board of directors are eligible to participate in the Offer. Options held by our executive officers and directors, and certain terminated employees, that would otherwise have constituted Eligible Options have already been amended to increase the exercise prices to the

1

closing share price of our common stock on the Actual Measurement Dates for such options; however, the Board of Directors has determined that for each of the foregoing persons no cash payment in connection with such amendment will be offered. See Section 1 — “Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations” of this Offer to Amend for a more detailed discussion.

Q:   Are optionees residing outside the United States eligible to participate in the Offer?

Yes. If you hold an Eligible Option and are subject to taxation in the United States, you are eligible to participate in the Offer, even if you are not currently residing in the United States. See Section 1 — “Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations” of this Offer to Amend for a more detailed discussion.

Q.   What are the components of the Offer?

Each Eligible Option (including both the Grandfathered Portion and the Eligible Portion) with respect to which an optionee accepts the Offer will be amended to increase the applicable per share exercise price to the closing price per share of our common stock on the Actual Measurement Date. In addition, we will compensate each optionee who accepts the Offer for the increased exercise price per share of his or her Eligible Option. If your Eligible Option is amended, you will become eligible to receive a cash payment (the “Cash Bonus”) in a dollar amount determined by multiplying (i) the number of shares of our common stock subject to your Eligible Option by (ii) the amount by which the new exercise price per share exceeds the original exercise price per share of that Eligible Option.

Q.   When will I receive my Cash Bonus?

The Cash Bonus will be paid as follows:

•  with respect to the Grandfathered Portion and the Eligible Portion of an Eligible Option that vested or is scheduled to vest prior to January 1, 2008 and not exercised before the termination of the Offer, on the first payroll date after January 1, 2008, and

•  with respect to any Eligible Portion of an Eligible Option that is scheduled to vest following December 31, 2007, on the last business day of the calendar quarter in which such Eligible Portion of any such Eligible Option vests. Thus, if an Eligible Option vests in more than one installment, you will receive a Cash Bonus only for each portion of the Eligible Option as such portion vests.

You must remain employed by us on the date each portion of your Eligible Option is scheduled to vest to receive the Cash Bonus payable with respect to such portion of your Eligible Option.

We may, at our discretion, accelerate the payment to any recipient of all or any portion of the Cash Bonus, but in no case shall such payments be made prior to January 1, 2008. We do not undertake, and will not be obligated, to treat all recipients of Cash Bonuses in the same manner with respect to any discretionary acceleration of the payment of any portion of any Cash Bonus. See Section 1 — “Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations” of this Offer to Amend for a more detailed discussion.

Q.   If I choose to participate in the Offer, are there circumstances under which my Eligible Options would be amended and I would not receive a portion of my Cash Bonus?

Yes. If you are not employed by us on the date an Eligible Option vests, you will forfeit your right to receive the Cash Bonus payable with respect to such Eligible Option. We have structured the Cash Bonus in this fashion to serve our compensatory objective of retaining and motivating employees. See Section 1 — “Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations” of this Offer to Amend for a more detailed discussion.

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Q.   What are the tax consequences if an option is subject to Section 409A?

Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”), which was added to the Code by the American Jobs Creation Act of 2004, generally provides new rules for the taxation of deferred compensation. In April 2007, the U.S. Treasury Department and the Internal Revenue Service issued final regulations with respect to certain items deemed to constitute deferred compensation under Section 409A. Under the final regulations, a stock option granted with an exercise price per share below the fair market value of the underlying shares on the Actual Measurement Date for such option will, to the extent that option was not vested as of December 31, 2004, be subject to certain adverse tax consequences under Section 409A. Under the final regulations, unless remedial action is taken to bring that option into compliance with Section 409A, such a below-market option is subject to adverse U.S. federal income tax consequences under Section 409A as indicated below.

To the extent a Section 409A-covered option vested as to one or more shares during 2005, 2006 or 2007 and was not exercised for those shares prior to December 31, 2007, the preamble to the final regulations (the “Preamble”) states that the optionee would recognize taxable income in 2008 and report the taxable income on his or her 2008 tax return. The Internal Revenue Service has not issued guidance on the manner in which the amount of such taxable income will be determined on those options in 2008, but based on information in the Preamble and guidance under Section 409A for determining the amount of taxable income for 2006 with respect to Section 409A-covered options that were exercised in 2005 or 2006 (the “Prior Taxation Guidance”), the amount of taxable income should be equal to the fair market value of those shares, less the exercise price payable for those shares (the “Spread”), with the fair market value of the shares being measured at December 31, 2008. Taxation would occur in this manner even though the options remain unexercised.

Any such options actually exercised in 2008 (or in 2007) would be taxable in the year of exercise, and the amount of taxable income would be the Spread determined at the time of exercise.

In addition to normal income taxes payable with respect to an affected option, an optionee would also be subject to an additional tax penalty in the year of taxation of the Section 409A-covered options, equal to the sum of (i) 20% of the Spread, plus (ii) interest, at the tax underpayment rate plus 1%, for failure to pay on a timely basis the taxes attributable to the vesting of the options for the taxable year in which the affected option first became vested and exercisable.

Based upon the Prior Taxation Guidance, for tax years after 2008, the optionee would be subject to additional income taxation, penalty taxes and withholding taxes on any subsequent increases to the year-end value of the vested option shares. Such taxation will continue each tax year until the options are exercised. For example, for option shares that vested in 2005 and remain unexercised at the end of 2009, the additional income subject to such taxation would be based on the amount by which the fair market value per share of our common stock on December 31, 2009 exceeded the value taxed in 2008, and the interest penalty tax may be measured for the additional year of 2009. Note, however, the Internal Revenue Service has not yet provided any guidance as to how the additional taxable income is to be measured over the period options remain outstanding after 2006.

Certain states have adopted provisions similar to Section 409A under state tax law, and for optionees subject to income taxation in such states, the total penalty tax would be in excess of 40% (a 20% federal penalty tax and up to a 20% state penalty tax, plus possible interest charges). We recommend that you consult with your tax advisor to determine the state tax law effect, if any, of the vesting and exercise of your options as well as your decision to accept or not accept this Offer.

Q.   What are the tax consequences if I accept the Offer?

Your acceptance of the Offer to amend your Eligible Options will not result in the recognition of any taxable income for U.S. federal income tax purposes with respect to such Eligible Options, either at the time of the acceptance or at the time your Eligible Options are amended.

If your Eligible Options are amended pursuant to the Offer, you will avoid the adverse tax consequences under Section 409A of the Code that would otherwise apply to the Eligible Portion of your Eligible Options. Accordingly, as each Eligible Portion of your amended Eligible Options vests in one or more installments, you will not recognize immediate taxable income with respect to the shares that vest at such time, and you will not be subject to any 20%

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penalty tax or any interest penalty under Section 409A of the Code. However, you will recognize taxable income when you receive the Cash Bonus and you may recognize taxable income when you exercise an amended Eligible Option and/or when you sell the purchased shares. See Sections 2 — “Purpose of the Offer” and 15 — “Material U.S. Federal Income Tax Consequences” of this Offer to Amend for a more detailed discussion.

If you are subject to the tax laws of other jurisdictions in addition to the United States, there may be additional consequences of participating in the Offer. All eligible participants, including those who are also subject to taxation in foreign jurisdictions, whether by reason of their nationality, residence or otherwise, should consult with their own personal tax advisors as to the tax consequences of accepting the Offer.

Q.   What are the tax consequences if I do not accept the Offer?

If you choose not to accept the Offer to amend your Eligible Options, then you may be subject to the adverse tax consequences applicable to the Eligible Portion of your Eligible Options under Section 409A described above. You will be solely responsible for any taxes, penalties or interest payable under Section 409A, and we will have a withholding obligation with respect to such taxes. See Section 2 — “Purpose of the Offer” of this Offer to Amend for a more detailed discussion. See also “Certain Risks of Participating in the Offer — Tax Related Risks.”

In addition, if your Eligible Options are not amended pursuant to the Offer, you will not become eligible to receive the Cash Bonus.

Q.   How are non-qualified options taxed?

Your Eligible Options, whether or not amended as part of this Offer, will be deemed to be non-qualified options. When you exercise any such non-qualified option, you will have immediate taxable income equal to the excess of (i) the fair market value of the purchased shares at the time of exercise over (ii) the exercise price paid for those shares, and we must collect the applicable withholding taxes with respect to such income. See Sections 10 — “Amended Eligible Options Will Not Differ from Eligible Options” and 15 — “Material U.S. Federal Income Tax Consequences” of this Offer to Amend for further discussion.

If you are subject to the tax laws of other jurisdictions in addition to the United States, there may be additional or different consequences in that jurisdiction of exercising your options. All eligible participants, including those who are also subject to taxation in foreign jurisdictions, whether by reason of their nationality, residence or otherwise, should consult with their own personal tax advisors as to the tax consequences of accepting the Offer.

Q.   How will my Cash Bonus be taxed?

You will be taxed upon receipt of each Cash Bonus payment. Each payment will constitute wages for tax withholding purposes but will not be eligible for 401(k) matching contribution purposes. Accordingly, we must withhold all applicable U.S. federal, state and local income and employment withholding taxes as well as all applicable foreign taxes and payments required to be withheld with respect to such payment. You will receive only the portion of the payment remaining after all those taxes and payments have been withheld. See Section 15 — “Material U.S. Federal Income Tax Consequences” of this Offer to Amend for further discussion.

Q.   Why do I have to wait until 2008 to receive any portion of my Cash Bonus?

Internal Revenue Service guidance under Section 409A indicates that if the Cash Bonuses are paid in the same calendar year in which the Eligible Portion of an Eligible Option is amended, adverse tax consequences under Section 409A will result. Since the Offer will expire (and the Eligible Options will be amended for those who elect to participate) during calendar year 2007, we are required to wait until calendar year 2008 to pay the Cash Bonus related to the Eligible Portion of Eligible Options in order to avoid these adverse tax consequences.

Q.   How can I participate in the Offer?

If you decide to accept the Offer to amend an Eligible Option, you must deliver to us, before 11:59 p.m., Central Time, on August 7, 2007 (or any later date to which the Offer may have been extended by us as described

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below), the Letter of Transmittal distributed to you, properly completed and duly executed, and any other documents required by the Letter of Transmittal. The Letter of Transmittal and other documents must be:

•  faxed to James L. Simmons, facsimile number (713) 744-9648;

•  sent via U.S. mail, Federal Express or other nationally-recognized commercial delivery service to James L. Simmons c/o HCC Insurance Holdings, Inc., 13403 Northwest Freeway, Houston, Texas 77040; or

•  emailed to JLSimmons@hcc.com.

Responses submitted by any other means, including hand delivery, are not permitted. If we extend the Offer beyond that time, you must deliver these documents before the extended expiration date of the Offer. We will not accept delivery of any Letter of Transmittal after expiration of the Offer. If we do not receive a properly completed and duly executed Letter of Transmittal from you prior to the expiration of the Offer, we will not accept your Eligible Option for amendment, and that option will not be amended pursuant to the Offer.

You do not need to deliver to us the stock option award notice or agreement, if you have it, for your Eligible Option in order to accept the Offer. We reserve the right to reject any or all acceptances of the Offer to amend Eligible Options that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we intend to accept all properly and timely submitted acceptances of the Offer that are not validly withdrawn. Subject to our rights to extend, terminate and amend the Offer, we currently expect that we will accept all properly submitted acceptances of the Offer upon the expiration of the Offer, and we will amend those Eligible Options on the Amendment Date to have exercise prices per share equal to the closing share price of our common stock on the Actual Measurement Dates for those Eligible Options. See Section 4 — “Procedures for Accepting the Offer to Amend Eligible Options” of this Offer to Amend for further discussion.

Q.   Am I required to participate in the Offer?

No. Participation in the Offer is voluntary. You may choose either to accept the Offer to amend an Eligible Option to increase the applicable exercise price or not to accept the Offer and thereby retain the current exercise price for such option. If you decide not to accept the Offer, you will be solely responsible for any income and excise taxes, penalties and interest payable under Section 409A and we will not reimburse you for any such taxes, penalties or interest. In addition, if your Eligible Options are not amended in the Offer, you will not be eligible to receive the Cash Bonus. See Sections 2 — “Purpose of the Offer” and 3 — “Status of Eligible Options Not Amended” of this Offer to Amend for a more detailed discussion. However, if you have already exercised vested options that are subject to Section 409A, or exercise such vested options before the termination of the Offer, the Company has agreed to pay all excise taxes and penalties otherwise payable under Section 409A.

Q.   If I hold multiple Eligible Options, can I choose which Eligible Options with respect to which I want to accept the Offer?

Yes. If you hold multiple Eligible Options, you can choose which Eligible Options with respect to which you want to accept the Offer. However, if you decide to accept the Offer with respect to a particular Eligible Option, you must accept the Offer to increase the per share exercise price for all of the option shares subject to that particular Eligible Option. With respect to a given Eligible Option, we will not accept your acceptance of the Offer if it relates to less than all of the option shares subject to that particular Eligible Option. See Sections 1 — “Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations” and 4 — “Procedures for Accepting the Offer to Amend Eligible Options” of this Offer to Amend for a more detailed discussion.

Q.   Will the terms and conditions of my amended Eligible Option be the same as my original Eligible Option?

Except for the new exercise price per share (which will be increased to the closing share price of our common stock on the Actual Measurement Date for the Eligible Option), each Eligible Option that is amended pursuant to the Offer will continue to remain subject to the same terms and conditions as in effect for that option immediately prior to its amendment. Accordingly, the amended Eligible Option will vest in accordance with the same vesting

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schedule measured from the same vesting commencement date and it will have the same exercise period, option term and other conditions currently in effect for that option. However, to the extent an Eligible Option was an incentive stock option prior to amendment pursuant to this Offer, such amended option will be deemed to be a non-qualified option as of the original grant date. See Sections 1 — “Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations” and 10 — “Amended Eligible Options Will Not Differ from Eligible Options” of this Offer to Amend for a more detailed discussion.

Q.   When will my Eligible Options be amended?

Each Eligible Option as to which you have timely accepted the Offer will be amended as of the first business day following the expiration date of the Offer (the “Amendment Date”). See Section 1 — “Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations” of this Offer to Amend for a more detailed discussion.

Q.   What happens if the fair market value of HCC common stock on the Amendment Date is less than the adjusted exercise price per share? Will my option shares have a price that is less than that adjusted exercise price?

No. Even if the closing share price of our common stock on the Amendment Date is less than the closing price per share of our common stock on the Actual Measurement Date, your Eligible Option will be amended to have an exercise price equal to the closing price per share of our common stock on the Actual Measurement Date as set forth in your personalized Option Summary.

Q.   When can I exercise an amended Eligible Option?

You may exercise an amended Eligible Option at any time following its amendment and prior to its termination for the shares for which it is exercisable at the time. If you exercise an Eligible Option prior to its amendment, it cannot be amended pursuant to the Offer and you will be subject to any income and excise taxes, penalties and interest payable under Section 409A applicable to the Eligible Portion of your Eligible Options. See the next question below.

