<PAGE>

     As filed with the Securities and Exchange Commission on July 9, 2003.

                                                    Registration No. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                    FORM S-1
                             REGISTRATION STATEMENT
                        UNDER THE SECURITIES ACT OF 1933
                             ---------------------
                          MONTPELIER RE HOLDINGS LTD.
             (Exact name of Registrant as specified in its charter)

<Table>
<S>                                      <C>                                      <C>
                BERMUDA                                    6331                                NOT APPLICABLE
    (State or other jurisdiction of            (Primary Standard Industrial                   (I.R.S. Employer
     incorporation or organization)            Classification Code Number)                  Identification No.)
</Table>

                                MINTFLOWER PLACE
                              8 PAR-LA-VILLE ROAD
                                 HAMILTON HM 08
                                    BERMUDA
                           TELEPHONE: (441) 296-5550
              (Address, including zip code, and telephone number,
       including area code, of Registrant's principal executive offices)
                             ---------------------

                             CT CORPORATION SYSTEM
                               111 EIGHTH AVENUE
                            NEW YORK, NEW YORK 10011
                           TELEPHONE: (212) 590-9200
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)
                             ---------------------
                                   COPIES TO:

<Table>
<S>                                      <C>                                      <C>
          MICHAEL GROLL, ESQ.                    JOSEPH D. FERRARO, ESQ.                  RICHARD J. SANDLER, ESQ.
 LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.   LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.            ETHAN T. JAMES, ESQ.
          125 WEST 55TH STREET                     NO. 1 MINSTER COURT                     DAVIS POLK & WARDWELL
        NEW YORK, NY 10019-5389                        MINCING LANE                         450 LEXINGTON AVENUE
       TELEPHONE: (212) 424-8000                     LONDON, EC3R 7AA                        NEW YORK, NY 10017
       FACSIMILE: (212) 424-8500              TELEPHONE: 011-44-207-459-5000             TELEPHONE: (212) 450-4000
                                              FACSIMILE: 011-44-207-459-5099             FACSIMILE: (212) 450-4800
</Table>

                             ---------------------
    APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC:  As soon as practicable after the Registration Statement becomes
effective.

    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]

    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]

    If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]

    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.  [ ]

                        CALCULATION OF REGISTRATION FEE

<Table>
<Caption>
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
               TITLE OF EACH CLASS OF                      PROPOSED MAXIMUM AGGREGATE                     AMOUNT OF
             SECURITIES TO BE REGISTERED                        OFFERING PRICE(1)                     REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                                   <C>
    % Senior Notes due     ..........................             $200,000,000                             $16,180
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
</Table>

(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457 under the Securities Act of 1933, as amended.
                             ---------------------
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

                   SUBJECT TO COMPLETION, DATED JULY   , 2003

                                  $200,000,000

                              [MONTPELIER RE LOGO]
                                % SENIOR NOTES DUE
                            ------------------------

     Montpelier Re Holdings Ltd. is offering $200 million aggregate principal
amount of    % Senior Notes due           . Interest on the notes will be paid
semi-annually in arrears on           and           of each year, beginning on
          , 2003.

     We may redeem the notes at any time and from time to time, in whole or in
part, at a "make-whole" redemption price described in this prospectus in the
section entitled "Description of the Notes -- Optional Redemption."

     The notes will be senior obligations of our company and will rank equally
with all of our other existing and future unsecured and unsubordinated
indebtedness. We do not intend to apply for listing of the notes on a national
securities exchange.

     INVESTING IN OUR NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
8.

<Table>
<Caption>
                                                                        UNDERWRITING
                                                          PRICE TO        DISCOUNTS      PROCEEDS TO
                                                         PUBLIC(1)     AND COMMISSIONS    COMPANY(1)
                                                        ------------   ---------------   ------------
<S>                                                     <C>            <C>               <C>
Per Note..............................................             %               %                %
Total.................................................   $               $                $
</Table>

---------------

(1) Plus accrued interest, if any, from August   , 2003, if settlement occurs
    after that date.

     Delivery of the notes in book-entry form only will be made on or about
August   , 2003 through the facilities of the Depository Trust Company.

     None of the Securities and Exchange Commission, any state securities
commission, the Registrar of Companies in Bermuda or the Bermuda Monetary
Authority has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

<Table>
<S>                             <C>
               Joint Book-Running Managers
BANC OF AMERICA SECURITIES LLC  CREDIT SUISSE FIRST BOSTON
</Table>

                The date of this prospectus is          , 2003.
<PAGE>

                               TABLE OF CONTENTS

<Table>
<Caption>
                                        PAGE
                                        ----
<S>                                     <C>
PROSPECTUS SUMMARY....................    1
RISK FACTORS..........................    8
FORWARD-LOOKING STATEMENTS............   20
USE OF PROCEEDS.......................   21
CAPITALIZATION........................   22
SELECTED FINANCIAL DATA...............   23
MANAGEMENT'S DISCUSSION AND ANALYSIS
  OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.......................   25
BUSINESS..............................   49
REGULATION............................   63
MANAGEMENT............................   68
PRINCIPAL SHAREHOLDERS................   77
</Table>

<Table>
<Caption>
                                        PAGE
                                        ----
<S>                                     <C>
CERTAIN RELATIONSHIPS AND RELATED
  TRANSACTIONS........................   80
MATERIAL TAX CONSIDERATIONS...........   82
DESCRIPTION OF THE NOTES..............   87
UNDERWRITING..........................   99
LEGAL MATTERS.........................  100
EXPERTS...............................  100
WHERE YOU CAN FIND MORE INFORMATION...  100
ENFORCEABILITY OF CIVIL LIABILITIES
  UNDER UNITED STATES FEDERAL
  SECURITIES LAWS AND OTHER MATTERS...  102
INDEX TO FINANCIAL STATEMENTS.........  F-1
GLOSSARY OF SELECTED REINSURANCE,
  INSURANCE AND INVESTMENT TERMS......  G-1
</Table>

                             ---------------------

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

                                        i
<PAGE>

                               PROSPECTUS SUMMARY

     This summary highlights information contained elsewhere in this prospectus
and may not contain all of the information that may be important to you. In this
prospectus, references to the "Company," "we," "us" or "our" refer to Montpelier
Re Holdings Ltd. and/or its subsidiaries, Montpelier Reinsurance Ltd., its
wholly owned Bermuda reinsurance company subsidiary, Montpelier Marketing
Services (UK) Limited, its wholly owned marketing subsidiary, and any other
direct or indirect subsidiary, unless the context suggests otherwise. References
to "Montpelier Re" refer solely to Montpelier Reinsurance Ltd. References in
this prospectus to "dollars" or "$" are to the lawful currency of the United
States of America, unless the context otherwise requires. Although this summary
contains important information about the Company and this offering, you should
read it together with the more detailed information and our financial statements
and the notes to those statements appearing elsewhere in this prospectus. You
should read this entire prospectus carefully, including "Risk Factors" and
"Forward-Looking Statements," to determine how suitable an investment in the
Company would be for you. For your convenience, we have provided a glossary,
beginning on page G-1, of selected reinsurance, insurance and investment terms
and have printed these terms in boldfaced type the first time they are used in
this prospectus.

                                  OUR COMPANY

OVERVIEW

     Montpelier Re Holdings Ltd., through its wholly owned operating subsidiary
Montpelier Reinsurance Ltd., is a Bermuda-based provider of global specialty
PROPERTY INSURANCE and REINSURANCE products. We were founded by White Mountains
Insurance Group, Ltd. and Benfield Holdings Limited and commenced operations in
December 2001 with approximately $1.0 billion of capital. We have assembled a
senior management team with significant industry expertise and longstanding
industry relationships. We seek to identify attractive insurance and reinsurance
opportunities by capitalizing on our management's significant UNDERWRITING
experience, using catastrophe modeling software and our own risk pricing and
capital allocation models. We underwrote $366.6 million and $607.7 million in
GROSS PREMIUMS WRITTEN for the three months ended March 31, 2003 and the year
ended December 31, 2002, respectively, which was spread between various classes
of business and geographic areas. We have well-established market relationships
with the world's top reinsurance BROKERS including Guy Carpenter & Company, Inc.
(a subsidiary of Marsh & McLennan Companies Inc.), Aon Re Worldwide (a
subsidiary of Aon Corporation), Benfield plc and Willis Group Holdings Ltd.,
among others.

MARKET OPPORTUNITIES AND INDUSTRY TRENDS

     There is substantial evidence that insurance and reinsurance prices rise in
the short term for property and other classes of insurance and reinsurance in
the aftermath of significant catastrophic events. We believe that the relatively
high current price levels for property and certain other "short-tail" insurance
and reinsurance products we write are principally due to a supply/demand
imbalance in capacity caused by losses sustained by the global insurance and
reinsurance industry resulting from the September 11th terrorist attacks, a
general decline of global equity markets thereafter, and the more recent
significant loss reserve strengthening of major insurance and reinsurance
companies. Through Montpelier Re, we seek to help fulfill the need for
additional UNDERWRITING CAPACITY in the global property and casualty insurance
and reinsurance market. We intend to take advantage of current conditions in
that market by providing capacity to ceding companies at prices commensurate
with the risk we assume.

     During 2002, Standard & Poors downgraded a large number of reinsurers and
upgraded very few. Many global property and casualty insurers and reinsurers are
experiencing significantly reduced capital as a result of several years of
excessively competitive pricing, expanding coverage terms, significant increases
in RESERVES from asbestos liability, a decline in the U. S. and global equity
markets and poor investment performance. We believe that this reduction in
global underwriting capacity together with continued low interest rates has
resulted in more favorable pricing terms and conditions for reinsurers such as
us.

                                        1
<PAGE>

OUR COMPETITIVE STRENGTHS

     We believe we distinguish ourselves from our competitors as follows:

     - Disciplined Underwriting and Risk Management.  We focus on underwriting
       profitability and seek to limit our loss exposure while earning an
       underwriting profit on all business we write by applying the professional
       insurance disciplines of pricing, underwriting and risk management.

     - Proven and Experienced Management Who Think and Act Like Owners.  Our
       seven underwriters, including our President and Chief Executive Officer,
       Anthony Taylor, who also serves as our Chief Underwriting Officer, have
       an average of 24 years of experience in the insurance and reinsurance
       industry. All of our executive officers participate in our long-term
       incentive program that ties compensation to the achievement of specific
       goals relating to our underwriting performance.

     - Well-Established Market Relationships.  Our underwriting team has the
       knowledge, experience and personal relationships that provide us with
       access to brokers and clients, and we believe we have established a broad
       level of support as a lead reinsurer among many of the largest
       reinsurance brokers worldwide, including Guy Carpenter, Aon Re Worldwide,
       Benfield and Willis Group. As a result of being in a lead position on a
       number of programs, we have the opportunity to analyze a broad range of
       opportunities and exercise selectivity on risks we underwrite.

     - No Historical Liabilities or Contingencies.  We are a recently formed
       company with a balance sheet unencumbered by any historical losses
       relating to the September 11th terrorist attacks, asbestos and other
       legacy exposures affecting our industry. As a result, we have no risk
       that deteriorating LOSS RESERVES related to legacy exposures prior to our
       formation will impact our future financial results.

     - Excellent Financial Strength.  Montpelier Re has a capital base of over
       $1.5 billion and has been assigned an "A" (Excellent) rating by A.M. Best
       Company Inc., the third highest rating of fifteen rating levels. This
       rating reflects A.M. Best's opinion of the results of our first year of
       operations, our capitalization and management. Montpelier Re has been
       assigned an "A3" (Good) rating by Moody's Investors Service, the seventh
       highest rating of twenty-one rating levels. This rating reflects Moody's
       opinion of the ability of Montpelier Re to punctually repay senior
       policyholder claims and obligations. These ratings are not evaluations
       directed to investors in the notes or a recommendation to buy, sell or
       hold the notes.

     - Strong Strategic Sponsorship.  We were founded by White Mountains and
       Benfield, each of whom has a strong reputation in the industry. White
       Mountains has substantial experience in managing companies and sponsoring
       the development of other insurance companies, while Benfield is the third
       largest reinsurance broker in the world ranked by reinsurance brokerage
       revenues for the year ended December 31, 2001.

RISKS RELATING TO OUR COMPANY

     As part of your evaluation of our company, you should take into account the
risks we face in our business and not solely our competitive strengths and
strategies. These risks include:

     - Short Operating History.  We have completed only one full fiscal year of
       operating and financial history and, therefore, our historical financial
       results may not accurately indicate our future performance.

     - Dependence on Principal Employees.  Our success is dependent in part upon
       our ability to attract and retain our principal employees. Our location
       in Bermuda and Bermuda employment restrictions may make it more difficult
       to do so.

     - Cyclical Nature of Reinsurance Business.  The reinsurance business has
       historically been cyclical. Although premium levels for many products
       have increased over the past year, the supply of reinsurance may
       increase, either by capital provided by new entrants or by the commitment
       of additional capital by existing reinsurers, which may cause prices to
       decrease.

                                        2
<PAGE>

     - Severe or Unanticipated Losses.  We may not adequately manage our
       exposure to severe or unanticipated risks. This could lead to losses that
       have a material adverse effect on our financial condition or results of
       operations.

     For more information about these and other risks, see "Risk Factors"
beginning on page 7. You should carefully consider these risk factors together
with all the other information included in this prospectus.

OUR STRATEGY

     We aim to maximize sustainable long-term growth in shareholder value by
pursuing the following strategies:

     - Manage Capital Prudently and Maintain a Disciplined Balance Sheet.  We
       focus on generating underwriting profits while maintaining a disciplined
       balance sheet and manage our capital prudently relative to our risk
       exposure in an effort to maximize sustainable long-term growth in
       shareholder value.

     - Enhance Our Lead Position With Brokers and CEDENTS.  We often take a lead
       position on underwriting treaties, which provides us with enhanced access
       to business and allows us to exercise superior risk selection. We believe
       this has allowed us to continue to build a substantial book of
       reinsurance business exhibiting superior performance.

     - Combine Subjective Underwriting Methods With Objective Modeling
       Tools.  We attempt to exploit pricing inefficiencies that may exist in
       the market from time to time through the use of sophisticated property
       risk modeling tools, both proprietary and third party, together with
       market knowledge and judgment, to seek the most favorable terms per unit
       of risk assumed by our portfolio.

     - Develop and Maintain Balanced Portfolio of Reinsurance Risks.  We are
       building a balanced portfolio of primarily property-related risks,
       diversified by class, product, geography and marketing source. We believe
       a more balanced portfolio of risks reduces the volatility of returns and
       optimizes the growth of shareholder value.

     - Deliver Customized, Innovative, and Timely Insurance and Reinsurance
       Solutions for Our Clients. We are establishing ourselves as a premier
       provider of global specialty property insurance and reinsurance products,
       such as property catastrophe, property specialty (retrocessional
       coverage, property RISK EXCESS OF LOSS REINSURANCE), other specialty
       (aviation, marine, personal accident, casualty) and QUALIFYING QUOTA
       SHARE, while developing an industry reputation for innovative and timely
       quotes for difficult technical risks.

                             ---------------------

     Our principal executive offices are located at Mintflower Place, 8
Par-La-Ville Road, Hamilton HM 08, Bermuda. Our telephone number is (441)
296-5550.

                                        3
<PAGE>

                                  THE OFFERING

Securities Offered............   $200,000,000 aggregate principal amount of
                                      % Senior Notes due

Interest Rate.................        %

Maturity Date.................        ,

Interest Payment Dates........   Semi-annually on each      and      ,
                                 commencing      , 2003.

Ranking.......................   The notes will rank senior in right of payment
                                 to all of our existing and future subordinated
                                 indebtedness and equal in right of payment to
                                 all of our other existing and future unsecured
                                 and
                                 unsubordinated indebtedness. The notes will be
                                 structurally subordinated to all of the
                                 liabilities of our subsidiaries.

Optional Redemption...........   We may redeem some or all of the notes at any
                                 time or from time to time at the "make-whole"
                                 redemption price described in "Description of
                                 the Notes -- Optional Redemption."

Tax Redemption................   We may redeem all of the notes at any time
                                 certain tax events occur as described in
                                 "Description of the Notes -- Redemption for Tax
                                 Purposes."

Certain Covenants.............   The notes will be issued under an indenture
                                 with The Bank of New York, as trustee. The
                                 indenture contains various covenants, including
                                 limitations on liens on the stock of designated
                                 subsidiaries, restrictions as to the
                                 disposition of the stock of designated
                                 subsidiaries and limitations on mergers,
                                 amalgamations and consolidations.

Use of Proceeds...............   We estimate the net proceeds from the offering
                                 of the notes, after deducting the underwriting
                                 discounts and commissions and estimated
                                 offering expenses we will pay, will be
                                 approximately $     million. We intend to use a
                                 portion of the proceeds from this offering to
                                 repay $150 million in aggregate principal
                                 amount outstanding under our existing term loan
                                 facility and to use the remaining proceeds for
                                 general corporate purposes.

No Trading Market.............   The notes are a new issue of securities for
                                 which there is currently no established trading
                                 market. Although the underwriters have informed
                                 us that they currently intend to make a market
                                 in the notes, they are not obligated to do so
                                 and any such market may be discontinued at any
                                 time without notice.

Form of the Notes.............   The notes will be represented by one or more
                                 global notes registered in the name of The
                                 Depository Trust Company or its nominee. This
                                 means that holders will not receive a
                                 certificate for their notes and the notes will
                                 not be registered in their names. Ownership
                                 interests in the notes will be shown on, and
                                 transfers of the notes will be effected only
                                 through, records maintained by participants in
                                 The Depository Trust Company. The Depository
                                 Trust Company and the paying agent for the
                                 notes will be responsible for interest payments
                                 to you.

                                        4
<PAGE>

                         SUMMARY FINANCIAL INFORMATION

     The following table sets forth our summary historical financial information
for the periods ended and as of the dates indicated. Montpelier Re commenced
operations on December 16, 2001. The summary income statement data for the
period from inception (November 14, 2001) through December 31, 2001 and for the
year ended December 31, 2002 and the summary balance sheet data as at December
31, 2002 are derived from our audited financial statements included elsewhere in
this prospectus, which have been prepared in accordance with U.S. GAAP and have
been audited by PricewaterhouseCoopers (Bermuda), our independent auditors. The
summary income statement data for the three months ended March 31, 2003 and
March 31, 2002 and the summary balance sheet data as at March 31, 2003 are
derived from our unaudited financial statements included elsewhere in this
prospectus. The unaudited financial statements have been prepared on the same
basis as our audited financial statements and, in our opinion, include all
adjustments, consisting only of normal recurring adjustments, which we consider
necessary for a fair presentation of our results of operations and financial
position for these periods. These historical results are not necessarily
indicative of results to be expected from any future period, and the results
presented below are not necessarily indicative of our full year performance. You
should read the following summary financial information along with the
information contained in this prospectus, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and related notes included elsewhere in this prospectus.

<Table>
<Caption>
                                                 THREE MONTHS ENDED
                                                      MARCH 31,                 PERIODS ENDED DECEMBER 31,
                                           -------------------------------   ---------------------------------
                                                2003             2002             2002             2001(1)
                                           --------------   --------------   ---------------   ---------------
                                           (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS AND PERCENTAGES)
                                                     (UNAUDITED)
<S>                                        <C>              <C>              <C>               <C>
SUMMARY INCOME STATEMENT DATA:
  Gross premiums written.................   $   366,563      $   203,679       $   607,688       $       150
  Net premiums written...................       332,296          189,359           565,909               150
  Net premiums earned....................       184,655           36,611           329,926                 8
  Net investment income..................        11,684            7,633            39,748             1,139
  Loss and loss adjustment expenses......       (47,690)         (14,367)         (133,310)               --
  Interest on long-term debt.............          (965)            (995)           (4,460)             (236)
Fair value of warrants issued............            --               --                --           (61,321)
Net income (loss)........................   $   103,841      $    18,659       $   152,045       $   (61,618)
Basic earnings (loss) per share..........   $      1.64      $      0.36       $      2.76       $     (1.18)
Diluted earnings (loss) per share........   $      1.56      $      0.36       $      2.74       $     (1.18)
Basic weighted average common shares
  outstanding............................    63,392,600       52,440,000        55,178,150        52,440,000
Diluted weighted average common shares
  outstanding............................    66,479,220       52,440,000        55,457,141        52,440,000
SELECTED RATIOS (BASED ON U.S. GAAP
  INCOME STATEMENT DATA):
Loss ratio(2)............................          25.8%            39.2%             40.4%              n/a
Acquisition costs ratio(3)...............          22.2             17.7              19.1               n/a
General and administrative expense
  ratio(4)...............................           4.8             11.6               7.9               n/a
                                            -----------      -----------       -----------       -----------
Combined ratio(5)........................          52.8%            68.5%             67.4%              n/a
                                            -----------      -----------       -----------       -----------
</Table>

                                        5
<PAGE>

<Table>
<Caption>
                                                                  AS AT             AS AT
                                                                MARCH 31,       DECEMBER 31,
                                                                   2003             2002
                                                              --------------   ---------------
                                                              (IN THOUSANDS, EXCEPT SHARE AND
                                                                   PER SHARE AMOUNTS AND
                                                                        PERCENTAGES)
                                                               (UNAUDITED)
<S>                                                           <C>              <C>
SUMMARY BALANCE SHEET DATA:
Fixed maturities, equities, cash and cash equivalents.......   $ 1,738,156       $ 1,581,461
Total assets................................................     2,154,488         1,833,918
Loss and loss adjustment expense reserves...................       183,621           146,115
Unearned premium............................................       415,730           241,000
Long-term debt..............................................       150,000           150,000
Total shareholders' equity..................................     1,356,573         1,252,535

PER SHARE DATA (BASED ON U.S. GAAP BALANCE SHEET DATA)
Book value per share (6)....................................   $     21.40       $     19.76
Fully converted book value per share (7)....................   $     20.81       $     19.39
</Table>

---------------

(1) The financial information for this period reflects our results from November
    14, 2001, the date of incorporation, to December 31, 2001.

(2) The LOSS RATIO is calculated by dividing loss and LOSS ADJUSTMENT EXPENSES
    by NET PREMIUMS EARNED.

(3) The acquisition costs ratio is calculated by dividing acquisition costs by
    net premiums earned.

(4) The general and administrative expense ratio is calculated by dividing
    general and administrative expenses by net premiums earned.

(5) The COMBINED RATIO is the sum of the loss ratio, the acquisition costs ratio
    and the general and administrative expense ratio.

(6) Book value per share is based on total shareholders' equity divided by basic
    shares outstanding of 63,392,600 as at March 31, 2003 and December 31, 2002.

(7) Fully converted book value per share is a non-GAAP measure calculated based
    on total shareholders' equity plus the assumed proceeds from the exercise of
    dilutive options and warrants in the amount of $168.1 million, divided by
    73,261,760 fully converted shares. We believe that this is the best single
    measure of the return made by our shareholders as it takes into account the
    effect of all dilutive securities.

                                        6
<PAGE>

                       RATIO OF EARNINGS TO FIXED CHARGES

     The following table sets forth our ratio of earnings to fixed charges and
the pro forma ratio of earnings to fixed charges for the periods ended December
31, 2001 and 2002 and the three months ended March 31, 2002 and 2003:

<Table>
<Caption>
                                                           THREE MONTHS
                                                               ENDED        PERIOD ENDED
                                                             MARCH 31,      DECEMBER 31,
                                                           -------------   --------------
                                                           2003    2002    2002   2001(1)
                                                           -----   -----   ----   -------
<S>                                                        <C>     <C>     <C>    <C>
Ratio of Earnings to Fixed Charges.......................  89.5    16.7    29.8   (226.4)
Pro Forma Ratio of Earnings to Fixed Charges(2)..........
                                                                   ----           ------
</Table>

     For purposes of computing these ratios, earnings consist of net income.
Fixed charges consist of interest expense, amortization of capitalized debt
expenses, and an imputed interest component for rental expense.
---------------

(1) We were formed on November 14, 2001 and commenced insurance operations on
    December 16, 2001. We incurred certain one-time expenses in connection with
    our formation including a $61.3 million charge for the fair value of
    warrants issued. The warrants were issued to certain founding shareholders,
    and qualify as equity for accounting purposes, therefore $61.3 million of
    additional paid-in capital was also created with a net neutral impact on
    shareholders' equity. The net loss of $61.6 million for the period was
    almost entirely due to the charge related to the warrants. Fixed charges
    exceeded earnings by $61.9 million for the period ended December 31, 2001.

(2) Assumes the sale of $200,000,000 aggregate principal amount of notes in this
    offering bearing an interest rate of      %, a portion of the net proceeds
    of which are applied as discussed under "Use of Proceeds."

                                        7
<PAGE>

                                  RISK FACTORS

     An investment in the notes involves a number of risks. You should carefully
consider the following information about these risks, together with the other
information contained in this prospectus, before investing in the notes. The
risks and uncertainties described below are not the only ones we face. However,
these are the risks our management believes are material. Additional risks not
presently known to us or that we currently deem immaterial may also impair our
business or results of operations. Any of the risks described below could result
in a significant or material adverse effect on our results of operations or
financial condition, and a corresponding adverse effect on our ability to
satisfy our obligations to you under the notes. You could lose all or part of
your investment.

     This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors,
including the risks described below and elsewhere in this prospectus. See
"Forward-Looking Statements."

RISKS RELATED TO OUR COMPANY

OUR FUTURE PERFORMANCE IS DIFFICULT TO PREDICT BECAUSE WE HAVE A LIMITED
OPERATING HISTORY.

     We were formed in November 2001, and we have completed only one full fiscal
year of operating and financial history. As a result, there is limited
historical financial and operating information available to help you evaluate
our performance. Companies in their initial stages of development present
substantial business and financial risks and may suffer significant losses. They
must successfully develop business relationships, establish operating
procedures, hire staff, install management information and other systems and
complete other tasks necessary to conduct their intended business activities. We
cannot assure you that we will be successful in accomplishing these necessary
tasks. In addition, because we did not have a full complement of underwriters
until the end of the second quarter of 2002, we did not underwrite as much gross
premium as would be expected in a full year and our historical financial results
may not accurately indicate our future performance.

WE COULD BE ADVERSELY AFFECTED BY THE LOSS OF ONE OR MORE PRINCIPAL EMPLOYEES OR
BY AN INABILITY TO ATTRACT AND RETAIN STAFF OR INDEPENDENT DIRECTORS.

     Our success will depend in substantial part upon our ability to attract and
retain our principal employees. As of June 2, 2003, we had forty full-time
employees and depend upon them for the generation and servicing of our business.
We rely substantially upon the services of Anthony Taylor, our Chief Executive
Officer, President and the Chief Underwriting Officer of Montpelier Re. Although
to date we have generally been successful in recruiting employees, our location
in Bermuda may be an impediment to attracting and retaining experienced
personnel, particularly if they are unable to secure work permits, as described
below. Furthermore, although we are not aware of any planned departures, if we
were to lose the services of members of our management team, our business could
be adversely affected. We do not currently maintain key man life insurance
policies with respect to our employees except for Anthony Taylor.

     We also may experience difficulty in attracting and retaining qualified
independent directors in the increasingly regulated corporate governance
environment. Independent directors are generally individuals other than our
employees, officers or their family members or shareholders of more than 10% of
our common shares and who do not have a significant financial relationship with
our Company, although the ultimate determination of independence may be based on
all relevant facts and circumstances.

OUR ABILITY TO CONDUCT OUR BUSINESS MAY BE ADVERSELY AFFECTED BY BERMUDA
EMPLOYMENT RESTRICTIONS.

     Under Bermuda law, non-Bermudians (other than spouses of Bermudians) may
not engage in any gainful occupation in Bermuda without specific permission in
the form of a work permit issued by the Bermuda Department of Immigration. Such
a work permit may be granted or extended upon showing that, after proper public
advertisement, no Bermudian (or spouse of a Bermudian) is available who meets
the minimum

                                        8
<PAGE>

standards for the advertised position. The Bermuda government has a policy that
limits the duration of work permits to six years, subject to certain exemptions
for key employees.

     None of our senior management team (and possibly other officers) based in
Bermuda are Bermudian. Of our employees in Bermuda, twenty-four are Bermudian.
Anthony Taylor, our Chief Executive Officer, Russell Fletcher, our Chief
Reinsurance Officer, and Thomas Busher, our Chief Operating Officer, are working
under work permits that will expire after three years from the date of issue,
unless renewed, and K. Thomas Kemp, our Chief Financial Officer, is working
under a one-year periodic work permit renewable annually in June, which was
recently re-approved in June 2003. If work permits are not obtained or renewed
for our principal employees, we could lose their services, which could
materially affect our business.

WE COULD FACE UNANTICIPATED LOSSES FROM WAR, TERRORISM AND POLITICAL UNREST, AND
THESE OR OTHER UNANTICIPATED LOSSES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     We may have substantial exposure to large, unexpected losses resulting from
future man-made catastrophic events, such as acts of war, acts of terrorism and
political instability. Although we may attempt to exclude losses from terrorism
and certain other similar risks from some coverages we write, we may not be
successful in doing so. In addition, we have written and will continue to write
some policies explicitly covering acts of terrorism. These risks are inherently
unpredictable and recent events may lead to increased frequency and severity of
losses. It is difficult to predict the timing of such events with statistical
certainty or to estimate the amount of loss that any given occurrence will
generate. To the extent that losses from such risks occur, our financial
condition and results of operations could be materially adversely affected.

OUR FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED BY THE OCCURRENCE OF NATURAL
DISASTERS.

     We may have substantial exposure to losses resulting from natural disasters
and other catastrophic events. Catastrophes can be caused by various events,
including hurricanes, tornadoes, earthquakes, hailstorms, explosions, severe
winter weather and fires. The incidence and severity of such catastrophes are
inherently unpredictable and our losses from catastrophes could be substantial.
The occurrence of claims from catastrophic events is likely to result in
substantial volatility in our financial condition or results for any fiscal
quarter or year and could have a material adverse effect on our financial
condition or results and our ability to write new business. This volatility is
compounded by accounting regulations that do not permit reinsurers to reserve
for such catastrophic events until they occur. We expect that increases in the
values and concentrations of insured property will increase the severity of such
occurrences in the future. Although we will attempt to manage our exposure to
such events, a single catastrophic event could affect multiple geographic zones,
or the frequency or severity of catastrophic events could exceed our estimates,
either of which could have a material adverse effect on our financial condition
or results of operations.

IF ACTUAL CLAIMS EXCEED OUR LOSS RESERVES, OUR FINANCIAL RESULTS COULD BE
SIGNIFICANTLY ADVERSELY AFFECTED.

     Our success depends upon our ability to assess accurately the risks
associated with the businesses that we reinsure. To the extent actual claims
exceed our expectations we will be required to recognize immediately the less
favorable experience as we become aware of it. This could cause a material
increase in our liabilities and a reduction in our profitability, including an
operating loss and reduction of capital. To date, we have not been required to
make any of these adjustments. However, it is early in our history and the
number and size of reported claims may increase, and their size could exceed our
expectations.

     A significant portion of the Company's business is property catastrophe and
other classes with high ATTACHMENT POINTS of coverage. Reserving for losses in
the property catastrophe market is inherently complicated in that losses in
excess of the attachment level of the Company's policies are characterized by
high severity and low frequency, and other factors which could vary
significantly as claims are settled. This limits the volume of relevant industry
claims experience available from which to reliably predict ultimate losses
following a loss event.

                                        9
<PAGE>

     In addition, there always exists a reporting lag between a loss event
taking place and the reporting of the loss to the Company. These incurred but
not reported losses are inherently difficult to predict. Because of the
variability and uncertainty associated with loss estimation, it is possible that
our individual case reserves for each catastrophic event and other case reserves
are incorrect, possibly materially.

     These factors require us to make significant assumptions when establishing
loss reserves. Since the Company has insufficient past loss experience,
management supplements this information with industry data. This industry data
may not match the risk profile of the Company, which introduces a further degree
of uncertainty into the process. Accordingly, actual claims and claim expenses
paid may deviate, perhaps substantially, from the reserve estimates reflected in
our financial statements.

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

     If our loss reserves are determined to be inadequate, we will be required
to increase loss reserves at the time of such determination with a corresponding
reduction in our net income in the period in which the deficiency is rectified.
It is possible that claims in respect of events that have occurred could exceed
our loss reserves and have a material adverse effect on our results of
operations or our financial condition in general. In addition, unlike the loss
reserves of U.S. reinsurers, our loss reserves are not regularly examined by
U.S. or other insurance regulators.

THE FAILURE OF ANY OF THE LOSS LIMITATION METHODS WE EMPLOY COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION OR OUR RESULTS OF OPERATIONS.

     We seek to limit our loss exposure by writing a number of our reinsurance
contracts on an excess of loss basis, adhering to maximum limitations on
reinsurance written in defined geographical zones, limiting program size for
each client and prudent underwriting of each program written. In the case of
proportional treaties, we seek per occurrence limitations or loss ratio caps to
limit the impact of losses from any one event. We cannot be sure that any of
these loss limitation methods will be effective. We also seek to limit our loss
exposure by geographic diversification. Geographic zone limitations involve
significant underwriting judgments, including the determination of the area of
the zones and the inclusion of a particular policy within a particular zone's
limits. There can be no assurance that various provisions of our policies, such
as limitations or exclusions from coverage or choice of forum, will be
enforceable in the manner we intend. Disputes relating to coverage and choice of
legal forum may also arise. Underwriting is inherently a matter of judgment,
involving important assumptions about matters that are inherently unpredictable
and beyond our control, and for which historical experience and probability
analysis may not provide sufficient guidance. One or more catastrophic or other
events could result in claims that substantially exceed our expectations, which
could have a material adverse effect on our financial condition or our results
of operations.

WE ARE A COMPANY WITH A LIMITED OPERATING HISTORY AND MAY ENCOUNTER DIFFICULTIES
ESTABLISHING THE INFORMATION TECHNOLOGY SYSTEMS NECESSARY TO RUN OUR BUSINESS.

     The performance of our information technology systems is critical to our
business, our reputation, and our ability to process transactions and provide
high quality customer service. Such technology is and will continue to be a very
important part of our underwriting process. We currently purchase risk modeling
services from AIR Worldwide Corporation ("AIR"), EQECAT, Inc. ("EQE") and Risk
Management Solutions, Inc. ("RMS"). In addition, we continue to work with Black
Diamond Group, an insurance consulting firm, on enhancing proprietary modeling
technologies.

     We cannot be certain that we would be able to replace these service
providers or consultants without slowing our underwriting response time, or that
our proprietary technology will operate as intended. Any defect or error in our
information technology systems could result in a loss or delay of revenues,
higher than expected loss levels, diversion of management resources, harm to our
reputation or an increase in costs.
                                        10
<PAGE>

OUR FOUNDERS AND CERTAIN OF OUR DIRECTORS AND OFFICERS MAY HAVE CONFLICTS OF
INTEREST WITH US.

     Our founders, White Mountains and Benfield Holdings Limited, beneficially
own 22.9% (assuming the exercise of White Mountains' warrants) and 4.5%
(assuming the exercise of Benfield Holdings Limited's warrants), respectively,
of our common shares. In addition, four of our directors are affiliated with our
founders.

     Our founders engage in certain commercial activities and transactions or
agreements with us, which may give rise to conflicts of interest. We may also
enter into commercial arrangements with related parties in the ordinary course
of business. In addition, White Mountains conducts a reinsurance business
through some of its subsidiaries, and we may compete with such subsidiaries for
the same prospective clients. The founders or their affiliates have sponsored,
and may in the future sponsor, other entities engaged in or intending to engage
in insurance and reinsurance underwriting, some of which, together with the
founders, may compete with us. Our founders and their affiliates have also
entered into agreements with and made investments in numerous companies that may
compete with us. In particular:

     - John J. (Jack) Byrne, Chairman of our Board of Directors and a member of
       our Compensation and Nominating Committee, is also Chairman of the Board
       of Directors of White Mountains Insurance Group.

     - K. Thomas Kemp, our Chief Financial Officer and a member of our Board of
       Directors, is a member of the Board of Directors of White Mountains
       Insurance Group and is also a director of Amlin plc, which accounts for a
       significant proportion of our Qualifying Quota Shares ("QQS") premiums.

     - Raymond Barrette, a member of our Board of Directors and a member of the
       Underwriting Policy Committee of our Board of Directors, is President and
       Chief Executive Officer of White Mountains Insurance Group.

     - John Gillespie, a member of our Board of Directors and Chairman of the
       Finance Committee of our Board, is Deputy Chairman of the Board of
       Directors of White Mountains Insurance Group. Mr. Gillespie is Chairman
       and President of White Mountains Advisors LLC, a wholly owned subsidiary
       of White Mountains Insurance Group, which we have engaged to provide
       investment advisory and management services. In addition, Mr. Gillespie
       is either general manager or investment manager of various funds, which
       own less than 5% of our common shares.

     - Folksamerica Reinsurance Company, a reinsurance subsidiary of White
       Mountains Insurance Group, has entered into a quota share arrangement
       with Olympus Reinsurance Ltd., a Bermuda insurance and reinsurance
       company that is one of our competitors. Certain of the directors,
       officers and affiliates of White Mountains Insurance Group own
       approximately 5% of the shares of the parent holding company of Olympus,
       and a member of the Board of Directors of White Mountains Insurance Group
       is Chairman of that holding company.

     - We have in the past purchased certain risk management services from
       Benfield and may purchase other services from them in the future. We also
       pay brokerage commissions to Benfield. These commissions are consistent
       with commissions that we pay to other brokers in the ordinary course of
       business.

     We may not be in a position to influence any party's decision to engage in
activities that would give rise to a conflict of interest, and they may take
actions that are not in our shareholders' best interests.

IF WE CHOOSE TO PURCHASE REINSURANCE, WE MAY BE UNABLE TO DO SO.

     We did not purchase reinsurance for our own account in 2002. In order to
limit the effect of large and multiple losses upon our financial condition, we
have since purchased and may continue to purchase reinsurance in the future.
This type of insurance is known as "RETROCESSIONAL REINSURANCE." A reinsurer's
insolvency or inability to make payments under the terms of its reinsurance
treaty with us could have a material adverse effect on us. In 2003 we purchased
specific retrocessional protection for our direct insurance

                                        11
<PAGE>

and facultative reinsurance programs and our property reinsurance programs,
excluding most other specialty lines. We may purchase additional retrocessional
protection for our own account in 2003.

     From time to time, market conditions have limited, and in some cases have
prevented, insurers and reinsurers from obtaining the types and amounts of
reinsurance, which they consider adequate for their business needs. Following
the September 11th terrorist attacks, terms and conditions in the retrocessional
market generally became less attractive. Accordingly, we may not be able to
obtain our desired amounts of retrocessional reinsurance. In addition, even if
we are able to obtain such retrocessional reinsurance, we may not be able to
negotiate terms that we deem appropriate or acceptable or from entities with
satisfactory creditworthiness.

SINCE WE DEPEND ON A FEW BROKERS FOR A LARGE PORTION OF OUR REVENUES, LOSS OF
BUSINESS PROVIDED BY THEM COULD ADVERSELY AFFECT US.

     We market our reinsurance and insurance worldwide primarily through
brokers. Subsidiaries and affiliates of Benfield (one of our founders and a
shareholder), Willis Group, Guy Carpenter and Aon Re Worldwide provided 29.3%,
23.9%, 21.9% and 12.1% (for a total of 87.2%), respectively, of our gross
premiums written sourced through brokers for the three months ended March 31,
2003. Affiliates of two of these brokers, Aon and Guy Carpenter, have also
co-sponsored the formation of Bermuda reinsurance companies that may compete
with us, and these brokers may favor these reinsurers over other companies. Loss
of all or a substantial portion of the business provided by one or more of these
brokers could have a material adverse effect on our business.

OUR RELIANCE ON REINSURANCE BROKERS SUBJECTS US TO THEIR CREDIT RISK.

     In accordance with industry practice, we frequently pay amounts owed on
claims under our policies to reinsurance brokers, and these brokers, in turn,
pay these amounts over to the ceding insurers that have reinsured a portion of
their liabilities with us. In some jurisdictions, if a broker fails to make such
a payment, we might remain liable to the ceding insurer for the deficiency.
Conversely, in certain jurisdictions, when the ceding insurer pays premiums for
these policies to reinsurance brokers for payment over to us, these premiums are
considered to have been paid and the ceding insurer will no longer be liable to
us for those amounts, whether or not we have actually received the premiums.
Consequently, consistent with the industry, we assume a degree of credit risk
associated with brokers around the world.

OUR INVESTMENT PERFORMANCE MAY AFFECT OUR FINANCIAL RESULTS AND ABILITY TO
CONDUCT BUSINESS.

     Our funds are invested on a discretionary basis by a professional
investment advisory management firm, White Mountains Advisors LLC, a wholly
owned subsidiary of White Mountains Insurance Group, subject to policy
guidelines, which are periodically reviewed by the Finance Committee of our
Board of Directors. See "Business -- Investments." Although our investment
policies stress diversification of risks, conservation of principal and
liquidity, our investments are subject to market-wide risks and fluctuations, as
well as to risks inherent in particular securities.

     In particular, the volatility of our claims submissions may force us to
liquidate securities, which may cause us to incur capital losses. If we
structure our investments improperly relative to our reinsurance liabilities, we
may be forced to liquidate investments prior to maturity at a significant loss
to cover such liabilities. Realized and unrealized investment losses resulting
from an other than temporary decline in value could significantly decrease our
assets, thereby affecting our ability to conduct business.

OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY CURRENCY FLUCTUATIONS.

     Our functional currency is the U.S. dollar. We expect that approximately
one-third of our premiums will be written in currencies other than the U.S.
dollar. A portion of our loss reserves are also in non-U.S. currencies. We may,
from time to time, experience losses resulting from fluctuations in the values
of these non-U.S. currencies, which could adversely affect our operating
results.

                                        12
<PAGE>

     At present we have no currency hedges in place, nor are we aware of any
significant exposures to loss payments that will be paid in non-U.S. currencies.
We intend to consider using hedges when we are advised of known or probable
significant losses that will be paid in non-U.S. currencies. We can, therefore,
choose to manage currency fluctuation exposure during the period between advice
and ultimate payment. However, we would not normally hedge against this possible
exposure for the portion of our loss reserves that represent losses INCURRED BUT
NOT REPORTED ("IBNR"). Reserves for IBNR will be a substantial part of our total
loss reserves.

WE ARE RATED BY RATING AGENCIES AND A DECLINE IN OUR RATINGS COULD AFFECT OUR
STANDING AMONG BROKERS AND CUSTOMERS AND CAUSE OUR REVENUE AND EARNINGS TO
DECREASE.

     Ratings have become an increasingly important factor in establishing the
competitive position of reinsurance companies. A.M. Best assigned Montpelier Re
a financial strength rating of "A" (Excellent), which is the third highest of
fifteen rating levels. The objective of A.M. Best's rating system is to provide
an opinion of an insurer's financial strength and ability to meet ongoing
obligations to its policyholders. Our rating reflects A.M. Best's opinion of the
results of our first year of operations, our capitalization and management.
Montpelier Re has been assigned an "A3" (Good) rating by Moody's Investors
Service, the seventh highest rating of twenty-one rating levels. This rating
reflects Moody's opinion of the ability of Montpelier Re to punctually repay
senior policyholder claims and obligations. These ratings are not evaluations
directed to investors in the notes or a recommendation to buy, sell or hold the
notes. Our ratings are subject to periodic review by, and may be revised
downward or revoked at the sole discretion of, A.M. Best and Moody's and we
cannot assure you that we will be able to retain these ratings.

     If our ratings are reduced from their current levels by A.M. Best and
Moody's, our competitive position in the insurance industry would suffer and it
would be more difficult for us to market our products. A significant downgrade
could result in a substantial loss of business as ceding companies, and brokers
that place such business, move to other reinsurers with higher ratings.

WE MAY REQUIRE ADDITIONAL CAPITAL IN THE FUTURE.

     Our future capital requirements depend on many factors, including our
ability to write new business successfully and to establish premium rates and
reserves at levels sufficient to cover losses. To the extent that the funds
generated by our initial capitalization, initial public offering and our
operations are insufficient to fund future operating requirements and cover
claim payments, we may need to raise additional funds through financings or
curtail our growth and reduce our assets. Any equity or debt financing, if
available at all, may be on terms that are not favorable to us. If we cannot
obtain adequate capital, our business, operating results and financial condition
could be adversely affected.

IF OUR SUBSIDIARY IS UNABLE TO OBTAIN THE NECESSARY CREDIT, WE MAY NOT BE ABLE
TO OFFER REINSURANCE IN CERTAIN MARKETS.

     Montpelier Re is not licensed or admitted as an insurer in any jurisdiction
other than Bermuda. Because many jurisdictions do not permit insurance companies
to take credit for reinsurance obtained from unlicensed or non-admitted insurers
on their statutory financial statements unless appropriate security mechanisms
are in place, it is anticipated that our reinsurance clients will typically
require us to post a letter of credit or other collateral. In order for
Montpelier Re to write Lloyd's QQS business, it must provide a letter of credit
in favor of The Society and Council of Lloyd's ("Lloyd's") in accordance with
Lloyd's rules. We have made arrangements with Fleet National Bank for the
provision of a standby letter of credit in a form acceptable to Lloyd's in an
amount of up to $250 million, and in favor of certain U.S. ceding companies in
an amount of up to $200 million. The Company has also made arrangements with
Barclay's Bank PLC for the provision of an additional letter of credit facility
in favor of certain U.S. ceding companies in an amount of up to $100 million. We
consider the letter of credit facilities sufficient to support Montpelier Re's
estimated obligations for the next 12 months.

                                        13
<PAGE>

     If Montpelier Re were to become unable to obtain the necessary credit,
Montpelier Re could be limited in its ability to write business for certain of
our clients.

RISKS RELATED TO OUR INDUSTRY

SUBSTANTIAL NEW CAPITAL INFLOWS INTO THE REINSURANCE INDUSTRY WILL INCREASE
COMPETITION.

     The reinsurance industry is highly competitive. We compete, and will
continue to compete, with major U.S. and non-U.S. reinsurers, many of which have
greater financial, marketing and management resources than we have. We also
compete with several other Bermuda-based reinsurers that write reinsurance and
that target the same market as we do and utilize similar business strategies,
and some of these companies currently have more capital than we have. We also
compete with financial products, such as risk securitization, the usage of which
has grown in volume. Established competitors have recently completed or may be
planning to complete additional capital raising transactions. New companies
continue to be formed to enter the reinsurance market. The full extent and
effect of this additional capital on the reinsurance market will not be known
for some time and current market conditions could reverse. Ultimately, this
competition could affect our ability to attract or retain business or to write
business at premium rates sufficient to cover losses. If competition limits our
ability to write new business at adequate rates, our return on capital may be
adversely affected.

RECENT EVENTS MAY RESULT IN POLITICAL, REGULATORY AND INDUSTRY INITIATIVES,
WHICH COULD ADVERSELY AFFECT OUR BUSINESS.

     The supply of property catastrophe reinsurance coverage has decreased due
to the withdrawal of capacity and substantial reductions in capital resulting
from, among other things, the September 11th terrorist attacks. This tightening
of supply has resulted in government intervention in the insurance and
reinsurance markets, both in the United States and worldwide. For example, in
response to the tightening of supply in certain insurance and reinsurance
markets resulting from, among other things, the September 11th terrorist
attacks, the Terrorism Risk Insurance Act of 2002 was enacted to ensure the
availability of insurance coverage for terrorist acts in the United States. This
law establishes a federal assistance program that will continue through the end
of 2005 to help the commercial insurers and reinsurers in the property and
CASUALTY INSURANCE industry cover claims related to future terrorism related
losses and regulates the terms of insurance relating to terrorism coverage. This
law could adversely affect our business by increasing our competitors'
underwriting capacity for terrorism-related coverage in the United States. We
are currently unable to predict the extent to which the foregoing new initiative
may affect the demand for our products or the risks that may be available for us
to consider reinsuring. In addition, the insurance and reinsurance regulatory
framework has been subject to increased scrutiny by individual U.S. state
governments.

     This government intervention and the possibility of future interventions
have created uncertainty in the insurance and reinsurance markets about the
definition of terrorist acts and the extent to which future coverages will
extend to terrorist acts. Government regulators are generally concerned with the
protection of policyholders to the exclusion of other constituencies, including
holders of the notes. While we cannot predict the exact nature, timing or scope
of possible governmental initiatives, such proposals could adversely affect our
business by:

     - Providing insurance and reinsurance capacity in markets and to consumers
       that we target;

     - Requiring our participation in industry pools and guaranty associations;

     - Regulating the terms of insurance and reinsurance policies; or

     - Disproportionately benefiting the companies of one country over those of
       another.

     The insurance industry is also affected by political, judicial and legal
developments that may create new and expanded theories of liability. Such
changes may result in delays or cancellations of products and services by
insurers and reinsurers, which could adversely affect our business.

                                        14
<PAGE>

COMPETITION IN THE INSURANCE INDUSTRY COULD REDUCE OUR OPERATING MARGINS.

     Competition in the insurance industry has increased as industry
participants seek to enhance their product and geographic reach, client base,
operating efficiency and general market power through organic growth, mergers
and acquisitions, and reorganization activities. As the insurance industry
evolves, competition for customers may become more intense and the importance of
acquiring and properly servicing each customer will grow. We could incur greater
expenses relating to customer acquisition and retention, which could reduce our
operating margins. There are also many potential initiatives by capital market
participants to produce alternative products that may compete with the existing
catastrophe reinsurance markets. Over time, these numerous initiatives could
significantly affect supply, pricing and competition in our industry.

THE REINSURANCE BUSINESS IS HISTORICALLY CYCLICAL, AND WE EXPECT TO EXPERIENCE
PERIODS WITH EXCESS UNDERWRITING CAPACITY AND UNFAVORABLE PREMIUMS.

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

WE MAY BE ADVERSELY AFFECTED BY INTEREST RATE CHANGES.

     Our operating results depend, in part, on the performance of our investment
portfolio. Our investment portfolio contains interest rate sensitive
instruments, such as bonds, which may be adversely affected by changes in
interest rates. Changes in interest rates could also have an adverse effect on
our investment income and results of operations.

     Interest rates are highly sensitive to many factors, including governmental
monetary policies, domestic and international economic and political conditions
and other factors beyond our control. Any measures we take that are intended to
manage the risks of operating in a changing interest rate environment may not
effectively mitigate such interest rate sensitivity.

RISKS RELATED TO THIS OFFERING OF NOTES

BECAUSE OF OUR HOLDING COMPANY STRUCTURE, THE NOTES WILL BE SUBORDINATED TO ALL
INDEBTEDNESS AND LIABILITIES OF OUR SUBSIDIARIES.

     We are a holding company and conduct substantially all of our operations
through our subsidiaries. As a result, claims of holders of the notes will be
effectively subordinated to the indebtedness and other liabilities of our
subsidiaries. Therefore, in the event of the bankruptcy, liquidation or
dissolution of a subsidiary, following payment by such subsidiary of its
liabilities, such subsidiary may not have sufficient assets remaining to make
payments to us as a shareholder or otherwise. As of March 31, 2003, the
liabilities of our subsidiaries that are structurally senior to the notes would
have been approximately $653.5 million (including reinsurance liabilities).

     In the event of a default under our subsidiaries' letter of credit
facilities, their creditors could elect to declare all amounts borrowed,
together with accrued and unpaid interest and other fees, to be due and payable

                                        15
<PAGE>

prior to any distributions by any such subsidiaries to us to pay interest or
principal due on the notes. In addition, if we caused a subsidiary to pay a
dividend to enable us to make payments in respect of the notes, and such
transfer were deemed a fraudulent transfer or unlawful distribution, the holders
of the notes could be required to return the payment to (or for the benefit of)
the creditors of such subsidiary. This would adversely affect our ability to
make payments to holders of the notes.

WE WILL DEPEND UPON DIVIDENDS FROM MONTPELIER RE TO MEET OUR OBLIGATIONS UNDER
THE NOTES.

     Dividends and other permitted distributions from Montpelier Re are expected
to be our sole source of funds to meet ongoing cash requirements, including debt
service payments and other expenses. Bermuda law and regulations, including, but
not limited to Bermuda insurance regulation, limit the declaration and payment
of dividends and the making of distributions by Montpelier Re to us and in
certain cases requires the prior notification to, or the approval of, the
Bermuda Monetary Authority. Subject to such laws, the directors of Montpelier Re
have the authority to determine whether or not to declare dividends to us. The
maximum amount of dividends that could have been paid by Montpelier Re to us at
March 31, 2003, without such notification, was $255.7 million. There is no
assurance that dividends will be declared or paid in the future.

     The inability of Montpelier Re to pay dividends to us in an amount
sufficient to enable us to meet our cash requirements at the holding company
level could have a material adverse effect on our operations and ability to
satisfy our obligations to you under the notes. See "Dividend Policy" and
"Regulation -- Bermuda Insurance Regulation -- Minimum Solvency Margin and
Restrictions on Dividends and Distributions" and "-- Certain Bermuda Law
Considerations."

     Montpelier Re has no obligation to pay interest or principal due on the
notes or to make funds available to us for that purpose, whether in the form of
loans, dividends or other distributions. Accordingly, our ability to repay the
notes at maturity or otherwise may be dependent upon our ability to refinance
the notes, which will in turn depend, in large part, upon factors beyond our
control.

OUR OPTION TO REDEEM THE NOTES IN CERTAIN CIRCUMSTANCES MAY ADVERSELY AFFECT
YOUR RETURN ON THE NOTES.

     The notes will be redeemable at our option if certain tax events occur.
Redemption may occur at a time when prevailing interest rates are relatively
low. If this happens, you generally will not be able to reinvest the redemption
proceeds in a comparable security at an effective interest rate as high as that
of the redeemed notes. See "Description of the Notes -- Redemption for Tax
Purposes" for a more detailed discussion of redemption of the notes.

THERE CURRENTLY EXISTS NO MARKET FOR THE NOTES AND WE CANNOT ASSURE YOU THAT AN
ACTIVE TRADING MARKET WILL DEVELOP.

     Prior to this offering, there has been no market for the notes. We have
been informed by the underwriters that they intend to make a market in the notes
after the offering is completed. However, the underwriters may cease their
market-making at any time without notice. The liquidity of the trading market in
the notes, and the market price quoted for the notes, may be adversely affected
by many factors, including changes in the overall market for debt securities
generally or the interest of securities dealers in making a market in the notes
and by changes in our financial performance or prospects or in the prospects for
companies in our industry generally.

YOU MAY HAVE DIFFICULTY EFFECTING SERVICE OF PROCESS ON US OR ENFORCING
JUDGMENTS AGAINST US IN THE UNITED STATES.

     We are incorporated pursuant to the laws of Bermuda and our business is
based in Bermuda. In addition, certain of our directors and officers reside
outside the United States, and all or a substantial portion of our

                                        16
<PAGE>

assets and the assets of such persons are located in jurisdictions outside the
United States. As such, we have been advised that there is doubt as to whether:

     - A holder of the notes would be able to enforce, in the courts of Bermuda,
       judgments of U.S. courts against persons who reside in Bermuda based upon
       the civil liability provisions of the United States federal securities
       laws;

     - A holder of the notes would be able to enforce, in the courts of Bermuda,
       judgments of U.S. courts based upon the civil liability provisions of the
       U.S. federal securities laws;

     - A holder of the notes would be able to bring an original action in the
       Bermuda courts to enforce liabilities against us or our directors and
       officers, as well as the experts named in this prospectus, who reside
       outside the United States based solely upon U.S. federal securities laws.

     Further, we have been advised that there is no treaty in effect between the
United States and Bermuda providing for the enforcement of judgments of U.S.
courts, and there are grounds upon which Bermuda courts may not enforce
judgments of U.S. courts. Because judgments of U.S. courts are not automatically
enforceable in Bermuda, it may be difficult for you to recover against us based
upon such judgments.

RISKS RELATED TO TAXATION

WE AND OUR SUBSIDIARIES MAY BE SUBJECT TO U.S. TAX.

     We and Montpelier Re are organized under the laws of Bermuda and believe,
based on the advice of counsel, that we operate in a manner such that we are not
subject to U.S. taxation on our income (other than excise taxes on insurance and
reinsurance premium income attributable to insuring or reinsuring U.S. risks and
U.S. withholding taxes on certain U.S. source investment income). However,
because there is considerable uncertainty as to the activities which constitute
being engaged in a trade or business within the United States, there can be no
assurances that the U.S. Internal Revenue Service will not contend successfully
that we or Montpelier Re are engaged in a trade or business in the United
States. If we or Montpelier Re were considered to be engaged in a business in
the United States, we could be subject to U.S. corporate income and branch
profits taxes on the portion of our earnings effectively connected to such U.S.
business.

     Personal Holding Company Rules.  We or a subsidiary might be subject to
U.S. tax on a portion of our income that is earned from U.S. sources if we or a
subsidiary are considered a personal holding company ("PHC") for U.S. federal
income tax purposes. This status will depend on the portion of our shareholder
base, based on value that consists of or is deemed to consist of individuals and
the percentage of our income, or the income of our subsidiaries, as determined
for U.S. federal income tax purposes, that consists of "personal holding company
income." We believe, based on the advice of counsel, that neither we nor any of
our subsidiaries will be considered a PHC, but we cannot assure you that this
will be the case or that the amount of U.S. tax that would be imposed if it were
not the case would be immaterial.

WE MAY BECOME SUBJECT TO U.S. TAX LEGISLATION CONCERNING BERMUDA CORPORATIONS.

     Congress has been discussing legislation intended to eliminate certain
perceived tax advantages of (1) U.S. companies that have changed their legal
domiciles to Bermuda and (2) U.S. insurance companies having Bermuda affiliates.
These legislative proposals do not contain provisions that would adversely
affect companies that were formed outside the United States and do not have any
U.S. affiliates. It is difficult to predict what any final legislation will look
like given the current political environment. Therefore, while currently there
is no specific legislative proposal which, if enacted, would adversely affect
us, Montpelier Re or our securityholders, broader-based legislative proposals
could emerge that could conceivably have an adverse impact on us, Montpelier Re
or our securityholders.

                                        17
<PAGE>

WE MAY BECOME SUBJECT TO TAXES IN BERMUDA AFTER 2016, WHICH MAY HAVE A MATERIAL
ADVERSE EFFECT ON OUR FINANCIAL CONDITION.

     The Bermuda Minister of Finance, under the Exempted Undertaking Tax
Protection Act 1966, as amended, of Bermuda, has given us assurance that if any
legislation is enacted in Bermuda that would impose tax on profits or income, or
computed on any capital asset, gain or appreciation, or any tax in the nature of
estate duty or inheritance tax, then the imposition of any such tax will not be
applicable to us or any of our operations or our shares, debentures or other
obligations until March 28, 2016. We cannot assure you that we will not be
subject to any Bermuda tax after that date.

THE IMPACT OF BERMUDA'S LETTER OF COMMITMENT TO THE ORGANIZATION FOR ECONOMIC
COOPERATION AND DEVELOPMENT TO ELIMINATE HARMFUL TAX PRACTICES IS UNCERTAIN AND
COULD ADVERSELY AFFECT OUR TAX STATUS IN BERMUDA.

     The Organization for Economic Cooperation and Development, which is
commonly referred to as the OECD, has published reports and launched a global
dialogue among member and non-member countries on measures to limit harmful tax
competition. These measures are largely directed at counteracting the effects of
tax havens and preferential tax regimes in countries around the world. In the
OECD's report dated June 26, 2000, Bermuda was not listed as a tax haven
jurisdiction because it had previously signed a letter committing itself to
eliminate harmful tax practices by the end of 2005 and to embrace international
tax standards for transparency, exchange of information and the elimination of
any aspects of the regimes for financial and other services that attract
business with no substantial domestic activity. We are not able to predict what
changes will arise from the commitment or whether such changes will subject us
to additional taxes.

RISKS RELATED TO REGULATION

IF WE BECOME SUBJECT TO INSURANCE STATUTES AND REGULATIONS IN JURISDICTIONS
OTHER THAN BERMUDA OR THERE IS A CHANGE TO BERMUDA LAW OR REGULATIONS OR
APPLICATION OF BERMUDA LAW OR REGULATIONS, THERE COULD BE A SIGNIFICANT AND
NEGATIVE IMPACT ON OUR BUSINESS.

     Montpelier Re, our wholly owned operating subsidiary, is a registered
Bermuda Class 4 insurer. As such, it is subject to regulation and supervision in
Bermuda. Bermuda insurance statutes, regulations and policies of the Bermuda
Monetary Authority require Montpelier Re to, among other things:

     - Maintain a minimum level of capital, surplus and liquidity;

     - Satisfy solvency standards;

     - Restrict dividends and distributions;

     - Obtain prior approval of ownership and transfer of shares;

     - Maintain a principal office and appoint and maintain a principal
       representative in Bermuda; and

     - Provide for the performance of certain periodic examinations of
       Montpelier Re and its financial condition.

     These statutes and regulations may, in effect, restrict our ability to
write reinsurance policies, to distribute funds and to pursue our investment
strategy.

     We do not presently intend that Montpelier Re will be admitted to do
business in any jurisdiction in the United States, the United Kingdom or
elsewhere (other than Bermuda). However, we cannot assure you that insurance
regulators in the United States, the United Kingdom or elsewhere will not review
the activities of Montpelier Re or related companies or its agents and claim
that Montpelier Re is subject to such jurisdiction's licensing requirements. If
any such claim is successful and Montpelier Re must obtain a license, we may be
subject to taxation in such jurisdiction. In addition, Montpelier Re is subject
to indirect regulatory requirements imposed by jurisdictions that may limit its
ability to provide insurance or reinsurance. For example, Montpelier Re's
ability to write insurance or reinsurance may be subject, in certain cases, to
arrangements satisfactory to applicable regulatory bodies. Proposed legislation
and regulations may have the

                                        18
<PAGE>

effect of imposing additional requirements upon, or restricting the market for,
alien insurers or reinsurers with whom domestic companies place business.

     Generally, Bermuda insurance statutes and regulations applicable to
Montpelier Re are less restrictive than those that would be applicable if it
were governed by the laws of any state in the United States. In the past, there
have been congressional and other initiatives in the United States regarding
proposals to supervise and regulate insurers domiciled outside the United
States. If in the future we become subject to any insurance laws of the United
States or any state thereof or of any other jurisdiction, we cannot assure you
that we would be in compliance with those laws or that coming into compliance
with those laws would not have a significant and negative effect on our
business.

     The process of obtaining licenses is very time consuming and costly, and we
may not be able to become licensed in a jurisdiction other than Bermuda, should
we choose to do so. The modification of the conduct of our business resulting
from our becoming licensed in certain jurisdictions could significantly and
negatively affect our business. In addition, our inability to comply with
insurance statutes and regulations could significantly and adversely affect our
business by limiting our ability to conduct business as well as subjecting us to
penalties and fines.

     Because we are incorporated in Bermuda, we are subject to changes of
Bermuda law and regulation that may have an adverse impact on our operations,
including imposition of tax liability or increased regulatory supervision. In
addition, we will be exposed to changes in the political environment in Bermuda.
The Bermuda insurance and reinsurance regulatory framework recently has become
subject to increased scrutiny in many jurisdictions, including in the United
States and in various states within the United States. We cannot predict the
future impact on our operations of changes in the laws and regulations to which
we are or may become subject.

                                        19
<PAGE>

                           FORWARD-LOOKING STATEMENTS

     Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus may include
forward-looking statements which reflect our current views with respect to
future events and financial performance. These statements include
forward-looking statements both with respect to us specifically and the
insurance sector in general. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Statements that include the words "expect," "intend," "plan," "believe,"
"project," "anticipate," "will" and similar statements of a future or
forward-looking nature identify forward-looking statements for purposes of the
federal securities laws or otherwise.

     All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that could
cause our actual results to differ materially from those indicated in these
statements. Important events that could cause the actual results to differ
include, but are not necessarily limited to: our short operating history; our
dependence on principal employees; the cyclical nature of the reinsurance
business; the levels of new and renewal business achieved; the possibility of
severe or unanticipated losses from natural or man-made catastrophes; the impact
of terrorist activities on us or the economy; our reliance on reinsurance
brokers; the impact of currency exchange rates and interest rates on our
investment results; competition in the reinsurance industry; and rating agency
policies and practices. In addition, due in part to these assumptions and
factors, any projections of growth in our gross premiums written, net premiums
earned, revenues or other similar financial information would not necessarily
result in commensurate levels of underwriting and operating profits. The
Company's forward-looking statements concerning market fundamentals could be
affected by changes in demand, pricing and policy term trends and competition.
These and other events that could cause actual results to differ are discussed
in detail in the "Risk Factors" section. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
dates on which they are made.

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

                                        20
<PAGE>

                                USE OF PROCEEDS

     We estimate the net proceeds from this offering, after deducting the
underwriting discounts and commissions and our estimated offering expenses, will
be approximately $     million. We intend to use a portion of the net proceeds
from this offering to repay $150 million in aggregate principal amount
outstanding under our existing term loan facility and to use the remaining
proceeds for general corporate purposes. This debt is due in December 2004 and
currently bears interest at LIBOR plus an applicable margin which is effectively
hedged into a fixed rate of 2.38% through an interest rate swap agreement which
will terminate upon repayment of the debt. Following this offering, we also
intend to terminate our existing revolving credit facility. There are currently
no amounts outstanding under this facility.

                                        21
<PAGE>

                                 CAPITALIZATION

     The following table sets forth our combined capitalization on an actual
basis as of March 31, 2003, and as adjusted to give effect to the sale of the
notes offered by us in this offering, after deducting estimated underwriting
discounts and commissions and our estimated offering expenses.

     You should read this table in conjunction with "Selected Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes that are included
elsewhere in this prospectus.

<Table>
<Caption>
                                                                AS OF MARCH 31, 2003
                                                              ------------------------
                                                                               AS
                                                                ACTUAL     ADJUSTED(1)
                                                              ----------   -----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>          <C>
LONG-TERM DEBT:
    % Senior Notes due......................................  $        0   $
  Bank debt(2)..............................................     150,000            0
                                                              ----------   ----------
  Total long-term debt......................................  $  150,000   $

SHAREHOLDERS' EQUITY:
  Common shares.............................................  $      106   $
  Additional paid-in capital................................   1,127,498
  Accumulated other comprehensive income....................      34,701
  Retained earnings.........................................     194,268
                                                              ----------   ----------
  Total shareholders' equity................................   1,356,573
                                                              ----------   ----------
TOTAL CAPITALIZATION........................................  $1,506,573   $
                                                              ==========   ==========
</Table>

---------------

(1) As Adjusted column reflects the deduction of estimated underwriting
    discounts and commissions and our estimated offering expenses.

(2) We are a party to a $150 million term loan facility with Bank of America,
    N.A. and a syndicate of commercial banks. As of March 31, 2003, we had
    borrowed all $150 million under this facility. We intend to use the proceeds
    from this offering to repay all outstanding amounts under, and terminate,
    this term loan facility.

                                        22
<PAGE>

                            SELECTED FINANCIAL DATA

     The following table sets forth our summary historical financial information
for the periods ended and as of the dates indicated. Montpelier Re commenced
operations on December 16, 2001. The summary income statement data for the
period from inception (November 14, 2001) through December 31, 2001 and for the
year ended December 31, 2002 and the summary balance sheet data as at December
31, 2002 are derived from our audited financial statements included elsewhere in
this prospectus, which have been prepared in accordance with U.S. GAAP and have
been audited by PricewaterhouseCoopers (Bermuda), our independent auditors. The
summary income statement data for the three months ended March 31, 2003 and
March 31, 2002 and the summary balance sheet data as at March 31, 2003 are
derived from our unaudited financial statements included elsewhere in this
prospectus. The unaudited financial statements have been prepared on the same
basis as our audited financial statements and, in our opinion, include all
adjustments, consisting only of normal recurring adjustments, which we consider
necessary for a fair presentation of our results of operations and financial
position for these periods. These historical results are not necessarily
indicative of results to be expected from any future period, and the results
presented below are not necessarily indicative of our full year performance. You
should read the following summary financial information along with the
information contained in this prospectus, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and related notes included elsewhere in this prospectus.