Q.   Can I exercise my Eligible Options prior to the expiration of the Offer?

You may exercise your Eligible Options during the Offer, provided such exercise complies with the existing terms of your Eligible Options. In addition, if you accept the Offer to amend an Eligible Option and subsequently decide that you want to exercise your Eligible Option prior to its amendment, you must first withdraw your previously submitted acceptance with respect to such Eligible Option. If you exercise an Eligible Option prior to its amendment pursuant to the Offer, you may be subject to adverse tax consequences under Section 409A with respect to the Eligible Portion of the Eligible Option. However, we have agreed to reimburse anyone who does exercise before this Offer is completed for the 20% excise taxes and penalties they would otherwise be obligated to pay under Section 409A. We will NOT reimburse you for any Section 409A excise taxes or penalties you incur by exercising options not in compliance with, or otherwise exempted from, the requirements of Section 409A following the expiration of this Offer. See Section 3 — “Status of Eligible Options Not Amended” of this Offer to Amend for a more detailed discussion.

Q.   If I elect to amend an Eligible Option, will my election affect other components of my compensation?

Your decision to accept or reject the Offer will not affect your current or future compensation. Your acceptance or rejection of the Offer also will not affect your eligibility to receive option grants in the future.

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Q.   What are the conditions of the Offer?

The Offer is subject to a number of conditions, which are described in Section 7 — “Conditions of the Offer” of this Offer to Amend. These conditions include requirements that there shall have been:

(1) no action or proceeding that relates in any manner to the Offer or that, in our reasonable judgment, could materially and adversely affect our business or materially impair the contemplated benefits of the Offer to you or us;

(2) no action threatened in writing, pending or taken, or approval withheld, or statute, rule, regulation, judgment, order or injunction deemed to be applicable to the Offer or us or any of our subsidiaries, that, in our reasonable judgment, might directly or indirectly:

•  restrict or prohibit consummation of the Offer;

•  delay or restrict our ability to amend some or all of the Eligible Options;

•  materially impair the benefits of the Offer to you or us; or

•  materially and adversely affect our business or otherwise materially impair in any way the contemplated future conduct of our business.

(3) no general suspension of, trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market;

(4) no significant change in the market price of the shares of our common stock or change in the general political, market, economic or financial conditions in the United States or abroad that could, in our reasonable judgment, have a material adverse effect on our business or that, in our reasonable judgment, makes it inadvisable to proceed with the Offer;

(5) no decline in either the Dow Jones Industrial Average, the NASDAQ Composite Index, the New York Stock Exchange Composite Index or the Standard and Poor’s 500 Index by an amount in excess of 10% measured during any time period after the close of business on June 15, 2007;

(6) no change in generally accepted accounting principles which could or would require us for financial reporting purposes to record compensation expense in connection with the Offer which would be in excess of any compensation expense which we would be required to record under generally accepted accounting principles in effect at the time we commence the Offer; and

(7) no change in our business, condition (financial or other), assets, operating results, operations, prospects or stock ownership or that of our subsidiaries that, in our reasonable judgment, is or may be material to us or our subsidiaries or otherwise makes it inadvisable for us to proceed with the Offer.

Please refer to Section 7 — “Conditions of the Offer” of this Offer to Amend for a complete list of the conditions of the Offer. The completion of the Offer is not conditioned upon the acceptance of the Offer by the holders of any minimum number of Eligible Options.

Q.   When does the Offer expire? Can the Offer be extended, and if so, how will I be notified if it is extended?

The Offer expires on August 7, 2007, at 11:59 p.m., Central Time, unless we extend it.

Although we do not currently intend to do so, we may, in our discretion, extend the Offer at any time. If the Offer is extended, we will issue a press release or other public announcement informing you of the extension no later than 8:00 a.m., Central Time (9:00 a.m., Eastern Time), on the next business day following the previously scheduled expiration of the Offer period. See Sections 1 — “Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations” and 16 — “Extension of the Offer; Termination; Amendment” of this Offer to Amend for further discussion.

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Q.   During what period of time may I withdraw my previously submitted acceptance of the Offer to amend an Eligible Option?

You may withdraw your acceptance of the Offer with respect to some or all of your Eligible Options at any time before 11:59 p.m., Central Time, on August 7, 2007. If we extend the Offer beyond that time, you may withdraw your submitted acceptance with respect to some or all of your Eligible Options at any time until the extended expiration date of the Offer. To withdraw your submitted acceptance, you must send to us a properly completed and executed Withdrawal Form, with the required information while you still have the right to withdraw the submitted acceptance of the Offer. A copy of the Withdrawal Form is enclosed with this Offer to Amend. The Withdrawal Form must be:

•  faxed to James L. Simmons, facsimile number (713) 744-9648;

•  sent via U.S. mail, Federal Express or other nationally-recognized commercial delivery service to James L. Simmons c/o HCC Insurance Holdings, Inc., 13403 Northwest Freeway, Houston, Texas 77040; or

•  emailed to JLSimmons@hcc.com.

Responses submitted by any other means, including hand delivery, are not permitted. Once you have withdrawn your acceptance, you may re-submit an acceptance only if you again follow the acceptance procedures described in this document and the Letter of Transmittal prior to the expiration date of the Offer. If you withdraw your acceptance and do not re-submit an acceptance, you may be subject to adverse income tax consequences under Section 409A. See Section 5 — “Withdrawal Rights” of this Offer to Amend for further discussion.

Q.   What will be the total amount of the Cash Bonuses?

If the Offer is accepted with respect to all of the Eligible Options, we expect to pay Cash Bonuses of approximately $4.0 million in the aggregate. See Section 13 — “Status of Options Amended by Us in the Offer; Accounting Consequences of the Offer” of this Offer to Amend for further discussion.

Q.   What does HCC think of the Offer?

Although our board of directors has approved the Offer, neither we nor our board of directors has made or will make any recommendation as to whether or not you should accept the Offer. You must make your own decision whether or not to accept the Offer, after taking into account your own personal circumstances and preferences. You should be aware that adverse tax consequences under Section 409A may apply to the Eligible Portion of an Eligible Option if the Eligible Option is not amended. We recommend that you consult with your tax advisors when deciding whether or not you should accept the Offer. See Sections 1 — “Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations” and 2 — “Purpose of the Offer” of this Offer to Amend for further discussion.

Q.   What are some of the key dates to remember?

Commencement Date:  The commencement date of the Offer is July 9, 2007.

Expiration Date:  The Offer expires at 11:59 p.m., Central Time, on August 7, 2007 (unless we extend the Offer).

Amendment Date:  The Eligible Options will be amended as of August 8, 2007 (unless we extend the Offer).

The Cash Bonus will be paid (i) with respect to the Grandfathered Portion and the Eligible Portion of an Eligible Option that vested or is scheduled to vest prior to January 1, 2008, on the first payroll date after January 1, 2008, and (ii) with respect to any Eligible Portion of an Eligible Option that is scheduled to vest following December 31, 2007, on the last business day of the calendar quarter in which such Eligible Portion of any such Eligible Option vests. Thus, if an Eligible Option vests in more than one installment, you will receive a Cash Bonus only for each portion of the Eligible Option as such portion vests. You must remain employed by us on the date each portion of your Eligible Option is scheduled to vest to receive the Cash Bonus payable with respect to such portion of your Eligible Option.

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Q.   Who can I talk to if I have questions about the Offer?

For additional information or assistance, you should contact James L. Simmons or Randy D. Rinicella of HCC at (713) 690-7300; provided, however, that neither Mr. Simmons, Mr. Rinicella, nor any other employee of HCC may render tax, financial or legal advice to you in connection with the Offer or advise you on whether or not you should accept the Offer.

CERTAIN RISKS OF PARTICIPATING IN THE OFFER

Participating in the Offer involves risks discussed in this Offer to Amend and described below. In addition, information concerning risk factors is included in our Annual Report on Form 10-K for the year ended December 31, 2006, which is incorporated by reference herein and may be inspected at, and copies of which may be obtained from, the places and in the manner described in Section 11 — “Information Concerning HCC” of this Offer to Amend. You should carefully consider these risks and are encouraged to consult your investment, tax and legal advisors before deciding to participate in the Offer.

Tax-Related Risks

The Internal Revenue Service could change the expected tax consequences of Section 409A.

As described in the Summary Term Sheet and in Section 2 — “Purpose of the Offer” below, based on the final regulations, including the Preamble, and under other guidance previously issued under Section 409A, the Eligible Portion of each Eligible Option is subject to adverse tax consequences under Section 409A. We believe that we have complied in good faith with the applicable guidance and final regulations with respect to the Offer to amend Eligible Options to avoid the adverse tax consequences of Section 409A. However, while the Internal Revenue Service has issued final regulations under Section 409A, the final regulations do not address all open issues under Section 409A. Additional future guidance is expected on several remaining issues, including the calculation of income inclusion. There is a chance that future guidance issued by the Internal Revenue Service may modify how and when you must recognize and report certain taxes, interest and penalties under Section 409A with respect to your Eligible Options. In addition, your personal tax advisor may advocate a position under the current statute and Internal Revenue Service guidance that your Eligible Options are exempt from Section 409A. We cannot guarantee the effect of any future Internal Revenue Service guidance.

You may incur additional tax and penalties other than under United States federal tax law.

State and local taxes.  The discussion in Section 2 — “Purpose of the Offer” and Section 15 — “Material U.S. Federal Income Tax Consequences” of this Offer to Amend describes the material U.S. federal income tax consequences if you choose to participate in the Offer and if you choose not to participate in the Offer; state and local taxes may differ. Certain states have adopted provisions similar to Section 409A under state tax law; if you are subject to income taxation in such states, you may incur additional taxes and penalties under such provisions with respect to the Eligible Portion of any Eligible Options.

Tax-related risks for residents of multiple countries.  If you are subject to the tax laws in more than one jurisdiction, you should be aware that tax consequences of more than one country may apply to you as a result of your participation in the Offer. You should be certain to consult your personal tax advisors to discuss these consequences.

All option holders should consult with their own personal tax advisors as to the tax consequences of their participation in the Offer.

Procedural Risks

We will not accept late or improperly submitted documents.

You are responsible for ensuring that your Letter of Transmittal and/or Withdrawal Form is received by us prior to the expiration date of the Offer. Your submissions may only be made via facsimile, U.S. mail, Federal Express or other nationally-recognized commercial delivery service or email. Submissions made by any other means,

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including hand delivery, will not be accepted. We recommend that you keep a copy of your submissions and fax confirmation sheet, U.S. postal receipt, or Federal Express or other nationally-recognized commercial delivery service receipt or email. If we do not have a record of receipt of your Letter of Transmittal and/or Withdrawal Form and you do not have evidence of timely submission, we will not be obligated to change any determinations we may have made regarding your participation in the Offer.

THE OFFER

1.   Eligible Participants; Eligible Options; Amendment and Cash Bonus; Expiration Date; Additional Considerations

Upon the terms and subject to the conditions of the Offer, we will amend all Eligible Options (as defined below) held by Eligible Participants (as defined below) who accept the Offer in accordance with Section 4 — “Procedures for Accepting the Offer to Amend Eligible Options”, and who do not validly withdraw their acceptance in accordance with Section 5 — “Withdrawal Rights” before the Expiration Date (as defined below).

Eligible Participants

Individuals to whom we have granted Eligible Options and who are subject to taxation in the United States are eligible to participate in the Offer (“Eligible Participants”) and to accept the Offer to amend their Eligible Options in accordance with the terms and conditions of the Offer.

None of our executive officers and none of the members of our board of directors is eligible to participate in the Offer. Options held by our executive officers and directors, and certain terminated employees, that would otherwise have constituted Eligible Options have already been amended to increase the exercise prices to the closing share price of our common stock on the Actual Measurement Dates for such options. See Section 12 — “Interests of Directors and Officers; Transactions and Arrangements Concerning the Options”.

Eligible Options

An “Eligible Option” is an option to purchase shares of our common stock granted under any of the Plan, with an exercise price less than the closing share price of our common stock on the Actual Measurement Date for such option, which option remains outstanding and unexercised on the Expiration Date of this Offer. The Actual Measurement Date was determined in connection with the restatement of our previously filed consolidated financial statements included in our Annual Report on Form 10-K/A for the year ended December 31, 2005. Eligible Options that may be amended under this Offer consist of two parts: (i) the portion of your Eligible Options that vested as of December 31, 2004 (the “Grandfathered Portion”) and (ii) each portion of your Eligible Options that vested or are scheduled to vest after December 31, 2004 (each an “Eligible Portion”). For various administrative reasons, we are unable to separate the Grandfathered Portion of an Eligible Option (which is not subject to adverse tax consequences under Section 409A) from the Eligible Portion of an Eligible Option (which is subject to adverse tax consequences under Section 409A).

We will provide each Eligible Participant with a personalized Option Summary showing, for each Eligible Option held by such Eligible Participant, the original date of grant, the number of unexercised options, the original exercise price and the new exercise price as proposed to be amended (which will be the closing share price of our common stock on the Actual Measurement Date) if the Eligible Participant accepts this Offer.

You are not required to accept this Offer with respect to any or all of your Eligible Options. If you are an Eligible Participant and you hold multiple Eligible Options you wish to amend, you may choose which Eligible Options with respect to which you accept the Offer. However, if you are an Eligible Participant and you choose to accept the Offer with respect to any given Eligible Option you hold, you must tender all or none of the option shares subject to such Eligible Option, including both the Eligible Portion and the Grandfathered Portion of such Eligible Option. A partial amendment of an Eligible Option will not be accepted. As of July 2, 2007, Eligible Options to purchase 2,221,237 shares of our common stock were outstanding.

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Amendment and Cash Bonus

If you accept the Offer to amend an Eligible Option, then the per share exercise price of the shares subject to the Eligible Option will be increased to the closing share price of our common stock on the Actual Measurement Date for that option. The “Amendment Date” will be the date on which the Eligible Option will be deemed to be amended to increase the exercise price to the closing share price of our common stock on the Actual Measurement Date for that option, and will be the first business day following the Expiration Date of the Offer.

The amendment of an Eligible Option pursuant to the Offer will not affect the original terms and conditions of the Eligible Option, other than as to the exercise price and the characterization of the Eligible Option as a non-qualified option as of the original date of grant, regardless of whether the Eligible Option was intended to qualify as an incentive stock option on such date. Your amended Eligible Option will continue to be subject to the same vesting schedule and expiration date as in effect prior to the amendment pursuant to the Offer. The number of shares of our common stock subject to an amended Eligible Option will be equal to the number of shares of our common stock subject to the original Eligible Option prior to the amendment (except as such number may be adjusted in the event of certain corporate changes as currently provided in the Plans). As a result of our determination that an Eligible Option was granted with an exercise price that is less than the closing share price of our common stock on the Actual Measurement Date, and regardless of whether an Eligible Option was intended on the original date of grant to qualify as an incentive stock option, all amended Eligible Options will be deemed to be non-qualified options as of the original date of grant, including any awards that were intended to qualify as incentive stock options. In other words, if you hold an option that was granted at a price below the closing share price of our common stock on the Actual Measurement Date, it will not be treated as an incentive stock option whether or not you accept this Offer.