<Table>
<Caption>
                                                  THREE MONTHS ENDED                     PERIODS ENDED
                                                       MARCH 31,                         DECEMBER 31,
                                           ---------------------------------   ---------------------------------
                                                2003              2002              2002             2001(1)
                                           ---------------   ---------------   ---------------   ---------------
                                            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS AND PERCENTAGES)
                                                      (UNAUDITED)
<S>                                        <C>               <C>               <C>               <C>
SUMMARY INCOME STATEMENT DATA:
  Gross premiums written.................    $   366,563       $   203,679       $   607,688       $       150
  Reinsurance premiums ceded(2)..........        (34,267)          (14,320)          (41,779)               --
                                             -----------       -----------       -----------       -----------
  Net premiums written...................        332,296           189,359           565,909               150
  Change in net unearned premiums........       (147,641)         (152,748)         (235,983)             (142)
                                             -----------       -----------       -----------       -----------
  Net premiums earned....................    $   184,655       $    36,611       $   329,926       $         8
  Net investment income..................         11,684             7,633            39,748             1,139
  Net realized gains on investments......          4,681               484             7,716                --
  Net foreign exchange gains.............          1,359                --             1,681                --
  Loss and loss adjustment expenses......        (47,690)          (14,367)         (133,310)               --
  Acquisition costs......................        (40,998)           (6,467)          (62,926)               (1)
  General and administrative expenses....         (8,884)           (4,240)          (26,278)           (1,207)
  Interest on long-term debt.............           (965)             (995)           (4,460)             (236)
  Fair value of warrants issued..........             --                --                --           (61,321)
                                             -----------       -----------       -----------       -----------
Income (loss) before taxes...............    $   103,842       $    18,659       $   152,097       $   (61,618)
                                             -----------       -----------       -----------       -----------
Net income (loss)........................    $   103,841       $    18,659       $   152,045       $   (61,618)
                                             ===========       ===========       ===========       ===========
Basic earnings (loss) per share..........    $      1.64       $      0.36       $      2.76       $     (1.18)
Diluted earnings (loss) per share........    $      1.56       $      0.36       $      2.74       $     (1.18)
Basic weighted average common shares
  outstanding............................     63,392,600        52,440,000        55,178,150        52,440,000
Diluted weighted average common shares
  outstanding............................     66,479,220        52,440,000        55,457,141        52,440,000
SELECTED RATIOS (BASED ON U.S. GAAP
  INCOME STATEMENT DATA):
Loss ratio(3)............................           25.8%             39.2%             40.4%              n/a
Acquisition costs ratio(4)...............           22.2              17.7              19.1               n/a
General and administrative expense
  ratio(5)...............................            4.8              11.6               7.9               n/a
                                             -----------       -----------       -----------       -----------
Combined ratio(6)........................           52.8%             68.5%             67.4%              n/a
                                             -----------       -----------       -----------       -----------
</Table>

                                        23
<PAGE>

<Table>
<Caption>
                                                                    AS AT                  AS AT
                                                               MARCH 31, 2003        DECEMBER 31, 2002
                                                              -----------------     --------------------
                                                              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE
                                                                       AMOUNTS AND PERCENTAGES)
                                                                 (UNAUDITED)
<S>                                                           <C>                   <C>
SUMMARY BALANCE SHEET DATA:
ASSETS
  Fixed maturities, equities, cash and cash equivalents.....     $1,738,156              $1,581,461
  Reinsurance premiums receivable...........................        277,407                 147,208
  Other assets..............................................        138,925                 105,249
                                                                 ----------              ----------
Total assets................................................     $2,154,488              $1,833,918
                                                                 ==========              ==========
LIABILITIES
  Loss and loss adjustment expense reserves.................     $  183,621              $  146,115
  Unearned premium..........................................        415,730                 241,000
  Long-term debt............................................        150,000                 150,000
  Other liabilities.........................................         48,564                  44,268
                                                                 ----------              ----------
Total liabilities...........................................     $  797,915              $  581,383
                                                                 ==========              ==========
Total shareholders' equity..................................     $1,356,573              $1,252,535
                                                                 ==========              ==========
Total liabilities and shareholders' equity..................     $2,154,488              $1,833,918
                                                                 ==========              ==========

PER SHARE DATA (BASED ON U.S. GAAP BALANCE SHEET DATA)
Book value per share (7)....................................     $    21.40              $    19.76
Fully converted book value per share (8)....................     $    20.81              $    19.39
</Table>

---------------

(1) The financial information for this period reflects our results from November
    14, 2001, the date of incorporation, to December 31, 2001.

(2) The syndicates with which we have qualifying quota share contracts have
    purchased retrocessional cover, which inures to our benefit. In 2003 we have
    also purchased retrocessional protection on our own account for our own
    direct insurance and facultative reinsurance programs.

(3) The loss ratio is calculated by dividing loss and loss adjustment expenses
    by net premiums earned.

(4) The acquisition costs ratio is calculated by dividing acquisition costs by
    net premiums earned.

(5) The general and administrative expense ratio is calculated by dividing
    general and administrative expenses by net premiums earned.

(6) The combined ratio is the sum of the loss ratio, the acquisition costs ratio
    and the general and administrative expense ratio.

(7) Book value per share is based on total shareholders' equity divided by basic
    shares outstanding of 63,392,600 as at March 31, 2003 and December 31, 2002.

(8) Fully converted book value per share is a non-GAAP measure calculated based
    on total shareholders' equity plus the assumed proceeds from the exercise of
    dilutive options and warrants in the amount of $168.1 million, divided by
    73,261,760 fully converted shares. We believe that this is the best single
    measure of the return made by our shareholders as it takes into account the
    effect of all dilutive securities.

                                        24
<PAGE>

                        MANAGEMENT'S DISCUSSION AND ANALYSIS
                  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    OVERVIEW

     Montpelier Re Holdings Ltd. and Montpelier Re were formed on November 14,
2001, and Montpelier Re commenced operations on December 16, 2001. Neither
company had any prior operating history. Accordingly, there are limited
meaningful comparisons between 2002 and 2001. The following is a discussion and
analysis of our results of operations for the three months ended March 31, 2003
and 2002 and for the year ended December 31, 2002 and, if relevant, for the
period from November 14, 2001, the date of incorporation, to December 31, 2001.
The following also includes a discussion of our financial condition at March 31,
2003. This discussion and analysis should be read in conjunction with the
unaudited consolidated financial statements and related notes thereto for the
three months ended March 31, 2003 and 2002 and the audited combined financial
statements and related notes thereto for the periods ended December 31, 2002 and
2001 included in this prospectus.

     This prospectus contains forward-looking statements that are not historical
facts, including statements about the Company's beliefs and expectations. These
statements are based upon current plans, estimates and projections. Our actual
results may differ materially from those projected in these forward-looking
statements as a result of various factors and therefore undue reliance should
not be placed on them. See "Forward-Looking Statements" and "Risk Factors"
contained elsewhere in this prospectus.

     We derive our revenues primarily from premiums from our insurance and
reinsurance contracts and, to a lesser extent, income from our investment
portfolio. Premiums are a function of the number and type of contracts we write,
as well as prevailing market prices. Renewal dates for reinsurance business
tends to be concentrated at the beginning of quarters, and the timing of premium
written varies by line of business. Most property catastrophe business is
written in the January 1, April 1 and July 1 renewal periods, while the property
specialty and other specialty lines are written throughout the year. Written
premiums are generally lower during the fourth quarter of the year as compared
to other quarters. Gross premiums written for pro-rata contracts, including QQS
programs, are initially booked as estimated and are adjusted as actual results
are reported by the cedents during the period. Earned premiums do not
necessarily follow the written premium pattern as certain written premiums are
earned ratably over the contract term, which ordinarily is twelve months,
although many pro-rata contracts are written on a risks attaching basis and are
generally earned over a 24 month period, consistent with industry practice.
Earned premiums are affected by our growing book of business; as written premium
levels increase, earned premium levels will correspondingly increase over the
earning period. Premiums are generally due in installments.

     The following are the main categories of gross premiums written:

     Property Specialty -- Contracts in this category include risk excess of
loss, property pro-rata and direct insurance and facultative reinsurance
business. Risk excess of loss reinsurance protects insurance companies on their
primary insurance risks and facultative reinsurance transactions on a "single
risk" basis. Coverage is usually triggered by a large loss sustained by an
individual risk rather than by smaller losses which fall below the specified
retention of the reinsurance contract.

     We also write direct insurance and facultative reinsurance coverage on
commercial property risks where we assume all or part of a risk under a single
insurance contract. We generally write such coverage on an excess of loss basis.

     We also write property pro-rata reinsurance contracts which are comprised
of property risk programs written on a proportional basis rather than on an
excess of loss basis.

     Property Catastrophe -- These contracts are typically "all risk" in nature,
providing protection against losses from earthquakes and hurricanes, as well as
other natural and man-made catastrophes such as floods, tornadoes, fires and
storms. The predominant exposures covered are losses stemming from property
damage and business interruption coverage resulting from a covered peril.
Certain risks, such as war, nuclear contamination and terrorism, are generally
excluded from these contracts. Property catastrophe reinsurance is
                                        25
<PAGE>

written on an excess of loss basis, which provides coverage to primary insurance
companies when aggregate claims and claims expenses from a single occurrence
from a covered peril exceed a certain amount specified in a particular contract.

     To a lesser extent, we also write retrocessional coverage contracts, which
provide reinsurance protection to other reinsurers, also called retrocedents.
Coverage generally provides catastrophe protection for the property portfolios
of other reinsurers. Retrocessional contracts typically carry a higher degree of
volatility than reinsurance contracts as they protect against concentrations of
exposures written by retrocedents, which in turn may experience an aggregation
of losses from a single catastrophic event.

     Qualifying Quota Share -- This category represents whole account quota
share reinsurance to select Lloyd's syndicates. Under QQS contracts, we assume a
specified portion of the risk on a specified coverage in exchange for an equal
proportion of the premiums. Gross premiums written related to QQS arrangements
have been recorded gross of original commissions to the syndicates. This
accounting treatment, when compared to recording such premiums net of original
commissions, has the effect of increasing gross premiums written and increasing
acquisition costs by an equal amount.

     Other Specialty -- Reinsurance contracts of aviation liability, aviation
war, marine, personal accident catastrophe, workers' compensation, terrorism,
casualty and other reinsurance business are included in this category. Marine
and aviation contracts are primarily written on a retrocessional excess of loss
basis.

     Since the classes of business we underwrite have large aggregate exposures
to natural and man-made disasters, we expect that our claims experience will
predominantly be the result of relatively few events of significant severity.
The occurrence of claims from catastrophic events is likely to result in
substantial volatility in, and could have a material adverse effect on, our
financial condition and results of operations and our ability to write new
business. This volatility will affect our results in the period that the loss
occurs because accounting principles do not permit reinsurers to reserve for
such catastrophic events until they occur. Catastrophic events of significant
magnitude have historically been relatively infrequent, although we believe the
property catastrophe reinsurance market has experienced a high level of
worldwide catastrophic losses in terms of both frequency and severity from 1987
to the present as compared to prior years. We also expect that increases in the
values and concentrations of insured property will increase the severity of such
occurrences in the future. We seek to reflect these trends as we price our
reinsurance.

     In October 2002, we completed an initial public offering of 10,952,600
common shares. Our common shares began trading on the New York Stock Exchange on
October 10, 2002. The offering raised approximately $201.2 million in net
proceeds, substantially all of which was contributed to our principal operating
subsidiary, Montpelier Re, for use in its underwriting operations.

     Income from our investment portfolio is primarily comprised of interest on
fixed maturity investments net of investment expenses, and to a lesser extent
from realized gains and losses on the sale of investments.

     Our expenses consist primarily of three types: loss and loss adjustment
expenses, acquisition costs and general and administrative expenses. In the
period ended December 31, 2001, our first period of operations, we also incurred
nonrecurring organizational expenses and an expense associated with the issuance
of warrants to our founders.

     Loss and loss adjustment expenses are a function of the amount and type of
insurance and reinsurance contracts we write and of the loss experience of the
underlying risks. We estimate loss and loss adjustment expenses based on an
actuarial analysis of the estimated losses we expect to be reported on contracts
written. Under U.S. GAAP, we reserve for catastrophic losses as soon as a loss
event is known to have occurred. The ultimate loss and loss adjustment expenses
will depend on the actual costs to settle claims. We will increase or decrease
our initial loss estimates as actual claims are reported and settled. Our
ability to estimate loss and loss adjustment expenses accurately at the time of
pricing our contracts will be a critical factor in determining our
profitability.

     Acquisition costs consist principally of brokerage expenses and commissions
that represent a percentage of the premiums on reinsurance contracts written,
and vary depending upon the amount and types of contracts

                                        26
<PAGE>

written, and to a lesser extent ceding commissions paid to ceding insurers and
excise taxes. Under certain contracts we may also pay profit commission to
cedents. This will vary depending on the loss experience on the contract.

     General and administrative expenses consist primarily of salaries,
benefits, professional fees and related costs, including costs associated with
awards under our bonus plan, performance unit plan and our share option plan.
Other than bonuses and performance units, expenses are primarily fixed in nature
and do not vary with the amount of premiums written or losses incurred.

     At the discretion of the Compensation and Nominating Committee of the Board
of Directors, the Company has awarded, and will in the future award, performance
units to executive officers and certain other key employees. The ultimate value
of these performance units, which vest at the end of three-year performance
periods, is dependent upon the Company's achievement of specified performance
targets over the course of the overlapping three-year periods and the market
value of the Company's shares at the date of redemption. Performance units are
payable in cash, common stock or a combination of both. The liability is
expensed over the vesting period of the performance units granted. The liability
is recalculated as the relevant financial results and share price of the Company
evolve. Any adjustments are reflected in the income statement in the period in
which they are determined.

     As part of our formation, we granted 2,040,000 share options to our
President and Chief Executive Officer, Anthony Taylor. In September 2002,
510,000 additional options for common shares were granted to other senior
executives. From inception, we have adopted FAS 123 "Accounting for Stock-Based
Compensation," which recommends the recognition of compensation expense for the
fair value of stock compensation awards on the date of grant. The compensation
expense is recognized over the vesting period of each grant, with a
corresponding recognition of the equity expected to be issued in Additional
paid-in capital.

     Our fixed maturity investments are classified as available for sale under
U.S. GAAP and are carried at fair value based on quoted market prices.
Unrealized gains and losses on these investments are included in accumulated
other comprehensive income as a separate component of shareholders' equity. If
management has determined that an investment has sustained an impairment in
value that is determined to be other than temporary, the unrealized loss will be
charged to income in the period it is determined.

     Currently, we have an equity investment in Aspen Insurance Holdings Limited
("Aspen"), the unquoted Bermuda-based holding company of Aspen Insurance UK
Limited ("Aspen Re"). Under U.S. GAAP, such unquoted investments are carried at
estimated fair value. Unrealized gains and losses on these investments are also
included in accumulated other comprehensive income as a separate component of
shareholders' equity.

RESULTS OF OPERATIONS

  FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002

     As we only commenced operations on December 16, 2001, the quarter ended
March 31, 2002 was our first complete quarter of operations. We did not have our
full complement of underwriters in place until the end of the second quarter of
2002 and, therefore, we were unable to fully participate in the January 2002
renewal season. As a result, some comparisons between the March 31, 2003 and
2002 quarters may not be meaningful.

     We ended the first quarter of 2003 with a fully converted book value per
share (as defined below) of $20.81, an increase of $4.28 from March 31, 2002.
This increase of 25.9%, was primarily caused by the following factors:

     - Our participation in the 2003 renewal season as a result of having our
       full complement of underwriters in place;

     - Continued high premium rate levels across the major classes that we
       specialize in; and

                                        27
<PAGE>

     - Relatively low levels of catastrophe/large loss frequency during the
       calendar year 2002, continuing into the first quarter of 2003.

     In addition, investment income was greater in the first quarter of 2003
compared to the first quarter of 2002 due to the positive effect of a larger
capital base, which outweighed the reduction in interest rates earned by our
fixed maturity portfolio.

     The following table summarizes our book values per common share as at the
periods indicated:

<Table>
<Caption>
                                                               AS AT            AS AT
                                                           MARCH 31, 2003   MARCH 31, 2002
                                                           --------------   --------------
<S>                                                        <C>              <C>
Book value per share(1)..................................      $21.40           $16.53
Fully converted book value per share(2)..................      $20.81           $16.53
</Table>

---------------

(1) Based on total shareholders' equity divided by basic shares outstanding.

(2) This is a non-GAAP measure, based on total shareholders' equity plus the
    assumed proceeds from the exercise of dilutive options and warrants in the
    amount of $168.1 million, divided by fully converted shares outstanding of
    73,261,760 shares. The Company believes this to be the best single measure
    of the return made by our shareholders as it takes into account the effect
    of all dilutive securities.

     The following table summarizes our financial results for the periods
indicated ($ in millions):

<Table>
<Caption>
                                                            THREE MONTHS     THREE MONTHS
                                                               ENDED            ENDED
                                                           MARCH 31, 2003   MARCH 31, 2002
                                                           --------------   --------------
<S>                                                        <C>              <C>
Net premiums earned......................................      $184.7           $36.6
Investment income and net foreign exchange gains.........        13.0             7.6
Net realized gains on fixed maturity investments.........         4.7             0.5
Loss and loss adjustment expenses........................       (47.7)          (14.4)
Acquisition costs........................................       (41.0)           (6.4)
Interest on long-term debt...............................        (1.0)           (1.0)
General and administrative and tax expenses..............        (8.9)           (4.2)
                                                               ------           -----
Net income...............................................      $103.8           $18.7
                                                               ======           =====
Basic earnings per common share..........................      $ 1.64           $0.36
                                                               ======           =====
Diluted earnings per common share........................      $ 1.56           $0.36
                                                               ======           =====
</Table>

     Gross Premiums Written

     We focus on writing global specialty property and other specialty classes
of insurance and reinsurance business.

     Details of gross premiums written by line of business and by geographic
area of risks insured are provided below ($ in millions):

                         GROSS PREMIUMS WRITTEN BY LINE

<Table>
<Caption>
                                                   THREE MONTHS ENDED   THREE MONTHS ENDED
                                                     MARCH 31, 2003       MARCH 31, 2002
                                                   ------------------   ------------------
<S>                                                <C>         <C>      <C>         <C>
Property Specialty...............................  $ 90.6       24.7%   $ 35.6       17.5%
Property Catastrophe.............................   150.8       41.1      79.1       38.8
Qualifying Quota Share...........................    76.4       20.9      73.8       36.2
Other Specialty..................................    48.8       13.3      15.2        7.5
                                                   ------      -----    ------      -----
Total............................................  $366.6      100.0%   $203.7      100.0%
                                                   ======      =====    ======      =====
</Table>

                                        28
<PAGE>

           GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA OF RISKS INSURED

<Table>
<Caption>
                                                   THREE MONTHS ENDED   THREE MONTHS ENDED
                                                     MARCH 31, 2003       MARCH 31, 2002
                                                   ------------------   ------------------
<S>                                                <C>         <C>      <C>         <C>
Worldwide(1).....................................  $174.0       47.5%   $112.0       55.0%
USA and Canada...................................   133.0       36.3      59.0       29.0
United Kingdom and Ireland.......................    21.3        5.8       5.4        2.6
Worldwide, excluding USA and Canada(2)...........    12.2        3.3       9.1        4.5
Western Europe, excluding the United Kingdom and
  Ireland........................................     9.8        2.7       5.1        2.5
Japan............................................     1.6        0.4       3.1        1.5
Others (1.5% or less)............................    14.7        4.0      10.0        4.9
                                                   ------      -----    ------      -----
Total............................................  $366.6      100.0%   $203.7      100.0%
                                                   ======      =====    ======      =====
</Table>

---------------

(1) "Worldwide" comprises insurance and reinsurance contracts that insure or
    reinsure risks on a worldwide basis.

(2) "Worldwide, excluding USA and Canada" comprises insurance and reinsurance
    contracts that insure or reinsure risks on a worldwide basis but
    specifically exclude the USA and Canada.

     The QQS contracts and substantial amounts of other lines of business are
worldwide in nature, with the majority of business related to North America and
Europe.

     The volume of gross premiums written has increased during the first quarter
of 2003 compared to the first quarter of 2002, with all four categories of
premium written increasing in volume for the following reasons:

     - Property catastrophe has increased as a proportion by only a small
       amount, but the total volume has increased compared to 2002 as we
       benefited from full participation in the January 1, 2003 renewal season;

     - Property specialty has primarily increased because during the three
       months ended March 31, 2002 our full complement of direct insurance and
       facultative reinsurance underwriters were not yet in place;

     - QQS has decreased as a percentage of gross premiums written but the level
       of premium written has remained consistent with the prior year. We
       renewed the same syndicates as we participated in during 2002; and

     - Other specialty has increased as we wrote more specialty lines during the
       first quarter of 2003, such as casualty and terrorism, compared to the
       comparable period in 2002.

     The proportion of property catastrophe gross premium written as a
percentage of total gross premiums written is greater in the three months ended
March 31, 2003 than we expect it to be for the remainder of the year because
proportionally higher volumes of property catastrophe business are traditionally
written in the first quarter, as compared to other quarters in the fiscal year.
Other lines of business are written throughout the year, with the least amount
of premiums being written during the fourth quarter.

     During the first quarter of 2003, we renewed the three QQS contracts that
we participated in during 2002. The premium levels on a dollar basis are
expected to be broadly consistent with 2002, but will be a lower percentage of
our total premiums written as we focus on our short-tail property specialty
lines, although ultimate premiums written will depend on the volume of premium
actually written by the syndicates.

     As part of a subscription and shareholders agreement with Aspen, a company
in which we have a 7% interest in on an undiluted basis and approximately a 6%
interest on a fully diluted basis, Montpelier Re has agreed to provide quota
share reinsurance to a subsidiary company, Aspen Re, comprising annual assumed
premiums by Montpelier Re of approximately $60.0 million for the underwriting
years 2003, 2004 and 2005. For the three months ended March 31, 2003, $19.0
million was recorded in gross premiums written under these arrangements, which
cover mainly property and casualty risks.

                                        29
<PAGE>

     We recorded reinstatement premiums of $0.1 million and $nil during the
three months ended March 31, 2003 and 2002, respectively. The lack of
reinstatement premiums was due to the minimal amount of reported losses during
these periods. In the remainder of 2003, we would expect to record greater
levels of reinstatement premiums as additional losses are notified, consistent
with our loss reserve estimates discussed below.

     Reinsurance Premiums Ceded

     Reinsurance premiums ceded for the three months ended March 31, 2003 and
2002 were $34.3 million and $14.3 million, respectively. Reinsurance purchased
by the QQS syndicates with respect to the contracts in which we participate
accounted for 79% of the reinsurance premiums ceded during the three months
ended March 31, 2003. The remainder relates to the purchase of retrocessional
protection on our own account for our direct insurance and facultative
reinsurance programs. We did not purchase retrocessional protection on our own
account during 2002 and the reinsurance premiums ceded for 2002 were
attributable solely to the reinsurance purchased by the QQS syndicates with
respect to the contracts in which we participate. We may purchase further
retrocessional protection for our own account in 2003.

     Reinsurance premiums ceded represented approximately 35.6% and 19.4% of
gross premiums assumed from the QQS syndicates for the three months ended March
31, 2003 and 2002, respectively. The reason for the increase in the ratio of
gross premiums written to reinsurance premiums ceded from 2002 to 2003 is due to
the timing of the purchase of reinsurance by the QQS syndicates. We expect that
this ratio will decrease over 2003 as the majority of reinsurance is purchased
by the QQS syndicates in the earlier months of the year.

     Net Premiums Earned

     Net premiums earned for the three months ended March 31, 2003 and 2002 were
$184.7 million and $36.6 million, respectively. Approximately two-thirds of
earned premium for the three months ended March 31, 2003 relates to the 2002
underwriting year and the remainder to business written in 2003. Net premiums
earned will continue to lag net premium written until the level of premium
written stabilizes at a constant level year on year. As our gross premiums
written continues to increase, our earned premiums are catching up with our
gross premiums written, which has resulted in an earned premium to written
premium ratio of 50.4% for the three months ended March 31, 2003, compared to
18.0% for the same period in 2002. In addition, we continue to write a minority
of our business, principally some underlying business contained in the QQS
contracts, on a risks attaching basis, for which premiums are generally earned
over a longer period. These factors combined will result in an acceleration of
earned premium throughout 2003.

     Loss and Loss Adjustment Expenses

     The underwriting results of an insurance or reinsurance company are often
measured by reference to its loss ratio and expense ratio. The loss ratio is
calculated by dividing loss and loss adjustment expenses incurred (including
estimates for incurred but not reported losses) by net premiums earned. The
expense ratio is calculated by dividing acquisition costs combined with general
and administrative expenses by net premiums earned. The combined ratio is the
sum of the loss ratio and the expense ratio.

     For comparative purposes, our combined ratio and components thereof are set
out below for the periods indicated:

<Table>
<Caption>
                                                            THREE MONTHS     THREE MONTHS
                                                               ENDED            ENDED
                                                           MARCH 31, 2003   MARCH 31, 2002
                                                           --------------   --------------
<S>                                                        <C>              <C>
Loss ratio...............................................       25.8%            39.2%
Expense ratio............................................       27.0%            29.3%
                                                                ----             ----
Combined ratio...........................................       52.8%            68.5%
                                                                ====             ====
</Table>

     Loss and loss adjustment expenses were $47.7 million and $14.4 million for
the three months ended March 31, 2003 and 2002, respectively. Reinsurance
recoveries of $(0.3) million and $0.6 million were netted

                                        30
<PAGE>

against loss and loss adjustment expenses for the three months ended March 31,
2003 and 2002, respectively. Reinsurance recoveries for the three months ended
March 31, 2003 related to QQS and the direct and facultative business written.
Reinsurance recoveries for the three months ended March 31, 2002 related to QQS
business written only. We paid losses of $10.1 million for the three months
ended March 31, 2003 and did not pay any losses for the three months ended March
31, 2002.

     The following are our gross and net loss and loss adjustment expense
reserves and our net loss ratios by line of business for the periods indicated
($ in millions):

<Table>
<Caption>
                       GROSS LOSS AND LOSS ADJUSTMENT   NET LOSS AND LOSS ADJUSTMENT        NET LOSS RATIOS
                           EXPENSE RESERVES AS AT          EXPENSE RESERVES AS AT      FOR THE THREE MONTHS ENDED
                               MARCH 31, 2003                  MARCH 31, 2003              MARCH 31, 2003(1)
                       ------------------------------   ----------------------------   --------------------------
<S>                    <C>                              <C>                            <C>
Property Specialty...              $ 71.6                          $ 70.8                         33.0%
Property
  Catastrophe........                26.6                            26.6                         (4.0)
Qualifying Quota
  Share..............                68.5                            53.0                         60.0
Other Specialty......                16.9                            16.9                         40.0
                                   ------                          ------
Total................              $183.6                          $167.3                         25.8%
                                   ======                          ======
</Table>

---------------

(1) The gross loss ratio for the three months ended March 31, 2003 was 24.7%.

     At March 31, 2003 net loss and loss adjustment expense reserves included an
estimate for losses incurred but not yet reported of $130.1 million and case
reserves of $37.2 million.

<Table>
<Caption>
                           GROSS LOSS AND LOSS
                                ADJUSTMENT            NET LOSS AND LOSS ADJUSTMENT        NET LOSS RATIOS
                          EXPENSE RESERVES AS AT         EXPENSE RESERVES AS AT      FOR THE THREE MONTHS ENDED
                              MARCH 31, 2002                 MARCH 31, 2002              MARCH 31, 2002(1)
                       ----------------------------   ----------------------------   --------------------------
<S>                    <C>                            <C>                            <C>
Property Specialty...             $  4.0                         $  4.0                         66.0%
Property
  Catastrophe........                 --                             --                          0.0
Qualifying Quota
  Share..............                9.5                            8.9                         70.0
Other Specialty......                1.5                            1.5                         54.9
                                  ------                         ------
Total................             $ 15.0                         $ 14.4                         39.2%
                                  ======                         ======
</Table>

---------------

(1) The gross loss ratio for the three months ended March 31, 2002 was 39.2%.

     At March 31, 2002, net loss and loss adjustment expense reserves included
an estimate for losses incurred but not yet reported of $13.7 million and case
reserves of $0.7 million.

     The variation in loss ratios between the first quarter of 2002 compared to
the first quarter of 2003 results from the fact that in 2002 we did not have the
benefit of prior years' loss history on which to base our loss reserve analysis
and, accordingly, we relied more heavily on industry experience and professional
judgement to estimate our loss and loss adjustment expense reserves. The
negative loss ratio for the property catastrophe category in the 2003 quarter
results from reductions in estimates of losses incurred in 2002, combined with
the fact that we were not materially affected by any catastrophes during the
quarter. Overall, the reduction in loss ratios has resulted from the receipt of
additional information from ceding companies during the first quarter of 2003
which indicates that projected losses are lower than originally expected,
combined with the unusually low level of catastrophes incurred. As our business
has developed over 2002 and into 2003, we have supplemented industry information
with our own specific experience in our actuarial analysis which has led to
reduced projections of ultimate losses.

     Minimal losses reported during the first quarter of 2003, combined with
reductions in the estimate of losses incurred in 2002, has resulted in a net
loss ratio to 25.8% for the three months ended March 31, 2003, compared to the
net loss ratio for the three months ended March 31, 2002 of 39.2% and 40.4% for
the year ended December 31, 2002.

                                        31
<PAGE>

     The following tables set forth a reconciliation of our gross and net loss
and loss adjustment expense reserves by line of business between December 31,
2002 and March 31, 2003 ($ in millions):

GROSS LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

<Table>
<Caption>
                                                     CHANGE IN
                                                   DECEMBER 2002       GROSS PAID LOSSES
                          GROSS LOSS AND LOSS     GROSS INCURRED       ON DECEMBER 2002                         GROSS LOSS AND LOSS
                          ADJUSTMENT EXPENSE    ESTIMATE DURING THE   RESERVES DURING THE   ADDITION OF GROSS   ADJUSTMENT EXPENSE
                            RESERVES AS AT      THREE MONTHS ENDED    THREE MONTHS ENDED    RESERVES FOR THE      RESERVES AS AT
                           DECEMBER 31, 2002      MARCH 31, 2003        MARCH 31, 2003       CURRENT QUARTER      MARCH 31, 2003
                          -------------------   -------------------   -------------------   -----------------   -------------------
<S>                       <C>                   <C>                   <C>                   <C>                 <C>
Property Specialty......        $ 54.1                $(13.4)               $ (3.4)               $34.3               $ 71.6
Property Catastrophe....          32.5                  (5.7)                 (3.5)                 3.3                 26.6
Qualifying Quota
  Share.................          50.5                  (1.8)                 (3.2)                23.0                 68.5
Other Specialty.........           9.0                   1.0                    --                  6.9                 16.9
                                ------                ------                ------                -----               ------
Total...................        $146.1                $(19.9)               $(10.1)               $67.5               $183.6
                                ======                ======                ======                =====               ======
</Table>

NET LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

<Table>
<Caption>
                                                   CHANGE IN
                                               DECEMBER 2002 NET    NET PAID LOSSES ON
                          NET LOSS AND LOSS    INCURRED ESTIMATE       DECEMBER 2002                           NET LOSS AND LOSS
                          ADJUSTMENT EXPENSE    DURING THE THREE    RESERVES DURING THE    ADDITION OF NET    ADJUSTMENT EXPENSE
                            RESERVES AS AT        MONTHS ENDED      THREE MONTHS ENDED    RESERVES FOR THE      RESERVES AS AT
                          DECEMBER 31, 2002      MARCH 31, 2003       MARCH 31, 2003       CURRENT QUARTER      MARCH 31, 2003
                          ------------------   ------------------   -------------------   -----------------   -------------------
<S>                       <C>                  <C>                  <C>                   <C>                 <C>
Property Specialty......        $ 54.1               $(13.4)              $ (3.4)               $33.5               $ 70.8
Property Catastrophe....          32.5                 (5.7)                (3.5)                 3.3                 26.6
Qualifying Quota
  Share.................          33.9                 (0.2)                (3.2)                22.5                 53.0
Other Specialty.........           9.0                  1.0                   --                  6.9                 16.9
                                ------               ------               ------                -----               ------
Total...................        $129.5               $(18.3)              $(10.1)               $66.2               $167.3
                                ======               ======               ======                =====               ======
</Table>

     The first quarter of 2003 includes approximately $18.3 million of positive
development of net losses incurred during 2002, $3.7 million relating to case
reserves and the remainder relating to a release of IBNR. In total, positive
prior period development benefited the loss ratio in the quarter by
approximately 10%.

     The positive development during the three months ended March 31, 2003 of
losses incurred during 2002 primarily resulted from the following:

     - In the Property Specialty Category, reported losses on 2002 occurrences
       during the three months ended March 31, 2003 decreased by $1.6 million.
       Both the frequency and severity of reported losses were significantly
       less than the assumed reporting pattern of losses established for this
       line of business at December 31, 2002. The reduction in reported losses
       during the quarter, combined with the increasing weight placed on our
       actual experience, has led to the reduction in ultimate losses of $13.4
       million or 9% of the total reserve balance at December 31, 2002.

     - Property Catastrophe net loss and loss adjustment expense reserves as at
       December 31, 2002 included approximately $28 million in respect of the
       European floods which occurred in August 2002, and Hurricane Lili which
       occurred in October 2002. The remainder of the Property Catastrophe loss
       and loss adjustment expense reserve balance at December 31, 2002 related
       to several smaller identified loss events and several proportional
       contracts. During the three months ended March 31, 2003, our share of the
       losses reported by ceding companies as at December 31, 2002 declined by
       $2.1 million. The remainder of the positive development in the quarter
       was due to a reduction in anticipated ultimate losses, driven largely by
       the specific declines in our share of reported losses.

     - Due to the potential variability in ultimate premiums and the limited
       availability of underlying loss information relating to the QQS business,
       our actuaries selected an expected loss ratio based on a review of the
       information supplied by cedents and applied it to projected premiums.
       During the three
                                        32
<PAGE>

       months ended March 31, 2003, we reduced our expected gross loss ratio,
       which resulted in a reduction of $1.8 million in gross loss and loss
       adjustment expense reserves. After taking into account the effect of
       reinsurance purchased by the QQS syndicates with respect to the contracts
       in which we participate, net loss and loss adjustment expense reserves
       declined by $0.2 million for the three months ended March 31, 2003.