Each amended Eligible Option will continue to be subject to the terms and conditions of the applicable Plan under which it was granted. The terms of the Plans permit us to amend outstanding options with the written consent of the option holder. The compensation committee of our board of directors administers the Plans, and has authority to construe, interpret and amend the Plans. All shares of common stock issuable upon exercise of options under the Plans, including the shares that will be issuable upon exercise of the amended Eligible Options, have been registered under the Securities Act of 1933, as amended, on one or more Registration Statements on Form S-8 filed with the Securities and Exchange Commission.

Additional information concerning the Plans may be found in the Plans, which are filed as exhibits to this Offer to Amend and are incorporated herein by reference, and in the related Prospectuses prepared in connection with each Plan. Please contact James L. Simmons of HCC by telephone at (713) 690-7300 or by email at JLSimmons@hcc.com to request copies of the Plans or the related Prospectuses. Copies will be provided to you promptly at our expense.

Each Eligible Option with respect to which an optionee accepts the Offer will be amended to increase the applicable per share exercise price as set forth in your personalized Option Summary. In addition, we will compensate each optionee who accepts the Offer for the increased exercise price per share of his or her Eligible Option. If your Eligible Option is amended, you will become eligible to receive a cash payment (the “Cash Bonus”) in a dollar amount determined by multiplying (i) the number of shares of our common stock subject to your Eligible Option by (ii) the amount by which the new exercise price per share exceeds the original exercise price per share of that Eligible Option. The Cash Bonus will be paid (i) with respect to the Grandfathered Portion and the Eligible Portion of an Eligible Option that vested or is scheduled to vest prior to January 1, 2008, on the first payroll date after January 1, 2008, and (ii) with respect to any Eligible Portion of an Eligible Option that is scheduled to vest following December 31, 2007, on the last business day of the calendar quarter in which such Eligible Portion of any such Eligible Option vests. Thus, if an Eligible Option vests in more than one installment, you will receive a Cash Bonus only for each portion of the Eligible Option as such portion vests. You must remain employed by us on the date each portion of your Eligible Option is scheduled to vest to receive the Cash Bonus payable with respect to such portion of your Eligible Option. We have structured the Cash Bonus payment with the continued employment requirement to serve our compensatory objective of retaining and motivating our employees.

We may, in our discretion, accelerate the payment to any recipient of all or any portion of the Cash Bonus, but in no case shall such payments be made prior to January 1, 2008. We do not undertake, and will not be obligated, to

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treat all recipients of Cash Bonuses in the same manner with respect to any discretionary acceleration of the payment of any portion of any Cash Bonus.

We must withhold all applicable U.S. federal, state and local income and employment withholding taxes as well as all applicable foreign tax and other payments from each Cash Bonus payment, and the optionee will receive only the portion of the payment remaining after those taxes and payments have been withheld.

If all the Eligible Participants accept the Offer to reprice all Eligible Options, then the maximum Cash Bonuses payable pursuant to the Offer will be approximately $4.0 million in the aggregate.

Expiration Date

The term “Expiration Date” means 11:59 p.m., Central Time, on August 7, 2007, or such later time and date at which the Offer expires in the event we decide to extend the period of time during which the Offer will remain open. See Section 16 — “Extension of the Offer; Termination; Amendment” for a description of our rights to extend, delay, terminate and amend the Offer and Section 7 — “Conditions of the Offer” for a description of conditions of the Offer.

Additional Considerations

In deciding whether to accept the Offer to amend any Eligible Option, you should know that we continually evaluate and explore strategic opportunities as they arise, including business combination transactions, strategic partnerships and the purchase or sale of assets. At any given time, we may be engaged in discussions or negotiations with respect to various corporate transactions, including public and private offerings of our debt and equity securities. We also grant options in the ordinary course of business to our current and new employees, including our executive officers and directors. Our employees, including our executive officers and directors, from time to time acquire or dispose of our securities. Subject to the foregoing, and except as otherwise disclosed in the Offer or in our filings with the Securities and Exchange Commission, we presently have no specific plans or proposals that relate to or would result in:

•  any extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving us or any of our subsidiaries;

•  any purchase, sale or transfer of a material amount of our assets or the assets of any of our subsidiaries;

•  any material change in our present dividend policy, or our capitalization;

•  any change in our present board of directors or executive management team, including any plans to change the number or term of our directors or to fill any existing board vacancies or to change the material terms of any executive officer’s employment;

•  any other material change in our corporate structure or business;

•  the delisting of our common stock from the NYSE;

•  our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”);

•  the suspension of our obligation to file reports pursuant to Section 15(d) of the Exchange Act;

•  the acquisition by any person of any of our securities or the disposition of any of our securities, other than in the ordinary course or pursuant to existing options or other rights; or

•  any change in our articles of incorporation or bylaws, or any actions which may impede the acquisition of control of us by any person.

2.   Purpose of the Offer

We previously granted to our employees options to purchase shares of our common stock under the Plans. We have recently determined that the closing share price of our common stock on the Actual Measurement Date for

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each such option for accounting and tax purposes was higher than the original exercise price of such option (i.e., the closing share price on the original grant date). We are making the Offer to mitigate the potential adverse tax consequences that apply to the holder of a stock option when the exercise price is lower than the closing share price of our common stock on the Actual Measurement Date of that option.

Under Section 409A of the Code, options granted with an exercise price less than the fair market value of our common stock on the Actual Measurement Date for such options, to the extent unvested as of December 31, 2004, will be subject to adverse income taxation unless the option is either amended to be brought into compliance with or made exempt from Section 409A. The purpose of the Offer is to enable us either to bring such options into compliance with or make such options exempt from Section 409A by increasing the exercise price per share to the closing share price of our common stock on the Actual Measurement Dates for those options. Because we may not be able to amend these options unilaterally without your consent, your acceptance of the Offer is necessary to effect this amendment.

Section 409A, which was added to the Code by the American Jobs Creation Act of 2004, generally provides new rules for the taxation of deferred compensation. In April 2007, the U.S. Treasury Department and the Internal Revenue Service issued final regulations with respect to certain items deemed to constitute deferred compensation under Section 409A. Under the final regulations, a stock option granted with an exercise price per share below the fair market value of the underlying shares on the Actual Measurement Date for such option will, to the extent that option was not vested as of December 31, 2004, be subject to certain adverse tax consequences under Section 409A. Under transition guidance issued prior to the final regulations, unless remedial action is taken to bring that option into compliance with Section 409A, such a below-market option is subject to adverse U.S. federal income tax consequences under Section 409A as indicated below.

To the extent a Section 409A-covered option vested as to one or more shares during 2005, 2006 or 2007 and was not exercised for those shares prior to December 31, 2007, the preamble to the final regulations (the “Preamble”) states that the optionee would recognize taxable income in 2008 and report the taxable income on his or her 2008 tax return. The Internal Revenue Service has not issued guidance on the manner in which the amount of such taxable income will be determined on those options in 2008, but based on information in the Preamble and guidance under Section 409A for determining the amount of taxable income for 2006 with respect to Section 409A-covered options that were exercised in 2005 or 2006 (the “Prior Taxation Guidance”), the amount of taxable income should be equal to the fair market value of those shares, less the exercise price payable for those shares (the “Spread”), with the fair market value of the shares being measured at December 31, 2008. Taxation would occur in this manner even though the options remain unexercised.

Any such options actually exercised in 2008 (or in 2007) would be taxable in the year of exercise, and the amount of taxable income would be the Spread determined at the time of exercise.

In addition to normal income taxes payable with respect to an affected option, an optionee would also be subject to an additional tax penalty in the year of taxation of the Section 409A-covered options, equal to the sum of (i) 20% of the Spread, plus (ii) interest, at the tax underpayment rate plus 1%, for failure to pay on a timely basis the taxes attributable to the vesting of the options for the taxable year in which the affected option first became vested and exercisable.

Based upon the Prior Taxation Guidance, for tax years after 2008, the optionee would be subject to additional income taxation, penalty taxes and withholding taxes on any subsequent increases to the year-end value of the vested option shares. Such taxation will continue each tax year until the options are exercised. For example, for option shares that vested in 2005 and remain unexercised at the end of 2009, the additional income subject to such taxation would be based on the amount by which the fair market value per share of our common stock on December 31, 2009 exceeded the value taxed in 2008, and the interest penalty tax may be measured for the additional year of 2009. Note, however, the Internal Revenue Service has not yet provided any guidance as to how the additional taxable income is to be measured over the period the options remain outstanding after 2006.

Certain states have adopted provisions similar to Section 409A under state tax law, and for optionees subject to income taxation in such states, the total penalty tax would be up to 40% (a 20% federal penalty tax and up to a 20% state penalty tax, plus possible interest charges). We strongly recommend that you consult with your tax advisor to

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determine the state tax law effect, if any, of the vesting and exercise of your options as well as your decision to accept or not accept this Offer.

By accepting the Offer to amend each Eligible Option you hold to increase the exercise price to the closing share price of our common stock on the Actual Measurement Date for that option, you will avoid the negative tax consequences of Section 409A applicable to the Eligible Portion of an Eligible Option described above. Please see Section 15 — “Material U.S. Federal Income Tax Consequences” for the material U.S. federal tax consequences of participating in this Offer.

Section 409A only applies to below-market grants of options which were not vested as of December 31, 2004. Any option with an exercise price less than the closing share price of our common stock on the Actual Measurement Date for such option granted prior to October 4, 2004 which was vested as of December 31, 2004 is not subject to Section 409A.

If you are subject to the tax laws in more than one jurisdiction, you should be aware that tax consequences of more than one country may apply to you as a result of your participation in the Offer. We recommend that you consult your personal tax advisors to discuss these consequences.

Neither we nor our board of directors has made or will make any recommendation as to whether or not you should accept the Offer to amend any Eligible Option, nor have we authorized any person to make any such recommendation. You must make your own decision whether or not to accept the Offer, after taking into account your own personal circumstances and preferences. You should be aware that adverse tax consequences under Section 409A may apply to the Eligible Portion of an Eligible Option if it is not amended pursuant to the Offer. You are urged to evaluate carefully all of the information in the Offer and we recommend that you consult your own investment, legal and tax advisors.

3.   Status of Eligible Options Not Amended

If you choose not to accept the Offer to amend an Eligible Option, that option will remain outstanding in accordance with its existing terms and will be deemed to be a non-qualified option. Accordingly, if no other action is taken to bring that option into compliance with, or otherwise make that option exempt from, Section 409A, you may be subject to the adverse U.S. federal income tax consequences described in Section 2 — “Purpose of the Offer” above. You will be solely responsible for any income or excise taxes, penalties and interest payable under Section 409A, and we will have a withholding obligation with respect to such income and excise taxes and penalties. We will NOT reimburse you for any Section 409A excise taxes, penalties or interest you incur in connection with options not in compliance with, or otherwise exempted from, the requirements of Section 409A following the expiration of this Offer.

4.   Procedures for Accepting the Offer to Amend Eligible Options

Proper Acceptance of Offer to Amend.  For your convenience, we will send you a personalized Option Summary of each Eligible Option that you currently hold, including the number of shares and the new exercise price that will apply to such Eligible Option if you accept the Offer. To validly accept the Offer to amend an Eligible Option pursuant to the Offer, you must, in accordance with the terms of the enclosed Letter of Transmittal, properly complete, duly execute and deliver to us the Letter of Transmittal, along with any other required documents. Except in accordance with the next sentence, the Letter of Transmittal must be executed by the Eligible Option holder. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or any other person acting in a fiduciary or representative capacity, the signer’s full title and proper evidence satisfactory to us of the authority of such person to act in such capacity must be indicated on the Letter of Transmittal.

We must receive all of the required documents before the Expiration Date. If we extend the Offer beyond that time, we must receive those documents before the extended Expiration Date of the Offer. We will not accept delivery of any Letter of Transmittal or other required documents after expiration of the Offer. If we do not receive a properly completed and duly executed Letter of Transmittal and all other required documents from you prior to the expiration of the Offer, no Eligible Option you hold will be amended. You do not need to deliver to us the stock option award notice or agreement, if you have it, for your Eligible Option in order to accept the Offer.

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The Letter of Transmittal and other documents may only be submitted by (i) facsimile to James L. Simmons, facsimile number (713) 744-9648, (ii) U.S. mail, Federal Express or other nationally-recognized commercial delivery service to James L. Simmons c/o HCC Insurance Holdings, Inc. 13403 Northwest Freeway, Houston, TX 77040 or (iii) email to JLSimmons@hcc.com. Submissions by any other means, including hand delivery, are not permitted. Delivery of all documents, including the Letter of Transmittal and any other required documents, is at your risk. You should allow sufficient time to ensure timely delivery.

If you have more than one Eligible Option, you may choose to tender some or all of your Eligible Options for amendment. However, if you decide to accept the Offer with respect to a particular Eligible Option, you must accept the Offer to increase the per share exercise price for all of the option shares subject to that particular Eligible Option. With respect to a given Eligible Option, we will not accept your acceptance of the Offer if it relates to less than all of the option shares subject to that particular Eligible Option.

If you attempt to include in your Letter of Transmittal any option which is not an Eligible Option or only a portion of an Eligible Option, we will not accept the submitted acceptance with respect thereto, but we do intend to accept any properly submitted acceptance of the Offer to amend an Eligible Option set forth in the Letter of Transmittal.

Determination of Validity; Rejection of Option Shares; Waiver of Defects; No Obligation to Give Notice of Defects. We will determine, in our discretion, all questions as to form of documents and the validity, form, eligibility (including time of receipt), and acceptance of the Offer, and we will decide, in our sole discretion all questions as to (i) the portion of each option grant which comprises an Eligible Option for purposes of the Offer; (ii) the number of shares of common stock comprising the Eligible Option, and (iii) the amount of the Cash Bonus relating to each properly submitted acceptance of the Offer to amend an Eligible Option and whether and when such Cash Bonus will be payable, consistent with the terms of the Offer. Our determination as to those matters will be final and binding on all parties. We reserve the right to reject any or all acceptances of the Offer that we determine do not comply with the conditions of the Offer, that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we intend to accept each properly and timely submitted acceptance of the Offer that is not validly withdrawn. We reserve the right to waive any of the conditions of the Offer. If we waive a condition of the Offer for any Eligible Participant, the condition will be waived for all Eligible Participants. We also reserve the right to waive any defect or irregularity in any acceptance of the Offer. No acceptance of the Offer to amend an Eligible Option will be deemed to have been properly made until all defects or irregularities have been cured by the submitting holder or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in the election to amend any Eligible Option, nor will anyone incur any liability for failure to give any such notice.

Our Acceptance Constitutes an Agreement.  Your acceptance of the Offer to amend an Eligible Option pursuant to the procedures described above constitutes your acceptance of the terms and conditions of the Offer. Our acceptance of your submitted acceptance of the Offer will constitute a binding agreement between us and you upon the terms and subject to the conditions of the Offer.

Subject to our rights to extend, terminate and amend the Offer, we currently expect that we will, promptly upon the expiration of the Offer, accept for amendment all properly submitted acceptances of the Offer to amend Eligible Options that have not been validly withdrawn, and we will increase the exercise price per share of those options on the Amendment Date to the closing share price of our common stock on the Actual Measurement Dates for those options.