     - Based on the information provided to management by cedents and a review
       of our attachment point levels, we increased our expected loss ratio
       during the quarter resulting in an increase of $1.0 million in net loss
       and loss adjustment expense reserves for our Other Specialty business.

     At March 31, 2003, we estimated our gross and net reserves for loss and
loss adjustment expenses using the methodology as outlined in "-- Financial
Condition and Liquidity -- Loss and Loss Adjustment Expense Reserves."

     Other than the matters described above, we did not make any significant
changes in assumptions used in our reserving process during the three months
ended March 31, 2003. Because of our short operating history, our loss
experience is limited and reliable evidence of changes in trends of numbers of
claims incurred, average settlement amounts, numbers of claims outstanding and
average losses per claim will necessarily take years to develop.

     Management has determined that the best estimate for gross loss and loss
adjustment expense reserves at March 31, 2003 and 2002 was $183.6 million and
$15.0 million, respectively. Management's best estimate of a range of likely
outcomes around the estimate at March 31, 2003 is between $166.3 million and
$197.9 million.

     Management has determined that the best estimate for net loss and loss
adjustment expense reserves at March 31, 2003 and 2002 was $167.3 million and
$14.4 million, respectively. Management's best estimate of a range of likely
outcomes around this estimate at March 31, 2003 is between $151.5 million and
$180.8 million.

     The following are management's best estimate of the range of gross and net
loss and loss adjustment expense reserves by line of business ($ in millions):

GROSS LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES AT MARCH 31, 2003

<Table>
<Caption>
                                                       LOW END OF              HIGH END OF
                                                       THE RANGE    SELECTED    THE RANGE
                                                       ----------   --------   -----------
<S>                                                    <C>          <C>        <C>
Property Specialty...................................    $ 65.7      $ 71.6      $ 75.2
Property Catastrophe.................................      24.2        26.6        28.6
Qualifying Quota Share...............................      60.8        68.5        71.7
Other Specialty......................................      15.6        16.9        22.4
                                                         ------      ------      ------
Total................................................    $166.3      $183.6      $197.9
                                                         ======      ======      ======
</Table>

NET LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES AT MARCH 31, 2003

<Table>
<Caption>
                                                       LOW END OF              HIGH END OF
                                                       THE RANGE    SELECTED    THE RANGE
                                                       ----------   --------   -----------
<S>                                                    <C>          <C>        <C>
Property Specialty...................................    $ 65.0      $ 70.8      $ 74.5
Property Catastrophe.................................      24.2        26.6        28.6
Qualifying Quota Share...............................      46.7        53.0        55.3
Other Specialty......................................      15.6        16.9        22.4
                                                         ------      ------      ------
Total................................................    $151.5      $167.3      $180.8
                                                         ======      ======      ======
</Table>

     A significant portion of our business is property catastrophe and other
classes with high attachment points of coverage. Reserving for losses in such
programs is inherently complicated in that losses in excess of the

                                        33
<PAGE>

attachment level of the Company's policies are characterized by high severity
and low frequency. In addition, as a broker market reinsurer, we must rely on
loss information reported to such brokers by primary insurers who must estimate
their own losses at the policy level, often based on incomplete and changing
information. The ranges above have been actuarially determined based primarily
on industry loss experience. It is conceivable that in view of the high
attachment points of most of our business that there could be no increase in the
reserve for losses already incurred at March 31, 2003, and in addition that
there may be no further losses reported. Therefore, the IBNR element of the
above reserve ranges could turn out to be minimal. By contrast, a minimal amount
of new loss advices could cause our ultimate incurred losses to significantly
exceed the high end of the reserve ranges.

     Net Foreign Exchange Gains

     Net foreign exchange gains result from the effect of the fluctuation in
foreign exchange rates on the translation of foreign currency assets and
liabilities combined with realized gains resulting from the receipt of premium
installments in foreign currencies. Net foreign exchange gains were immaterial
at March 31, 2002 and were included in investment income.

     Underwriting Expenses

     UNDERWRITING EXPENSES consist of acquisition costs and general and
administrative expenses. Acquisition costs and general and administrative
expenses were $49.9 million and $10.7 million for the three months ended March
31, 2003 and 2002, respectively, representing expense ratios of 27.0% and 29.3%,
respectively. General and administrative expenses are comprised of fixed
expenses which include costs for salaries and benefits, stock options and office
and risk management expenses. Variable general and administrative expenses
include expenses related to our performance unit plan and bonuses. Acquisition
costs are generally driven by contract terms and are normally a set percentage
of premiums. If our premiums continue to increase in 2003 as anticipated,
acquisition costs will also increase as these costs vary directly with the level
of premiums written.

     Our premiums earned are increasing at a more rapid pace than general and
administrative expenses, which contributed to the lower expense ratio for the
three months ended March 31, 2003. Other factors could also affect the expense
ratio, including the mix of business written and the amount of acquisition costs
incurred. Partially offsetting this reduction is an increase in the accrual for
profit commission of $5.0 million for the first quarter of 2003, which is
included in acquisition costs. Depending on the development of incurred losses
in upcoming quarters, we may be required to record additional profit commission.
The expense ratio for the three months ended March 31, 2003 would have been 24%
excluding the effect of profit commissions.

     For the three months ended March 31, 2003 and 2002, acquisition costs
incurred were $41.0 million and $6.4 million, respectively, which were
principally due to brokerage commissions for our insurance and reinsurance
contracts of $24.6 million and $3.1 million respectively, commissions paid to
ceding insurers and other costs of $16.4 million and $3.5 million, respectively,
for the three months ended March 31, 2003 and 2002. An accrual was not required
for profit commission for the three months ended March 31, 2002.

     Acquisition costs as a percentage of premiums earned, excluding reinsurance
and profit commission, were 18.8% and 17.1% for the three months ended March 31,
2003 and 2002, respectively. The ratios are consistent between quarters, with
2003 being slightly higher as a result of an overall increase in pro-rata
business written.

                                        34
<PAGE>

     General and administrative expenses for the periods indicated consisted of
the following ($ in millions):

<Table>
<Caption>
                                           THREE MONTHS ENDED   THREE MONTHS ENDED
                                             MARCH 31, 2003       MARCH 31, 2002
                                           ------------------   ------------------
<S>                                        <C>                  <C>
Fixed expenses, excluding stock
  options................................         $5.9                 $2.4
Bonus accrual............................          0.6                  0.2
Performance Unit Plan accrual............          1.4                  0.4
Fair value of stock options expense......          1.0                  1.2
                                                  ----                 ----
Total general and administrative
  expenses...............................         $8.9                 $4.2
                                                  ====                 ====
</Table>

     The increase in general and administrative expenses between the first
quarter of 2002 and the first quarter of 2003 relates to increased employment
costs, premises and office expenses, consistent with the increase in staff
numbers. We may be required to employ additional resources and occupy additional
office space as our business grows.

     Net Investment Income

     Net investment income for the three months ended March 31, 2003 and 2002
was $11.7 million and $7.6 million, respectively. Net investment income is
primarily composed of interest on coupon-paying bonds and bank interest,
partially offset by accretion of premium on bonds of $2.7 million and $0.9
million, respectively, and investment management and custodian fees of $0.7
million and $0.5 million, respectively, for the three months ended March 31,
2003 and 2002. Investment management fees are paid to White Mountains Advisors
LLC, a wholly owned indirect subsidiary of White Mountains Insurance Group, one
of our major shareholders. The fees charged are consistent with those that would
be charged by a non-related party.

     Because we provide short-tail insurance and reinsurance coverage for losses
resulting mainly from natural and man-made catastrophes, it is possible that we
could become liable to pay substantial claims on short notice. Accordingly, we
have structured our investment portfolio to preserve capital and provide us with
a high level of liquidity, which means that the large majority of our investment
portfolio contains shorter term fixed maturity investments, such as U.S.
government bonds, corporate bonds and mortgage-backed and asset-backed
securities.

     Based on the weighted average monthly investments held, and including net
unrealized losses of $0.8 million and $13.6 million for the three months ended
March 31, 2003 and 2002, respectively, the total investment return was 1.02%
(annualized return of 4%), and (0.5%), respectively. In 2003, as expected, our
investment income has increased as a result of our larger capital base, driven
by positive cash flow consistent with the low level of paid claims, offset
somewhat by lower interest rates.

     We did not experience any other-than-temporary impairment charges relating
to our portfolio of investments for the three months ended March 31, 2003 and
2002.

     Interest on Long-Term Debt

     For the three months ended March 31, 2003 and 2002, interest expensed
relating to the $150.0 million outstanding balance on our term loan facility was
$1.0 million for each period, representing an average rate of 2.59% and 2.65%,
respectively. The interest rate was fixed at 2.59% for the period from October
21, 2002 until April 21, 2003. From April 21, 2003, the rate was fixed at 2.07%
until July 21, 2003. In order to hedge the interest rate risk of the loan, the
Company entered into an interest rate swap contract with Bank of America, which
became effective April 22, 2003 and expires on December 11, 2004, the last day
of the term loan facility. Under the terms of the interest rate swap contract,
the Company pays interest at a fixed rate of 1.88% plus a margin dependent on
leverage, and receives interest at a variable rate equal to the offshore LIBOR
rate plus an applicable margin. Following this offering, we intend to repay all
amounts outstanding under the term loan facility and terminate such facility and
the related swap contract.

                                        35
<PAGE>

     We incurred interest expense of $1.0 million for each of the three months
ended March 31, 2003 and 2002, and paid interest of $1.0 million and $1.1
million, respectively.

     Net Realized Investment Gains

     Net realized investment gains for the three months ended March 31, 2003 and
2002 were $4.7 million and $0.5 million, respectively, which were due to gains
realized from the sale of fixed maturity investments.

     Comprehensive Income

     Comprehensive income for the three months ended March 31, 2003 and 2002
were $103.0 million and $5.1 million respectively, which includes the $103.8
million and $18.7 million of net income described above, and $0.8 million and
$13.6 million, respectively, of net unrealized losses on fixed maturity
investments and changes in currency translation adjustments.

     The cost or amortized cost, gross unrealized gains and losses, and carrying
values of our investments as at March 31, 2003 were as follows ($ in thousands):

<Table>
<Caption>
                                   COST OR       GROSS        GROSS
                                  AMORTIZED    UNREALIZED   UNREALIZED
INVESTMENTS                          COST        GAINS        LOSSES     FAIR VALUE
-----------                       ----------   ----------   ----------   ----------
<S>                               <C>          <C>          <C>          <C>
Fixed maturity investments......  $1,535,755    $32,745       $1,017     $1,567,483
Equity investment (unquoted)....      60,758      2,933           --         63,691
</Table>

  FOR THE YEAR ENDED DECEMBER 31, 2002

     The Company ended the 2002 year with a fully converted book value per share
(as defined below) of $19.39, an increase of $2.98 from December 31, 2001. This
increase of 18.2% resulted from premium rate levels being relatively high across
the major classes that the Company specializes in, together with a relatively
low level of catastrophes during the year. The Company also benefited from a
positive total return of approximately 7.0% on its investment portfolio for the
year ended December 31, 2002.

     As the Company commenced writing business on December 16, 2001, it is not
meaningful to compare 2002 results with 2001 results. We only wrote one
reinsurance policy during 2001 and did not incur any related losses. In
addition, we incurred significant start-up expenses which included the results
of expensing the fair value of warrants issued to the founding shareholders.
Therefore, both the loss ratio and the expense ratio for the period ended
December 31, 2001 are not useful for comparative purposes and are not indicative
of future results.

     Our results for the 2002 year were primarily driven by the following
factors:

     - The extensive and diverse experience of our team of underwriters, who
       have particular expertise in the property and specialty areas;

     - High premium rate levels coupled with the relatively low levels of
       catastrophe/large loss frequency;

     - Our superior service capabilities driven by our investment in operational
       and modeling technologies;

     - The existence of a substantial capital base, with approximately $1
       billion raised from our initial capitalization in 2001, combined with an
       additional $201.2 million from the successful completion of our Initial
       Public Offering in October 2002; and

     - Our A.M. Best financial strength rating.

                                        36
<PAGE>

     The following table summarizes our book values per common share as at
December 31, 2002:

<Table>
<S>                                                           <C>
Book value per share(1).....................................  $19.76
Fully converted book value per share(2).....................  $19.39
</Table>

---------------

(1) Based on total shareholders' equity divided by basic shares outstanding.

(2) This is a non-GAAP measure, based on total shareholders' equity plus the
    assumed proceeds from the exercise of dilutive options and warrants in the
    amount of $168.1 million, divided by fully converted shares outstanding of
    73,261,760 shares. The Company believes this to be the best single measure
    of the return made by our shareholders as it takes into account the effect
    of all dilutive securities.

    Gross Premiums Written

     Gross premiums written were $607.7 million for the year ended December 31,
2002. Details of gross premiums written by line of business and by geographic
area of risk insured for the year ended December 31, 2002 are provided below ($
in millions):

                         GROSS PREMIUMS WRITTEN BY LINE

<Table>
<Caption>
                                                                 YEAR ENDED
                                                              DECEMBER 31, 2002
                                                              -----------------
<S>                                                           <C>        <C>
Property Specialty..........................................  $230.3      37.9%
Property Catastrophe........................................   141.4      23.3
Qualifying Quota Share......................................   171.7      28.2
Other Specialty.............................................    64.3      10.6
                                                              ------     -----
Total.......................................................  $607.7     100.0%
                                                              ======     =====
</Table>

           GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA OF RISKS INSURED

<Table>
<Caption>
                                                                 YEAR ENDED
                                                              DECEMBER 31, 2002
                                                              -----------------
<S>                                                           <C>        <C>
Worldwide(1)................................................  $306.4      50.4%
USA and Canada..............................................   207.4      34.1
Japan.......................................................    23.3       3.8
Western Europe, excluding the United Kingdom and Ireland....    17.8       2.9
United Kingdom and Ireland..................................    11.8       1.9
Worldwide, excluding USA and Canada(2)......................    11.4       1.9
Others (1.5% or less).......................................    29.6       5.0
                                                              ------     -----
Total.......................................................  $607.7     100.0%
                                                              ======     =====
</Table>

---------------

(1) "Worldwide" comprises insurance and reinsurance contracts that insure or
    reinsure risks on a worldwide basis.

(2) "Worldwide, excluding USA and Canada" comprises insurance and reinsurance
    contracts that insure or reinsure risks on a worldwide basis but
    specifically exclude the USA and Canada.

     The QQS contracts and substantial amounts of other lines of business are
worldwide in nature, with the majority of business related to North America and
Europe.

     During the year ended December 31, 2002, we recorded reinstatement premiums
on outstanding losses of approximately $4.7 million, primarily due to reinstated
coverages on assumed contracts impacted by losses arising from the flooding
which occurred in central Europe in August 2002 ("European floods"). The
reinstatement premiums are principally included in the property catastrophe
category, with the remainder in

                                        37
<PAGE>

the property specialty and other specialty categories. Additional reinstatement
premiums may be recorded in future periods as additional losses are notified,
consistent with our loss reserve estimates discussed below.

     The QQS business incepting in the year ended December 31, 2002 is estimated
on the basis of projections for the twelve months of 2002 supplied by the
underlying syndicates, adjusted for actual reported results from the underlying
syndicates for the nine months ended September 30, 2002. Estimated annual
premiums can change based on revised projections supplied by the underlying
syndicates. The resulting changes in accrued premium are recorded in the period
in which they are determined.

     Reinsurance Premiums Ceded

     Reinsurance premiums ceded were $41.8 million for the year ended December
31, 2002. Reinsurance premiums ceded are attributable to the reinsurance
purchased by the QQS syndicates with respect to the contracts in which we
participate. Reinsurance premiums ceded represented approximately 24% of gross
premiums written from the syndicates for the year ended December 31, 2002. This
reinsurance inures to the benefit of the Company and will potentially result in
lower loss ratio volatility in the QQS book of business than in the remainder of
the book of business over which reinsurance protection was not purchased in
2002. We remain liable to the extent that any of the underlying reinsurers fails
to pay our claims; however, we have reviewed the financial condition of the
reinsurers on the QQS syndicates and do not consider it necessary to write off
any reinsurance recoverables.

     Net Premiums Earned

     Net premiums earned for the year ended December 31, 2002 were $329.9
million. In the fourth quarter we experienced an acceleration of premiums earned
as the majority of our business is written during the January 1, April 1 and
July 1 renewal periods and, therefore, it is reasonable to anticipate that the
net premiums earned would generally increase over the course of our first full
fiscal year as premiums written in earlier months are increasingly earned. We
also did not have our full complement of underwriters until the end of the
second quarter of 2002 and, therefore, we were not able to fully participate in
the 2002 renewal season, resulting in a higher level of unearned premium at
December 31, 2002.

     In addition, modest variances exist between the ratio of gross premiums
written to net premiums earned between prior quarters and the fourth quarter of
2002. These variances arose from the clarification over the year of the earnings
patterns on certain customers' proportional reinsurance contracts. The overall
effect is to defer some earned premium from 2002 into 2003. We would not expect
this to recur in 2003.

     Loss and Loss Adjustment Expenses

     Our combined ratio and components thereof are set out below for the year
ended December 31, 2002.

<Table>
<S>                                                           <C>
Loss ratio..................................................  40.4%
Expense ratio...............................................  27.0%
                                                              ----
Combined ratio..............................................  67.4%
                                                              ====
</Table>

     Loss and loss adjustment expenses were $133.3 million for the year ended
December 31, 2002, representing a net loss ratio of 40.4%. At December 31, 2002,
net loss reserves were $129.5 million of which $91.7 million related to an
estimate of losses incurred but not yet reported. Reinsurance recoverables of
$16.7 million related to the QQS business written were netted against loss and
loss adjustment expenses for the year ended December 31, 2002. We paid losses of
$4.2 million for the year ended December 31, 2002. Overall for the year ended
December 31, 2002, we have benefited from the relatively low level of
catastrophes.

     Pro-rata contracts, including QQS business incepting in the year ended
December 31, 2002 are estimated on the basis of projections supplied by the
underlying cedents, together with actual reported results for portions of 2002.
Estimated losses can change, based on revised projections supplied by the
underlying cedents. The resulting changes in incurred losses are recorded in the
period in which they are determined. Reported loss ratios for the 2002
underwriting year were generally lower than anticipated and our subsequent

                                        38
<PAGE>

loss ratio selections reflect this improvement. We have estimated the QQS loss
ratios based on figures provided by the syndicates. We will monitor changes in
these estimates closely to determine any deviation from previously published
forecasts and any required adjustments will be recorded in income in the period
in which they are determined. In 2002 we experienced a year with a relatively
low level of claims activity. This may not be indicative of future results.

     Our net loss and loss adjustment expense reserves at December 31, 2002 and
our net loss ratios by line of business for the year ended December 31, 2002 are
set out below ($ in millions):

<Table>
<Caption>
                                                  NET LOSS AND LOSS          NET LOSS RATIOS
                                             ADJUSTMENT EXPENSE RESERVES    FOR THE YEAR ENDED
                                               AT DECEMBER 31, 2002(1)     DECEMBER 31, 2002(2)
                                             ---------------------------   --------------------
<S>                                          <C>                           <C>
Property Specialty.........................            $ 54.1                      55.7%
Property Catastrophe.......................              32.5                      25.7
Qualifying Quota Share.....................              33.9                      60.2
Other Specialty............................               9.0                      24.9
                                                       ------
Total......................................            $129.5                      40.4%
                                                       ======
</Table>

---------------

(1) Gross loss and loss adjustment expense reserves per the balance sheet were
    $146.1 million which was reduced by $16.6 million in reinsurance recoverable
    related to the Qualifying Quota Share programs to derive the net loss and
    loss adjustment expense reserves of $129.5 million noted above.

(2) The gross loss ratio for the year ended December 31, 2002 was 41.0%.

     Underwriting Expenses

     Acquisition costs and general and administrative expenses were $89.2
million for the year ended December 31, 2002, representing an expense ratio of
27%. The expense ratio increased during the fourth quarter as a result of the
accrual of approximately $1.5 million in profit commission and the accrual of
additional variable compensation expense, driven by the lower combined ratio
than in prior quarters.

     General and administrative expenses for the year ended December 31, 2002
consisted of the following ($ in millions):

<Table>
<Caption>
                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                                   2002
                                                              ---------------
<S>                                                           <C>
Fixed expenses, excluding stock options.....................       $15.7
Bonus accrual...............................................         2.7
Performance Unit Plan accrual...............................         2.5
Fair value of stock options expense.........................         5.4
                                                                   -----
Total general and administrative expenses...................       $26.3
                                                                   =====
</Table>

     For the year ended December 31, 2002, acquisition costs incurred were $62.9
million, which were principally due to brokerage commissions for our insurance
and reinsurance contracts of $29.6 million, commissions paid to ceding insurers
and other costs of $31.8 million and an accrual for profit commission of $1.5
million.

     Net Investment Income

     Net investment income for the year ended December 31, 2002 was $39.7
million. Net investment income for the period ended December 31, 2001 was $1.1
million which reflects the receipt of the private placement proceeds in
mid-December 2001. Net investment income is primarily composed of interest on
coupon-paying bonds and bank interest, partially offset by accretion of premium
on bonds of $3.8 million and $1.7 million, respectively, and investment
management and custodian fees of $2.3 million and $0.7 million, respectively,

                                        39
<PAGE>

for the periods ended December 31, 2002 and 2001. The investment management fees
were paid to White Mountains Advisors LLC, a wholly owned indirect subsidiary of
White Mountains Insurance Group, one of our major shareholders. The fees charged
are consistent with those that would be charged by a non-related party.

     Based on the weighted average monthly investments held, and including net
unrealized gains of $33.6 million for the year ended December 31, 2002, the
total investment return was 7.0%. Interest rates declined in 2002, which
resulted in decreasing reinvestment yields on our portfolio.

     The performance results of our fixed maturity portfolio, with a comparison
to the Lehman Brothers Government/Corporate 1-3 Year Index, for the year ended
December 31, 2002 was as follows:

<Table>
<Caption>
                                                                 LEHMAN BROTHERS
                                               MONTPELIER RE       GOV'T/CORP.
PERFORMANCE                                   HOLDINGS LTD.(1)   1-3 YEAR INDEX
-----------                                   ----------------   ---------------
<S>                                           <C>                <C>
Total return................................        7.1%               6.3%
</Table>

---------------

(1) Total return is calculated by dividing total net investment income on fixed
    maturity investments by the average of the sum of such investments at
    amortized cost at the end of each month in 2002.

     The Lehman Brothers Government/Corporate 1-3 Year Index is used for
comparative purposes as it lines up with our assets and the nature of our
business.

     We did not experience any other-than-temporary impairment charges relating
to our portfolio of investments for the year ended December 31, 2002.

     Interest on Long-Term Debt

     Interest expensed relating to the $150.0 million outstanding balance on our
long-term credit facility for the year ended December 31, 2002 and the period
ended December 31, 2001 was $4.5 million and $0.2 million, which represents an
average rate of 2.80% and 2.99%, respectively. The interest rate on the loan was
variable from the inception of the loan on December 12, 2001 until April 20,
2002. Thereafter, the interest rate was fixed at 2.96% from April 21, 2002 until
October 21, 2002 and was fixed at 2.59% for the period from October 21, 2002
until April 21, 2003. At December 31, 2002 and 2001, the Company accrued
interest expense of $800,000 and $236,000 and paid interest of $3.5 million and
$nil, respectively.

     Net Realized Investment Gains

     Net realized investment gains for the year ended December 31, 2002 were
$7.7 million, which were due to gains realized from the sale of fixed maturity
investments.

     Comprehensive Income

     Comprehensive income for the year ended December 31, 2002 was $185.7
million, which includes net income of $152.0 million and $33.7 million of net
unrealized gains on investments and changes in currency translation adjustments.

     The cost or amortized cost, gross unrealized gains and losses, and carrying
values of our investments as of December 31, 2002 were as follows ($ in
thousands):

<Table>
<Caption>
                                COST OR       GROSS        GROSS
                               AMORTIZED    UNREALIZED   UNREALIZED
INVESTMENTS                       COST        GAINS        LOSSES     FAIR VALUE
-----------                    ----------   ----------   ----------   ----------
<S>                            <C>          <C>          <C>          <C>
Fixed maturity investments...  $1,322,256    $32,714        $125      $1,354,845
Equity investment
  (unquoted).................      60,758      2,933          --          63,691
</Table>

                                        40
<PAGE>

FINANCIAL CONDITION AND LIQUIDITY

     We are a holding company that conducts no operations of its own. We rely
primarily on cash dividends and management fees from Montpelier Re to pay our
operating expenses, interest on debt facilities and dividends, if any. There are
restrictions on the payment of dividends from Montpelier Re to the Company,
which are described in more detail below. It is our continuing policy to retain
earnings to support the growth of our business. We do not currently intend to
pay dividends.

CAPITAL RESOURCES

     The Company's shareholders' equity at March 31, 2003 was $1,356.6 million,
of which $194.3 million was retained earnings. The Company's capital base has
grown since December 31, 2002 as a result of an increase in net premiums earned
and the low level of losses incurred.

     Our capital resources, prior to the closing of this offering, also include
two senior credit facilities with Bank of America, N.A. and a syndicate of
commercial banks, consisting of the Bank of N.T. Butterfield & Son Limited,
Credit Suisse First Boston, The Bank of Bermuda Ltd., Fleet National Bank, The
Bank of New York, Barclays Bank PLC and Comerica Bank. We intend to use a
portion of the proceeds from this offering to repay all amounts outstanding
under, and terminate, our existing term loan facility. In addition, we intend to
terminate our revolving credit facility, thereby rendering inapplicable the
covenants under these facilities described below. The credit facilities consist
of a 364-day revolving credit facility with a $50.0 million borrowing limit and
a three-year term loan facility with a $150.0 million aggregate borrowing limit.
As of March 31, 2003, we had borrowed $150.0 million under the term loan
facility and had not accessed the revolving credit facility. These credit
facilities contain various restrictions and covenants which include maintaining:
(i) a ratio of debt to total capital no greater than 30%; (ii) a tangible net
worth equal to at least the sum of: (x) $525.0 million; (y) 50% of positive
quarterly net income (with no deduction for net losses); and (z) 50% of any net
equity proceeds, minus certain dividends; and (iii) the ratio of the aggregate
statutory net written premiums to the net worth of all our insurance
subsidiaries at a level no greater than 1.5 to 1 at the end of any fiscal
quarter. Also, these covenants restrict our other borrowings, the ability of our
subsidiaries to merge, consolidate, make acquisitions, sell any assets or assign
any receivables, and our ability to create liens on any assets, make certain
capital expenditures and to hold margin stock. In addition, a change in control
of our Company or unpaid final judgments against us which exceed an aggregate of
$5.0 million (excluding any portion thereof which will likely be recovered
through insurance) each constitute an event of default under our credit
facilities. These restrictions and covenants have all been met during the three
months ended and as at March 31, 2003 and 2002.

     Montpelier Re is registered under The Insurance Act 1978 (Bermuda), which
we refer to in this prospectus as the "Insurance Act". Under the Insurance Act,
Montpelier Re is required annually to prepare and file Statutory Financial
Statements and a Statutory Financial Return. The Insurance Act also requires
Montpelier Re to meet a minimum solvency margin equal to the greatest of (i)
$100.0 million, (ii) 50% of net premiums written or (iii) 15% of the reserve for
loss and loss adjustment expenses. For the three months ended March 31, 2003 and
2002, Montpelier Re satisfied these requirements.

     Bermuda law limits the maximum amount of annual dividends or distributions
payable by Montpelier Re to us and in certain cases requires the prior
notification to, or the approval of, the Bermuda Monetary Authority. Subject to
such laws, the directors of Montpelier Re have the unilateral authority to
declare or not to declare dividends to us. The maximum amount of dividends that
could have been paid by Montpelier Re to us at March 31, 2003, without such
notification, was $255.7 million. There is no assurance that dividends will be
declared or paid in the future.

     Montpelier Re is not licensed or admitted as an insurer or reinsurer in any
jurisdiction other than Bermuda. Because many jurisdictions do not permit
insurance companies to take credit for reinsurance obtained from unlicensed or
non-admitted insurers on their statutory financial statements unless appropriate
security mechanisms are in place, we anticipate that our reinsurance clients
will typically require Montpelier Re to post a letter of credit or other
collateral. In order for Montpelier Re to write Lloyd's QQS business, it must
provide a letter of credit in favor of Lloyd's in accordance with Lloyd's rules.
We have made arrangements with Fleet National Bank for the provision of a
standby letter of credit in a form acceptable to

                                        41
<PAGE>

Lloyd's in an amount of up to $250.0 million. Letters of credit outstanding at
March 31, 2003 under the Fleet facility were approximately $125.8 million, which
were secured by investments of approximately $138.3 million. Montpelier Re has
the ability to provide sufficient unencumbered assets to support the standby
letter of credit.

     Effective June 20, 2003, Montpelier Re entered into a new Letter of Credit
Reimbursement and Pledge Agreement with Fleet National Bank and a syndicate of
lending institutions for the provision of a letter of credit facility in favor
of Lloyd's in an amount of up to $250.0 million, and in favor of certain U.S.
ceding companies in an amount of up to $200.0 million. Simultaneously, the
previously existing Pledge Agreement with Fleet National Bank in favor of
Lloyd's QQS business was superceded by the Letter of Credit Reimbursement and
Pledge Agreement, and the letters of credit issued under the previous facility
are now effectively issued under the new facility agreement. There have not yet
been any letters of credit issued under the new facility agreement in relation
to U.S. ceding companies. We consider this letter of credit facility sufficient
to support Montpelier Re's estimated obligations for the next 12 months.

     The Company has made arrangements with Barclay's Bank PLC for the provision
of an additional letter of credit facility in favor of certain U.S. ceding
companies in an amount of up to $100.0 million. Letters of credit outstanding at
March 31, 2003 under the Barclay's facility were approximately $20.8 million and
were secured by investments of approximately $22.9 million. Montpelier Re has
the ability to provide sufficient unencumbered assets to support the standby
letter of credit.

INVESTMENTS

     The following table shows the aggregate amount of investments available for
sale, equity investment and cash and cash equivalents comprising our portfolio
of invested assets ($ in thousands):

<Table>
<Caption>
                                                  AS AT              AS AT
                                              MARCH 31, 2003   DECEMBER 31, 2002
                                              --------------   -----------------
<S>                                           <C>              <C>
Fixed maturities, available for sale, at
  fair value................................    $1,567,483        $1,354,845
Equity investment, unquoted, at estimated
  fair value................................        63,691            63,691
Cash and cash equivalents, at fair value....       106,982           162,925
                                                ----------        ----------
Total Invested Assets.......................    $1,738,156        $1,581,461
                                                ==========        ==========
</Table>

     Because a significant portion of our contracts provide short-tail
reinsurance coverage for damages resulting mainly from natural and man-made
catastrophes, it is possible that we could become liable for a significant
amount of losses on short-term notice. Accordingly, we have structured our
investment portfolio to preserve capital and provide us with a high level of
liquidity, which means that the large majority of our investment portfolio
contains shorter term fixed maturity investments, such as U.S. government bonds,
corporate bonds and mortgage-backed and asset-backed securities.

     The market value of our portfolio of fixed maturity investments comprises
investment grade corporate debt securities (26%), U.S. government and agency
bonds (62%) and mortgage-backed and asset-backed securities (12%). All of the
fixed maturity investments currently held by us were publicly traded at March
31, 2003. Based on the weighted average monthly investments held, and including
unrealized gains, our total return for the three months ended March 31, 2003 was
1.02%. The average duration of the portfolio was 1.9 years and the average
rating of the portfolio was AA+ at March 31, 2003.

     The Company has invested a total of L40.0 million (or $60.8 million) in the
common shares of Aspen. At March 31, 2003, Montpelier Re held approximately 7%
of Aspen on an undiluted basis and approximately 6% on a fully diluted basis.

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

     For most insurance and reinsurance companies, the most significant judgment
made by management is the estimation of the loss and loss adjustment expense
reserves. Due to the short-tail nature of our business,

                                        42
<PAGE>

generally we expect that the majority of our losses will be paid relatively
quickly. However, this can be affected by such factors as the event causing the
loss, the location of the loss, and whether our losses are from policies with
insurers or reinsurers. Accordingly, it is necessary to estimate, as part of the
loss and loss adjustment expense reserve, an amount for IBNR.

     A significant portion of our business is property catastrophe and other
classes with high attachment points of coverage. Reserving for losses in such
programs is inherently complicated in that losses in excess of the attachment
level of the Company's policies are characterized by high severity and low
frequency. This limits the volume of industry claims experience available from
which to reliably predict ultimate loss levels following a loss event. In
addition, there always exists a reporting lag between a loss event taking place
and the reporting of the loss to the Company, which can sometimes be several
years, particularly on longer-tail classes of business such as casualty. During
this period, additional facts and trends will be revealed and as these factors
become apparent, reserves will be adjusted. These IBNRs are inherently difficult
to predict. Changes to our prior year loss reserves can impact our current
underwriting results by improving our results if the prior year reserves prove
to be redundant or reducing our results if the prior year reserves prove to be
insufficient. Because of the variability and uncertainty associated with loss
estimation, it is possible that our individual case reserves for each
catastrophic event and other case reserves are incorrect, possibly materially.
This volatility will affect our results in the period that the loss occurs
because U.S. GAAP does not permit reinsurers to reserve for such catastrophic
events until they occur which may give rise to a claim. As a result, no
allowance for the provision of a contingency reserve to account for expected
future losses can be recorded. Claims arising from future catastrophic events
can be expected to require the establishment of substantial reserves from time
to time.

     These factors require us to make significant assumptions when establishing
loss reserves. For losses which have been reported to the Company, we estimate
our ultimate loss using the following: (1) claims reports from insureds; (2) our
underwriters and management experience in setting claims reserves; and (3) the
use of computer models, where applicable. Since the Company has insufficient
past loss experience, management supplements this information with industry
data. This industry data may not match the risk profile of the Company, which
introduces a further degree of uncertainty into the process. For losses which
have been incurred but not reported, the reserving process is further
complicated.

     Our actuaries use a combination of the following methods in determining our
loss and loss adjustment expense reserves:

     The Reported Loss Development Method is a widely used actuarial technique
for estimating ultimate losses. This method analyzes the reporting pattern for a
body of losses over time and uses that pattern to predict future reported
incurred losses. The selected reporting pattern is used to create loss
development factors which are multiplied by reported losses to date to produce
ultimate loss estimates. Due to our limited operating history, we do not have
our own historical reporting patterns. Therefore, we have relied on selected
industry reporting patterns for similar classes of business.

     The Expected Loss Ratio Method assumes that ultimate losses vary
proportionately with premiums. Ultimate losses are calculated by multiplying the
selected expected loss ratio by the total amount of premium. The method is
independent of actual loss experience. This method is particularly useful in the
early stages of development for an underwriting year or when limited historical
or current loss information is available.

     The Bornheutter-Ferguson Reported Method is a combination of the Reported
Loss Development Method and the Expected Loss Ratio Method. Estimates of losses
incurred but not yet reported are based on an expected loss ratio assumption.
The expected loss ratio is modified to the extent that reported losses to date
differ from what would be expected based on the selected loss reporting pattern.
This method gives more weight to the actual reported loss experience as the
underwriting period matures.

     Based on the characteristics of each line of business and the amount of
loss information available, our actuaries weight the reliance on each reserving
methodology. The methods and assumptions used by our actuaries to estimate loss
reserves produce a point estimate by class, and we consider these point
estimates to be management's best estimate of reserves. The Company considers
these point estimates as its best

                                        43
<PAGE>

estimates because the selections of expected loss ratios and expected reporting
patterns which underlie the estimates are based on the most current information
available to management. We have used these point estimates in establishing our
reserve for loss and loss adjustment expenses. For each line of business, we
have produced a range around management's best point estimate by selecting
upward and downward percentage variation bounds around the ultimate loss ratio.

     Having regard to the limited amount of loss information available due to
our short operating history and the low frequency and high severity nature of
many of our contracts, management uses the following methodology in determining
a range: (1) selection of downward and upward percentage variation bounds around
the ultimate loss selection for each class; and (2) establishment of the width
of the range around our best point estimate based on management's estimate of
the potential variability for each class and the reporting pattern assumptions.

     On pro-rata contracts, including QQS arrangements, we estimate ultimate
losses based on loss ratio forecasts as reported quarterly by cedents, which is
normally on a quarterly lag. We also review historical loss ratios from prior
years as provided by each cedent, as well as public reports. We base our
estimate of the ultimate losses on both of these factors. Estimated losses can
change, based on revised projections supplied by the underlying cedents and
actuarial support of the underwriting year forecasts. The resulting changes in
incurred losses are recorded in the period in which they are determined.

     These complications, together with the potential for unforeseen adverse
developments, may result in loss and loss adjustment expenses significantly
greater or less than the reserve provided. Reserving can prove especially
difficult should a significant loss event take place near the end of an
accounting period, particularly if it involves a catastrophic event.

     Loss and loss adjustment reserve estimates are regularly reviewed and
updated, as new information becomes known to us. Any resulting adjustments are
included in income in the period in which they become known.

CASH FLOWS

     Cash flows for three months ended March 31, 2003 and 2002.  Cash flows from
operations for the three months ended March 31, 2003 were $160.0 million
compared to $35.6 million for the first quarter of 2002. This increase
principally relates to a substantial increase in operating income in the 2003
period. Offsetting this increase is an increase in loss and loss adjustment
expense reserves in excess of paid losses of $10.1 million. We invested a net
amount of $215.8 million during the three months ended March 31, 2003, compared
to $282.8 million during the same period in 2002. At March 31, 2003, we had a
cash balance of $107.0 million.

     Cash flows for the year ended December 31, 2002.  In the year ended
December 31, 2002, we generated net cash flow from operations of $295.2 million,
primarily relating to premiums received by Montpelier Re. We paid losses of $4.2
million during the year ended December 31, 2002. We invested a net amount of
$706.3 million during the year ended December 31, 2002, and had a cash balance
of $162.9 million at December 31, 2002. The increase in liquidity has resulted
from premiums received and the addition of approximately $201.2 million in net
proceeds as a result of the successful completion of our initial public offering
of 10,952,600 common shares (including the exercise of the over-allotment
provision of 1,428,600 common shares) in October, 2002, which was offset by
equity raising costs of $18.3 million. We also received approximately $26.0
million in cash from the completion of our private placement of our common
shares which occurred in December, 2001. The Company's common shares began
trading on the New York Stock Exchange on October 10, 2002. The net proceeds of
the offering were contributed to our principal operating subsidiary, Montpelier
Re to provide additional capital for use in its underwriting operations. In
addition, the year ended December 31, 2002 was a year with a relatively low
level of catastrophes, resulting in a low level of claims payments.

     Our liquidity depends on operating, investing and financing cash flows as
described below.

                                        44
<PAGE>

     Our sources of funds primarily consist of the receipt of premiums written,
investment income and proceeds from sales and redemptions of investments. Our
operating subsidiary since inception has produced sufficient cash flows to meet
expected claim payments, pay operational expenses and purchase retrocessional
protection.

     Cash is used primarily to pay loss and loss adjustment expenses, brokerage
commissions, excise taxes, general and administrative expenses, to purchase new
investments and to pay interest on our long-term debt facility. We will also use
cash to pay for any premiums retroceded and any authorized share repurchases. In
2003 we have purchased specific retrocessional protection for our direct
insurance and facultative reinsurance programs on an "any one risk" basis to
limit our exposure from losses at one location. We may purchase additional
retrocessional protection for our own account in 2003.

     Our cash flows from operations represent the difference between premiums
collected and investment earnings realized, and the loss and loss adjustment
expenses paid, underwriting and other expenses paid and investment losses
realized. Cash flows from operations may differ substantially, however, from net
income. To date, we have invested substantially all cash flows not required for
operating purposes.

     Certain business we write has loss experience generally characterized as
having low frequency and high severity. This may result in volatility in both
our results and our operational cash flows. The potential for a large claim
under one of our insurance or reinsurance contracts means that substantial and
unpredictable payments may need to be made within relatively short periods of
time.

     We intend to manage these risks by structuring our investments in an effort
to anticipate the payout patterns of our liabilities under insurance or
reinsurance policies. No assurance can be given, however, that we will
successfully match the structure of Montpelier Re's investments with its
liabilities under insurance or reinsurance contracts. If our calculations with
respect to these reinsurance liabilities are incorrect, or if we improperly
structure our investments to match such liabilities, we could be forced to
liquidate investments prior to maturity, potentially at a significant loss.

     The market value of fixed maturity investments, our unquoted equity
investment and our cash and cash equivalents balance was $1,738.2 million as at
March 31, 2003, compared to $1,581.5 million at December 31, 2002. The primary
cause of this increase was the receipt of $161.5 million in premiums net of
acquisition costs, net investment income of $11.6 million, the change in net
unrealized losses on investments of $0.8 million offset by paid claims of $10.1
million.

     We anticipate leasing additional office space in Bermuda later in 2003, and
may incur related costs which we would expect to be less than those incurred in
2002.

     For the period from inception until March 31, 2003, we have had sufficient
cash flow from operations to meet our liquidity requirements. The cash generated
from our private placement in 2001 and the successful completion of our initial
public offering in October 2002, together with our credit facilities, and our
positive operating results for 2002 and for the first quarter of 2003 have
provided us with sufficient liquidity to enable Montpelier Re to meet its
Bermuda statutory requirements under the Insurance Act.

OUTLOOK

     In general, in 2003 we have experienced premium rate levels that are more
stable than in 2002 for the "short-tail" insurance and reinsurance products that
we write. In addition, premium rate levels are comparable to those of 2002
levels and we expect both of these trends to continue for the remainder of 2003.
Prices for the specific reinsurance contracts we write continue to be affected
primarily by the supply of, and demand for, capacity in the global reinsurance
market which is driven by: (1) the decline in recent years in the U.S. and
global equity markets; (2) significant reserve strengthening in insurance and
reinsurance companies; (3) poor investment performance; and (4) rating agency
downgrades of competitors. While we believe that overall price levels are
currently favorable for reinsurers and better than they have been in many years,
capital provided by newly-formed reinsurers or additional capital raised by
existing reinsurers may increase the supply of reinsurance capacity which could
impact negatively the prices that we receive for the products we write.
                                        45
<PAGE>

     Our financial results in 2003 continue to be affected positively by the
unusually low frequency of large natural catastrophic events impacting our
business. We would anticipate that we may be impacted in future periods on
average by a higher frequency of large natural catastrophic events than those
experienced in 2002 and into 2003. Such events could have a material adverse
impact on our financial position and results of operations. The worldwide
property and casualty insurance and reinsurance industry continues to be highly
competitive and some of our competitors possess significantly greater financial
and other resources than we do. This competition could also affect our financial
condition and results of operations.

QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK

     We believe that we are principally exposed to three types of market risk:
interest rate risk, foreign currency risk and credit risk.

     The use of derivative instruments is expressly prohibited by our investment
guidelines, other than the use of forward currency exchange contracts to
minimize the impact of exchange rate fluctuations.

     Interest Rate Risk.  Our primary market risk exposure is to changes in
interest rates. Our fixed maturity portfolio is exposed to interest rate risk.
Fluctuations in interest rates have a direct impact on the market valuation of
these investments. As interest rates rise, the market value of our fixed
maturity portfolio falls, and the converse is also true. We manage interest rate
risk by selecting investments with characteristics such as duration, yield,
currency and liquidity tailored to the anticipated cash outflow characteristics
of Montpelier Re's reinsurance liabilities.

     As of March 31, 2003, the impact on our portfolio from an immediate 100
basis point increase in market interest rates would have resulted in an
estimated decrease in market value of 1.9% or approximately $31.9 million and
the impact on our portfolio from an immediate 100 basis point decrease in market
interest rates would have resulted in an estimated increase in market value of
1.9% or approximately $31.9 million.

     As of March 31, 2003, we held $189.0 million, or 12.1% of our total
invested assets in mortgage-backed and asset-backed securities. These assets are
exposed to prepayment risk, which occurs when holders of individual mortgages
increase the frequency with which they prepay the outstanding principal before
the maturity date and refinance at a lower interest rate cost. Given the
proportion that these securities comprise of the overall portfolio, and the
current low interest rate environment, prepayment risk is not considered
significant at this time.

     Interest rate movements also affect the economic value of our long-term
debt obligation. The interest rate was fixed at 2.59% for the period from
October 21, 2002 until April 21, 2003. From April 21, 2003, the rate is fixed at
2.07% until July 21, 2003. The average interest rate for the three months ended
March 31, 2003 was 2.59%. In order to hedge the interest rate risk of the loan,
the Company entered into an interest rate swap contract with Bank of America,
which became effective April 22, 2003 and expires on December 11, 2004, the last
day of the term loan facility. Under the terms of the interest rate swap
contract, the Company pays interest at a fixed rate of 1.88% plus a margin
dependent on leverage, and receives interest at a variable rate equal to the
offshore LIBOR rate plus an applicable margin. Following this offering, we
intend to repay all amounts outstanding under the term loan facility and
terminate such facility and the related swap contract.

     Foreign Currency Risk.  In the event of a significant loss event which
requires settlement in a currency other than the United States dollar, we may
use forward foreign currency exchange contracts in an effort to hedge against
movements in the value of foreign currencies relative to the United States
dollar. A forward foreign currency exchange contract involves an obligation to
purchase or sell a specified currency at a future date at a price set at the
time of the contract. Foreign currency exchange contracts will not eliminate
fluctuations in the value of our assets and liabilities denominated in foreign
currencies but rather allow us to establish a rate of exchange for a future
point in time. We do not expect to enter into such contracts with respect to a
material amount of our assets. At March 31, 2003 we did not have any outstanding
forward foreign currency exchange contracts.

     Our functional currency is the United States dollar. The British pound is
the functional currency of our wholly owned subsidiary, Montpelier Marketing
Services (UK) Limited ("MMSL"). Accordingly, MMSL's
                                        46
<PAGE>

assets and liabilities are translated at exchange rates in effect at the balance
sheet date. Revenue and expenses of MMSL are translated at average exchange
rates during the period. The effect of translation adjustments is not included
in our consolidated results of operations but is included in accumulated other
comprehensive income, a separate component of shareholders' equity. On a
consolidated basis, MMSL does not generate material revenue and expenses and,
therefore, the effects of changes in exchange rates during the period are not
material.

     Credit Risk.  We have exposure to credit risk primarily as a holder of
fixed maturity investments. In accordance with our investment guidelines as
approved by our Board of Directors, our risk management strategy and investment
policy is to invest in debt instruments of high credit quality issuers and to
limit the amount of credit exposure with respect to particular ratings
categories and any one issuer. At March 31, 2003, all fixed maturity investments
that we held were investment grade.

CURRENCY

     We write a portion of our business and receive premiums in currencies other
than United States dollars and may maintain a small portion of our investment
portfolio in investments denominated in currencies other than United States
dollars. We may experience exchange losses to the extent our foreign currency
exposure is not properly managed or otherwise hedged, which in turn would
adversely affect our statement of operations and financial condition.

EFFECTS OF INFLATION

     The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local economy. The anticipated effects on us are
considered in our catastrophe loss models. The effects of inflation are also
considered in pricing and in estimating reserves for loss and loss adjustment
expenses. The actual effects of inflation on our results cannot be accurately
known until claims are ultimately settled.

SUMMARY OF CRITICAL ACCOUNTING POLICIES

     The Company's consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("U.S. GAAP"). The preparation of financial statements in accordance
with U.S. GAAP requires management to make estimates and assumptions that affect
reported and disclosed amounts of assets and liabilities, as well as disclosure
of contingent assets and liabilities as at the balance sheet date and the
reported amounts of revenues and expenses during the reporting period. We
believe the following accounting policies are critical to our operations as
their application requires management to make the most significant judgments.

     Other significant accounting policies that we use to prepare our
consolidated financial statements are included in Note 2 to the December 31,
2002 Combined Financial Statements and in the notes to the March 31, 2003
Consolidated Financial Statements, both of which are included in this filing.

     Premiums.  Premium income is primarily earned ratably over the term of the
insurance policy. We also write certain pro-rata reinsurance policies on a risks
attaching basis which are generally earned over a 24-month period, consistent
with industry practice. The portion of the premium related to the unexpired
portion of the policy at the end of any reporting period is reflected in
unearned premium.

     We write both excess of loss and pro-rata contracts. On excess of loss
contracts, the minimum and deposit premium is defined in the contract wording
and this is the amount we record as written premium in the period the underlying
risks incept, therefore no management judgment is necessary. Subsequent
adjustments to the minimum and deposit premium are recorded in the period in
which they are determined.

     On pro-rata contracts, including QQS arrangements, premiums assumed are
estimated to ultimate levels based on information provided by the ceding
companies. An estimate of premium is recorded in the period in which the
underlying risks incept. When the actual premium is reported by the ceding
company, which may be reported on a quarterly or six month lag, it may be
significantly higher or lower than the estimate. Adjustments arising from the
reporting of actual premium by the ceding companies are recorded in the period
                                        47
<PAGE>

in which they are determined. Estimates of premium are based on information
available, including previously reported premium and underlying economic
conditions. Premiums on pro-rata contracts are earned over the risk periods of
the related reinsurance contracts.

     Where contract terms require the reinstatement of coverage after a ceding
company's loss, the mandatory reinstatement premiums are recorded as written
premiums when the loss event occurs, and are recognized as earned premium
ratably over the remaining contract period. Accrual of reinstatement premiums is
based on our estimate of loss and loss adjustment expense reserves, which
involves management judgment as described below. Reinstatement premiums are not
accrued on reserves for losses incurred but not reported.

     Loss and Loss Adjustment Expense Reserves.  See "-- Financial Condition and
Liquidity -- Loss and Loss Adjustment Expense Reserves."

     Other Than Temporary Impairments in Investments.  In accordance with our
investment guidelines, our investments consist of high-grade marketable fixed
maturity investments and equity securities. Fixed maturity investments are
classified as available for sale and accordingly are carried at market value as
determined by the most recently traded price of each security at the balance
sheet date. For unquoted investments, estimated fair value is determined using
the financial information received, which includes reported net asset values,
other information available to management, and other economic and market
knowledge as appropriate. Investments are reviewed periodically to determine if
they have sustained an impairment in value that is considered to be other than
temporary. The identification of potentially impaired investments involves
significant management judgment. In our determination of other-than-temporary
impairment, we consider several factors and circumstances including the issuer's
overall financial condition, the issuer's credit and financial strength ratings,
a weakening of the general market conditions in the industry or geographic
region in which the issuer operates, a prolonged period (typically six months or
longer) in which the fair value of an issuer's securities remains below our cost
and any other factors that may raise doubt about the issuer's ability to
continue as a going concern. The current economic environment and recent
volatility of securities markets increases the difficulty in determining
impairment and whether the impairment is considered to be other than temporary.

     Unrealized depreciation in the value of individual investments, considered
by management to be other than temporary, is charged to income in the period it
is determined.

RECENT ACCOUNTING PRONOUNCEMENT

     The Financial Accounting Standards Board issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46") an interpretation of
ARB No. 51 "Consolidated Financial Statements" in January 2003. FIN 46 clarifies
the accounting and reporting for certain entities in which equity investors do
not have the characteristics of a controlling financial interest. The financial
statements included with the Company's December 31, 2002 Form 10-K were prepared
on a combined basis as a result of the fact that Montpelier Re's and the
Company's bye-laws include certain restrictions relating to the election of
directors of Montpelier Re. The Company adopted FIN 46 in the first quarter of
2003. The impact of adoption of FIN 46 is that the Company's financial
statements are now prepared on a consolidated basis instead of on a combined
basis. There is no impact on the Company's net income or shareholders' equity as
presented in these consolidated financial statements as a result of the adoption
of FIN 46.

                                        48
<PAGE>

                                    BUSINESS

OVERVIEW

     Montpelier Re Holdings Ltd. (the "Company"), through its wholly owned
operating subsidiary Montpelier Reinsurance Ltd. ("Montpelier Re"), is a
Bermuda-based provider of global specialty property insurance and reinsurance
products. We were founded by White Mountains Insurance Group, Ltd. and Benfield
Holdings Limited and commenced operations in December 2001 with approximately
$1.0 billion of capital. We have assembled a senior management team with
significant industry expertise and longstanding industry relationships. We seek
to identify attractive insurance and reinsurance opportunities by capitalizing
on our management's significant underwriting experience, using catastrophe
modeling software and our own risk pricing and capital allocation models. We
underwrote $366.6 million and $607.7 million in gross premiums written for the
three months ended March 31, 2003 and for the year ended December 31, 2002,
respectively, which was spread between various classes of business and
geographic areas. We have well-established market relationships with the world's
top reinsurance brokers including Guy Carpenter & Company, Inc. (a subsidiary of
Marsh & McLennan Companies Inc.), Aon Re Worldwide (a subsidiary of Aon
Corporation), Benfield plc ("Benfield") and Willis Group Holdings Ltd., among
others.

MARKET OPPORTUNITIES AND INDUSTRY TRENDS

     The prices of property and other insurance and reinsurance contracts have
historically often risen in the aftermath of significant catastrophic losses.
The occurrence of catastrophic events, the frequency and severity of which are
inherently unpredictable, affects both industry results and subsequent
prevailing market prices of our products. As claims are incurred, industry
surplus is depleted and the industry's capacity to write new business
diminishes. Market trends similar to those that have occurred in past cycles
have developed in the current environment.

     During 2002, Standard & Poors downgraded a large number of reinsurers and
upgraded very few. Many global property and casualty insurers and reinsurers are
experiencing significantly reduced capital as a result of several years of
excessively competitive pricing, expanding coverage terms, significant increases
in reserves from asbestos liability, a decline in the U.S. and global equity
markets and poor investment performance. This reduction in capacity has resulted
in more favorable pricing terms and conditions. Through Montpelier Re, we seek
to help fulfill the need for additional underwriting capacity in the global
property and casualty insurance and reinsurance market. We intend to take
advantage of current conditions in those markets by opportunistically providing
capacity to ceding companies at prices commensurate with the risk we assume.

     This tightening of supply has resulted in government intervention in the
insurance and reinsurance markets, both in the U.S. and worldwide. For example,
in response to the tightening of supply in certain insurance and reinsurance
markets resulting from, among other things, the September 11th terrorist
attacks, the Terrorism Risk Insurance Act of 2002 was enacted to ensure the
availability of insurance coverage for terrorist acts in the U.S. This law
establishes a federal assistance program that will continue through the end of
2005 to help the commercial property and casualty insurance industry cover
claims related to future terrorism related losses and regulates the terms of
insurance relating to terrorism coverage. This law could adversely affect our
business by increasing underwriting capacity for our competitors as well as by
requiring that coverage for terrorist acts be offered by insurers. We are in the
process of evaluating the likely impact of this law on our future operations. We
are currently unable to predict the extent to which the foregoing new initiative
may affect the demand for our products or the risks that may be available for us
to consider underwriting. In addition, the insurance and reinsurance regulatory
framework has been subject to increased scrutiny by individual U.S. state
governments. This government intervention and the possibility of future
intervention have created uncertainty in the insurance and reinsurance markets
about the definition of terrorist acts and the extent to which future coverages
will extend to terrorist acts. The extent to which coverage for terrorist acts
is offered in the future is also uncertain.

     At this time we believe that the "short-tail" insurance and reinsurance
market in which we participate seems to be in general price equilibrium. There
is under-capacity in some areas and over-capacity in others,

                                        49
<PAGE>

but the market is generally stable. Overall price-levels are favorable for
insurers and reinsurers and better than they have been in many years. It appears
that for 2003 the market may be peaking but that pricing will remain more stable
for a longer period than we originally anticipated.

OUR COMPETITIVE STRENGTHS

     We believe we distinguish ourselves from our competitors as follows:

        Disciplined Underwriting and Risk Management.  We focus on underwriting
     profitability rather than growth in premium volume or market share. We
     write business with a view toward minimizing the loss ratio, which
     represents the ratio of our loss and loss adjustment expenses to premiums
     earned, and we do not rely on investment returns to achieve our pricing
     goals. We seek to limit and diversify our loss exposure while earning an
     underwriting profit on all business we write by applying the professional
     insurance disciplines of pricing, underwriting and risk management.

        Proven and Experienced Management Who Think and Act Like Owners.  Our
     management team is led by our President and Chief Executive Officer,
     Anthony Taylor, who also serves as our Chief Underwriting Officer,
     reflecting our underwriting emphasis. Mr. Taylor, formerly the Deputy
     Chairman of Wellington Underwriting plc, has substantial underwriting
     expertise, much of it a result of his underwriting experience at Lloyd's.
     Our seven underwriters have an average of 24 years of experience in the
     insurance and reinsurance industry. This experience creates the opportunity
     for disciplined and profitable underwriting, and the opportunity to take a
     lead position on underwriting treaties. Our Chairman, John (Jack) Byrne,
     our Chief Reinsurance Officer, C. Russell Fletcher III, and our Chief
     Financial Officer, K. Thomas Kemp, and Anthony Taylor have each invested in
     our common shares, and all of our executive officers participate in our
     long-term incentive program that ties compensation to the achievement of
     specific goals relating to our underwriting performance over the course of
     overlapping three-year periods. A substantial portion of each executive's
     total compensation depends upon our long-term underwriting performance. We
     believe that our incentive compensation program aligns our executive
     officers' interests with those of our shareholders.

        Well-Established Market Relationships.  Our underwriting team has the
     knowledge, experience and personal relationships that provide us with
     access to brokers and clients and to existing and new reinsurance programs.
     We believe we have established a broad level of support as a lead reinsurer
     among many of the largest reinsurance brokers worldwide, including Guy
     Carpenter, Aon Re Worldwide, Benfield and Willis Group, each of whom has
     provided significant business to us. As a result of being in a lead
     position on a number of programs, we expect to have the opportunity to
     analyze a broad range of opportunities and exercise selectivity on risks we
     underwrite.

        No Historical Liabilities or Contingencies.  We are a recently formed
     company with a balance sheet unencumbered by any historical losses relating
     to the September 11th terrorist attacks, asbestos and other legacy
     exposures affecting our industry. As a result, we have no risk that
     deteriorating loss reserves related to legacy exposures prior to our
     formation will impact our future financial results. To maximize our
     returns, we opportunistically price our products in line with many of our
     competitors, who are increasing market prices due to such factors.

        Excellent Financial Strength.  Montpelier Re has a capital base of over
     $1.5 billion, which provides a high degree of financial strength to our
     clients. A.M. Best Company Inc. assigned an "A" (Excellent) rating, the
     third highest of fifteen rating levels, to Montpelier Re. This rating
     reflects A.M. Best's opinion of the results of our first year of
     operations, our capitalization and management. Montpelier Re has been
     assigned an "A3" (Good) rating by Moody's Investors Service, the seventh
     highest rating of twenty-one rating levels. This rating reflects Moody's
     opinion of the ability of Montpelier Re to punctually repay senior
     policyholder claims and obligations. These ratings are not evaluations
     directed to investors in the notes or a recommendation to buy, sell or hold
     the notes.

        Strong Strategic Sponsorship.  We were founded by White Mountains
     Insurance Group, Ltd. ("White Mountains") and Benfield, each of whom has a
     strong reputation in the industry. White

                                        50
<PAGE>

     Mountains has substantial experience in managing companies and sponsoring
     the development of other insurance companies. Mr. Byrne, our Chairman and
     the Chairman of White Mountains, has worked in the insurance industry for
     over 50 years. Benfield is the third largest reinsurance broker in the
     world ranked by reinsurance brokerage revenues for the year ended December
     31, 2001.

CORPORATE STRATEGY

     We aim to maximize sustainable long-term growth in shareholder value by
pursuing the following strategies:

        Manage Capital Prudently and Maintain a Disciplined Balance Sheet.  We
     focus on generating underwriting profits while maintaining a disciplined
     balance sheet. We intend to manage our capital prudently relative to our
     risk exposure in an effort to maximize sustainable long-term growth in
     shareholder value. In 2003 we have purchased specific retrocessional
     protection for our direct insurance and facultative reinsurance programs
     and for our property reinsurance programs, excluding most other specialty
     lines. We may purchase additional retrocessional protection for our own
     account in 2003. Our capital management strategy will emphasize the
     appropriate use of leverage (borrowings) to augment capital when it can be
     fully and profitably used to support our underwriting. If we have idle or
     excess capital, we may, although we have no current plans to, reduce
     leverage and consider share repurchases or dividends to return capital to
     our owners. We employ a conservative investment policy, which aims to
     minimize any duration mismatch among our assets and liabilities, and we
     seek to establish appropriate loss reserves in order to minimize later
     adjustments.

        Enhance Our Lead Position With Brokers and Cedents.  We often take a
     lead position on underwriting treaties, which provides us with enhanced
     access to business and allows us to exercise superior risk selection. Our
     underwriters seek to identify those exposures which meet our objectives in
     terms of return on capital and underwriting criteria. By leading
     reinsurance programs, we believe our underwriters see a broad range of our
     clients' business which, in conjunction with sophisticated modeling tools,
     has allowed us to build a substantial book of reinsurance business
     exhibiting superior performance.

        Combine Subjective Underwriting Methods With Objective Modeling
     Tools.  We intend to exploit pricing inefficiencies that may exist in the
     market from time to time. To achieve this, we disseminate market
     information to our entire underwriting team through the development of
     knowledge management systems and personal contact among all underwriters.
     Generally, our underwriters use sophisticated property risk modeling tools,
     both proprietary and third party, together with their market knowledge and
     judgment, to seek the most favorable terms per unit of risk assumed by our
     portfolio.

        Develop and Maintain a Balanced Portfolio of Reinsurance Risks.  We aim
     to build a balanced portfolio of primarily property related risks,
     diversified by class, product, geography and marketing source. We actively
     seek to grow in classes experiencing improved or stable conditions and
     avoid classes suffering from intense price competition or poor
     fundamentals. Our approach to new business is flexible and dynamic because
     we have a centralized underwriting team in Bermuda, as opposed to a large
     decentralized structure that might encourage writings in particular
     geographic areas or product classes to justify previous commitments. We
     underwrite a variety of different products, and seek to avoid a focus on
     any particular region or class of business, including U.S. property
     catastrophe business. We employ risk management techniques to monitor
     correlation risk and seek to enhance the underwriting returns through
     careful risk selection using advanced capital allocation methodologies. We
     utilize industry modeling tools to stress test the portfolio by simulating
     large loss events. We believe a more balanced portfolio of risks reduces
     the volatility of returns and optimizes the growth of shareholder value.

        Deliver Customized, Innovative and Timely Insurance and Reinsurance
     Solutions for Our Clients. We intend to establish ourselves as a premier
     provider of global specialty property insurance and reinsurance products
     and seek to provide superior customer service. Our objective is to solidify
     long-term relationships with brokers and clients while developing an
     industry reputation for innovative and timely quotes for difficult
     technical risks.

                                        51
<PAGE>

INSURANCE AND REINSURANCE PRODUCTS

     General.  The majority of the reinsurance products we seek to write are in
the form of treaty reinsurance contracts, which are contractual arrangements
that provide for automatic reinsuring of a type or category of risk underwritten
by our clients. When we write treaty reinsurance contracts, we do not evaluate
separately each of the individual risks assumed under the contracts and are
largely dependent on the individual underwriting decisions made by the cedent.
Accordingly, we carefully review and analyze the cedent's risk management and
underwriting practices in deciding whether to provide treaty reinsurance and in
appropriately pricing the treaty. We also write direct insurance and facultative
reinsurance contracts where we reinsure individual risks on a case by case
basis.

     Our contracts can be written on either a quota share, also known as
proportional or pro-rata, basis or on an excess of loss basis. With respect to
quota share reinsurance, we share the premiums as well as the losses and
expenses in an agreed proportion with the cedent. In the case of reinsurance
written on an excess of loss basis, we generally receive the premium for the
risk assumed and indemnify the cedent against all or a specified portion of
losses and expenses in excess of a specified dollar or percentage amount. In
both types of contracts, we may provide a ceding commission to the cedent.

     We seek to manage our risk by seeking profitable pricing, using contract
terms, diversification criteria, prudent underwriting, the use of our
proprietary modeling system, CATM, and varying the conditions based on the
nature and scope of coverage. Underwriting is primarily a matter of judgment,
involving important assumptions about matters that are inherently unpredictable
and beyond our control, and for which historical experience and probability
analysis may not provide sufficient guidance.

     Premiums are a function of the number and type of contracts we write, as
well as prevailing market prices. Renewal dates for reinsurance business tend to
be concentrated at the beginning of quarters, and the timing of premium written
varies by line of business. Most property catastrophe business is written in the
January 1, April 1 and July 1 renewal periods, while the property specialty and
other specialty lines are written throughout the year. Written premiums are
generally lower during the fourth quarter of the year as compared to prior
quarters. Gross premiums written for QQS programs are initially booked as
estimates and are adjusted as actual results are reported by the syndicates
during the period. Earned premiums do not necessarily follow the written premium
pattern as certain premiums written are earned ratably over the contract term,
which ordinarily is twelve months, although many pro-rata contracts are written
on a risks attaching basis and are generally earned over a 24 month period,
consistent with industry practice. Earned premiums are affected by our growing
book of business; as written premium levels increase, earned premium levels will
correspondingly increase over the earning period. Premiums are generally due in
installments.

     We believe our most significant opportunities, excluding QQS, are in the
short-tail property exposed business with higher levels of attachment, and in
our specialty lines. Details of gross premiums written by line of business for
the three months ended March 31, 2003 and the year ended December 31, 2002 are
provided below ($ in millions):

                         GROSS PREMIUMS WRITTEN BY LINE

<Table>
<Caption>
                                                 THREE MONTHS ENDED         YEAR ENDED
                                                   MARCH 31, 2003       DECEMBER 31, 2002
                                                 ------------------     ------------------
<S>                                              <C>         <C>        <C>         <C>
Property Specialty.............................  $ 90.6       24.7%     $230.3       37.9%
Property Catastrophe...........................   150.8       41.1       141.4       23.3
Qualifying Quota Share.........................    76.4       20.9       171.7       28.2
Other Specialty................................    48.8       13.3        64.3       10.6
                                                 ------      -----      ------      -----
Total..........................................  $366.6      100.0%     $607.7      100.0%
                                                 ======      =====      ======      =====
</Table>

     Property Specialty.  Contracts in this category include risk excess of
loss, property pro-rata and direct insurance and facultative reinsurance. Risk
excess of loss reinsurance protects insurance companies on their primary
insurance risks and facultative reinsurance transactions on a "single risk"
basis. A "risk" in this

                                        52
<PAGE>

context might mean the insurance coverage on one building or a group of
buildings or the insurance coverage under a single policy which the reinsured
treats as a single risk. Coverage is usually triggered by a large loss sustained
by an individual risk rather than by smaller losses which fall below the
specified RETENTION of the reinsurance contract. All property risk coverages are
written on an excess of loss basis, which provides the insured protection beyond
a specified amount up to the limit set within the reinsurance contract.

     Based on the heavy level of losses experienced by the overall market during
2001, prices for these types of risk coverages experienced substantial increases
over their expiring terms in 2002. We have seen continuing significant
restrictions on policy terms and conditions in 2003, which will improve the
underlying risk profile even further. For example, under current market
conditions, contracts generally allow a limited number of reinstatement
provisions during the policy period versus an unlimited number that was
previously available.

     We also write direct insurance and facultative reinsurance coverage on
commercial property risks where we assume all or part of a risk under a single
insurance contract. We generally write such coverage on an excess of loss basis.
Facultative reinsurance is normally purchased by clients where individual risks
are not covered by their reinsurance treaties, for amounts in excess of the
dollar limits of their reinsurance treaties, or for unusual risks.

     We also write property pro-rata reinsurance contracts which are comprised
of property risk programs written on a proportional basis rather than on an
excess of loss basis.