5.   Withdrawal Rights

You may only withdraw your submitted acceptance of the Offer in accordance with the provisions of this Section 5 — “Withdrawal Rights”.

You may withdraw your submitted acceptance of the Offer with respect to some or all of your Eligible Options at any time before 11:59 p.m., Central Time, on the Expiration Date of the Offer. In addition, unless we accept your Letter of Transmittal and amend your Eligible Option before 11:59 p.m., Central Time, on August 7, 2007, you may withdraw your submitted acceptance of the Offer with respect to some or all of your Eligible Options at any time

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thereafter. Assuming the Offer is not extended, we currently expect to amend all Eligible Options with respect to which the Offer has been accepted on August 8, 2007.

To validly withdraw your submitted acceptance of the Offer, you must deliver to us a properly completed and duly executed Withdrawal Form with the required information, while you still have the right to withdraw the submitted acceptance of the Offer. You may submit the Withdrawal Form only by (i) facsimile to James L. Simmons, facsimile number (713) 744-9648, (ii) U.S. mail, Federal Express or other nationally-recognized commercial delivery service to James L. Simmons c/o HCC Insurance Holdings, Inc., 13403 Northwest Freeway, Houston, Texas 77040 or (iii) email to JLSimmons@hcc.com. Submissions by any other means, including hand delivery, are not permitted. A copy of the Withdrawal Form is enclosed with this Offer to Amend.

Although you may withdraw your acceptance with respect to one or more Eligible Options, you may not withdraw your acceptance of the Offer with respect to only a portion of the option shares subject to an Eligible Option. If you choose to withdraw your acceptance of the Offer with respect to any Eligible Option, you must withdraw the entire acceptance with respect to all option shares subject to such Eligible Option.

Except in accordance with the immediately following sentence, the Withdrawal Form must be executed by the option holder who submitted the acceptance. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or any other person acting in a fiduciary or representative capacity, the signer’s full title and proper evidence satisfactory to us of the authority of such person to act in such capacity must be indicated on the Withdrawal Form.

You may not rescind any withdrawal, and any acceptance of the Offer you withdraw will not thereafter be deemed to be subject to the Offer, unless you properly re-submit a new Letter of Transmittal indicating your acceptance to amend an Eligible Option before the Expiration Date by following the procedures described in Section 4 — “Procedures for Accepting the Offer to Amend Eligible Options”. This new acceptance must be properly completed, signed and dated after your original Letter of Transmittal and your Withdrawal Form.

Neither we nor any other person is obligated to give notice of any defects or irregularities in any Withdrawal Form submitted to us, nor will anyone incur any liability for failure to give any such notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of notices of withdrawal. Our determination of these matters will be final and binding on all parties.

6.   Acceptance of Eligible Options for Amendment

The Offer is subject to the terms and conditions described in this Offer to Amend. We will only accept elections as to Eligible Options that are properly submitted for amendment and not validly withdrawn in accordance with Section 5 — “Withdrawal Rights” of this Offer to Amend before the Expiration Date. We may, however, reject any or all election forms to the extent that we determine they were not properly submitted, to the extent that we determine it is unlawful to accept the Eligible Option tendered for amendment or to the extent certain conditions described in Section 7 — “Conditions of the Offer” of this Offer to Amend exist which in our reasonable judgment makes it inadvisable to proceed with the Offer.

We will amend the exercise price of accepted Eligible Options on the Amendment Date. We will provide oral or written notice to the option holders of our acceptance, which may be by e-mail, press release or other means.

Promptly following the Expiration Date, we will also provide the holder of each Eligible Option subject to a validly submitted acceptance of the Offer with a letter evidencing your eligibility to receive the Cash Bonus in accordance with the terms of the Offer.

7.   Conditions of the Offer

We will not accept any acceptances of the Offer to amend Eligible Options, and we may terminate or amend the Offer or postpone our acceptance and amendment of any Eligible Options, in each case, subject to Rule 13e-4(f)(5) under the Exchange Act, if at any time on or after July 9, 2007, and prior to the Expiration Date, any of the following events has occurred, or has been reasonably determined by us to have occurred and, in our reasonable judgment in

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any such case, the occurrence of such event or events makes it inadvisable for us to proceed with the Offer or with our acceptance of any acceptances of the Offer to amend Eligible Options:

(a) there shall have been threatened in writing or instituted or be pending any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or by any other person, domestic or foreign, before any court, authority, agency or tribunal that directly or indirectly challenges the making of the Offer, the repricing of some or all of the Eligible Options pursuant to the Offer or the payment of the Cash Bonuses, or otherwise relates in any manner to the Offer or that, in our reasonable judgment, could materially and adversely affect our business, condition (financial or other), assets, operating results, operations or prospects, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries or materially impair the contemplated benefits of the Offer to you or us;

(b) there shall have been any action threatened in writing, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened in writing, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or us or any of our subsidiaries, by any court or any agency, authority or tribunal that, in our reasonable judgment, would or might directly or indirectly:

•  make the amendment of the Eligible Options or payment of the Cash Bonuses illegal or otherwise restrict or prohibit consummation of the Offer or otherwise relate in any manner to the Offer;

•  delay or restrict our ability, or render us unable, to amend some or all of the Eligible Options;

•  materially impair the benefits of the Offer to you or us, which we believe might occur as a result of further changes to Section 409A of the Code, the regulations thereunder or other tax laws that would affect the Offer or the Eligible Options; or

•  materially and adversely affect our business, condition (financial or other), assets, operating results, operations or prospects or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries.

(c) there shall have occurred:

•  any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market;

•  any significant change in the market price of the shares of our common stock or any change in the general political, market, economic or financial conditions in the United States or abroad that could, in our reasonable judgment, have a material adverse effect on our business, condition (financial or other), assets, operating results, operations or prospects or on the trading in our common stock, or that, in our reasonable judgment, makes it inadvisable to proceed with the Offer;

•  in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or

•  any decline in either the Dow Jones Industrial Average, the NASDAQ Composite Index, the New York Stock Exchange Composite Index or the Standard and Poor’s Index of 500 Companies by an amount in excess of 10% measured during any time period after the close of business on June 15, 2007.

(d) there shall have occurred any change in generally accepted accounting principles or the application or interpretation thereof which could or would require us for financial reporting purposes to record compensation expense in connection with the Offer which would be in excess of any compensation expense which we would be required to record under generally accepted accounting principles in effect at the time we commence the Offer;

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(e) a tender or exchange offer with respect to some or all of our outstanding common stock, or a merger or acquisition proposal for us, shall have been proposed, announced or made or shall have been publicly disclosed, or we shall have learned that:

•  any person, entity or “group,” within the meaning of Section 13(d)(3) of the Exchange Act, shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding shares of our common stock, or any new group shall have been formed that beneficially owns more than 5% of the outstanding shares of our common stock, other than any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the Securities and Exchange Commission before August 7, 2007;

•  any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the Securities and Exchange Commission before August 7, 2007 shall have acquired or proposed to acquire beneficial ownership of an additional 2% or more of the outstanding shares of our common stock; or

•  any person, entity or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or made a public announcement reflecting an intent to acquire us or any of our subsidiaries or any of our assets or securities or those of any of our subsidiaries.

(f) any change or changes shall have occurred in our business, condition (financial or other), assets, operating results, operations, prospects or stock ownership or that of our subsidiaries that, in our reasonable judgment, is or may be material to us or our subsidiaries or otherwise makes it inadvisable for us to proceed with the Offer; or

(g) any rules, regulations or actions by any governmental authority, the NYSE, or other regulatory or administrative authority of any national securities exchange shall have been enacted, enforced or deemed applicable to us that makes it inadvisable for us to proceed with the Offer.

The conditions of the Offer are for our benefit. We may assert them in our reasonable discretion prior to the Expiration Date regardless of the circumstances giving rise to them. We may waive them, in whole or in part, at any time and from time to time prior to the Expiration Date, in our reasonable discretion, whether or not we waive any other condition to the Offer. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Section 7 — “Conditions of the Offer” will be final and binding upon all persons. If we waive a material condition of the Offer, we will extend the Offer to the extent required by applicable law. See Section 16 — “Extension of the Offer; Termination; Amendment”. The Offer is not conditioned upon the acceptance of the Offer by the holders of any minimum number of Eligible Options.

8.   Price Range of Common Stock Underlying the Options

There is no established trading market for Eligible Options, or any other options granted under the Plans.

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Our common stock is listed and traded on the NYSE under the symbol “HCC.” The following table provides, for the periods indicated, the high and low intra-day sales prices per share of our common stock as reported on the NYSE, and the dividends declared:

					Cash Dividend
	High		Low		per Share
Year Ending December 31, 2007
Third Quarter (through July 5, 2007)	$	34.21	$	33.50		—
Second Quarter	$	34.45	$	30.43	$	.10
First Quarter	$	32.89	$	29.39	$	.10
Year Ending December 31, 2006
Fourth Quarter	$	35.15	$	28.81	$	.10
Third Quarter	$	33.99	$	28.82	$	.10
Second Quarter	$	34.92	$	28.51	$	.10
First Quarter	$	34.89	$	29.25	$	.075
Year Ended December 31, 2005
Fourth Quarter	$	32.95	$	26.91	$	.075
Third Quarter	$	28.89	$	25.11	$	.075
Second Quarter	$	26.96	$	23.05	$	.075
First Quarter	$	26.17	$	21.31	$	.057

On July 5, 2007, the closing price of our common stock on the NYSE was $33.66 per share.

Beginning in June 1996, we announced a planned quarterly program of paying cash dividends to shareholders. Our board of directors may review our dividend policy from time to time and any determination with respect to future dividends will be made in light of regulatory and other conditions at that time, including our earnings, financial condition, capital requirements, loan covenants and other related factors. Under the terms of our bank loan facility, we are prohibited from paying dividends in excess of an agreed upon maximum amount in any year. That limitation should not affect our ability to pay dividends in a manner consistent with our past practice and current expectations.

The price of our common stock has been, and in the future may be, volatile and could decline. The trading price of our common stock has fluctuated in the past and is expected to continue to do so in the future, as a result of a number of factors, many of which are outside our control. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market prices of many companies, and that have often been unrelated or disproportionate to the operating performance of these companies.

9.   Source and Amount of Consideration

If we accept your acceptance of the Offer to amend an Eligible Option, that option will be amended to increase the exercise price per share to the closing share price of our common stock on the Actual Measurement Date for that option. If you accept the Offer, then in addition to the repricing of your Eligible Option, you will be eligible to receive the Cash Bonus. The Cash Bonus payments will be made from our cash and cash equivalents, and you will be a general creditor of HCC with respect to the Cash Bonus. To receive the Cash Bonus with respect to an Eligible Option, you must remain employed by us (or one of our subsidiaries) on the date each portion of your Eligible Option is scheduled to vest.

If all Eligible Participants accept the Offer to amend all Eligible Options pursuant to the Offer, then the resulting repriced Eligible Options will cover 2,221,237 shares of our common stock, which represents approximately 2.0% of the total number of shares of our common stock outstanding as of July 2, 2007, and the maximum amount of Cash Bonuses payable pursuant to the Offer will be approximately $4.0 million in the aggregate. We believe that our existing and future cash and cash equivalents will be adequate to fund these payments.

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10.   Amended Eligible Options Will Not Differ from Eligible Options

Except for the increased exercise price per share, each Eligible Option that is amended pursuant to the Offer will continue to remain subject to the same terms and conditions as in effect for that option immediately prior to its amendment. However, to the extent an Eligible Option was an incentive stock option prior to amendment pursuant to this Offer, such amended option will be deemed to be a non-qualified option as of the original grant date, and to the extent an Eligible Option was a non-qualified option prior to amendment pursuant to this Offer, such amended option will remain a non-qualified option. Except for the foregoing, no change to the vesting schedule will occur by reason of the amendment, and the exercise period, option term and other conditions of the Eligible Options will remain unchanged.

11.   Information Concerning HCC

We are a Delaware corporation, which was formed in 1991. Its predecessor corporation was formed in 1974. Our principal executive offices are located at 13403 Northwest Freeway, Houston, Texas 77040, and our telephone number is (713) 690-7300. We maintain an Internet web-site at www.hcc.com. The reference to our Internet web-site address in this Offer to Amend does not constitute the incorporation by reference of the information contained at the web-site in this Offer to Amend. We will make available, free of charge through publication on our Internet web-site, a copy of our Annual Report on Form 10-K and quarterly reports on Form 10-Q and any current reports on Form 8-K or amendments to those reports, filed with or furnished to the Securities and Exchange Commission as soon as reasonably practicable after we have filed or furnished such materials with the Securities and Exchange Commission.

We provide specialized property and casualty, surety, and group life, accident and health insurance coverages and related agency and reinsurance brokerage services to commercial customers and individuals. We concentrate our activities in selected, narrowly defined, specialty lines of business. We operate primarily in the United States, the United Kingdom, Spain, Bermuda and Ireland. Some of our operations have a broader international scope. We underwrite insurance both on a primary basis, where we insure a risk in exchange for a premium, and on a reinsurance basis, where we insure all or a portion of another insurance company’s risk in exchange for all or a portion of the premium. We market our products both directly to customers and through a network of independent and affiliated brokers, producers and agents.

Since our founding, we have been consistently profitable, generally reporting annual increases in total revenue and shareholders’ equity. During the period 2002 through 2005, which is the latest period for which industry information is available, we had an average statutory combined ratio of 89.8% versus the less favorable 101.7% (source: A.M. Best Company, Inc.) recorded by the U.S. property and casualty insurance industry overall. During the period 2002 through 2006, our gross written premium increased from $1.2 billion to $2.2 billion, an increase of 83%, while net written premium increased 232% from $545.9 million to $1.8 billion. During this period, our revenue increased from $666.8 million to $2.1 billion, an increase of 211%. During the period December 31, 2002 through December 31, 2006, our shareholders’ equity increased 131% from $884.7 million to $2.0 billion and our assets increased 105% from $3.7 billion to $7.6 billion.

Our insurance companies are risk-bearing and focus their underwriting activities on providing insurance and/or reinsurance in the following lines of business:

•  Diversified financial products

•  Group life, accident and health

•  Aviation

•  London market account

•  Other specialty lines

Our operating insurance companies are rated “AA (Very Strong)” (3rd of 22 ratings) by Standard & Poor’s Corporation and AA- (Very Strong) by Fitch Ratings (4th of 24 ratings). Avemco Insurance Company, HCC Life Insurance Company, Houston Casualty Company and U.S. Specialty Insurance Company are rated “A+ (Superior)”

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(2nd of 16 ratings) by A.M. Best Company, Inc. American Contractors Indemnity Company, Perico Life Insurance Company, United States Surety Company and HCC Insurance Company are rated “A (Excellent)” (3rd of 16 ratings). Standard & Poor’s, Fitch Ratings and A.M. Best are nationally recognized independent rating agencies. These financial strength ratings are intended to provide an independent opinion of an insurer’s ability to meet its obligations to policyholders and are not evaluations directed at investors.