     Property Catastrophe.  Property catastrophe reinsurance contracts are
typically "all risk" in nature, providing protection against losses from
earthquakes and hurricanes, as well as other natural and man-made catastrophes
such as floods, tornadoes, fires and storms. The predominant exposures covered
are losses stemming from property damage and business interruption coverage
resulting from a covered peril. Certain risks, such as war, nuclear
contamination and various forms of terrorism, are generally excluded from our
contracts.

     Property catastrophe reinsurance is written on an excess of loss basis,
which provides coverage to primary insurance companies when aggregate claims and
claim expenses from a single occurrence from a covered peril exceed a certain
amount specified in a particular contract. Under these contracts, we provide
protection to an insurer for a portion of the total losses in excess of a
specified loss amount, up to a maximum amount per loss specified in the
contract. In the event of a loss, most contracts provide for coverage of a
second occurrence following the payment of a premium to reinstate the coverage
under the contract, which is referred to as a reinstatement premium. The
coverage provided under excess of loss reinsurance contracts may be on a
worldwide basis or limited in scope to specific regions or geographical areas,
while the underlying risks covered might be located throughout the world.
Coverage can also vary from "all property" perils, which is the most expansive
form of coverage, to more limited coverage of specified perils such as windstorm
only coverage.

     To a lesser extent we also write retrocessional coverage contracts, which
provide reinsurance protection to other reinsurers, also called retrocedents.
Coverage generally provides catastrophe protection for the property portfolios
of other reinsurers. Retrocessional contracts typically carry a higher degree of
volatility than reinsurance contracts as they protect against concentrations of
exposures written by retrocedents, which in turn may experience an aggregation
of losses from a single catastrophic event. In addition, the information
available to retrocessional underwriters concerning the original primary risk
can be less precise than the information received directly from primary
companies. Furthermore, exposures from retrocessional business can change within
a contract term as the underwriters of a retrocedent may alter their book of
business after retrocessional coverage has been bound.

     Qualifying Quota Share.  We currently provide whole account quota share
reinsurance, or QQS reinsurance, to select Lloyd's syndicates and may consider
similar contracts with similarly selected other insurers or reinsurers in the
future. We target syndicates which have a proven underwriting franchise, long-
term customer relationships and whose ability to write premiums is limited by
their stamp capacity. Stamp capacity is a measure of the amount of premium a
Lloyd's syndicate is authorized to write by the Council of Lloyd's and on which
it must pay subscriptions and contributions. For the 2002 underwriting year,
Lloyd's

                                        53
<PAGE>

allowed syndicates to write up to 120% (in some special cases up to 130%) of
their stamp capacity, with the ability to cede the surplus income to quota share
reinsurers. We do not have exposure to underwriting in earlier years and the
contracts are expected to be commuted after 36 months, the point at which the
underwriting year is closed.

     Under QQS contracts, we assume a specified portion of the risk on a
specified coverage in exchange for an equal proportion of the premiums. The
ceding syndicate receives a commission, based on the amount of the premiums
ceded, which is intended to reimburse the insurer for costs of writing and
administering the business. The reinsurer is dependent on the ceding syndicate's
ability in underwriting, pricing and claims administration.

     QQS contracts provide us with premiums in the form of a diversified
portfolio of risks with a balanced spread of risks. We target business which is
property exposed and is consistent with our underwriting parameters. We believe
that the extensive relationships of our management provide us with the advantage
of identifying profitable syndicates which have a consistent track record of
underwriting profitability. This approach allows us to benefit from favorable
market conditions in the absence of having a full underwriting staff across a
wide variety of classes of business. Business assumed under QQS contracts
usually benefits from all reinsurance purchased by the syndicate, including
individual risk and excess of loss portfolio contracts.

     Other Specialty.  We also write specialty risks such as aviation liability,
aviation war, marine, personal accident catastrophe, worker's compensation,
terrorism, casualty and other reinsurance business. We diversify our risk by
writing predominantly short-tail lines of business. Marine and aviation
contracts are primarily written on a retrocessional excess of loss basis. A
limited number of terrorism specific risks, reinsurance treaties and national
pools are written as well. We also write a limited amount of aviation war risk
business, as prices renewed at multiples of their expiring prices following
significant industry losses from the September 11th and Sri Lanka terrorist
attacks. We expect to increase our other specialty and property specialty lines
of business based on our assessment of the current market environment.

     Our casualty portfolio of risks focuses on selected classes, with an
initial emphasis on casualty clash excess of loss reinsurance business. Under a
casualty clash reinsurance agreement, the ceding insurer retains an amount which
is generally higher than the limit on any one reinsured policy. Thus, two or
more coverages or policies issued by the ceding insurer generally must be
involved in a loss for coverage to apply under the reinsurance agreement. In
addition, we also write UK employers liability coverage and excess auto
liability coverage in the U.S.

     Coverage for worker's compensation and personal accident catastrophe
contracts are generally written to restrict recoveries by the cedent unless
normally at least a minimum of twenty insured persons are involved in the same
event. As a result of the number of fatalities arising from the September 11th
terrorist attacks, worker's compensation and personal accident reinsurers
experienced significant underwriting losses. Accordingly, many reinsurers were
reluctant to provide this type of cover in December 2001. In 2002, we quoted and
led what we believe to be the first treaties of this kind purchased after
September 11th. This business is generally written to provide coverage
worldwide.

     A very high percentage of the reinsurance contracts that we write do not
provide coverage for losses arising from acts of terrorism caused by nuclear,
biological or chemical attack. With respect to PERSONAL LINES risks, losses
arising from acts of terrorism occasioned by causes other than nuclear,
biological or chemical attack are usually covered by our reinsurance contracts.
Such losses relating to COMMERCIAL LINES risks are generally covered on a
limited basis, for example, where the covered risks fall below a stated insured
value or into classes or categories we deem less likely to be targets of
terrorism than others or where an act of terrorism does not meet the definition
of "act of terrorism" set forth in the Terrorism Risk Insurance Act of 2002. We
have written a limited number of reinsurance contracts, both on a proportional
and excess of loss basis, covering solely acts of terrorism. We have done so
only in instances where we believe we are able to obtain pricing that adequately
covers our exposure. These contracts typically exclude coverage protecting
against nuclear, biological or chemical attack.

                                        54
<PAGE>

     We pursue specialty reinsurance on a disciplined and opportunistic basis.
We plan to target short-tail lines of business, often with low frequency, high
severity profiles similar to catastrophe business. We also seek to manage the
correlations of this business with property catastrophe through the use of CATM,
our proprietary modeling system.

     Geographic Breakdown.  Since inception, we have sought to diversify our
exposure across geographic zones around the world in order to obtain the optimum
spread of risk. The exposures are also a function of market conditions and
opportunities. The following table sets forth a breakdown of our gross premiums
written by geographic area of risk insured for the three months ended March 31,
2003 and the year ended December 31, 2002 ($ in millions).

           GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA OF RISKS INSURED

<Table>
<Caption>
                                                 THREE MONTHS ENDED         YEAR ENDED
                                                   MARCH 31, 2003       DECEMBER 31, 2002
                                                 ------------------     ------------------
<S>                                              <C>         <C>        <C>         <C>
Worldwide(1)...................................  $174.0       47.5%     $306.4       50.4%
USA and Canada.................................   133.0       36.3       207.4       34.1
Japan..........................................     1.6        0.4        23.3        3.8
Western Europe, excluding the United Kingdom
  and Ireland..................................     9.8        2.7        17.8        2.9
United Kingdom and Ireland.....................    21.3        5.8        11.8        1.9
Worldwide, excluding USA and Canada(2).........    12.2        3.3        11.4        1.9
Others (1.5% or less)..........................    14.7        4.0        29.6        5.0
                                                 ------      -----      ------      -----
Total..........................................  $366.6      100.0%     $607.7      100.0%
                                                 ======      =====      ======      =====
</Table>

---------------

(1) "Worldwide" comprises insurance and reinsurance contracts that insure or
    reinsure risks on a worldwide basis.

(2) "Worldwide, excluding USA and Canada" comprises insurance and reinsurance
    contracts that insure or reinsure risks on a worldwide basis but
    specifically exclude the USA and Canada.

     The QQS contracts and substantial amounts of other lines of business are
worldwide in nature, with the majority of business related to North America and
Europe.

UNDERWRITING AND RISK MANAGEMENT

     During 2002 and through the first quarter of 2003, we believe we created a
balanced portfolio of risks, diversified by class, product, geography and
marketing source. For example, our current policy is to limit our exposure to
$100 million on any single contract. We attempt to limit the amount of potential
loss that may arise from a single catastrophic event. We also attempt to manage
our exposure against clash and correlation among risks.

     Our underwriting team is led by our President and Chief Executive Officer,
Anthony Taylor, who also serves as Montpelier Re's Chief Underwriting Officer.
C. Russell Fletcher III is our Chief Reinsurance Officer and is also a principal
member of our underwriting team. We underwrite to specific disciplines as set
out by the Chief Underwriting Officer, with the aim of maintaining the following
principles:

     - Assume excess of loss business with an attachment point above the
       expected level of attritional losses, thereby covering infrequent large
       losses;

     - Limit the scope of coverage on regular property classes to "traditional
       perils" and generally exclude perils that are difficult to measure such
       as cyber risks, pollution and nuclear, biological and chemical acts of
       terrorism;

     - Entertain difficult risks such as terrorism but only on a specific basis
       whereby exposures are carefully controlled through limits, terms and
       conditions and are appropriately priced;

                                        55
<PAGE>

     - Exclude "single risk" exposure from catastrophe and retrocessional
       business;

     - Be prepared to lead business but work with and follow respected existing
       leaders where appropriate; and

     - Use risk assessment models such as RMS, AIR and EQE to assist in the
       underwriting process and in the quantification of our catastrophe
       aggregate exposures.

     We have implemented underwriting guidelines that are designed to limit our
exposure to loss from any one contract. As part of our pricing and underwriting
process, we also assess a variety of other factors, including, but not limited
to:

     - The reputation of the proposed cedent and the likelihood of establishing
       a long-term relationship with the cedent;

     - The geographical location of the cedent's original risks;

     - Historical loss data of the cedent and, where available, of the industry
       as a whole in the relevant regions, in order to compare the cedent's
       historical catastrophe loss experience to industry averages; and

     - The perceived financial strength of the cedent.

     Our principal underwriting objective is to create a balanced portfolio of
risks, diversified by class, product, geography and marketing source. To help us
achieve this objective we have developed a sophisticated modeling tool to
analyze and manage the reinsurance exposures we assume from cedents, called
CATM. This proprietary computer-based underwriting system, the technical
components of which incorporate the fundamentals of modern portfolio theory, is
designed to measure the amount of capital required to support individual
contracts based on the degree of correlation between contracts that we
underwrite as well as other factors. CATM comprises risk assessment tools,
exposure databases and intelligent systems, and enables us to price contracts
according to actual exposures and estimate the amount of loss and volatility
associated with the contracts we assume.

     CATM is designed to use output from models developed by our actuarial staff
as well as from those of commercial vendors such as AIR, RMS and EQE. In
addition, CATM serves as a first step in the development of a dynamic financial
analysis model to be used as a guide in managing our exposure to liability,
asset and business risk. CATM was fully operational prior to the 2003 renewal
season.

     We frequently seek to be a part of the limited group of reinsurers who act
as the lead in our reinsurance contracts. Historically, one reinsurer acted as
the "lead" underwriter in negotiating principal policy terms and pricing of
reinsurance contracts with a reinsurance broker. In the current environment, a
consensus of price and terms is produced from a limited group of reinsurers, of
which we are very frequently a part. We believe that our financial strength, the
experience and reputation of our underwriters and the withdrawal of other
reinsurers from the reinsurance market permits us to be a part of this limited
group of reinsurers in underwriting many of our reinsurance contracts. We
believe that being a part of this group will be an important factor in achieving
long-term success because we believe that this limited group of underwriters
generally has greater influence in negotiation of policy terms, attachment
points and premium rates than following reinsurers. In addition, we believe that
reinsurers that are a part of this limited group are generally solicited for a
broader range of business than other reinsurers and have greater access to
preferred risks.

MARKETING

     Business is produced through brokers and reinsurance intermediaries. We
seek to establish an identity with brokers and ceding companies by providing:
(i) prompt and responsive service on underwriting submissions; (ii) innovative
and customized insurance and reinsurance solutions to clients; and (iii) timely
payment of claims. Our objective is to build long-term relationships with
brokers and ceding companies and provide financial strength and security. We
expect to support the existing market as we build our reputation and brand. All
brokerage transactions are entered into on an arm's length basis. We target
prospects that are

                                        56
<PAGE>

capable of supplying detailed and accurate underwriting data and that
potentially add further diversification to our book of business.

     The following table shows our gross premiums written by broker ($ in
millions):

<Table>
<Caption>
                                                THREE MONTHS ENDED        YEAR ENDED
                                                  MARCH 31, 2003       DECEMBER 31, 2002
                                                ------------------     -----------------
<S>                                             <C>         <C>        <C>         <C>
Benfield(1)...................................  $101.6       29.3%      $180.5      29.7%
Willis Group(1)...............................    82.8       23.9        140.2      23.1
Guy Carpenter.................................    75.8       21.9        107.3      17.6
Aon Re Worldwide..............................    42.1       12.1         90.4      14.9
Other brokers.................................    44.7       12.8         89.3      14.7
                                                ------      -----      -------     -----
Total brokers.................................  $347.0      100.0%      $607.7     100.0%
                                                ------      -----      -------     -----
Direct (no broker)............................    19.6                      --
                                                ------                 -------
Total.........................................  $366.6                  $607.7
                                                ======                 =======
</Table>

---------------

(1) Includes QQS gross premium written. Benfield represents gross premiums
    written through UK and U.S. brokerage subsidiaries of Benfield Holdings
    Limited.

     MMSL, our marketing subsidiary in London, experiences a flow of
introductions from brokers who are either seeking new markets into which to
channel their business or who desire a personal dialogue prior to rating and
acceptance by our Bermuda underwriters. MMSL regularly conducts meetings with
major London brokers, smaller brokers, UK cedents and international cedents
visiting London. In addition, MMSL conducts specific client trips to Japan,
Australia and Scandinavia.

CLAIMS MANAGEMENT

     Claims management includes the receipt of loss notifications, the
establishment of case loss reserves and approval of loss payments. Additionally,
if required, claims audits may be conducted for specific claims and claims
procedures at the offices of certain ceding companies. We recognize that fair
interpretation of our reinsurance agreements with our customers and timely
payment of covered claims is a valuable service to our clients and enhances our
reputation.

RESERVES

     Our policy is to establish prudent loss and loss adjustment expense
reserves for the ultimate settlement costs of all loss and loss adjustment
expenses incurred and incurred but not yet reported.

     Under U.S. GAAP, we are not permitted to establish loss and loss adjustment
expense reserves with respect to our property catastrophe portfolio until an
event which gives rise to a loss occurs. A significant portion of the Company's
business is property catastrophe and other classes with high attachment points
of coverage. Reserving for losses in the property catastrophe market is
inherently complicated in that losses in excess of the attachment level of the
Company's policies are characterized by high severity and low frequency and
other factors which could vary significantly as claims are settled. This limits
the volume of relevant industry claims experience available from which to
reliably predict ultimate losses following a loss event. The reserve for IBNR is
estimated by management using industry data and professional judgment to
estimate the ultimate loss to the Company from insurance and reinsurance
contracts exposed to a loss event. Such reserves are estimated by management
based upon reports received from ceding companies, supplemented by our own
estimates of reserves for which ceding company reports have not been received,
and our own historical experience. These estimates are subject to a
corroborative review by external actuaries, based on loss development patterns
determined by reference to the Company's underwriting practices, the policy
form, type of insurance program and industry data.

     Delays in ceding companies reporting losses to the Company together with
the potential for unforeseen adverse developments may result in losses and loss
expenses significantly greater or less than the reserve
                                        57
<PAGE>

provided at the time of the loss event. Reserving can prove especially difficult
should a significant loss event take place near the end of an accounting period,
particularly if the loss is a catastrophic event. These estimates are regularly
reviewed and updated, as experience develops and new information becomes known.
Any resulting adjustments are reflected in income in the period in which they
become known. Loss and loss adjustment reserves represent estimates, including
actuarial and statistical projections at a given point in time, of our
expectations of the ultimate settlement and administration costs of claims
incurred, and it is likely that the ultimate liability may exceed or be less
than such estimates, perhaps significantly. Such estimates are not precise in
that, among other things, they are based on predictions of future developments
and estimates of future trends in loss severity and frequency and other variable
factors such as inflation. During the loss settlement period, it often becomes
necessary to refine and adjust the estimates of liability on a claim either
upward or downward. Even after such adjustments, ultimate liability may exceed
or be less than the revised estimates. To assist us in establishing appropriate
loss and loss adjustment reserves, we have access to commercially available
databases showing historical catastrophe losses. In addition, when reviewing a
proposed reinsurance contract, we typically receive loss experience information
with respect to the insured on such a contract. Reserve estimates by new
reinsurers may be inherently less reliable than the reserve estimates of a
reinsurer with a stable volume of business and an established claim history. As
our business has developed over 2002 and into 2003, we have supplemented
industry information with our own specific experience in our actuarial analysis
which has led to reduced projections of ultimate losses. As our mix of business
changes, we expect that our reserve process and practices will correspondingly
change to a degree in the future.

INVESTMENTS

     We follow a conservative investment strategy designed to emphasize the
preservation of invested assets and provide sufficient liquidity for the prompt
payment of claims. At March 31, 2003, our portfolio of fixed maturity
investments comprised investment grade corporate debt securities (26%), U.S.
government and agency bonds (62%) and mortgage-backed and asset-backed
securities (12%). All of the fixed maturity investments held by us were publicly
traded at March 31, 2003. The average duration of the portfolio was 1.9 years
and the average rating of the portfolio was AA+ at March 31, 2003. The Company
did not have an aggregate investment in a single entity, other than the U.S.
government, in excess of 10% of shareholders' equity at March 31, 2003. We also
have an equity investment in Aspen, the unquoted Bermuda-based holding company
of Aspen Re.

     In determining our investment decisions, we consider the impact of various
catastrophic events, particularly those to which our insurance and reinsurance
portfolio may be exposed, on our invested assets to protect our financial
position. Our intent is to look for opportunities to add a modest amount of
common equity securities over time. Over longer time horizons, we believe
investments in common equity securities will enhance returns without
significantly raising the risk profile of the portfolio. We do not plan to have
meaningful exposure to alternative asset classes, such as hedge funds or private
equity funds.

     Our Finance Committee establishes investment guidelines and supervises our
investment activity. These objectives and guidelines stress diversification of
risk, capital preservation, market liquidity, and stability of portfolio income.
The Finance Committee regularly monitors the overall investment results, reviews
compliance with our investment objectives and guidelines, and ultimately reports
the overall investment results to the Board. These guidelines specify minimum
criteria on the overall credit quality and liquidity characteristics of the
portfolio. They also include limitations on the size of certain holdings as well
as restrictions on purchasing certain types of securities or investing in
certain industries.

     We have engaged White Mountains Advisors LLC, a wholly owned indirect
subsidiary of White Mountains Insurance Group, one of our major shareholders, to
provide investment advisory and management services. We have agreed to pay
investment management fees based on the month-end market values held under
management. The fees, which vary depending on the amount of assets under
management, are between 0.15% and 0.30% and are deducted from net investment
income. The Company incurred an average fee of 0.17% and 0.20% for the three
months ended March 31, 2003, and 2002, respectively. The agreement may be
terminated by either party upon 30 days written notice. We expensed investment
management fees
                                        58
<PAGE>

of approximately $692,000 and $523,000 for the three months ended March 31, 2003
and 2002, respectively, and have recorded an amount payable for these services
of approximately $705,000 and $525,000 for the three months ended March 31, 2003
and 2002, respectively.

     The types of securities in our portfolio and their amortized cost, fair
value and related gross unrealized gains and losses as at March 31, 2003 were as
follows ($ in thousands):

<Table>
<Caption>
                                           COST OR       GROSS        GROSS
                                          AMORTIZED    UNREALIZED   UNREALIZED
                                             COST        GAINS        LOSSES     FAIR VALUE
                                          ----------   ----------   ----------   ----------
<S>                                       <C>          <C>          <C>          <C>
Fixed Maturities:
  U.S. government and agency............  $  953,653    $16,928       $  669     $  969,912
  Corporate debt securities.............     393,626     15,059          111        408,574
  Mortgage-backed and asset-backed
     securities.........................     188,476        758          237        188,997
                                          ----------    -------       ------     ----------
                                           1,535,755     32,745        1,017      1,567,483
                                          ==========    =======       ======     ==========
Equity Investment.......................      60,758      2,933           --         63,691
                                          ----------    -------       ------     ----------
Total...................................  $1,596,513    $35,678       $1,017     $1,631,174
                                          ==========    =======       ======     ==========
</Table>

     The following table sets forth the composition of the cost or amortized
cost of fixed maturities by ratings assigned by rating agencies (e.g. Standard
and Poor's Corporation) as at March 31, 2003 ($ in thousands):

<Table>
<Caption>
                                                                COST OR
RATINGS                                                      AMORTIZED COST    PERCENTAGE
-------                                                      --------------    ----------
<S>                                                          <C>               <C>
U.S. government and agency.................................    $  953,653         62.1%
AAA........................................................       236,341         15.4
AA.........................................................        75,118          4.9
A..........................................................       262,337         17.1
BBB+.......................................................         8,306          0.5
                                                               ----------        -----
                                                               $1,535,755        100.0%
                                                               ==========        =====
</Table>

     The amortized cost and estimated fair value amounts for fixed maturity
investments held at March 31, 2003 are shown by contractual maturity ($ in
thousands):

<Table>
<Caption>
                                                                COST OR
                                                             AMORTIZED COST   FAIR VALUE
                                                             --------------   ----------
<S>                                                          <C>              <C>
Due within one year........................................    $   93,963     $   95,467
Due after one year through five years......................     1,195,157      1,224,803
Due after five years through ten years.....................        58,159         58,216
Mortgage-backed and asset-backed securities................       188,476        188,997
                                                               ----------     ----------
                                                               $1,535,755     $1,567,483
                                                               ==========     ==========
</Table>

     Actual maturity may differ from contractual maturity because certain
borrowers have the right to call or prepay certain obligations with or without
call or prepayment penalties.

                                        59
<PAGE>

     Our net investment returns for the periods indicated were as follows ($ in
millions):

<Table>
<Caption>
                                                              AS AT              AS AT
                                                          MARCH 31, 2003   DECEMBER 31, 2002
                                                          --------------   -----------------
<S>                                                       <C>              <C>
Net investment income...................................      $11.7              $39.7
Net realized investment gains...........................        4.7                7.7
Net increase (decrease) in unrealized investment gains
  (losses)..............................................       (0.8)              33.6
                                                              -----              -----
Total net investment return.............................      $15.6              $81.0
                                                              =====              =====
</Table>

     The performance results of our fixed maturity portfolio, with a comparison
to the Lehman Brothers Government/Corporate 1-3 Year Index for the year ended
December 31, 2002 was as follows:

<Table>
<Caption>
                                                                            LEHMAN BROTHERS
                                                          MONTPELIER RE       GOV'T/CORP.
                                                         HOLDINGS LTD.(1)   1-3 YEAR INDEX
                                                         ----------------   ---------------
<S>                                                      <C>                <C>
PERFORMANCE
Total return...........................................        7.1%               6.3%
</Table>

---------------

(1) Total return is calculated by dividing total net investment income on fixed
    maturity investments by the average of the sum of such investments at
    amortized cost at the end of each month in 2002.

     The Lehman Brothers Government/Corporate 1-3 Year Index is used for
comparative purposes as it lines up with our assets and the nature of our
business.

     The Company has invested a total of L40.0 million (or $60.8 million) in the
common shares of Aspen. At December 31, 2002, Montpelier Re held approximately
7% of Aspen on an undiluted basis and approximately 6% on a fully diluted basis.

     For additional information concerning the Company's investments, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere in
this prospectus.

RETROCESSIONS

     For certain pro-rata contracts, including QQS contracts, the subject
portfolios will carry underlying reinsurance protection from third party
reinsurers. We record our pro-rata share of gross premiums from the direct
insurance contracts as gross written premiums and record our proportionate share
of amounts incurred by the ceding company for the underlying third party
reinsurance coverage as reinsurance premiums ceded. For the year ended December
31, 2002, we recorded reinsurance premiums on QQS contracts only and did not
purchase reinsurance protection on our other lines of business. In 2003 we have
purchased specific retrocessional protection for our direct insurance and
facultative reinsurance programs and for our property reinsurance programs,
excluding most Other Specialty lines. We may purchase additional retrocessional
protection for our own account in 2003.

COMPETITION

     The insurance and reinsurance industries are highly competitive. We compete
with major U.S., Bermuda and other international insurers and reinsurers and
certain underwriting syndicates and insurers, some of which have greater
financial, marketing and management resources than we do. In particular, we
compete with insurers that provide property-based lines of insurance and
reinsurance, such as ACE Tempest Re, Converium, Everest Reinsurance Company, IPC
Re Limited, Lloyd's of London syndicates, Munich Re, PartnerRe Ltd., PXRE
Reinsurance Company, Renaissance Reinsurance Ltd., Swiss Re and XL Re. In
addition, there are other new Bermuda reinsurers, such as Allied World Assurance
Company, Ltd., Arch Reinsurance Ltd., AXIS Specialty Limited, Endurance
Specialty Insurance Ltd., Platinum Underwriters Holdings Ltd. and Olympus Re
Holdings, Ltd. with whom we also compete. Competition varies depending on

                                        60
<PAGE>

the type of business being insured or reinsured and whether we are in a leading
position or acting on a following basis.

     In addition, established competitors have completed or may be planning to
complete additional capital raising transactions. New companies continue to be
formed to enter the reinsurance market. Competition in the types of business
that we underwrite is based on many factors, including:

     - Premiums charged and other terms and conditions offered;

     - Services provided;

     - Financial ratings assigned by independent rating agencies;

     - Speed of claims payment;

     - Reputation;

     - Perceived financial strength; and

     - The experience of the reinsurer in the line of reinsurance to be written.

     Increased competition could result in fewer submissions, lower premium
rates, and less favorable policy terms, which could adversely impact our growth
and profitability. In addition, capital market participants have recently
created alternative products that are intended to compete with reinsurance
products. We are unable to predict the extent to which these new, proposed or
potential initiatives may affect the demand for our products or the risks that
may be available for us to consider underwriting.

     We believe that we are well positioned in terms of client services and
underwriting expertise. We also believe that our capitalization and strong
financial ratios provide us with a competitive advantage in the marketplace.

RATINGS

     Ratings have become an increasingly important factor in establishing the
competitive position of reinsurance companies. A.M. Best has assigned Montpelier
Re a financial strength rating of "A" (Excellent), which is the third highest of
fifteen rating levels. The objective of A.M. Best's rating system is to provide
an opinion of an insurer's financial strength and ability to meet ongoing
obligations to its policyholders. Our rating reflects A.M. Best's opinion of the
results of our first year of operations, our capitalization and management.
Montpelier Re has been assigned an "A3" (Good) rating by Moody's Investors
Service, the seventh highest rating of twenty-one rating levels. This rating
reflects Moody's opinion of the ability of Montpelier Re to punctually repay
senior policyholder claims and obligations. These ratings are not evaluations
directed to investors in the notes or a recommendation to buy, sell or hold the
notes. Our ratings are subject to periodic review by, and may be revised
downward or revoked at the sole discretion of A.M. Best and Moody's, and we
cannot assure you that we will be able to retain these ratings.

PROPERTIES

     The Company leases office space in Hamilton, Bermuda, where the Company's
principal executive offices are located. The Company also leases office space in
London, United Kingdom, where the Company's subsidiary, Montpelier Marketing
Services (UK) Limited is located. We anticipate leasing additional office space
in Hamilton, Bermuda, during 2003.

EMPLOYEES

     As of June 2, 2003, we had forty employees. The majority of our employees
are employed by Montpelier Re or by Montpelier Marketing Services (UK) Limited.
None of our employees are subject to collective bargaining agreements, and we
know of no current efforts to implement such agreements.

                                        61
<PAGE>

     Many of our Montpelier Re employees, including all of our senior
management, are employed pursuant to work permits granted by the Bermuda
authorities. These permits expire at various times over the next several years.
We have no reason to believe that these permits would not be extended to our
principal employees at expiration upon request, although no assurances can be
given in this regard.

LEGAL PROCEEDINGS

     The Company, in common with the insurance and reinsurance industry in
general, is subject to litigation and arbitration in the normal course of its
business. We are not currently involved in any material pending litigation or
arbitration proceedings.

                                        62
<PAGE>

                                   REGULATION

BERMUDA INSURANCE REGULATION

     The following summary of Bermuda insurance regulation is based upon current
law and is for general information only.

     The Insurance Act.  As a holding company, Montpelier Re Holdings Ltd. is
not subject to Bermuda insurance regulations; however, Montpelier Re is subject
to regulations under the Insurance Act. No person shall carry on any insurance
business in or from within Bermuda unless registered as an insurer under the
Insurance Act by the Bermuda Monetary Authority, which we refer to as the BMA,
which has responsibility for the day-to-day supervision of insurers. Under the
Insurance Act, insurance business includes reinsurance business. The continued
registration of a company as an insurer under the Insurance Act is subject to
its complying with the terms of its registration and such other conditions as
the BMA may impose from time to time.

     An Insurance Advisory Committee appointed by the Bermuda Minister of
Finance advises the BMA on matters connected with the discharge of the BMA's
functions, and sub-committees thereof supervise and review the law and practice
of insurance in Bermuda, including reviews of accounting and administrative
procedures.

     The Insurance Act imposes on Bermuda insurance companies solvency and
liquidity standards and auditing and reporting requirements and grants to the
BMA powers to supervise, investigate and intervene in the affairs of insurance
companies. Certain significant aspects of the Bermuda insurance regulatory
framework are set forth below.

     Classification of Insurers.  The Insurance Act distinguishes between
insurers carrying on long-term business and insurers carrying on general
business. There are four classifications of insurers carrying on general
business, with Class 4 insurers subject to the strictest regulation. Montpelier
Re is registered to carry on general business as a Class 4 insurer in Bermuda
and is regulated as such under the Insurance Act. As so registered, Montpelier
Re may not carry on long-term business. In general, long-term business includes
effecting and carrying out contracts of insurance on human life or contracts to
pay annuities on human life, and contracts of insurance against risks of the
persons insured sustaining injury as the result of an accident, or dying as the
result of an accident or becoming incapacitated or dying in consequence of
disease. These are contracts that are expressed to be in effect for a period of
not less than five years or unlimited and to be terminable by the insurer before
the expiration of five years or are so terminable before the expiration of that
period only in special circumstances.

     Cancellation of Insurer's Registration.  An insurer's registration may be
canceled by the BMA on certain grounds specified in the Insurance Act, including
failure of the insurer to comply with its obligations under the Insurance Act or
if, in the opinion of the BMA, the insurer has not been carrying on business in
accordance with sound insurance principles.

     Principal Representative.  An insurer is required to maintain a principal
office in Bermuda and to appoint and maintain a principal representative in
Bermuda. For the purpose of the Insurance Act, the principal office of
Montpelier Re is at the Company's principal executive offices in Hamilton,
Bermuda, and Montpelier Re's principal representative is Mr. Anthony Taylor.
Without a reason acceptable to the BMA, an insurer may not terminate the
appointment of its principal representative, and the principal representative
may not cease to act as such, unless 30 days' notice in writing to the BMA is
given of the intention to do so. It is the duty of the principal representative,
within 30 days of reaching the view that there is a likelihood of the insurer
for which the principal representative acts becoming insolvent or that a
reportable "event" has, to the principal representative's knowledge, occurred or
is believed to have occurred, to make a report in writing to the BMA setting out
all the particulars of the case that are available to the principal
representative. Examples of such a reportable "event" include failure by the
insurer to comply substantially with a condition imposed upon the insurer by the
BMA relating to a solvency margin or a liquidity or other ratio.

                                        63
<PAGE>

     Independent Approved Auditor.  Every registered insurer must appoint an
independent auditor who will annually audit and report on the statutory
financial statements and the statutory financial return of the insurer, both of
which, in the case of Montpelier Re, are required to be filed annually with the
BMA. The independent auditor of Montpelier Re must be approved by the BMA and
may be the same person or firm which audits Montpelier Re's financial statements
and reports for presentation to its shareholders. Montpelier Re's independent
auditor is PricewaterhouseCoopers (Bermuda).

     Loss Reserve Specialist.  As a registered Class 4 insurer, Montpelier Re is
required to submit an opinion of its approved loss reserve specialist with its
statutory financial return in respect of its loss and loss expense reserves. The
loss reserve specialist, who will normally be a qualified casualty actuary, must
be approved by the BMA.

     Statutory Financial Statements.  Montpelier Re must prepare annual
statutory financial statements. The Insurance Act prescribes rules for the
preparation and substance of such statutory financial statements (which include,
in statutory form, a balance sheet, an income statement, a statement of capital
and surplus and notes thereto). Montpelier Re is required to give detailed
information and analyses regarding premiums, claims, reinsurance and
investments. The statutory financial statements of Montpelier Re are not
prepared in accordance with U.S. GAAP and are distinct from the Company's
combined financial statements which, under the Companies Act, are prepared in
accordance with U.S. GAAP. Montpelier Re, as a general business insurer, is
required to submit their annual statutory financial statements as part of the
annual statutory financial return. The statutory financial statements and the
statutory financial return do not form part of the public records maintained by
the BMA.

     Annual Statutory Financial Return.  Montpelier Re is required to file with
the BMA a statutory financial return no later than four months after its
financial year end (unless specifically extended). The statutory financial
return for a Class 4 insurer includes, among other matters, a report of the
approved independent auditor on the statutory financial statements of such
insurer, solvency certificates, the statutory financial statements themselves,
the opinion of the loss reserve specialist and a schedule of reinsurance ceded.
The solvency certificates must be signed by the principal representative and at
least two directors of the insurer who are required to certify, among other
matters, whether the minimum solvency margin has been met and whether the
insurer complied with the conditions attached to its certificate of
registration. The independent approved auditor is required to state whether in
its opinion it was reasonable for the directors to so certify. Where an
insurer's accounts have been audited for any purpose other than compliance with
the Insurance Act, a statement to that effect must be filed with the statutory
financial return.

     Minimum Solvency Margin and Restrictions on Dividends and
Distributions.  Under the Insurance Act, the value of the general business
assets of a Class 4 insurer, such as Montpelier Re, must exceed the amount of
its general business liabilities by an amount greater than the prescribed
minimum solvency margin. Montpelier Re:

     (1) is required, with respect to its general business, to maintain a
         minimum solvency margin (the prescribed amount by which the value of
         its general business assets must exceed its general business
         liabilities) equal to the greatest of:

         (A) $100 million;

         (B) 50% of net premiums written (being gross premiums written less any
             premiums ceded by Montpelier Re but Montpelier Re may not deduct
             more than 25% of gross premiums when computing net premiums
             written); and

         (C) 15% of loss, loss expense and other insurance reserves;

     (2) is prohibited from declaring or paying any dividends during any
         financial year if it is in breach of its minimum solvency margin or
         minimum liquidity ratio or if the declaration or payment of such
         dividends would cause it to fail to meet such margin or ratio (if it
         has failed to meet its minimum solvency margin or minimum liquidity
         ratio on the last day of any financial year, Montpelier Re will

                                        64
<PAGE>

         be prohibited, without the approval of the BMA, from declaring or
         paying any dividends during the next financial year);

     (3) is prohibited from declaring or paying in any financial year dividends
         of more than 25% of its total statutory capital and surplus (as shown
         on its previous financial year's statutory balance sheet) unless it
         files (at least 7 days before payment of such dividends) with the BMA
         an affidavit stating that it will continue to meet the required
         margins;

     (4) is prohibited, without the prior approval of the BMA, from reducing by
         15% or more its total statutory capital as set out in its previous
         year's financial statements and any application for such approval must
         include an affidavit stating that it will continue to meet the required
         margins; and

     (5) is required, at any time it fails to meet its solvency margin, within
         30 days (45 days where total statutory capital and surplus falls to $75
         million or less) after becoming aware of that failure or having reason
         to believe that such failure has occurred, to file with the BMA a
         written report containing certain information and is precluded from
         declaring and/or paying dividends until the failure is rectified.

     Minimum Liquidity Ratio.  The Insurance Act provides a minimum liquidity
ratio for general business insurers, such as Montpelier Re. An insurer engaged
in general business is required to maintain the value of its relevant assets at
not less than 75% of the amount of its relevant liabilities. Relevant assets
include cash and time deposits, quoted investments, unquoted bonds and
debentures, first liens on real estate, investment income due and accrued,
account and premiums receivable and reinsurance balances receivable. There are
certain categories of assets which, unless specifically permitted by the BMA, do
not automatically qualify as relevant assets, such as unquoted equity
securities, investments in and advances to affiliates and real estate and
collateral loans. The relevant liabilities are total general business insurance
reserves and total other liabilities less deferred income tax and sundry
liabilities (by interpretation, those not specifically defined).

     Supervision, Investigation and Intervention.  The BMA may appoint an
inspector with extensive powers to investigate the affairs of an insurer if it
believes that an investigation is required in the interest of the insurer's
policyholders or persons who may become policyholders. In order to verify or
supplement information otherwise provided to the BMA, it may direct an insurer
to produce documents or information relating to matters connected with the
insurer's business.

     If it appears to the BMA that there is a risk of Montpelier Re becoming
insolvent, or that it is in breach of the Insurance Act or any conditions
imposed upon its registration, the BMA may, among other things, direct
Montpelier Re (1) not to take on any new insurance business, (2) not to vary any
insurance contract if the effect would be to increase the insurer's liabilities,
(3) not to make certain investments, (4) to realize certain investments, (5) to
maintain in, or transfer to the custody of a specified bank, certain assets, (6)
not to declare or pay any dividends or other distributions or to restrict the
making of such payments and/or (7) to limit its premium income.

     Disclosure of Information.  In addition to powers under the Insurance Act
to investigate the affairs of an insurer, the BMA may require certain
information from an insurer (or certain other persons) to be produced to them.
Further, the BMA has been given powers to assist other regulatory authorities,
including foreign insurance regulatory authorities with their investigations
involving insurance and reinsurance companies in Bermuda but subject to
restrictions. For example, the BMA must be satisfied that the assistance being
requested is in connection with the discharge of regulatory responsibilities of
the foreign regulatory authority. Further, the BMA must consider whether to
cooperate is in the public interest. The grounds for disclosure are limited and
the Insurance Act provides sanctions for breach of the statutory duty of
confidentiality.

CERTAIN BERMUDA LAW CONSIDERATIONS

     The Company and Montpelier Re are designated as non-resident for exchange
control purposes by the BMA. The Company is required to obtain the permission of
the BMA for the issue and transfer of the notes. We obtained consent from the
BMA for the issue and transfer of the notes, to and between non-residents of
Bermuda for exchange control purposes, subject to the condition that our common
shares shall be listed on an
                                        65
<PAGE>

appointed stock exchange, such as the New York Stock Exchange. The Company has
been granted permission by the BMA to hold all of the currently issued common
shares of Montpelier Re. Because we do not intend to transfer any of these
shares to any other person or entity and Montpelier Re does not intend to issue
any additional shares, no further permissions of the BMA are required with
respect to Montpelier Re.

     The transfer and issuance of the notes to any resident in Bermuda for
exchange control purposes may require specific prior approval under the Exchange
Control Act 1972. Montpelier Re's common shares cannot be transferred without
the consent of the BMA. Because the Company is designated as non-resident for
Bermuda exchange control purposes, it is allowed to engage in transactions, and
to pay interest subject to Bermuda law and regulations, including but not
limited to insurance regulations as discussed below, to Bermuda non-residents
who are holders of the notes, in currencies other than the Bermuda dollar. There
are no restrictions on the Company's ability to transfer funds (other than funds
denominated in Bermuda dollars) in and out of Bermuda to United States residents
who are holders of the Company's notes.

     Each of the Company and Montpelier Re has been incorporated in Bermuda as
an "exempted company." Under Bermuda law, exempted companies are companies
formed for the purpose of conducting business outside Bermuda from a principal
place in Bermuda. As a result, they are exempt from Bermuda laws restricting the
percentage of share capital that may be held by non-Bermudians, but they may not
participate in certain business transactions, including: (1) the acquisition or
holding of land in Bermuda (except that required for their business and held by
way of lease or tenancy for terms of not more than 50 years) without the express
authorization of the Bermuda legislature; (2) the taking of mortgages on land in
Bermuda to secure an amount in excess of $50,000 without the consent of the
Minister of Finance; (3) the acquisition of any bonds or debentures secured by
any land in Bermuda, other than certain types of Bermuda government securities;
or (4) the carrying on of business of any kind in Bermuda, except in furtherance
of their business carried on outside Bermuda or under license granted by the
Minister of Finance. While an insurer is permitted to reinsure risks undertaken
by any company incorporated in Bermuda and permitted to engage in the insurance
and reinsurance business, generally it is not permitted without a special
license granted by the Minister of Finance to insure Bermuda domestic risks or
risks of persons of, in or based in Bermuda. Montpelier Re does not have a
special license.

     Each of the Company and Montpelier Re must comply with the provisions of
the Companies Act regulating the payment of dividends and making distributions
from contributed surplus. Under the Companies Act, a company shall not declare
or pay a dividend, or make a distribution out of contributed surplus, if there
are reasonable grounds for believing that: (a) the company is, or would after
the payment be, unable to pay its liabilities as they become due; or (b) the
realizable value of the company's assets would thereby be less than the
aggregate of its liabilities and its issued share capital and share premium
accounts. Under the Companies Act, when a Bermuda company issues shares at a
premium (that is for a price above the par value), whether for cash or
otherwise, a sum equal to the aggregate amount or value of the premium on those
shares must be transferred to an account called "the share premium account." The
provisions of the Companies Act relating to the reduction of the share capital
of a company apply as if the share premium account were paid-up share capital of
that company, except for certain matters such as premium arising on a particular
class of shares which may be used in paying up unissued shares to be issued to
shareholders as fully paid bonus shares. The paid-up share capital may not be
reduced if on the date the reduction is to be effected there are reasonable
grounds for believing that the company is, or after the reduction would be,
unable to pay its liabilities as they become due.

     Exempted companies, such as the Company and Montpelier Re, must comply with
Bermuda resident representation provisions under the Companies Act which require
that a minimum number of offices must be filled by persons who are ordinarily
resident in Bermuda. We do not believe that such compliance will result in any
material expense to us.

     Under Bermuda law, non-Bermudians (other than spouses of Bermudians) may
not engage in any gainful occupation in Bermuda without an appropriate
governmental work permit. Our success may depend in part upon the continued
services of our principal employees in Bermuda. Most of our principal employees
are not Bermudians and are not spouses of Bermudians. Accordingly, any such
employee will require specific approval

                                        66
<PAGE>

to work for us in Bermuda. A work permit may be granted or extended upon showing
that, after proper public advertisement, no Bermudian (or spouse of a Bermudian)
is available who meets the minimum standards reasonably required by the
employer. The Bermuda government has a policy that places a six-year term limit
on individuals with work permits, subject to certain exemptions for principal
employees. We have no reason to believe that the permits held by our senior
management would not be extended at expiration upon request.

UNITED STATES INSURANCE REGULATION

     Montpelier Re is licensed in Bermuda to write insurance and reinsurance and
is not admitted to do business in any jurisdiction in the United States or in
any country other than Bermuda. The insurance laws of each state of the United
States and of many other jurisdictions regulate the sale of insurance and
reinsurance within their jurisdictions by alien insurers and reinsurers, such as
Montpelier Re. Montpelier Re intends to conduct its business so as not to be
subject to the licensing requirements of insurance regulators in the United
States or elsewhere (other than Bermuda). Many aspects of the activities of
Montpelier Re will be similar to those employed by other non-admitted reinsurers
that provide reinsurance to United States and other ceding companies. There can
be no assurance, however, that insurance regulators in the United States or
elsewhere will not review the activities of Montpelier Re and claim that
Montpelier Re is subject to such jurisdiction's licensing requirements.

     In addition to the regulatory requirements imposed by the jurisdictions in
which they are licensed, reinsurers are subject to indirect regulatory
requirements imposed by jurisdictions in which their ceding companies are
licensed through the "credit for reinsurance" mechanism. In general, a ceding
company which obtains reinsurance from a reinsurer that is licensed, accredited
or approved by the jurisdiction or state in which the insurer files statutory
financial statements is permitted to reflect in its statutory financial
statements a credit in an aggregate amount equal to the liability for unearned
premiums and loss and LAE reserves ceded to the reinsurer.

     In the United States, many states allow credit for reinsurance ceded to a
reinsurer that is domiciled and licensed in another state of the United States
and meets certain financial requirements. A few states do not allow credit for
reinsurance ceded to non-licensed reinsurers except in certain limited
circumstances, and others impose additional requirements that make it difficult
to become accredited. The great majority of states, however, permit the
reduction in statutory surplus resulting from reinsurance obtained from a
nonlicensed or non-accredited reinsurer to be offset to the extent that the
reinsurer provides a letter of credit, trust or other acceptable security
arrangement.

UNITED KINGDOM INSURANCE REGULATION

     The Company intends that Montpelier Re will conduct its business so as not
to be subject to insurance regulation in the United Kingdom. However, if it were
determined that Montpelier Re is effecting or carrying out contracts of
insurance (including contracts of reinsurance) in the United Kingdom, it would
be required to be authorized and regulated by the Financial Services Authority
(the "FSA"). Insurers carrying on such business in the United Kingdom are
required to provide information relating to their insurance and reinsurance
arrangements to the FSA and insurers headquartered outside the European Union
are required to maintain assets in the United Kingdom in accordance with the
rules of the FSA. The FSA has wide-ranging powers of intervention in relation to
such insurers, which may be triggered if the FSA has a concern relating to such
arrangements or the solvency of such insurers as a result of the receipt of such
information or otherwise.

                                        67
<PAGE>

                                   MANAGEMENT

DIRECTORS

     The table below sets forth certain information concerning our directors as
of the date of this prospectus:

<Table>
<Caption>
NAME                         AGE                          POSITIONS
----                         ---                          ---------
<S>                          <C>   <C>
John J. (Jack) Byrne(1)....  70    Chairman
Anthony Taylor(1)..........  57    Deputy Chairman, Director, President and Chief Executive
                                   Officer of the Company, Chairman, Director, President
                                   and Chief Underwriting Officer of Montpelier Re
John D. Gillespie(3).......  44    Director
Raymond Barrette(3)........  52    Director
G. Thompson Hutton(2)......  48    Director
Raymond M. Salter(2).......  69    Director
Allan W. Fulkerson(1)......  69    Director
William Spiegel(3).........  40    Director
Steven J. Gilbert(3).......  56    Director
Kamil M. Salame(2).........  34    Director
K. Thomas Kemp(1)..........  62    Director and Chief Financial Officer
</Table>

---------------

(1) Denotes Class A Director with term expiring in 2006.

(2) Denotes Class B Director with term expiring in 2004.

(3) Denotes Class C Director with term expiring in 2005.

     John J. (Jack) Byrne.  Mr. Byrne has been our Chairman since our inception.
He is also currently the Chairman of White Mountains Insurance Group Ltd., a
position he has held since 1985. Mr. Byrne previously held the position of CEO
of White Mountains from time to time from 1985 until 2002. Mr. Byrne previously
held the positions of Chairman and CEO of GEICO Corporation and Fireman's Fund
Corporation and Chairman of Financial Security Assurance Holdings, Ltd. Mr.
Byrne is a Managing Director of OneBeacon Insurance Group, LLC, a subsidiary of
White Mountains, and also serves as a director of Folksamerica Holding Company,
Inc. He previously served on the boards of directors of American Express, Martin
Marietta, Lehman Brothers, MidOcean Reinsurance, and Zurich Re.

     Anthony Taylor.  Mr. Taylor has served as our President and Chief Executive
Officer and President and Chief Underwriting Officer of Montpelier Re since
January 1, 2002. From 1983 until December 2001, Mr. Taylor was associated with
Lloyd's Syndicate number 51 "A Taylor & Others," which was initially managed by
Willis Faber Agencies and, after a management buy out, by Wellington
Underwriting Agencies of which he was a founding director. From 1998 until 2001,
Mr. Taylor was Chairman of Wellington Underwriting Inc., as well as Underwriting
Director of Wellington Underwriting Agencies Limited. During 2001, Mr. Taylor
was Chairman of Wellington Underwriting Agencies Limited and Deputy Chairman of
Wellington Underwriting plc. Prior to 1998, Mr. Taylor served as the Active
Underwriter of Lloyd's Syndicate Number 51. Mr. Taylor is also a director of
Aspen Insurance Holdings, Ltd., a Bermuda insurance and reinsurance company. Mr.
Taylor is a Fellow of the Chartered Insurance Institute and has held various
committee and board positions for the Lloyd's market.

     John D. Gillespie.  Mr. Gillespie has been a director of White Mountains
since 1999, and Deputy Chairman since January 2003, and is Chairman and
President of White Mountains Advisors LLC. He is also the founder and Managing
Partner of his own investment firm, Prospector Partners, LLC, in Guilford,
Connecticut. Mr. Gillespie also serves as a director of Folksamerica and served
as Managing Director of OneBeacon. Prior to forming Prospector Partners, Mr.
Gillespie was President of the T. Rowe Price Growth Stock Fund and the New Age
Media Fund, Inc. Mr. Gillespie was at T. Rowe Price from 1986-1997 and GEICO
Corporation from 1980-1984.

                                        68
<PAGE>

     Raymond Barrette.  Mr. Barrette has been President and CEO of White
Mountains since January 2003, and a director since 2000, and served as Chairman
and Chief Executive Officer of OneBeacon from 2001 until 2002. Mr. Barrette
formerly served as President of White Mountains from 2000 to June 2001 and
served as Executive Vice President and Chief Financial Officer of White
Mountains from 1997 to 2000. He was formerly a consultant to Tillinghast-Towers
Perrin from 1994 to 1996 and was with Fireman's Fund Insurance Company from 1973
to 1993. Mr. Barrette is also Chairman of Folksamerica.

     G. Thompson Hutton.  Mr. Hutton is a private equity and venture capital
investor based in Palo Alto, California. Since 2003, Mr. Hutton has been
Managing Director of Thompson Hutton LLC, providing management and investment
advisory services to private equity and venture capital firms and their
portfolio of operating companies. Immediately prior to forming Thompson Hutton
LLC, he worked as a private investor in association with Trident Capital, Sutter
Hill Ventures and Morgan Stanley Venture Partners. Mr. Hutton served as
President and Chief Executive Officer of Risk Management Solutions, Inc. from
1990 to 2000. Prior to 1990, Mr. Hutton was a management consultant at McKinsey
& Company, Inc. Mr. Hutton is currently a director of Claim IQ and Finaplex.

     Raymond Salter.  Mr. Salter was associated with Willis Faber plc from 1986
to 1993, during which time he served as a main board director and Managing
Director of the North American Reinsurance Division. During his eight years at
Willis Faber plc, Mr. Salter also held a number of other directorships in the
Willis Faber group. Mr. Salter retired from Willis Faber plc in 1993 and since
then has held a number of non-executive directorships including positions at
Kiln Capital plc (in the position of Chairman), Kiln Underwriting Limited,
Lombard Insurance Group and Groupama UK (Lombard was acquired by Groupama UK),
BF Caudle Agencies (in the position of Chairman), Advent Capital plc and Ashley
Palmer Syndicates Limited.

     Allan W. Fulkerson.  For almost ten years, Mr. Fulkerson has served as
President and Chief Executive Officer of Century Capital Management, Inc. In
addition, he serves as a director of Asset Allocation and Management, LLC, The
Galtney Group, Inc., HCC Insurance Holdings, Inc., and International Financial
Group, Inc. Previously, he has served as a director of Mutual Risk Management,
Ltd., Risk Capital Holdings, Inc., SCUUL Limited, Tempest Reinsurance Co., Terra
Nova (Bermuda) Holdings, Ltd., United Educators Risk Retention Group, Inc. and
Wellington Underwriting plc. Mr. Fulkerson is a graduate of Williams College,
where he served as a Trustee and Chairman of the Finance Committee until June
2001.

     William Spiegel.  Mr. Spiegel is a Managing Director of Cypress Advisors
Inc., which manages over $3.5 billion in private equity funds. He has been with
Cypress since its formation in 1994. Prior to joining Cypress, he was a member
of the Merchant Banking Group at Lehman Brothers. Over the course of his career,
he has worked on private equity transactions in a wide range of industries. Mr.
Spiegel currently manages Cypress' efforts in the healthcare and financial
services industries. Mr. Spiegel is a director of Catlin Westgen Group Ltd. and
Cinemark USA, Inc. He has an M.B.A. from the University of Chicago, an M.A. in
Economics from the University of Western Ontario, and a B.Sc. in Economics from
the London School of Economics.

     Steven J. Gilbert.  Mr. Gilbert has been Chairman of the Board of the
general partner of Gilbert Global Equity Partners, L.P., a private equity fund,
and Chairman of the Investment Committee of the general partner of Gilbert
Global Equity Partners (Bermuda), L.P., a private equity fund, since 1997. From
1992 to 1997, Mr. Gilbert was the Founder and Managing General Partner of Soros
Capital L.P., and a principal Advisor to Quantum Industrial Holdings Ltd. From
1988 through 1992, Mr. Gilbert was the Managing Director of Commonwealth Capital
Partners, L.P., a private equity investment firm. Mr. Gilbert is also a Limited
Partner of Chemical Venture Partners (now J.P. Morgan), which he founded in 1984
and where he was Managing General Partner until 1988. Mr. Gilbert is currently a
Director of Veritas, Inc., LCC International, Inc., Edmunds.com, Inc., Optical
Capital Group LLC, iSky, Inc., Birch Telecommunications, Inc., and the Asian
Infrastructure Fund.

     Kamil M. Salame.  Mr. Salame is a Director in the Private Equity Group of
Credit Suisse First Boston. Mr. Salame joined DLJ's Merchant Banking Group, a
predecessor to Credit Suisse First Boston Private Equity, Inc., in 1997.
Previously he was a member of DLJ's Leveraged Finance Group. Mr. Salame is also
a director of Aspen Insurance Holdings, Ltd., a Bermuda insurance and
reinsurance company. Mr. Salame
                                        69
<PAGE>

received a J.D. from Columbia Law School, an M.B.A. from Columbia Business
School and a B.S. from Georgetown University.

     K. Thomas Kemp.  Mr. Kemp serves as our Chief Financial Officer and as a
director. Mr. Kemp has been a Director of White Mountains since 1994. He was
also President of White Mountains from June 2001 until December 2002. From
January 2000 to June 2001, Mr. Kemp was Deputy Chairman, and from 1997 to 2000,
he was President and CEO of White Mountains. He also serves as a director of
Folksamerica, Amlin plc, PECO Pallets and Main Street America.

BOARD OF DIRECTORS

     Our directors are divided into three classes of approximately equal size
and serve for terms of three years. Our Class A directors, whose terms expire in
2006, are Messrs. Byrne, Taylor, Fulkerson and Kemp. Our Class B directors,
whose terms expire in 2004, are Messrs. Hutton, Salter and Salame. Our Class C
directors, whose terms expire in 2005, are Messrs. Gillespie, Barrette, Spiegel
and Gilbert.

COMMITTEES OF THE BOARD OF DIRECTORS

     Audit Committee.  The Audit Committee, comprised of Messrs. Fulkerson,
Hutton, Salame and Spiegel, has general responsibility for the oversight and
surveillance of our accounting, reporting and financial control practices. The
Audit Committee annually reviews the qualifications of the Independent Auditors,
makes recommendations to the Board as to their selection and reviews the plan,
fees and results of their audit. Mr. Hutton is Chairman of the Audit Committee.

     Compensation and Nominating Committee.  The Compensation and Nominating
Committee, comprised of Messrs. Byrne, Gilbert, Salter and Spiegel, oversees our
compensation and benefit policies and programs, including administration of our
annual bonus awards and long-term incentive plans, the selection of new
directors, the evaluation of the board and management, and the development of
corporate governance principles. In addition, the Compensation and Nominating
Committee develops and reviews background information for candidates for the
Board, including those recommended by shareholders, and makes recommendations to
the Board regarding such candidates. Mr. Salter is Chairman of the Compensation
and Nominating Committee.

     Underwriting Policy Committee.  The Underwriting Policy Committee,
comprised of Messrs. Barrette, Hutton, Salter and Taylor, oversees Montpelier
Re's underwriting policies and approves any exceptions thereto. Mr. Taylor is
the Chairman of the Underwriting Policy Committee.

     Finance Committee.  The Finance Committee, comprised of Messrs. Fulkerson,
Gilbert, Gillespie, Salame and Taylor, formulates our investment policy and
oversees all of our significant investing activities. Mr. Gillespie is the
Chairman of the Finance Committee.

COMPENSATION AND NOMINATING COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     K. Thomas Kemp, our Chief Financial Officer and a member of our Board of
Directors is a member of the Board of Directors of White Mountains. The Chief
Executive Officer of White Mountains, John (Jack) Byrne, is a member of the
Compensation and Nominating Committee.

DIRECTOR COMPENSATION

     Those directors who are also our employees are not paid any fees or other
compensation for services as members of the Board or any committee of the Board.
In 2002, non-employee directors received an annual retainer fee of $25,000 and
$2,000 per Board or committee meeting attended, including formal telephonic
meetings, but not including informal informational meetings. In addition,
non-employee committee chairs receive an annual fee of $5,000 for each committee
chaired. All compensation received by directors was in cash.

                                        70
<PAGE>

EXECUTIVE OFFICERS

     The table below sets forth certain information concerning our executive
officers as of the date of this prospectus:

<Table>
<Caption>
NAME                                     AGE                     POSITIONS
----                                     ---                     ---------
<S>                                      <C>   <C>
Anthony Taylor(1)......................  57    Deputy Chairman, Director, President and
                                               Chief Executive Officer of the Company,
                                               Chairman, Director, President and Chief
                                               Underwriting Officer of Montpelier Re
Thomas George Story Busher.............  47    Chief Operating Officer, Executive Vice
                                               President and Secretary of the Company and
                                               Montpelier Re and Deputy Chairman of
                                               Montpelier Re
K. Thomas Kemp(1)......................  62    Director and Chief Financial Officer of the
                                               Company
C. Russell Fletcher III................  50    Chief Reinsurance Officer and Executive Vice
                                               President of the Company and Montpelier Re
Nicholas Newman-Young..................  51    Managing Director of Montpelier Marketing
                                               Services (UK) Limited
</Table>

---------------

(1) Anthony Taylor and K. Thomas Kemp are also directors; detailed information
    regarding their experience is set forth in the prior section.

     Thomas George Story Busher.  Mr. Busher serves as our Chief Operating
Officer, Executive Vice President and Secretary. From 1985 to 2000, Mr. Busher
was employed by Wellington Underwriting plc, where he served as Director and
Group Secretary and as Director and Secretary of Wellington Underwriting
Agencies Limited. Prior to his employment with Wellington Underwriting plc, Mr.
Busher served as Director and Company Secretary of Richard Beckett Underwriting
Agencies Limited. Mr. Busher has also served as Chairman of Lloyd's Underwriting
Agents Association and as a member of the Business Conduct Committee of Lloyd's
Regulatory Board and of Lloyd's/FSA Liaison Committee.

     C. Russell Fletcher III.  Mr. Fletcher is our Chief Reinsurance Officer and
Executive Vice President. From 1999 to 2001, he served as Executive Vice
President of Homesite Group Incorporated. From 1996 to 1998, he was employed by
CAT Limited (acquired by ACE Ltd.) and its successor, Tempest Reinsurance
Company Limited, where he served as Chief Underwriting Officer -- North America.
From 1986 to 1996, he was employed by Vesta Insurance Group, Inc. (and its
predecessor, Liberty National Fire Insurance Company), where he served as
Executive Vice President. Mr. Fletcher has also been employed by subsidiaries of
the following reinsurance and insurance brokerages: Benfield Group plc, Aon
Corporation and Marsh & McLennan Companies, Inc.

     Nicholas Newman-Young.  Mr. Newman-Young serves as Managing Director of
Montpelier Marketing Services (UK) Limited. From 1998 to 2001, he served as
Managing Director in the London office of HartRe Company, LLC. From 1992 to
1998, Mr. Newman-Young was employed by Willis Faber North America (U.K.), where
he served as Managing Director. Prior to joining Willis Faber, Mr. Newman-Young
served as Chairman of MCWinn Underwriting Agencies and Director of Claremount
Underwriting Agency. He also served as an underwriter for 18 years in the
following Lloyd's syndicates: Syndicate 558, Syndicate 674 and Sir Philip
d'Ambrumenil Syndicate.

                                        71
<PAGE>

MANAGEMENT COMPENSATION AND INCENTIVE PLANS

                           SUMMARY COMPENSATION TABLE

     The following table includes certain summary information concerning the
compensation awarded to, earned by or paid for services rendered in all
capacities during 2002 by the Company's Chief Executive Officer and the four
most highly compensated executive officers who were serving as executive
officers at the end of 2002, who we refer to as the named executive officers.

<Table>
<Caption>
                                                                                 LONG-TERM
                                                  ANNUAL COMPENSATION           COMPENSATION
                                          -----------------------------------   ------------
                                                                                   SHARES
                                                                 OTHER ANNUAL    UNDERLYING     ALL OTHER
                                                                 COMPENSATION   OPTIONS/SARS   COMPENSATION
NAME AND PRINCIPAL POSITION        YEAR   SALARY(1)    BONUS         (2)            (3)            (4)
---------------------------        ----   ---------   --------   ------------   ------------   ------------
<S>                                <C>    <C>         <C>        <C>            <C>            <C>
Anthony Taylor
  President and Chief
  Executive Officer..............  2002   $447,520    $379,000     $216,849      2,040,000       $ 85,726
Thomas George Story Busher
  Chief Operating Officer,
  Executive Vice President and
  Secretary......................  2002   $317,032    $297,000     $108,551        225,000       $ 64,795
C. Russell Fletcher III
  Chief Reinsurance Officer and
  Executive Vice President.......  2002   $400,000    $339,000     $ 48,000        225,000       $194,397
Nicholas Newman-Young
  Managing Director of
  Montpelier Marketing Services
  (UK) Limited...................  2002   $224,850    $188,000           --         60,000       $ 22,485
K. Thomas Kemp
  Chief Financial Officer and
  Executive Vice President.......  2002         --    $113,000           --             --             --
</Table>

---------------

(1) The salary for Mr. Newman-Young is the dollar equivalent of L150,000.

(2) Represents housing expense reimbursements in the amount of $110,000, $75,000
    and $48,000 for Messrs. Taylor, Busher and Fletcher, respectively, and
    personal travel in the amount of $106,849 and $33,551 for Mr. Taylor and Mr.
    Busher, respectively.

(3) Represents the aggregate number of Full Voting Common Shares subject to
    Options granted to the Named Executive Officers during 2002.

(4) Represents expenses incurred in relocating to Bermuda, contributions made to
    the Company's defined contribution pension scheme and personal taxation
    consulting fees paid on behalf of the individuals.

                                        72
<PAGE>

                    OPTIONS GRANTED DURING FISCAL YEAR 2002

     The following table provides information related to options granted to the
named executive officers during fiscal year 2002.

<Table>
<Caption>
                                              INDIVIDUAL GRANTS
                       ----------------------------------------------------------------      POTENTIAL REALIZABLE VALUE
                       NUMBER OF                                 FAIR                          AT ASSUMED ANNUAL RATE
                         COMMON     PERCENT OF                  MARKET                         OF COMMON SHARE PRICE
                         SHARES       TOTAL                    VALUE PER                          APPRECIATION FOR
                       UNDERLYING    OPTIONS     EXERCISE      SHARE ON                             OPTION TERM
                        OPTIONS     GRANTED TO   PRICE PER      DATE OF      EXPIRATION   --------------------------------
NAME                   GRANTED(1)   EMPLOYEES      SHARE         GRANT          DATE        0%         5%          10%
----                   ----------   ----------   ---------     ---------     ----------   -------   ---------   ----------
<S>                    <C>          <C>          <C>           <C>           <C>          <C>       <C>         <C>
Anthony Taylor.......   510,000(2)     20.0%      $16.67        $16.67(11)   12/31/2011        --   5,130,682   13,205,590
                        510,000(3)     20.0%      $17.50        $16.67(11)   12/31/2011        --   4,707,382   12,782,290
                        510,000(4)     20.0%      $18.33        $16.67(11)   12/31/2011        --   4,284,082   12,358,990
                        510,000(5)     20.0%      $19.17        $16.67(11)   12/31/2011        --   3,855,682   11,930,590
Thomas George Story
  Busher.............    56,250(6)      2.2%      $17.50(10)    $20.00(12)    9/30/2012   140,625     848,131    1,933,585
                         56,250(7)      2.2%      $18.33(10)    $20.00(12)    9/30/2012    93,938     801,444    1,886,898
                         56,250(8)      2.2%      $19.17(10)    $20.00(12)    9/30/2012    46,687     754,194    1,839,648
                         56,250(9)      2.2%      $20.00(10)    $20.00(12)    9/30/2012        --     707,506    1,797,960
C. Russell Fletcher
  III................    56,250(6)      2.2%      $17.50(10)    $20.00(12)    9/30/2012   140,625     848,131    1,933,585
                         56,250(7)      2.2%      $18.33(10)    $20.00(12)    9/30/2012    93,938     801,444    1,886,898
                         56,250(8)      2.2%      $19.17(10)    $20.00(12)    9/30/2012    46,687     754,194    1,839,648
                         56,250(9)      2.2%      $20.00(10)    $20.00(12)    9/30/2012        --     707,506    1,797,960
Nicholas Newman-
  Young..............    15,000(6)      0.6%      $17.50(10)    $20.00(12)    9/30/2012    37,500     226,168      515,623
                         15,000(7)      0.6%      $18.33(10)    $20.00(12)    9/30/2012    25,050     213,718      503,173
                         15,000(8)      0.6%      $19.17(10)    $20.00(12)    9/30/2012    12,450     201,118      490,573
                         15,000(9)      0.6%      $20.00(10)    $20.00(12)    9/30/2012        --     188,668      478,123
K. Thomas Kemp.......        --          --           --            --               --        --          --           --
</Table>

---------------

 (1) All options are cliff vesting.

 (2) The vesting date for these options was December 31, 2002.

 (3) The vesting date for these options is December 31, 2003.

 (4) The vesting date for these options is December 31, 2004.

 (5) The vesting date for these options is December 31, 2005.

 (6) The vesting date for these options is September 30, 2003.

 (7) The vesting date for these options is September 30, 2004.

 (8) The vesting date for these options is September 30, 2005.

 (9) The vesting date for these options is September 30, 2006.

(10) The exercise price per share for these options was determined based upon
     the estimated fully converted book value of the Common Shares as of June
     30, 2002, the most recent quarter end date preceding the date of grant.

(11) These options were granted in connection with the formation of the Company;
     accordingly, the fair market value per share on the date of grant was equal
     to the price per share paid by the initial investors in the Company.

(12) These options were granted after the formation of the Company, but prior to
     the Company's initial public offering, which was completed on October 15,
     2002. As such, there was no trading market for the

                                        73
<PAGE>

     Common Shares on the date of grant from which the fair market value can be
     calculated. However, for purposes of this table only, the initial public
     offering price of the Common Shares, $20.00, has been used for the fair
     market value of the Common Shares.

OPTIONS EXERCISED DURING FISCAL YEAR 2002 AND FISCAL YEAR-END OPTION VALUES

     No options were exercised by named executive officers during 2002.

     The following table provides information on unexercised options held by
each of the named executive officers as of December 31, 2002.