Our underwriting agencies underwrite on behalf of our insurance companies and in certain situations for other non-affiliated insurance companies. They receive fees for these services and do not bear any of the insurance risk of the companies for which they underwrite. Our underwriting agencies generate revenues based on fee income and profit commissions and specialize in contingency (including contest indemnification, event cancellation and weather coverages); directors’ and officers’ liability; individual disability (for athletes and other high profile individuals); kidnap and ransom; employment practices liability; marine; professional indemnity; public entity; mortgage, residual value and title insurance; and other specialty lines of business. Our principal underwriting agencies are Covenant Underwriters, G.B. Kenrick & Associates, HCC Global Financial Products, HCC Indemnity Guaranty Agency, HCC Specialty Underwriters, Professional Indemnity Agency, and RA&MCO Insurance Services.

Our brokers provide reinsurance and insurance brokerage services for our insurance companies, agencies and our clients and receive fees for their services. A reinsurance broker structures and arranges reinsurance between insurers seeking to cede insurance risks and reinsurers willing to assume such risks. Reinsurance brokers do not bear any of the insurance risks of their client companies. They earn commission income, and to a lesser extent, fees for certain services, generally paid by the insurance and reinsurance companies with whom the business is placed. Insurance broker operations consist of consulting with retail and wholesale clients by providing information about insurance coverage and marketing, placing and negotiating particular insurance risks. Our brokers specialize in placing insurance and reinsurance for group life, accident and health, surety, marine, and property and casualty lines of business. Our brokers are Rattner Mackenzie, HCC Risk Management and Continental Underwriters.

Summary Financial Data.  The following sets forth our summary consolidated financial data as of and for the years ended December 31, 2006, 2005, 2004, 2003 and 2002 and the three months ended March 31, 2007 and 2006. The financial data has been derived from our audited consolidated financial statements or our unaudited interim consolidated financial statements for the periods specified. In the opinion of management, the summary consolidated financial data as of and for the three months ended March 31, 2007 and 2006 include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the interim periods presented. Financial results for the three-month periods may not be indicative of financial results for the full year and historical results of operations may not be indicative of results to be expected for any future period.

You should read this information in conjunction with our consolidated financial statements, the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual report on Form 10-K for the year ended December 31, 2006 and our Quarterly Report on From 10-Q for the quarter ended March 31, 2007.

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	Three Months Ended
	March 31,						Year Ended December 31,
	2007			2006			2006			2005		2004		2003		2002
	(Unaudited)			(Unaudited)
	(In thousands, except per share data(1))
Revenue
Net earned premium	$	497,600		$	380,571		$	1,709,189		$	1,369,988	$	1,010,692	$	738,272	$	505,521
Fee and commission income		32,125			31,669			137,131			132,628		183,802		142,615		116,090
Net investment income		49,467			36,581			152,804			98,851		64,885		47,335		37,755
Net realized investment gain (loss)		(555	)		(1,298	)		(841	)		1,448		5,822		527		453
Other operating income		18,585			18,750			77,012			39,773		19,406		13,215		6,985
Total revenue		597,222			466,273			2,075,295			1,642,688		1,284,607		941,964		666,804
Expense
Loss and loss adjustment expense, net		300,472			222,067			1,011,856			919,697		645,230		488,000		307,143
Policy acquisition costs, net		89,099			76,232			319,885			261,708		222,323		137,212		99,521
Other operating expense		57,641			47,333			222,324			180,990		168,045		144,574		101,513
Interest expense		3,303			2,154			11,396			7,684		8,374		7,453		8,301
Total expense		450,515			347,786			1,565,461			1,370,079		1,043,972		777,239		516,478
Earnings from continuing operations before income tax expense		146,707			118,487			509,834			272,609		240,635		164,725		150,326
Income tax expense on continuing operations		50,017			39,345			167,549			84,177		81,940		59,382		52,372
Earnings from continuing operations		96,690			79,142			342,285			188,432		158,695		105,343		97,954
Earnings from discontinued operations, net of income taxes(2)		—			—			—			2,760		4,004		36,684		6,365
Net earnings	$	96,690		$	79,142		$	342,285		$	191,192	$	162,699	$	142,027	$	104,319
Basic earnings per share data:
Earnings from continuing operations	$	0.86		$	0.71		$	3.08		$	1.78	$	1.63	$	1.11	$	1.05
Earnings from discontinued operations(2)		—			—			—			0.03		0.04		0.39		0.07
Net earnings	$	0.86		$	0.71		$	3.08		$	1.81	$	1.67	$	1.50	$	1.12
Weighted average shares outstanding		111,959			111,014			111,309			105,463		97,257		94,919		93,338
Diluted earnings per share data:
Earnings from continuing operations	$	0.83		$	0.68		$	2.93		$	1.72	$	1.61	$	1.09	$	1.04
Earnings from discontinued operations(2)		—			—			—			0.03		0.04		0.38		0.07
Net earnings	$	0.83		$	0.68		$	2.93		$	1.75	$	1.65	$	1.47	$	1.11
Weighted average shares outstanding		117,009			116,896			116,736			109,437		98,826		96,576		94,406
Cash dividends declared, per share	$	0.100		$	0.075		$	0.375		$	0.282	$	0.213	$	0.187	$	0.170

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	Three Months Ended
	March 31,				Year Ended December 31,
	2007		2006		2006		2005		2004		2003		2002
	(Unaudited)		(Unaudited)
	(In thousands, except per share data(1))
Balance sheet data (at end of period):
Total investments	$	4,183,056	$	3,364,334	$	3,927,995	$	3,257,428	$	2,468,491	$	1,707,300	$	1,177,775
Premium, claims and other receivables		771,462		855,880		864,705		884,654		891,360		934,252		789,226
Reinsurance recoverables		1,058,667		1,349,351		1,169,934		1,361,983		1,104,026		900,775		797,195
Ceded unearned premium		224,235		239,530		226,125		239,416		311,973		291,591		164,224
Goodwill		742,607		531,286		742,677		532,947		444,031		388,023		335,288
Total assets		7,632,092		7,106,318		7,630,132		7,028,800		5,900,568		4,883,345		3,738,963
Loss and loss adjustment expense payable		3,113,496		2,837,495		3,097,051		2,813,720		2,089,199		1,525,313		1,158,915
Unearned premium		917,728		825,375		920,350		807,109		741,706		592,311		331,050
Premium and claims payable		554,272		735,131		646,224		753,859		766,765		784,038		759,910
Notes payable		298,281		309,426		308,887		309,543		311,277		310,404		230,027
Shareholders’ equity		2,132,449		1,758,303		2,042,803		1,690,435		1,325,498		1,046,405		884,671
Book value per share(3)	$	19.03	$	15.82	$	18.28	$	15.26	$	12.99	$	10.91	$	9.45

(1)	Certain amounts in the 2002 through 2005 selected consolidated financial data have been reclassified to conform to the 2006 presentation. Such reclassifications had no effect on our consolidated net earnings, shareholders’ equity or cash flows.
(2)	We sold our retail brokerage operation, HCC Employee Benefits, Inc., in 2003. The net earnings of HCC Employee Benefits, the 2003 gain on sale and the subsequent gains in 2004 and 2005 from a contractual earnout are classified as discontinued operations. Consistent with this presentation, all pre-sale revenue and expense of HCC Employee Benefits was reclassified to discontinued operations.
(3)	Book value per share is calculated by dividing the sum of outstanding shares into total shareholders’ equity.

Ratio of Earnings to Fixed Charges.  The ratio of our earnings to fixed charges for each of the periods indicated is as follows:

	Three Months Ended		Year Ended December 31,
	March 31, 2007		2006		2005		2004		2003		2002
Ratio of earnings to fixed charges		34.92		34.24		25.65		21.58		16.66		14.50

In determining the ratio, fixed charges consist of interest expense, including amounts capitalized and amortization of capitalized expenses related to indebtedness, and 33% of rent expenses, which represents a reasonable approximation of the interest factor of rent expenses. Earnings consist of earnings from continuing operations before income tax expense plus fixed charges.

Additional Information.  We are subject to the informational filing requirements of the Exchange Act, and, accordingly, are required to file annual, quarterly and current reports, statements and other information with the Securities and Exchange Commission relating to our business, financial condition and other matters. Certain information, as of particular dates, concerning our directors and executive officers, their remuneration, stock options granted to them, the principal holders of our securities and any material interest of these persons in transactions with us is required to be disclosed in proxy statements distributed to our shareholders and filed with the Securities and Exchange Commission. We have also filed with the Securities and Exchange Commission a Tender Offer Statement on Schedule TO, of which this Offer to Amend is a part, that includes additional information relating to the Offer.

These reports, statements and other information and Securities and Exchange Commission filings can be inspected and copied at the public reference facilities maintained by the Securities and Exchange Commission at

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100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of this material may also be obtained by mail, upon payment of the Securities and Exchange Commission’s customary charges, from the Public Reference Section of the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. The Securities and Exchange Commission also maintains a website on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission. You may access our publicly filed documents at this site, including the Tender Offer Statement on Schedule TO and the documents incorporated therein by reference. You may obtain information about the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. You may also go to our website at http://www.hcc.com to access the Tender Offer Statement on Schedule TO and related documents. Reference to our website address in this Offer to Amend does not constitute the incorporation by reference of the information contained at that site into this Offer to Amend.

This Offer to Amend does not contain all of the information contained in the Tender Offer Statement on Schedule TO and the exhibits to the Tender Offer Statement on Schedule TO. We recommend that you review the Tender Offer Statement on Schedule TO, including its exhibits, and the materials identified below in this Section 11 — “Information Concerning HCC” under the heading “Incorporation by Reference” that we have filed with the Securities and Exchange Commission before making a decision on whether to accept the Offer.

Incorporation by Reference.  The rules of the Securities and Exchange Commission allow us to “incorporate by reference” information into this document, which means that we can disclose important information to you by referring you to another document filed separately with the Securities and Exchange Commission. The following documents that have been previously filed with the Securities and Exchange Commission contain important information about us and we incorporate them by reference (other than any portions of the respective filings that were furnished to, rather than filed with, the Securities and Exchange Commission under applicable Securities and Exchange Commission rules):

•  Annual Report on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on April 1, 2007;

•  Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 as filed with the Securities and Exchange Commission on May 10, 2007;

•  Our Current Reports on Form 8-K filed on January 3, 2007, January 30, 2007, February 12, 2007, February 20, 2007, February 21, 2007, March 5, 2007, March 13, 2007, April 13, 2007, April 17, 2007, May 8, 2007 and May 14, 2007 (in each case to the extent these items were “filed” with the SEC and not “furnished”).

•  Definitive Proxy Statement on Schedule 14A, as filed with the Securities and Exchange Commission on April 13, 2007; and

•  All documents filed by us under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act.

Any statement contained in any document incorporated by reference into this Offer to Amend shall be deemed to be modified or superseded to the extent that an inconsistent statement is made in this Offer to Amend or any subsequently filed document. You can obtain any of the documents incorporated by reference in this document from the Securities and Exchange Commission’s website at the address described above. You may also request a copy of these filings, other than exhibits to such filings (unless such exhibits are specifically incorporated by reference into such filings), at no cost, by writing or telephoning James L. Simmons at HCC, 13403 Northwest Freeway, Houston, Texas 77040, phone (713) 690-7300.

12.   Interests of Directors and Officers; Transactions and Arrangements Concerning the Options

None of our executive officers and none of the members of our board of directors is eligible to participate in the Offer.

On or about December 27, 2006, each of our executive officers and directors who held any options that otherwise would have constituted Eligible Options agreed with us in writing to amend those options to increase the

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exercise prices of such options to the closing share price of our common stock on the Actual Measurement Dates for such options.

A list of the current members of our board of directors and executive officers is attached as Schedule I to this Offer to Amend. Schedule II to this Offer to Amend sets forth a table indicating the beneficial ownership of our common stock by our current directors and executive officers as of July 2, 2007.

The following are, to the best of our knowledge, the only transactions that we, our directors, our executive officers or the affiliates of any of our directors or executive officers have engaged in that involved options to purchase our common stock or involved a purchase or sale of our common stock during the 60-day period ended July 2, 2007:

On May 9, 2007, the following executives were granted stock options at $31.92 per share:

1	)	Barry J. Cook	50,000	Vesting at 16,667 on December 31, 2007; 16,666 on December 31, 2008 and 16,667 on December 31, 2009.
2	)	Edward H. Ellis, Jr.	50,000	Vesting at 16,667 on December 31, 2007; 16,666 on December 31, 2008 and 16,667 on December 31, 2009.
3	)	Craig J. Kelbel	100,000	Vesting at 25,000 shares each year on February 28, 2008; February 28, 2009; February 28, 2010 and February 28, 2011.
4	)	John N. Molbeck, Jr.	150,000	Vesting at 37,500 shares each year on December 31, 2007; December 31, 2008; December 31, 2009 and December 31, 2010.
5	)	Michael J. Schell	100,000	Vesting at 25,000 shares each year on June 30, 2008; June 30, 2009; June 30, 2010 and June 30, 2011.

On May 10, 2007, the following directors were granted stock in the amount of $80,000 as part of their annual compensation; priced at $32.00 per share on such date:

1	)	Patrick B. Collins	2,500 shares
2	)	James R. Crane	2,500 shares
3	)	J. Robert Dickerson	2,500 shares
4	)	Walter M. Duer	2,500 shares
5	)	James C. Flagg	2,500 shares
6	)	Allan W. Fulkerson	2,500 shares
7	)	Michael A.F. Roberts	2,500 shares
8	)	Christopher J.B. Williams	2,500 shares

On May 14, 2007, Mr. Allan W. Fulkerson sold 20,000 shares at $32.54. On May 15, 2007, Mr. Fulkerson exercised 18,750 shares at $18.33 per share and 37,500 shares at $16.80 per share, and he sold these 56,250 shares at $32.53 per share.

On May 17, 2007, Mr. Edward H. Ellis, Jr. exercised 58,125 shares at $17.92 per share. On the same date, Mr. Ellis sold these shares at $32.73. On May 18, 2007, Mr. Ellis exercised, and held, 16,875 shares at $17.92 per share. All shares exercised were from a grant with an expiration date of October 1, 2007.

On May 24, 2007, Mr. James E. Oesterreicher was granted stock in the amount of $76,930 as part of his election/annual board of directors compensation. Priced at $32.82 on such date, Mr. Oesterreicher was awarded 2,344 shares.

On June 18, 2007, Mr. James C. Flagg exercised 18,750 shares at $18.33 per share. On the same date, Mr. Flagg sold these shares at $33.74.

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13.   Status of Options Amended by Us in the Offer; Accounting Consequences of the Offer

Eligible Options validly tendered and accepted by us in the Offer will be amended on the Amendment Date to have an increased exercise price per share equal to the closing share price of our common stock on the Actual Measurement Dates for such options. The terms and conditions of each amended Eligible Option resulting from the acceptance of the Offer will not differ from the terms and conditions in effect for that option at the time of acceptance, except for the amended exercise price. However, to the extent an Eligible Option was an incentive stock option prior to amendment pursuant to this Offer, such amended Eligible Option will be deemed to be a non-qualified option as of the original grant date. All Eligible Options, whether or not amended pursuant to the Offer, will continue to remain outstanding options subject to the terms and conditions of the respective Plans under which they were granted and will be deemed to be non-qualified options.

As a result of a voluntary independent investigation by a special committee of our board of directors of our past practices related to granting stock options, which was concluded on November 16, 2006, we recorded non-cash compensation expense in each year from 1997 through 2005, which aggregated $26.6 million. See our Annual Report on Form 10-K for the year ended December 31, 2006 for additional information.

Assuming all of the Eligible Options subject to this Offer are amended, we anticipate that we will pay Cash Bonuses of up to approximately $4.0 million. According to Statement of Financial Accounting Standards No. 123(R) (“FAS No. 123(R)”), Share-Based Payment, a company modifying an award under FAS No. 123(R) would incur non-cash compensation expense for any incremental difference in fair value between the new award and the old award, measuring the old award’s fair value immediately before the modification. Because we will pay a Cash Bonus in connection with the amendment of Eligible Options that are tendered, the modified awards will result in a higher fair value than the original awards. In our 2006 consolidated financial statements, we recognized compensation expense and accrued a corresponding liability to cover such payments.

14.   Legal Matters; Regulatory Approvals

We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our amending the Eligible Options to have an increased exercise price per share or paying the Cash Bonuses, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for such amendment of those options or the payment of the Cash Bonuses as contemplated herein, except as contemplated by the Tender Offer Statement on Schedule TO. Should any such approval or other action be required, we presently contemplate that we will seek such approval or take such other action. We are unable to predict whether we may determine that we are required to delay the acceptance of the Eligible Options submitted for amendment under the Offer or the payment of the Cash Bonuses pending the outcome of any such matter. We cannot assure you that any such approval or other action, if needed, would be obtained or taken without substantial conditions or that the failure to obtain any such approval or take other action might not result in adverse consequences to our business. Our obligation to amend Eligible Options is subject to certain conditions, including the conditions described in Section 7 — “Conditions of the Offer”.

15.   Material U.S. Federal Income Tax Consequences

The following is a general summary of the material U.S. federal income tax consequences applicable to the amendment of the Eligible Options and the payment of the Cash Bonuses. Foreign, state and local tax consequences are not addressed.

Acceptance of Offer.  If you accept the Offer to amend an Eligible Option, you will not recognize any taxable income with respect to such Eligible Option for U.S. federal income tax purposes at the time of your acceptance.

Amendment of Option.  The amendment of your Eligible Option is not a taxable event for U.S. federal income tax purposes.

Exercise of Amended Eligible Option.  Your amended Eligible Option will be taxable as a non-qualified stock option for U.S. federal income tax purposes. Accordingly, upon each exercise of your amended Eligible Option, you will recognize immediate taxable ordinary income equal to the excess of (i) the fair market value of the purchased

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shares at the time of exercise over (ii) the exercise price paid for those shares, and we must collect the applicable withholding taxes with respect to such income.

Sale of Acquired Shares.  The subsequent sale of the shares acquired upon the exercise of your amended Eligible Option will give rise to a taxable gain to the extent the amount realized upon that sale exceeds the sum of (i) the exercise price paid for the shares plus (ii) the taxable income recognized in connection with the exercise of your amended Eligible Option for those shares. A capital loss will result to the extent the amount realized upon such sale is less than such sum. The gain or loss will be long-term if the shares are not sold until more than one (1) year after the date the amended Eligible Option is exercised to acquire those shares.

Cash Bonus.  You will be immediately taxed upon receipt of each payment of the Cash Bonus. The payment will constitute wages for tax withholding purposes, but will not be eligible for 401(k) matching contribution purposes. Accordingly, we must withhold all applicable federal, state and local income and employment withholding taxes as well as all applicable foreign taxes and payments required to be withheld with respect to such payment, and you will receive only the portion of the payment remaining after those taxes have been withheld.

Foreign Taxation.  If you are subject to the tax laws in more than one jurisdiction, you should be aware that tax consequences of more than one country may apply to you as a result of your receipt, vesting or exercise of a HCC option grant and/or your participation in the Offer. You should be certain to consult your personal tax advisors to discuss these consequences.

We recommend that you consult your own tax advisors with respect to the foreign and U.S. federal, state and local tax consequences of participating in the Offer.

16.   Extension of the Offer; Termination; Amendment

We expressly reserve the right, in our discretion, at any time and from time to time, and regardless of whether or not any event set forth in Section 7 — “Conditions of the Offer” has occurred or is deemed by us to have occurred, to extend the period of time during which the Offer is open and thereby delay the acceptance and amendment of any Eligible Options by making a public announcement thereof.

We also expressly reserve the right, in our discretion, at any time prior to the Expiration Date, to terminate or amend the Offer and to postpone our acceptance and amendment of any Eligible Options with respect to which the Offer has been accepted upon the occurrence of any of the conditions specified in Section 7 — “Conditions of the Offer”, by making a public announcement thereof. Our reservation of the right to delay our acceptance and amendment of the accepted Eligible Options is limited by Rule 13e-4(f)(5) promulgated under the Exchange Act, which requires that we must pay the consideration offered or return the accepted Eligible Options promptly after termination or withdrawal of the Offer.

Amendments to the Offer may be made at any time and from time to time by public announcement of the amendment. In the case of an extension, the public announcement will be issued no later than 8:00 a.m., Central Time (9:00 a.m., Eastern Time), on the next business day after the last previously scheduled or announced Expiration Date. Any public announcement made pursuant to the Offer will be disseminated promptly to option holders in a manner reasonably designated to inform option holders of such change.

If we materially change the terms of the Offer or the information concerning the Offer, or if we waive a material condition of the Offer, we will extend the Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Exchange Act. Those rules require that the minimum period during which an Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend on the facts and circumstances, including the relative materiality of such terms or information. If we decide to take any of the following actions, we will give notice of such action and keep the Offer open for at least ten business days after the date of such notification:

(1) we change the terms of the proposed amendment of the Eligible Options, or increase or decrease the amount of the Cash Bonus to be paid to the holders of Eligible Options; or

(2) we decrease the number of Eligible Options eligible to be accepted for amendment in the Offer.

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17.   Fees and Expenses

We will not pay any fees or commissions to any broker, dealer or other person for soliciting or recommending submissions of Eligible Options for amendment pursuant to the Offer. We expect that certain of our officers and employees will, in the normal scope of their employment, participate in the distribution of this Offer to Amend, the related Letter of Transmittal and the Option Summaries and the dissemination of any additional information about the Offer that we may announce publicly. We do not intend to pay any such officer or employee any additional consideration for any such services.

18.   Forward-Looking Statements; Miscellaneous

This Offer to Amend and the documents referred to above and incorporated by reference in this Offer to Amend may contain “forward-looking” statements and information, which involve risks and uncertainties. Actual future results may differ materially. Statements indicating that we “anticipate,” “expect,” “intend,” “estimate,” “believe,” “are planning” or “plan to” are forward-looking, as are other statements concerning future financial results, product offerings or other events that have not yet occurred. There are several important factors that could cause actual results or events to differ materially from those anticipated by the forward-looking statements. Such factors include those described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2006 under the heading “Risk Factors.” Although we have sought to identify the most significant risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized. We also cannot assure you that we have identified all possible issues which we might face. We undertake no obligation to update any forward-looking statements that we make, except as required by applicable law. We confirm that we will comply with Rule 13e-4(d)(2) and Rule 13e-4(e)(3) of the Exchange Act with respect to the information presented to security holders.

The safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 (the “Act”) protects companies from liability for their forward-looking statements if they comply with the requirements of the Act. The Act does not provide this protection for transactions such as the Offer, to the extent it constitutes a tender offer, and may not be available for our forward-looking statements contained in this document.

We are not aware of any jurisdiction where the making of the Offer is not in compliance with applicable law. If we become aware of any jurisdiction where the making of the Offer is not in compliance with any valid applicable law, we intend to make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law or we determine that further efforts to comply are not advisable, the Offer will not be made to, nor will acceptances of the Offer be accepted from or on behalf of, the holders of Eligible Options residing in such jurisdiction.

We have not authorized anyone to give you any information or to make any representations in connection with the Offer other than the information and representations contained in this Offer to Amend, the related Tender Offer Statement on Schedule TO and the related Letter of Transmittal. If anyone makes any representation to you or gives you any information different from the representations and information contained in this Offer to Amend, the related Tender Offer Statement on Schedule TO and the related Letter of Transmittal, you must not rely upon that representation or information as having been authorized by us. We have not authorized any person to make any recommendation on our behalf as to whether or not you should accept the Offer. You should rely only on the representations and information contained in this Offer to Amend, the related Tender Offer Statement on Schedule TO and the related Letter of Transmittal or to which we have referred you.

HCC INSURANCE HOLDINGS, INC.

July 9, 2007

28

SCHEDULE I

DIRECTORS AND EXECUTIVE OFFICERS OF HCC

The directors and executive officers of HCC and their respective positions and offices as of July 9, 2007 are set forth in the following table. The business address of each of our directors and executive officers is c/o HCC Insurance Holdings, Inc., 13403 Northwest Freeway, Houston, Texas 77040.

Name	Position and Offices Held
Frank J. Bramanti	Director, Chief Executive Officer
Patrick B. Collins	Director
James R. Crane	Director
J. Robert Dickerson	Director, Chairman of the Board
Walter M. Duer	Director
Edward H. Ellis, Jr.	Director, Executive Vice President and Chief Financial Officer
James C. Flagg, Ph.D.	Director
Allan W. Fulkerson	Director
John N. Molbeck, Jr.	Director, President and Chief Operating Officer
James E. Oesterreicher	Director
Michael A. F. Roberts	Director
Christopher Williams	Director
Barry J. Cook	Executive Vice President
Craig J. Kelbel	Executive Vice President
Michael J. Schell	Executive Vice President
Robert F. Thomas	Executive Vice President
Pamela J. Penny	Senior Vice President
Randy D. Rinicella	Senior Vice President and General Counsel

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SCHEDULE II

BENEFICIAL OWNERSHIP OF HCC SECURITIES BY

DIRECTORS AND EXECUTIVE OFFICERS OF HCC

The following table provides the aggregate number and percentage of shares of our common stock that were beneficially owned by our directors and executive officers and their respective associates, if any, as of July 5, 2007. For purposes of this table, and in accordance with Securities and Exchange Commission rules, shares of common stock are considered “beneficially owned” if the person directly or indirectly has sole or shared power to vote or direct the voting of the securities or has sole or shared power to divest of or direct the divestment of the securities. A person is also considered to beneficially own shares of common stock that he or she has the right to acquire within 60 days after July 5, 2007, in accordance with Rule 13d-3 under the Exchange Act.

Directors and Executive Officers

	Beneficially Owned
Name of Beneficial Owner(1)	Number		Percentage
Frank J. Bramanti(2)		308,918		*
Patrick B. Collins(3)		112,500		*
James R. Crane(4)		133,750		*
J. Robert Dickerson(5)		148,250		*
Walter M. Duer(6)		48,750		*
Edward H. Ellis, Jr.(7)		187,542		*
James C. Flagg, Ph.D.(8)		68,750		*
Allan W. Fulkerson(9)		91,325		*
John N. Molbeck, Jr.(10)		94,166		*
James E. Oesterreicher		2,344		*
Michael A. F. Roberts(11)		86,250		*
Christopher Williams		2,500		*
Barry J. Cook(12)		47,050		*
Craig J. Kelbel(13)		20,000		*
Michael J. Schell(14)		175,000		*
Robert F. Thomas(15)		81,251		*
Pamela J. Penny(16)		21,500		*
Randy D. Rinicella		1,075		*
All Directors and Executive Officers as a Group		1,630,921		1.45	%

*	Less than 1%
(1)	All persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable and subject to the other information contained in the footnotes to this table.
(2)	Includes 87,500 shares issuable upon the exercise of outstanding options that are exercisable within 60 days of July 5, 2007. Includes 1,125 shares owned of record by Mr. Bramanti’s wife in trust for their children and 2,468 shares owned of record by their children. Mr. Bramanti disclaims beneficial ownership of such shares.
(3)	Includes 87,500 shares issuable upon the exercise of outstanding options that are exercisable within 60 days of July 5, 2007.
(4)	Includes 31,250 shares issuable upon the exercise of outstanding options that are exercisable within 60 days of July 5, 2007.
(5)	Includes 87,500 shares issuable upon the exercise of outstanding options that are exercisable within 60 days of July 5, 2007.

30

(6)	Includes 44,250 shares issuable upon the exercise of outstanding options that are exercisable within 60 days of July 5, 2007. Includes 2,000 shares owned of record by a family limited partnership. Another 7,500 shares become exercisable on August 26, 2007.
(7)	Includes 169,167 shares issuable upon the exercise of outstanding options that are exercisable within 60 days of July 5, 2007. Includes 375 shares owned of record by Mr. Ellis’ wife. Mr. Ellis disclaims beneficial ownership of these shares.
(8)	Includes 66,250 shares issuable upon the exercise of outstanding options that are exercisable within 60 days of July 5, 2007.
(9)	Includes 31,250 shares issuable upon the exercise of outstanding options that are exercisable within 60 days of July 5, 2007. Includes 7,500 shares owned of record in Mr. Fulkerson’s IRA.
(10)	Includes 94,166 shares issuable upon the exercise of outstanding options that are exercisable within 60 days of July 5, 2007.
(11)	Includes 83,750 shares issuable upon the exercise of outstanding options that are exercisable within 60 days of July 5, 2007.
(12)	Includes 40,000 shares issuable upon exercise of outstanding options that are exercisable within 60 days of July 5, 2007.
(13)	Includes 20,000 shares issuable upon exercise of outstanding options that are exercisable within 60 days of July 5, 2007.
(14)	Includes 175,000 shares issuable upon exercise of outstanding options that are exercisable within 60 days of July 5, 2007.
(15)	Includes 81,251 shares issuable upon exercise of outstanding options that are exercisable within 60 days of July 5, 2007.
(16)	Includes 21,500 shares issuable upon exercise of outstanding options that are exercisable within 60 days of July 5, 2007. Another 7,500 become exercisable on August 26, 2007.

31

EX-99.(A)(1)(B)

Exhibit (a)(1)(B)

To holders of certain HCC Insurance Holdings, Inc. stock options:

I am pleased to announce that HCC Insurance Holdings, Inc. is implementing a special option amendment program to enable holders of certain HCC stock options to avoid the unfavorable tax consequences they might otherwise face in connection with certain below-market option grants. The details of the program, which for securities law reasons takes the form of a tender offer, are described in the accompanying Offer to Amend.

As you may know, we recently determined that the exercise price of some of our stock options was less than the fair market value of our common stock on the actual measurement date for such options for tax purposes, where the fair market value is based on the closing share price of our common stock on the New York Stock Exchange on such date. These below-market grants will create adverse tax consequences to the extent that these options were not vested on or before December 31, 2004.

Specifically, Section 409A of the Internal Revenue Code imposes a 20% penalty tax on income attributable to certain below-market options. For tax purposes, the income from the option is calculated as the difference between the aggregate fair market value of the shares that are vested and the aggregate exercise price for those shares. This penalty tax, along with interest based on the failure to pay the taxes on a timely basis are imposed regardless of whether the option is ever exercised, and are in addition to the regular income tax that the holder would ordinarily pay on exercise of the option. Section 409A has other adverse tax consequences, and some states impose similar penalty taxes that would be in addition to the federal penalty tax imposed by Section 409A.

Section 409A only applies to persons who are otherwise subject to U.S. federal income tax. Option holders who are not obligated to pay U.S. federal income tax will not owe the penalty tax imposed by Section 409A.

You are receiving this message and the attached materials because you hold outstanding HCC Insurance Holdings, Inc. options that will be subject to the adverse tax consequences of Section 409A.

For more complete information regarding U.S. federal income tax consequences, you should carefully read the Offer to Amend.

The Section 409A penalty tax will not apply to a below-market grant of a stock option if the stock option is amended either to be brought into compliance with, or made exempt from, Section 409A. Such an option can be brought into compliance with, or made exempt from, Section 409A if it is amended to increase its exercise price to the fair market value of the underlying common stock on the date of grant. To be effective, this amendment must occur on or before December 31, 2007.

In the Offer to Amend, we are offering each holder of a below-market stock option grant the opportunity to amend the unexercised portion of such option to increase the exercise price of that portion to the closing share price of our common stock on the actual measurement date for such option for tax purposes. As part of the offer, each holder who agrees to amend an eligible option will be eligible to receive a cash bonus in an amount equal to the increase in the per share exercise price of that option multiplied by the number of shares that remain unexercised at the expiration of the offer (the “Cash Bonus”).

The Cash Bonus will have two components. First, the Cash Bonus payable with respect to eligible option shares that are vested or scheduled to vest prior to January 1, 2008 will be paid to you on the first payroll date after

January 1, 2008. Second, any Cash Bonus payable with respect to eligible option shares that are scheduled to vest after December 31, 2007 will be paid to you on the last business day of the calendar quarter in which each such eligible option shares vest. If an eligible option vests in more than one installment, you will receive a Cash Bonus only for each portion of the eligible option as each such portion vests. You must remain employed by us on the date each portion of your eligible option shares vest to receive the Cash Bonus payable with respect to such portion of your eligible option shares. We have structured the Cash Bonus payment with the continued employment requirement to serve our compensatory objective of retaining and motivating our employees.

We may, at our discretion, accelerate the payment to any recipient of all or any portion of the Cash Bonus, but in no case earlier than January 1, 2008. We do not undertake, and will not be obligated, to treat all recipients of Cash Bonuses in the same manner with respect to any discretionary acceleration of the payment of any portion of any Cash Bonus.

The offer will not apply to any portion of an option grant that has already been exercised or that is exercised before the expiration of the offer. However, we will reimburse you for the 20% federal excise tax and penalties and any similar state tax, related to any options exercised in 2007 before expiration of the offer.

The offer is being made under the terms and conditions of the Offer to Amend and the accompanying Letter of Transmittal. The Offer to Amend contains detailed information about the option amendment program, including the eligible options, the tax consequences of accepting or not accepting the offer and the risks relating to the offer.

ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THE TENDER OFFER DESCRIBED ABOVE, NEITHER WE NOR OUR BOARD OF DIRECTORS IS MAKING ANY RECOMMENDATION REGARDING WHETHER YOU SHOULD ACCEPT OUR OFFER TO AMEND YOUR ELIGIBLE OPTIONS. WE ENCOURAGE YOU TO CONSULT WITH YOUR TAX ADVISORS REGARDING THE TAX CONSEQUENCES FOR YOUR PERSONAL FINANCIAL SITUATION OF ACCEPTING OR NOT ACCEPTING THE OFFER.

We urge you to read all of the tender offer materials carefully, particularly the Q&A in the Summary Term Sheet at the beginning of the Offer to Amend. We will send each holder of an affected option a personalized summary of his or her options that are eligible for the offer. You may direct questions about the tender offer or the accompanying documents to James L. Simmons or Randy D. Rinicella of HCC at (713) 690-7300; provided, however, that neither Mr. Simmons, Mr. Rinicella, nor any other employee of HCC may render tax, financial or legal advice to you in connection with the Offer or advise you on whether nor not to accept the Offer.

The tender offer is currently scheduled to expire at 11:59 p.m., Central Time, on August 7, 2007. To participate in the option amendment program, you must send all the necessary documents so that we receive them by that time. Unless the Offer is extended, we will not accept late submissions.

We encourage you to respond promptly to the Offer to Amend.

Sincerely,

Frank J. Bramanti

Chief Executive Officer

2

EX-99.(A)(1)(C)

Exhibit (a)(1)(C)

HCC INSURANCE HOLDINGS, INC.
OFFER TO AMEND ELIGIBLE OPTIONS

LETTER OF TRANSMITTAL

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 11:59 P.M., CENTRAL TIME,

ON AUGUST 7, 2007, UNLESS THE OFFER IS EXTENDED.

Important: Read the remainder of this Letter of Transmittal before completing this page and signing on page 4.

If you want to accept the Offer with respect to all Eligible Options that you hold, check Box 1, “Amend All Eligible Options” below. If you want to accept the Offer with respect to some, but not all, of the Eligible Options that you hold, check Box 2, “Amend All Eligible Options, Except For” below, and list each Eligible Option with respect to which you are not accepting the Offer. If you sign and submit this Letter of Transmittal but do not clearly mark one of those two boxes, your election with respect to your Eligible Options will default to “Amend All Eligible Options,” and all of your Eligible Options will be amended to increase the per share exercise price to the closing share price of HCC common stock on the actual measurement date for each such option for tax purposes.

BOX 1:	o	AMEND ALL ELIGIBLE OPTIONS
BOX 2:	o	AMEND ALL ELIGIBLE OPTIONS, EXCEPT FOR THE FOLLOWING (and those on any additional sheets that I have attached to this Letter of Transmittal):

			Original
	Grant	Number of	Exercise
Option Number	Date	Shares Granted	Price

IMPORTANT: YOU MUST ALSO SIGN THIS LETTER ON PAGE 4.

To HCC Insurance Holdings, Inc. (“HCC”):

By checking Box 1, “Amend All Eligible Options” or Box 2, “Amend All Eligible Options, Except For” on the cover page of this Letter of Transmittal (or by signing and submitting this Letter of Transmittal without marking either such box), I understand and agree to all of the following:

1. I acknowledge that I am not required to accept the Offer (as defined below).

2. I hereby accept the offer by HCC to amend my Eligible Options in accordance with the terms set forth in (i) the Offer to Amend dated July 9, 2007 (the “Offer to Amend”), of which I hereby acknowledge receipt, and (ii) this Letter of Transmittal (this “Letter”, which together with the Offer to Amend, as they may be amended or supplemented from time to time, constitute the “Offer”). My Eligible Options consist of the portions of the options to purchase shares of HCC common stock granted by HCC to me that have an exercise price less than the fair market value of HCC common stock on the actual measurement dates for such options for tax purposes and that will be outstanding and unexercised at the expiration of the Offer. Each Eligible Option that I hold with respect to which the Offer is accepted will be amended on the first business day following the expiration date of the Offer to have an exercise price per share equal to the closing share price of HCC common stock on the actual measurement date for such option for tax purposes. The date on which the Eligible Option is amended will constitute the “Amendment Date.” Except for the increased exercise price, all the terms and provisions of my amended Eligible Option will be the same as in effect immediately before the amendment; however, to the extent an Eligible Option was an incentive stock option prior to amendment pursuant to the Offer, such amended option will be deemed to be a non-qualified option as of the original grant date whether or not I amend the option. All other capitalized terms used in this Letter of Transmittal but not defined herein have the meaning assigned to them in the Offer to Amend.

3. The Offer expires at 11:59 p.m., Central Time, on August 7, 2007 (the “Expiration Date”), unless HCC, in its discretion, has extended or extends the period of time during which the Offer will remain open. In such event, the term “Expiration Date” will mean the latest time and date on which the Offer, as so extended, expires.

4. Until the Expiration Date, I will have the right to withdraw my acceptance of the Offer with respect to any Eligible Option. If I accept the Offer with respect to multiple Eligible Options, I will have the right to withdraw my acceptance of the Offer with respect to some or all of my Eligible Options. I understand that I can exercise my right to withdraw by returning to HCC a completed, dated and signed Withdrawal Form, a copy of which I have received. I do not have the right to withdraw my acceptance of the Offer with respect to only a portion of a specific Eligible Option. I will have no withdrawal rights after the Expiration Date, unless HCC does not accept any of my Eligible Options for amendment before 11:59 p.m., Central Time, on September 4, 2007, the 40th business day after July 9, 2007. I may then withdraw my acceptance of the Offer with respect to some or all of my Eligible Options at any time before HCC accepts those options for amendment pursuant to the Offer.

5. HCC’s acceptance of my Eligible Option for amendment pursuant to the Offer will constitute a binding agreement between HCC and me upon the terms and subject to the conditions of the Offer.

6. I am the registered holder of each Eligible Option submitted hereby.

7. HCC is not giving me legal, tax or investment advice with respect to the Offer and has advised me to consult with my own legal, tax and investment advisors regarding the consequences of participating or not participating in the Offer.

8. I acknowledge and agree that, under certain circumstances set forth in the Offer to Amend, HCC may either terminate the Offer or amend the Offer and postpone its acceptance of Eligible Options for amendment. If HCC does not accept for amendment an Eligible Option for which I have accepted the Offer, that option will not be amended and will continue to have the same terms and conditions, including exercise price, as were in effect before the Offer was made.

9. I acknowledge and agree that HCC will determine, in its discretion, all questions as to the form of documents and the validity, form, eligibility (including time of receipt), and acceptance of and withdrawal

2

from the Offer. I agree that HCC’s determination of such matters will be final and binding on all parties. I acknowledge and agree that HCC reserves the right to reject any acceptances of, or withdrawals from, the Offer that it determines do not comply with the conditions of the Offer, not to be in appropriate form or the acceptance of which to be unlawful. I acknowledge and agree that HCC also reserves the right to waive any of the conditions of the Offer or any defect or irregularity in any acceptance of, or withdrawal from, the Offer, and HCC’s interpretation of the terms of the Offer (including the instructions to this Letter of Transmittal) will be final and binding on all parties. I acknowledge and agree that no acceptance of, or withdrawal from, the Offer will be deemed to be properly made until all defects and irregularities have been cured by me or waived by HCC. I acknowledge and agree that, unless waived, any defects or irregularities in connection with any acceptance of, or withdrawal from, the Offer must be cured within such time as HCC shall determine. I agree that neither HCC nor any other person is or will be obligated to give notice of any defects or irregularities in the acceptance of or withdrawal from the Offer, and no person will incur any liability for failure to give any such notice. I acknowledge and agree that HCC will not accept for amendment any options that are not eligible for the Offer.

I UNDERSTAND AND AGREE THAT NEITHER HCC NOR THE BOARD OF DIRECTORS OF HCC IS MAKING ANY RECOMMENDATION REGARDING WHETHER OR NOT I SHOULD ACCEPT THE OFFER WITH RESPECT TO ANY ELIGIBLE OPTION, AND THAT I MUST MAKE MY OWN DECISION REGARDING WHETHER TO ACCEPT THE OFFER WITH RESPECT TO ANY ELIGIBLE OPTION, TAKING INTO ACCOUNT MY OWN PERSONAL CIRCUMSTANCES.

3

SIGNATURE OF OPTIONEE

(Signature of Optionee or Authorized Signatory)

(Please print Optionee’s Name in full)

(Capacity of Authorized Signatory, if applicable)

Date: ­ ­

Address: ­ ­

Daytime Telephone (          ) ­ ­

Email Address: ­ ­

Please read the instructions on the following page of this Letter of Transmittal and then check the appropriate box on the cover page (and complete the information in Box 2, if desired), sign and date the signature block above, and return the entire Letter of Transmittal before 11:59 p.m., Central Time, on August 7, 2007 by (i) facsimile to James L. Simmons, facsimile number (713) 744-9648, (ii) U.S. mail, Federal Express or other nationally-recognized commercial delivery service to James L. Simmons c/o HCC Insurance Holdings, Inc., 13403 Northwest Freeway, Houston, Texas 77040 or (iii) email to JLSimmons@hcc.com.

DELIVERY OF THIS LETTER OF TRANSMITTAL IN ANY WAY
OTHER THAN AS DESCRIBED ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.

4

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. Delivery of Letter of Transmittal.  To accept the Offer, a properly completed and duly executed original of this Letter of Transmittal, and any other documents required by this Letter of Transmittal, must be received by HCC by facsimile, mail or e-mail, as set forth on the signature page of this Letter of Transmittal, before 11:59 p.m., Central Time, on the Expiration Date.

Delivery will be deemed made only when actually received by HCC. It is your responsibility to ensure that your Letter of Transmittal has been received by the Expiration Date. You should in all events allow sufficient time to ensure timely delivery.

NOTE: Receipt by HCC does not constitute a determination by HCC that the Letter of Transmittal has been properly completed. It is your responsibility to ensure that you have submitted a properly completed and signed Letter of Transmittal.

2. Delivery by E-mail.  If you choose to deliver this Letter of Transmittal to HCC by e-mail, you may complete and return it by scanning and e-mailing it to JLSimmons@hcc.com as a .pdf attachment, which must contain a properly completed and duly executed copy of this Letter of Transmittal (including these instructions) and any other required documents.

3. Acceptance.  HCC will not accept any alternative, conditional or contingent acceptance. All persons accepting the Offer with respect to Eligible Options shall, by execution of this Letter, waive any right to receive any notice of HCC’s acceptance of their Eligible Options for amendment, except as set forth in the Offer.

4. Signatures.  Except as otherwise provided in the next sentence, the optionee must sign this Letter of Transmittal. If this Letter of Transmittal is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to HCC of the authority of such person so to act must be submitted with this Letter of Transmittal. A Letter of Transmittal requiring any evidence of authority to sign may not be submitted as provided in Instruction 2(b).

5

EX-99.(A)(1)(D)

Exhibit (a)(1)(D)

HCC INSURANCE HOLDINGS, INC.
OFFER TO AMEND ELIGIBLE OPTIONS

WITHDRAWAL FORM

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 11:59 P.M., CENTRAL TIME,
ON AUGUST 7, 2007, UNLESS THE OFFER IS EXTENDED.

Important: Read the remainder of this Withdrawal Form before completing the form and signing on page 3.

You have received (1) the Offer to Amend dated July 9, 2007 (the “Offer to Amend”) and (2) a Letter of Transmittal. You should return this Withdrawal Form only if you previously signed and returned a Letter of Transmittal with respect to one or more Eligible Options and you now wish to change that election and withdraw your acceptance of the Offer with respect to one or more Eligible Options. Capitalized terms used in this Withdrawal Form but not defined herein shall have the meanings assigned to them in the Offer to Amend.

To withdraw your acceptance of the Offer with respect to an Eligible Option, you must complete, sign, date and return this Withdrawal Form (including the instructions) before 11:59 p.m., Central Time, on the Expiration Date by (i) facsimile to James L. Simmons, facsimile number (713) 744-9648, (ii) U.S. mail, Federal Express or other nationally-recognized commercial delivery service to James L. Simmons c/o HCC Insurance Holdings, Inc., 13403 Northwest Freeway, Houston, Texas 77040 or (iii) email to JLSimmons@hcc.com.

If you withdraw your acceptance of the Offer with respect to an Eligible Option, that Eligible Option will not be amended and you will not receive any Cash Bonus with respect to that Eligible Option. You may be subject to adverse tax consequences under Section 409A of the Internal Revenue Code of 1986, as amended, with respect to the Eligible Portion of an Eligible Option; you will be solely responsible for any taxes, penalties or interest payable under Section 409A, and we will have a withholding obligation with respect to such taxes. Your withdrawn Eligible Option will continue to have the same terms and conditions as were in effect before the Offer was made, except that such options will be deemed to be non-qualified options.

You should note that any Eligible Option with respect to which you previously accepted the Offer, but do not withdraw from the Offer as provided in this Withdrawal Form, will remain bound by your previously submitted Letter of Transmittal.

You may not rescind or revoke any withdrawal, and any acceptance of the Offer that you withdraw will not thereafter be deemed to be subject to the Offer unless you properly re-submit your acceptance of the Offer with respect to a withdrawn Eligible Option before the Expiration Date. You will not be deemed to have made a proper acceptance of the Offer with respect to a withdrawn Eligible Option unless you deliver, before 11:59 p.m., Central Time, on the Expiration Date, a new Letter of Transmittal following the procedures described in the instructions to the Letter of Transmittal. This new Letter of Transmittal must be signed and dated after your original Letter of Transmittal and any Withdrawal Form you have submitted.

Upon HCC’s receipt of a new, properly completed, signed and dated Letter of Transmittal, any previously submitted Letter of Transmittal or Withdrawal Form received by HCC prior to the Expiration Date will be disregarded and will be considered replaced in full by the new Letter of Transmittal. You will be bound by the last properly submitted Letter of Transmittal or Withdrawal Form received by HCC before 11:59 p.m., Central Time, on the Expiration Date. To avoid confusion in submitting a Letter of Transmittal after submitting a Withdrawal Form, HCC recommends that you submit a new Letter of Transmittal that clearly accepts the Offer with respect to all Eligible Options for which you wish to accept the Offer.

* * *

If you wish to withdraw your acceptance of the Offer, please check the appropriate box below. If you check Box 2, you must also complete the table that follows it to indicate the Eligible Option(s) with respect to which you are withdrawing your acceptance.

BOX 1:	o	I wish to withdraw my election to accept the Offer, and instead decline the Offer, with respect to all of my Eligible Options.
BOX 2:	o	I wish to withdraw my election to accept the Offer, and instead decline the Offer, only with respect to each of the Eligible Options listed below (and on any additional sheets that I have attached to this Withdrawal Form). I still wish to accept the Offer with respect to all other Eligible Options for which I accepted the Offer in my Letter of Transmittal:

			Original
	Option	Number of	Exercise
Grant Date	Number	Shares Granted	Price

2

SIGNATURE OF OPTIONEE

(Signature of Optionee or Authorized Signatory)

(Please print Optionee’s Name in full)

(Capacity of Authorized Signatory, if applicable)

Date: ­ ­

Address: ­ ­

Daytime Telephone (          ) ­ ­

Email Address: ­ ­

Please read the instructions on the following page of this Withdrawal Form and then check the appropriate box on the cover page (and complete the information in Box 2, if desired), sign and date the signature block above, and return the entire Withdrawal Form before 11:59 p.m., Central Time, on August 7, 2007 by (i) facsimile to James L. Simmons, facsimile number (713) 744-9648, (ii) U.S. mail, Federal Express or other nationally-recognized commercial delivery service to James L. Simmons c/o HCC Insurance Holdings, Inc., 13403 Northwest Freeway, Houston, Texas 77040 or (iii) email to JLSimmons@hcc.com.

DELIVERY OF THIS WITHDRAWAL FORM IN ANY WAY
OTHER THAN AS DESCRIBED ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.

3

HCC INSURANCE HOLDINGS, INC.

INSTRUCTIONS TO WITHDRAWAL FORM

1. Delivery of Withdrawal Form.  To withdraw your acceptance of the Offer with respect to any Eligible Option, a properly completed and duly executed original of this Withdrawal Form, and any other documents required by this Withdrawal Form, must be received by HCC by facsimile, mail or e-mail, as set forth on the signature page of this Withdrawal Form, before 11:59 p.m., Central Time, on the Expiration Date.

Delivery will be deemed made only when actually received by HCC. It is your responsibility to ensure that your Withdrawal Form has been received by the Expiration Date. You should in all events allow sufficient time to ensure timely delivery.

NOTE: Receipt by HCC does not constitute a determination by HCC that the Withdrawal Form has been properly completed. It is your responsibility to ensure that any Withdrawal Form you submit has been properly completed and signed.

2. Delivery by E-mail.  If you choose to deliver this Withdrawal Form to HCC by e-mail, you may complete and return it by scanning and e-mailing it to JLSimmons@hcc.com as a .pdf attachment, which must contain a properly completed and duly executed copy of this Withdrawal Form (including these instructions) and any other required documents.

3. Acceptance.  HCC will not accept any alternative, conditional or contingent withdrawal. All persons withdrawing their acceptance of the Offer with respect to any Eligible Option shall, by execution of this Withdrawal Form, waive any right to receive any notice of HCC’s acceptance of the Withdrawal Form, except as set forth in the Offer.

4. Signatures.  Except as otherwise provided in the next sentence, the optionee must sign this Withdrawal Form. If this Withdrawal Form is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to HCC of the authority of such person so to act must be submitted with this Withdrawal Form. A Withdrawal Form requiring any evidence of authority to sign may not be submitted as provided in Instruction 2(b).

4

EX-99.(A)(5)(A)

Exhibit (a)(5)(A)

FORM OF REMINDER OF EXPIRATION DATE

REMINDER

DEADLINE: 11:59 P.M. (CENTRAL TIME) AUGUST 7, 2007

To all Option Holders Eligible to Participate in the Option Amendment Program:

The Offer to amend some or all of your Eligible Options will expire at 11:59 p.m., Central Time, on August 7, 2007, unless we extend the Offer.

If you want to accept the Offer with respect to some or all of your Eligible Options, you must submit your Letter of Transmittal in accordance with its instructions by the deadline. We cannot accept late submissions, and we therefore urge you to respond early to avoid any last minute problems.

If you do not want to accept the Offer, please disregard this reminder.

This reminder is being distributed to all individuals eligible to participate in the Offer. Accordingly, you are receiving this notice even if you have previously submitted your Letter of Transmittal.

EX-99.(A)(5)(B)

Exhibit (a)(5)(B)

FORM OF NOTICE OF
AMENDMENT OF ELIGIBLE OPTIONS
AND ELIGIBILITY FOR CASH BONUS

To: [Holder]

We are pleased to announce that we have completed our Offer to amend Eligible Options. As a result of the Offer, we have accepted submitted acceptances of the Offer with respect to Eligible Options covering approximately          shares of HCC common stock and have amended the per share exercise price of each such option to the closing share price of HCC common stock on the actual measurement date for each such option for tax purposes. In addition, the participants whose Eligible Options have been amended in accordance with the Offer are now eligible to receive special cash bonuses (each, a “Cash Bonus”) in the aggregate amount of up to $      million to compensate them for the increase in the exercise prices per share in effect for their amended options.

As part of our acceptance process, we accepted and amended your Eligible Options as set forth on Exhibit A.  Accordingly, the adjusted exercise price per share in effect for each of your amended Eligible Options is as set forth on Exhibit A. Each of your amended Eligible Options will continue to vest in accordance with the same vesting schedule measured from the same vesting commencement date currently in effect for such option. The amendment has had no effect on the option’s vesting schedule, exercise period, option term or any other term of the option. However, to the extent an Eligible Option was an incentive stock option such option will be deemed to be a non-qualified option as of the original grant date (and this is so whether or not you have accepted the Offer to Amend).

By accepting the Offer with respect to the Eligible Options set forth on Exhibit A, you became eligible to receive, and HCC agrees to pay to you, the Cash Bonus as set forth on Exhibit A. You must remain employed by us on the date each portion of your Eligible Option is scheduled to vest to receive the Cash Bonus payable with respect to such portion of your Eligible Option.

We must withhold all applicable U.S. federal, state and local income and employment withholding taxes as well as all applicable foreign tax and other payments from each Cash Bonus payment, and you will receive only the portion of the payment remaining after those taxes and payments have been withheld.

Your eligibility to receive the Cash Bonus is subject to the terms and conditions of the Offer as set forth in the Offer to Amend and the related Letter of Transmittal (collectively, the “Offer Documents”), all of which are incorporated herein by reference. The Offer Documents reflect the entire agreement between you and HCC with respect to this transaction. That agreement may be amended only by means of a writing signed by you and an authorized officer of HCC.

HCC INSURANCE HOLDINGS, INC.

By: ­ ­

Title: ­ ­

Printed
Name: ­ ­

Date
Signed: ­ ­

Exhibit A

Amended Eligible Options Held by [Holder]

					Number
		Number	Original	Amended	of Shares
Option	Grant	of Shares	Exercise	Exercise	Constituting an	Cash
Number	Date	Granted	Price	Price	Eligible Option	Bonus

The Cash Bonus will have two components. First, the Cash Bonus payable with respect to Eligible Option shares that are vested or scheduled to vest prior to January 1, 2008 will be paid to you on the first payroll date after January 1, 2008, provided such Eligible Option shares are vested as of such date. Second, any Cash Bonus payable with respect to Eligible Option shares that are scheduled to vest after December 31, 2007 will be paid to you on the last business day of the calendar quarter in which any such portion of your Eligible Option shares vest. You must remain employed by us on the date each portion of your Eligible Option is scheduled to vest to receive the Cash Bonus payable with respect to such portion of your Eligible Option.

2

EX-99.(A)(5)(C)

Exhibit (a)(5)(C)

FORM OF OPTION SUMMARY

To [Holder]:

As you know, we have determined that certain HCC Insurance Holdings, Inc. options you hold were granted with a below-market exercise price, and that to the extent that these options vested after December 31, 2004 or may vest in the future, they may be subject to taxation as nonqualified deferred compensation under Section 409A of the U.S. Internal Revenue Code.

As previously announced, we have commenced a tender offer to amend your unexercised options to increase the exercise price to the closing share price of our common stock on the actual measurement date for each such option for tax purposes. If you accept the offer to amend, this amendment will prevent any adverse tax consequences under Section 409A associated with past or future vesting of the portion of your unexercised options that were not vested as of December 31, 2004. In order to compensate for the higher exercise price, you will also be eligible to receive a cash payment equal to the increase in the aggregate exercise price. In addition, these options, whether or not amended as part of this offer, will be deemed to be non-qualified options.

We have provided to eligible option holders, and have also filed with the SEC, a formal Offer to Amend, a related Letter of Transmittal and other documents describing the tender offer in detail. You should read these tender offer documents carefully because they contain important information about the tender offer. You can obtain the tender offer documents and other related documents filed with the SEC at the SEC’s web site (www.sec.gov) or from us at no cost.

We will also send you another communication in July 2007 that provides the amount of and scheduled payment dates for your cash payments (assuming you elect to amend all affected options). The payment dates will depend on the vesting schedules of the amended options.

Your Affected Options

Set forth below is a list of the options that you hold, listed by option number and grant date, that may be subject to Section 409A. The table includes for each option the total number of shares originally granted, the original exercise price and the exercise price as proposed to be amended, the number of shares subject to each option that are eligible for amendment under the tender offer, and the aggregate amount of the cash bonus you will receive if you accept the offer to amend and satisfy all of the other conditions relating to payment of the cash bonus.

					Number of
					Shares
		Number	Original	Amended	Constituting
Option	Grant	of Shares	Exercise	Exercise	an Eligible	Cash
Number	Date	Granted	Price	Price	Option	Bonus

EX-99.(D)(5)

Exhibit (d)(5)

Option Amendment Agreement

This Option Amendment Agreement (this “Agreement”) is entered into and effective as of the date of the last signature below by and between HCC Insurance Holdings, Inc., a Delaware corporation (“HCC”), and                           (“Employee”), an employee of HCC.

WHEREAS, HCC has granted to Employee, and Employee continues to hold, certain options to purchase shares of HCC common stock at exercise prices below the fair market value of the HCC common stock on the respective actual measurement dates for such options for tax purposes (the “Eligible Options”), which exercise prices and fair market values are set forth on Exhibit A hereto;

WHEREAS, under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended, options granted with an exercise price less than the fair market value of the underlying stock on the actual measurement date for such options, to the extent they were not vested as of December 31, 2004, will be subject to adverse income taxation unless such options are amended to exempt them from Section 409A;

WHEREAS, each portion of an Eligible Option that (i) was unvested as of December 31, 2004 and (ii) remains outstanding and unexercised on the date hereof (such portion to constitute an “Eligible Portion”) is not in compliance with Section 409A; and

WHEREAS, Employee wishes to avoid the adverse income tax consequences arising from Section 409A, and HCC is willing to amend the terms of the Eligible Options as set forth in this Agreement to exempt such Eligible Options from Section 409A;

NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, HCC and Employee hereby agree as follows:

1. Increase in Exercise Price of Eligible Options.  Each Eligible Option held by Employee is hereby amended to increase the exercise price of such Eligible Option to the fair market value of the HCC common stock on the actual measurement date of such option for tax purposes, in each case as set forth on Exhibit A hereto. Except for the increased exercise price per share, each Eligible Option held by Employee will continue to remain subject to the same terms and conditions as in effect for that option immediately prior to the date hereof (it being understood that, because each Eligible Option was originally granted with an exercise price below the fair market value of the HCC common stock on the actual measurement date, no Eligible Option will qualify as an incentive stock option for tax purposes, regardless of whether it was designated as such at the time of grant). Accordingly, each amended Eligible Option will vest in accordance with the same vesting schedule measured from the same vesting commencement date, and it will have the same exercise period, option term and other conditions currently in effect for that option and each will be a non-qualified option.

2. Amendment; Waiver.  This Agreement may be amended, modified or supplemented by the parties hereto only by a written instrument signed by HCC and Employee. The terms and conditions of this Agreement may be waived only by a written instrument signed by the party waiving compliance.

3. Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of Delaware, without regard to its principles of conflicts of laws.

4. Entire Agreement, Assignment, etc.  This Agreement supersedes all prior written and oral negotiations, discussions, communications, understandings, arrangements and agreements between the parties with respect to the subject matter hereof. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is personal to Employee and shall not be assignable by Employee, by operation of law or otherwise.

5. Counterparts.  This Agreement may be executed in one or more counterparts, all of which together shall constitute one and the same Agreement.

In Witness Whereof, the parties have caused this Agreement to be executed as an agreement under seal as of the date of the last signature below.

HCC INSURANCE HOLDINGS, INC.

By: ­ ­

Title: ­ ­

Printed
Name: ­ ­

Date
Signed: ­ ­

EMPLOYEE: ­ ­

Printed
Name: ­ ­

Date
Signed: ­ ­