<Table>
<Caption>
                                                        NUMBER OF SHARES            VALUE OF UNEXERCISED
                                                           UNDERLYING                   IN-THE-MONEY
                                                    UNEXERCISED OPTIONS/ SARS         OPTIONS/ SARS AT
                            SHARES                      DECEMBER 31, 2002             DECEMBER 31, 2002
                           ACQUIRED      VALUE     ---------------------------   ---------------------------
NAME                      ON EXERCISE   REALIZED   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                      -----------   --------   -----------   -------------   -----------   -------------
<S>                       <C>           <C>        <C>           <C>             <C>           <C>
Anthony Taylor..........       --           --       510,000       1,530,000     $6,186,300     $16,014,000
Thomas George Story
  Busher................       --           --            --         225,000             --     $ 2,261,250
C. Russell Fletcher
  III...................       --           --            --         225,000             --     $ 2,261,250
Nicholas Newman-Young...       --           --            --          60,000             --     $   603,000
K. Thomas Kemp..........       --           --            --              --             --              --
</Table>

LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR

     The following table summarizes the Long-Term Incentive Plan awards made to
the Named Executive Officers during the latest fiscal year exclusive of awards
of options which have been presented in the Options Granted During Fiscal Year
2002 table. The long-term incentive awards presented below consisted of
performance shares. A performance share derives its value from the market value
of a Common Share when earned.

<Table>
<Caption>
                               NUMBER OF                          ESTIMATED FUTURE PAYOUTS(2)
                              PERFORMANCE    PERFORMANCE PERIOD   ----------------------------
NAME                          UNITS(#)(1)        FOR PAYOUT        THRESHOLD(#)     TARGET(#)    MAXIMUM(#)
----                          ------------   ------------------   --------------   -----------   ----------
<S>                           <C>            <C>                  <C>              <C>           <C>
Anthony Taylor..............     78,684           3 years                0            78,684      157,368
Thomas George Story Busher..     31,470           3 years                0            31,470       62,940
C. Russell Fletcher III.....     59,010           3 years                0            59,010      118,020
Nicholas Newman-Young.......     15,738           3 years                0            15,738       31,476
K. Thomas Kemp..............         --                --               --                --           --
</Table>

---------------

(1) Each performance unit represents the fair value of a Common Share.

(2) Performance units are conditional grants which entitle the recipient to
    receive, without payment to the Company, all, double, or a part of the value
    of the units granted, depending on the achievement of specific financial or
    operating goals. Performance units vest at the end of a three-year
    performance cycle, and can be denominated in common shares at market value
    and are payable in cash, common shares or a combination of both at the
    discretion of the Compensation and Nominating Committee of the Board. The
    performance target for full payment of performance units issued in the
    2002-2004 performance cycle is the achievement of a target combined ratio as
    measured over the applicable performance periods. The payment on performance
    units can double if the average combined ratio is significantly less than
    the target. Conversely, the payment on performance units declines to zero
    with an increasing combined ratio. The Compensation and Nominating Committee
    has significant discretion regarding the payout level of the performance
    units.

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<PAGE>

CEO EMPLOYMENT AGREEMENT

     We have entered into service agreements with Mr. Taylor, effective as of
January 1, 2002, under which he agreed to serve as our Chief Executive Officer
and the Chief Underwriting Officer of Montpelier Re for an initial term ending
on December 31, 2004. The agreements provide that Mr. Taylor be paid an initial
annual salary of L300,000 (approximately $483,000), subject to annual increase
or decrease (but not below L300,000) as determined by the Compensation and
Nominating Committee of the Board, subject to ratification by the full Board. In
addition, the agreements provide that Mr. Taylor shall receive a housing
allowance each year. Mr. Taylor received a signing bonus of $400,000 upon
entering into the service agreements for services to be rendered upon the
commencement of his employment.

     If Mr. Taylor's service agreements are terminated prior to their expiration
by the Company due to his mental or physical incapacity, Mr. Taylor will be
entitled to continue to receive his salary for a period of twelve months
following the termination. If Mr. Taylor terminates his service agreements, or
we terminate his agreements for cause, we will have no further obligations to
Mr. Taylor under the agreements. Mr. Taylor's employment agreement has no
specific provisions relating to a Change in Control of the Company.

     Mr. Taylor's agreements entitle him to participate in our annual bonus and
long-term incentive plans, which are described below, pursuant to which he had
been granted 78,684 units under the performance unit plan ("PUP") as of December
31, 2002. Mr. Taylor has also been granted options under the Share Option Plan.
The agreements also contain customary provisions relating to confidentiality,
non-competition and non-solicitation.

EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS

     The following information summarizes the employment-related agreements for
our named executive officers.

     Thomas George Story Busher.  We have entered into service agreements with
Mr. Busher, effective as of January 1, 2002, pursuant to which he has agreed to
serve as our Chief Operating Officer and Executive Vice President. In addition
to his annual salary, Mr. Busher is entitled to a housing allowance, initially
set at $90,000 per year. Mr. Busher's service agreements also entitle him to
participate in our PUP plan, pursuant to which he had been granted 31,470 units
as of December 31, 2002. Mr. Busher has also been granted options under the
Share Option Plan. The remaining material terms of Mr. Busher's service
agreements are common to the other officers' service agreements and are
described below.

     C. Russell Fletcher III.  We have entered into a service agreement with Mr.
Fletcher, effective as of January 1, 2002, pursuant to which he has agreed to
serve as our Chief Reinsurance Officer and Executive Vice President. In addition
to his annual salary, Mr. Fletcher is entitled to a housing allowance, initially
set at $144,000 per year. Mr. Fletcher's service agreement also entitles him to
participate in our PUP plan, pursuant to which he had been granted 59,010 units
as of December 31, 2002. Mr. Fletcher has also been granted options under the
Share Option Plan. The remaining material terms of Mr. Fletcher's service
agreement are common to the other officers' service agreements and are described
below.

     Nicholas Newman-Young.  We have entered into a service agreement with Mr.
Newman-Young, effective as of January 24, 2002, pursuant to which he has agreed
to serve as the Managing Director of Montpelier Marketing Services (UK) Limited.
Mr. Newman-Young's service agreement entitles him to participate in our PUP
plan, pursuant to which he had been granted 15,738 units as of December 31,
2002. Mr. Newman-Young has also been granted options under the Share Option
Plan. The remaining material terms of Mr. Newman-Young's service agreement are
common to the other officers' service agreements and are described below.

     Provisions Common to the Service Agreements.  In addition to the provisions
described above, the service agreements of Messrs. Busher, Fletcher and
Newman-Young contain the following provisions. Each service agreement is
terminable upon twelve months written notice by us or upon six months written
notice by the officer. Each agreement also contains non-compete provisions of
varying terms, and entitles the officer to

                                        75
<PAGE>

participate in our annual bonus and long-term incentive plans described below.
The service agreements have no specific provisions relating to a Change in
Control of the Company.

     K. Thomas Kemp.  We have entered into a Letter of Employment with Mr. Kemp,
effective May 21, 2002 (other than with respect to his compensation, for which
purpose the letter is effective as of January 1, 2003) pursuant to which he has
agreed to serve as the Chief Financial Officer of the Company. Mr. Kemp's Letter
of Employment entitles him to participate in our annual bonus plan and the PUP
plan, although no units had been granted to him as of December 31, 2002. This
Letter of Employment agreement with Mr. Kemp may be terminated by us or by Mr.
Kemp upon two weeks written notice. We paid a bonus of $113,000 to Mr. Kemp in
recognition of his services to the Company as Chief Financial Officer during
2002, however, this bonus was not paid pursuant to the terms of his Letter of
Employment.

ANNUAL BONUS PLAN

     Each year, officers that participate in the annual bonus plan will be
eligible to receive a bonus based upon the officer's achievement of annual
performance targets that have been established by the Compensation and
Nominating Committee of the Board of Directors. The Compensation and Nominating
Committee will establish a bonus pool at the end of each year, with the amount
of such pool determined based upon our year end results. The pool will then be
allocated to officers based upon their individual performance with respect to
their performance targets.

LONG-TERM INCENTIVE PLANS

     Performance Unit Plan.  Performance units are conditional grants which
entitle the recipient to receive, without payment to the Company, all, double,
or a part of the value of the units granted, depending on the achievement of
specific financial or operating goals. Performance units vest at the end of a
three-year performance cycle, and can be denominated in common shares at market
value and are payable in cash, common shares or a combination of both at the
discretion of the Compensation and Nominating Committee of the Board. The
performance target for full payment of performance units issued in the 2002-2004
performance period is the achievement of an average combined ratio of 70% as
measured over the period. The performance target for full payment of performance
units issued in the 2003-2005 performance period is a combination of the
achievement of an average combined ratio of 72% as measured over the period, and
the achievement of an annual increase in fully converted book value per share of
18% as measured over the period. Linear scale collars around the targets provide
for payment on performance units to rise to 200% if performance materially
exceeds target or to reduce to nil if performance is materially below target.
The Compensation and Nominating Committee has significant discretion regarding
the payout level of the performance units.

     Share Option Plan.  Pursuant to the terms of the Share Option Plan, the
committee has discretion to grant share options to certain principal employees.
As of September 20, 2002, Messrs. Taylor, Busher, Fletcher and Newman-Young had
received options under the plan. The options expire ten years after the award
date are subject to various vesting periods, and require full payment in cash
prior to exercise. A total of 2,550,000 options, the maximum amount authorized
under current Committee approvals, were outstanding pursuant to the Share Option
Plan at December 31, 2002.

DEFERRED COMPENSATION PLAN

     The Deferred Compensation Plan gives executive officers the ability to
defer receipt of executive compensation, including performance unit payouts, at
no cost to the Company. Under the plan, various investment options are available
including a phantom share tracking option, a fixed income investment option and
an equity fund investment option. The plan is a non-funded general obligation.

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<PAGE>

                             PRINCIPAL SHAREHOLDERS

     The following table sets forth information as of July 1, 2003 regarding
beneficial ownership of common shares and the applicable voting rights attached
to such share ownership in accordance with our bye-laws by:

     - each person known by us to beneficially own 5% or more of our outstanding
       common shares;

     - each of our directors;

     - each of our executive officers; and

     - all of our executive officers and directors as a group.

<Table>
<Caption>
                                                                BENEFICIAL OWNERSHIP OF
                                                               PRINCIPAL SHAREHOLDERS(2)
                                                              ----------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1)                          NUMBER       PERCENTAGE
---------------------------------------                       ------------   -------------
<S>                                                           <C>            <C>
White Mountains Insurance Group, Ltd.(3)....................  15,581,571.7       22.9%
  One Beacon Street
  Boston, MA 02108
Cypress Associates II (Cayman) L.P.(4)......................     6,808,334       10.7%
  65 East 55th Street, 28th Floor
  New York, New York 10022
DLJMB Overseas Partners III, C.V. and associated funds(5)...     5,760,000        9.1%
  11 Madison Avenue, 16th Floor
  New York, NY 10010
Vestar AIV Managers Ltd.(6).................................     3,404,165        5.4%
  245 Park Avenue, 41st Floor
  New York, New York 10167
FMR Corp.(7)................................................     3,283,900        5.2%
  82 Devonshire Street
  Boston, Massachusetts 02109
John J. (Jack) Byrne(8).....................................       560,000          *
Allan W. Fulkerson(9).......................................       560,000          *
Anthony Taylor(10)..........................................       570,100          *
K. Thomas Kemp(11)..........................................        60,000          *
John D. Gillespie(12).......................................     1,260,000        2.0%
C. Russell Fletcher(13).....................................         6,000          *
G. Thompson Hutton(14)......................................         6,000          *
Raymond M. Salter...........................................            --         --
William Spiegel(15).........................................            --         --
Steven J. Gilbert(16).......................................            --         --
Kamil M. Salame(17).........................................            --         --
Raymond Barrette............................................            --         --
Thomas G.S. Busher(18)......................................            --         --
Nicholas Newman-Young(19)...................................            --         --
All directors and executive officers as a group.............     3,022,100        4.7%
                                                              ------------       ----
</Table>

---------------

  *  Less than 1%.

 (1) Unless otherwise stated, the address for each beneficial owner is c/o
     Montpelier Re Holdings Ltd., Mintflower Place, 8 Par-La-Ville Road,
     Hamilton HM 08, Bermuda.

 (2) Our bye-laws reduce the total voting power of any shareholder owning more
     than 9.5% of our common shares to 9.5% of the voting power of our common
     shares.

 (3) Includes 900,000 common shares held by Camden Fire Insurance Company,
     8,100,000 common shares held by OneBeacon Insurance Company and 1,800,000
     common shares held by Pennsylvania General Insurance Company and warrants,
     which are currently exercisable, to purchase 4,781,571.7 common

                                        77
<PAGE>

     shares. Jack Byrne beneficially owns 1,111,818 common shares of White
     Mountains, representing 13.3% of White Mountains' total common shares
     outstanding at March 21, 2003, and is the Chairman of White Mountains.

 (4) Includes 62,319 common shares held by 55th Street Partners II (Cayman)
     L.P., 6,457,865 common shares held by Cypress Merchant B Partners II
     (Cayman) L.P., 274,534 common shares held by Cypress Merchant Banking II-A
     C.V. and 13,616 common shares held by Cypress Side-By-Side (Cayman) L.P.
     (the "Cypress Entities"). Cypress Associates II (Cayman) L.P. is the
     general partner of the Cypress Entities. The general partner of Cypress
     Associates II (Cayman) L.P. is CMBP II (Cayman) Ltd., whose directors are
     Jeff Hughes, James Singleton, David Spalding and James Stern.

 (5) Includes 37,138 common shares held by DLJ MB Partners III GmbH & Co. KG,
     304,637 common shares held by DLJ Offshore Partners III, C.V., 78,581
     common shares held by DLJ Offshore Partners III-1, C.V., 55,978 common
     shares held by DLJ Offshore Partners III-2, C.V., 922,156 common shares
     held by MBP III Plan Investors, L.P., 7,373 common shares held by
     Millennium Partners II, L.P. and 4,354,137 common shares held by DLJMB
     Overseas Partners III, C.V. Credit Suisse First Boston, a Swiss bank, owns
     the majority of the voting stock of Credit Suisse First Boston, Inc., which
     in turn owns all of the voting stock of Credit Suisse First Boston (USA),
     Inc. ("CSFB-USA"). The DLJ related entities named above (the "DLJ Related
     Entities") are merchant banking funds advised by indirect subsidiaries of
     CSFB-USA.

 (6) Includes 3,333,954 shares held by Vestar AIV Holdings A L.P. ("Vestar
     Holdings A"), 28,361 shares held by Vestar AIV Holdings B L.P. ("Vestar
     Holdings B") and 41,850 shares held by Vestar AIV Employees Ltd. ("Vestar
     Employees"). Vestar AIV Managers Ltd. is the sole director of Vestar
     Employees and the general partner of Vestar AIV Associates L.P. ("Vestar
     Associates"). Vestar Associates, in turn, is the general partner of each of
     Vestar Holdings A and Vestar Holdings B. Vestar AIV Managers Ltd. is owned
     by Norman W. Alpert, Bryan J. Carey, Nicholas A. Dovidio, James L. Elrod,
     Jr., Jack M. Feder, James P. Kelley, Sander M. Levy, Arthur J. Nagle,
     Daniel S. O'Connell, Robert L. Rosner and Brian P. Schwartz, all of whom
     disclaim beneficial ownership of the shares of Montpelier owned by Vestar
     Holdings A, Vestar Holdings B and Vestar Employees, except to the extent of
     their pecuniary interest therein.

 (7) Based on a Schedule 13G filed jointly by FMR Corp., Edward C. Johnson, 3d
     and Abigail P. Johnson with the Securities and Exchange Commission on
     February 13, 2003. Fidelity Management & Research Company ("Fidelity"), a
     wholly owned subsidiary of FMR Corp. and an investment adviser registered
     under Section 203 of the Investment Advisers Act of 1940, is the beneficial
     owner of 3,283,900 shares as a result of acting as investment adviser to
     various investment companies registered under Section 8 of the Investment
     Company Act of 1940. Edward C. Johnson 3d, FMR Corp., through its control
     of Fidelity, and the funds each has sole power to dispose of the 3,283,900
     shares owned by the Funds. Neither FMR Corp. nor Edward C. Johnson 3d,
     Chairman of FMR Corp., has the sole power to vote or direct the voting of
     the shares owned directly by the Fidelity Funds, which power resides with
     the Funds' Boards of Trustees. Fidelity carries out the voting of the
     shares under written guidelines established by the Funds' Boards of
     Trustees. Members of the Edward C. Johnson, 3d family are the predominant
     owners of Class B shares of common stock of FMR Corp., representing
     approximately 49% of the voting power of FMR Corp. Mr. Johnson, 3d owns
     12.0% and Abigail Johnson owns 24.5% of the aggregate outstanding voting
     stock of FMR Corp. Mr. Johnson, 3d is Chairman of FMR Corp. and Abigail P.
     Johnson is a Director of FMR Corp. The Johnson family group and all other
     Class B shareholders have entered into a shareholders' voting agreement
     under which all Class B shares will be voted in accordance with the
     majority vote of Class B shares. Accordingly, through their ownership of
     voting common stock and the execution of the shareholders' voting
     agreement, members of the Johnson family may be deemed, under the
     Investment Company Act of 1940, to form a controlling group with respect to
     FMR Corp.

 (8) Includes 60,000 common shares held by his wife, Dorothy Byrne, 260,000
     common shares held by his son, John J. Byrne, III, and 240,000 common
     shares held by Jack Byrne. Mr. Byrne is also the Chairman of White
     Mountains Insurance Group, Ltd., another one of our shareholders.

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<PAGE>

 (9) Includes 560,000 common shares held by Century Capital Partners II, L.P.,
     to which Mr. Fulkerson disclaims beneficial ownership, except to the extent
     of his actual pecuniary interest therein. He is a limited partner of
     Century and is a managing member of the LLC that is the general partner of
     Century.

(10) Includes options which have vested and are currently exercisable to
     purchase 510,000 common shares. Does not include options to purchase
     1,530,000 common shares, which are not currently exercisable and which vest
     over three years.

(11) Includes 15,000 common shares held by Little Oak Hill Partnership L.P.

(12) Includes (i) 1,140,000 common shares owned by various funds of Prospector
     Partners LLC in which Mr. Gillespie is either general manager or investment
     manager, (ii) 60,000 common shares held by Gillespie Family 2000, LLC in
     which Mr. Gillespie's interest is limited to that as a co-managing member,
     (iii) 36,000 common shares held by Main Street America Assurance
     Corporation to which Mr. Gillespie serves as an investment manager and (iv)
     24,000 common shares held by National Grange Mutual Insurance Company to
     which Mr. Gillespie serves as an investment manager. Mr. Gillespie
     disclaims beneficial ownership of such common shares owned by Prospector
     Partners LLC and Gillespie Family 2000, LLC, except to the extent of his
     pecuniary interest therein. Mr. Gillespie is also Deputy Chairman of White
     Mountains Insurance Group, Ltd., another one of our shareholders.

(13) Does not include options to purchase 225,000 shares, which are not
     currently exercisable and which vest over four years.

(14) Includes 6,000 common shares held by Hutton Living Trust.

(15) Mr. Spiegel, one of our directors, is a Managing Director of Cypress
     Advisors Inc., which manages the Cypress Entities discussed in footnote 4
     above. Mr. Spiegel disclaims beneficial ownership of any of the common
     shares owned by the Cypress Entities.

(16) Does not include 1,515,562 common shares held by Gilbert Global Equity
     Partners, L.P., 276,164 shares held by Gilbert Global Equity Partners
     (Bermuda), L.P. and 23,829 shares held by GGEP-SK, LLC. Mr. Gilbert, one of
     our directors, is Chairman of the Board of the general partner of Gilbert
     Global Equity Partners, L.P. and Chairman of the Investment Committee of
     the general partner of Gilbert Global Equity Partners (Bermuda) L.P. Mr.
     Gilbert disclaims beneficial ownership of any of the common shares owned by
     the entities discussed in this footnote 16.

(17) Mr. Salame, one of our directors, is a Director in the Private Equity Group
     of Credit Suisse First Boston, of which the DLJ Related Entities are a
     part. Mr. Salame disclaims beneficial ownership of any of the common shares
     owned by the DLJ Related Entities.

(18) Does not include options to purchase 225,000 shares, which are not
     currently exercisable and which vest over four years.

(19) Does not include options to purchase 60,000 shares, which are not currently
     exercisable and which vest over four years.

                                        79
<PAGE>

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     We describe below some of the transactions we have entered into with
parties that are related to our company. We believe that each of the
transactions described below was on terms no less favorable to us than we could
have obtained from unrelated parties.

TRANSACTIONS AND RELATIONSHIPS WITH INITIAL INVESTORS

     White Mountains and Benfield sponsored our formation and invested $180
million and $25 million respectively in our initial private placement. In
addition, White Mountains and Benfield were granted warrants that entitle them
to purchase 4,781,571.7 common shares and 2,390,785.8 common shares,
respectively.

     In connection with our formation, White Mountains and Benfield established
a trust in Bermuda to fund our start-up expenses. After our formation and
funding, we reimbursed White Mountains and Benfield $400,000 each for the
amounts they had contributed to the trust: $238,185 each as of December 31, 2001
with the remaining amount of $161,815 each, being repaid as of March 26, 2002.
In addition, in December 2001 the Company paid Benfield Advisory Limited, an
affiliate of Benfield, advisory fees of $3.3 million in connection with the
formation of the Company.

     Mr. Byrne, Chairman of our Board and a member of our Compensation and
Nominating Committee, is also Chairman of the board of directors of White
Mountains and served as Chief Executive Officer of White Mountains until
December 31, 2002. Mr. Kemp, our Chief Financial Officer and one of our
directors, is a member of the board of directors of White Mountains and served
as President of White Mountains until December 31, 2002. Mr. Barrette, one of
our directors and a member of the Underwriting Policy Committee, is a director
of White Mountains and was named President and Chief Executive Officer of White
Mountains, effective January 1, 2003. Mr. Gillespie, one of our directors, is
Principal Executive Officer of White Mountains Advisors LLC, a wholly owned
indirect subsidiary of White Mountains, and Deputy Chairman of the board of
directors of White Mountains.

     We have engaged White Mountains Advisors LLC, a wholly owned indirect
subsidiary of White Mountains Insurance Group, to provide investment advisory
and management services. The fees, which vary depending on the amount of assets
under management, are between 0.15% and 0.30% and are included in net investment
income. The Company incurred an average fee of 0.17% and 0.20% for the three
months ended March 31, 2003 and 2002, respectively. For the three months ended
March 31, 2003 and 2002, the Company expensed investment management fees of
approximately $692,000 and $523,000, respectively, and has recorded an amount
payable for these services of $705,000 and $525,000, respectively. John
Gillespie, the Company's Chairman of the Finance Committee, is Deputy Chairman
of the Board of Directors of White Mountains Insurance Group, the Principal
Executive Officer of White Mountains Advisors LLC and is either general manager
or investment manager of various funds which own less than 5% of the Company.

     We have also entered into an agreement with Remetrics, a subsidiary of
Benfield Holdings Limited, which beneficially owns 4.5% of our common shares,
for the provision of certain risk management services. This agreement was no
longer in place at December 31, 2002. As a result of this agreement, the Company
accrued approximately $nil and $650,000 for the three months ended March 31,
2003 and 2002, respectively, for risk management services.

     In addition, in the ordinary course of business, we have entered into four
reinsurance agreements with OneBeacon, a wholly owned subsidiary of White
Mountains, one of our principal shareholders, during the three months ended
March 31, 2002. The Company received $728,000 in aggregate annual premiums from
these contracts during the year ended December 31, 2002. The Company has not
entered into any reinsurance agreements with OneBeacon Insurance Group during
the three months ended March 31, 2003.

     In addition, we pay brokerage commissions to UK and U.S. brokerage
subsidiaries of Benfield Holdings Limited, on business brought in by Benfield.
These commissions are consistent with commissions paid to other brokers in the
ordinary course of business and totaled $5.8 million and $3.2 million for the
three months ended March 31, 2003 and 2002, respectively.

                                        80
<PAGE>

RELATIONSHIPS WITH STRATEGIC INVESTORS AND UNDERWRITERS

     Mr. Kamil M. Salame, one of our directors, is a Director in the Private
Equity Group of Credit Suisse First Boston, an affiliate of which, Credit Suisse
First Boston LLC, is acting as an underwriter in this offering. In addition,
certain entities in the Private Equity Group own our common shares. Banc of
America Securities LLC, one of the underwriters in this offering, is one of our
warrantholders and is an affiliate of Bank of America Corporation, one of our
shareholders.

     Bank of America, N.A., an affiliate of Banc of America Securities LLC,
participates and acts as the administrative agent and a lender in our credit
facilities. Credit Suisse First Boston is also a lender in our credit
facilities. Under these facilities, we have a revolving credit line with a $50
million borrowing limit and have a three-year term loan of $150 million.
Following this offering, we intend to use a portion of the net proceeds of this
offering to repay all amounts outstanding under the term loan facility and to
terminate the term loan and revolving credit facilities. As a result, affiliates
of some of the underwriters will receive a portion of the proceeds of this
offering. Affiliates of both Banc of America Securities LLC and Credit Suisse
First Boston LLC are participants in the letter of credit facility which
Montpelier Re entered into on June 20, 2003.

     In addition, in the ordinary course of business, the Company entered into
four reinsurance agreements with OneBeacon Insurance Group, a subsidiary of
White Mountains Insurance Group, during the three months ended March 31, 2002.
The Company received $728,000 in aggregate annual premiums from these agreements
during the year ended December 31, 2002. The Company has not entered into any
reinsurance agreements with OneBeacon Insurance Group during the three months
ended March 31, 2003.

TRANSACTIONS WITH MANAGEMENT

     On January 29, 2002, we paid Mulherrin $95,230 for financial advisory
services. Allan Waters, who previously served as one of our directors, is the
managing member and owner of Mulherrin.

                                        81
<PAGE>

                          MATERIAL TAX CONSIDERATIONS

     The following summary of our taxation, the taxation of the Company and the
taxation of holders of notes is based upon current law and is for general
information only. Legislative, judicial or administrative changes may be
forthcoming that could affect this summary.

     The following legal discussion (including and subject to the matters and
qualifications set forth in such summary) of the material tax considerations (i)
under "Taxation of the Company and Montpelier Re -- Bermuda" and "Taxation of
noteholders -- Bermuda Taxation" is based upon the advice of Conyers Dill &
Pearman, special Bermuda legal counsel, and (ii) under "Taxation of the Company
and Montpelier Re -- United States" is the opinion of Cahill Gordon & Reindel
LLP, New York, New York, special tax counsel (the advice of such firms does not
include any factual or accounting matters, determinations or conclusions,
amounts and computations and amounts of components thereof or facts relating to
the business or activities of the Company and Montpelier Re). The opinion of
Cahill Gordon & Reindel LLP relies upon and is premised on the accuracy of
factual statements and representations made by the Company concerning the
business and properties, ownership, organization, source of income and manner of
operation of the Company and Montpelier Re. The discussion is based upon current
law. Legislative, judicial or administrative changes or interpretations may be
forthcoming that could be retroactive and could affect the tax consequences to
holders of notes. The tax treatment of a holder of notes, or of a person treated
as a holder of notes for U.S. federal income, state, local or non-U.S. tax
purposes, may vary depending on the holder's particular tax situation.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S.
FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF OWNING THE NOTES.

TAXATION OF THE COMPANY AND MONTPELIER RE

     Bermuda.  Under current Bermuda law, there is no income tax or capital
gains tax payable by us or Montpelier Re. The Company and Montpelier Re have
each obtained from the Minister of Finance under The Exempted Undertaking Tax
Protection Act 1966, as amended, an assurance that, in the event that Bermuda
enacts legislation imposing tax computed on profits, income, any capital asset,
gain or appreciation, or any tax in the nature of estate duty or inheritance,
then the imposition of any such tax shall not be applicable to the Company, to
Montpelier Re or to any of their operations or their shares, debentures or other
obligations, until March 28, 2016. The Company and Montpelier Re could be
subject to taxes in Bermuda after that date. This assurance is subject to the
proviso that it is not to be construed so as to prevent the application of any
tax or duty to such persons as are ordinarily resident in Bermuda (the Company
and Montpelier Re are not so currently affected) or to prevent the application
of any tax payable in accordance with the provisions of the Land Tax Act 1967 or
otherwise payable in relation to any property leased to the Company or
Montpelier Re. The Company and Montpelier Re each pay annual Bermuda government
fees, and Montpelier Re pays annual insurance license fees. In addition, all
entities employing individuals in Bermuda are required to pay a payroll tax and
there are other sundry taxes payable, directly or indirectly, to the Bermuda
government.

     United Kingdom.  The Company presently intends to operate in such a manner
that, for tax purposes, it and Montpelier Re will not be considered to have a
taxable presence in the United Kingdom.

     The Company has a subsidiary based in the UK to provide business
introduction and other support services to Montpelier Re. Appropriate arm's
length fees are charged for such services. These fees do not include an element
of profit related commission.

     Normal UK tax will be payable on profits made by the UK subsidiary but it
not expected that, in the context of the group's profitability as a whole, any
such tax charges will be seen to be significant.

     If the nature and/or scope of the services provided from the UK subsidiary
to Montpelier Re changed (perhaps in response to growth in business or market
necessity) and was held to give rise either to the existence of a taxable
presence in the UK or to a requirement to charge higher fees for the services
provided, a greater proportion of the income generated by Montpelier Re might
become subject (directly or indirectly)

                                        82
<PAGE>

to UK tax. This is a question of fact and degree. The amount of income deemed to
arise in the UK would depend on exactly what was done there and on the balance
between onshore UK and offshore UK activities.

     United States.  The Company and Montpelier Re currently intend to conduct
substantially all of their operations in Bermuda or elsewhere outside the United
States and to limit their U.S. contacts so that they will not be engaged in a
trade or business in the United States. However, because there is no definitive
identification of activities which constitute being engaged in a trade or
business in the United States for U.S. federal income tax purposes, there can be
no assurance that the IRS will not contend, perhaps successfully, that the
Company or Montpelier Re will be engaged in a trade or business in the United
States. A foreign corporation deemed to be so engaged would be subject to U.S.
income tax, as well as the branch profits tax, on its income which is treated as
effectively connected with the conduct of that trade or business unless the
corporation is entitled to relief under the permanent establishment provision of
a tax treaty, as discussed below.

     Under the income tax treaty between Bermuda and the United States (the
"Treaty"), Montpelier Re will not be subject to U.S. income tax on any income
found to be effectively connected with a U.S. trade or business unless that
trade or business is conducted through a permanent establishment in the United
States. No regulations interpreting the Treaty have been issued. Montpelier Re
currently intends not to have a permanent establishment in the United States,
although there can be no assurance that it will achieve this result. Under
existing law, if Montpelier Re (i) has no permanent establishment in the United
States and (ii) is entitled to the benefits of the Treaty, it will not be
subject to U.S. federal income tax.

     Montpelier Re would not be entitled to the benefits of the Treaty if (i)
50% or less of the Company's stock were beneficially owned, directly or
indirectly, by Bermuda residents or U.S. citizens or residents, or (ii)
Montpelier Re's income were used in substantial part to make distributions to,
or to meet certain liabilities to, persons who are not Bermuda residents or U.S.
citizens or residents. There can be no assurance that Montpelier Re will be
eligible for Treaty benefits as of the date of this offering or in the future
because of factual and legal uncertainties regarding the residency and
citizenship of the Company's shareholders.

     The Code requires that foreign insurance companies carrying on an insurance
business within the United States have a certain minimum amount of effectively
connected net investment income, determined in accordance with a formula that
depends, in part, on the amount of U.S. risk insured or reinsured by such
companies. If Montpelier Re is considered to be engaged in the conduct of an
insurance business in the United States and it is not entitled to the benefits
of the Treaty in general (because it fails to satisfy one of the limitations on
treaty benefits discussed above), the Code could subject a significant portion
of Montpelier Re's investment income to U.S. income tax. In addition, while the
Treaty clearly applies to premium income, it is uncertain whether the Treaty
applies to other income such as investment income. If Montpelier Re is
considered engaged in the conduct of an insurance business in the United States
and is entitled to the benefits of the Treaty in general, but the Treaty is
interpreted to not apply to investment income, a significant portion of
Montpelier Re's investment income could be subject to U.S. income tax.

     Foreign corporations not engaged in a trade or business in the United
States are nonetheless subject to U.S. income tax imposed by withholding on
certain "fixed or determinable annual or periodic gains, profits and income"
derived from sources within the United States (such as dividends and certain
interest on investments).

     The United States also imposes an excise tax on insurance and reinsurance
premiums paid to foreign insurers or reinsurers with respect to risks located in
the United States. The rates of tax applicable to premiums paid to Montpelier Re
are 4% for casualty insurance premiums and 1% for reinsurance premiums.

     Personal Holding Companies.  Based on the representations made by the
management of the Company regarding the nature of the ownership of the common
stock of the Company and Montpelier Re (including the representation that, based
on the information available to the Company, five or fewer individuals (without
regard to their citizenship or residency) do not own and are not deemed to own
(after applying the relevant constructive ownership rules) more than 50% of the
stock (by value) of the Company or Montpelier Re), Cahill Gordon & Reindel LLP
is of the opinion that neither the Company nor any subsidiary is a PHC

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for U.S. federal income tax purposes. A non-U.S. corporation generally will be
classified as a PHC for U.S. federal income tax purposes in a given taxable year
if at some time during the last half of such taxable year, five or fewer
individuals (without regard to their citizenship or residency) own or are deemed
to own (pursuant to certain constructive ownership rules) more than 50% of the
stock of the corporation by value and at least 60% of the corporation's gross
income, as determined for U.S. federal income tax purposes, for such taxable
year consists of "PHC income." For purposes of the 50% test, all of the common
shares owned by an investment partnership will be attributed to each of its
partners, if any, who are individuals. Additionally, certain entities (such as
tax-exempt organizations and pension funds) will be treated as individuals.

     If the Company or any subsidiary were a PHC in a given taxable year, such
corporation would be subject to PHC tax (at the highest marginal rate on
ordinary income applicable to individuals) on the "undistributed PHC income"
(which, in the case of a non-U.S. corporation, would exclude PHC income that is
from non-U.S. sources, except to the extent that such income is effectively
connected with a trade or business in the United States). Thus, the PHC income
of the Company and its non-U.S. subsidiaries (including Montpelier Re) would not
include underwriting income or investment income derived from non-U.S. sources
and should not include dividends received by the Company from its non-U.S.
subsidiaries (as long as such non-U.S. subsidiaries are not engaged in a trade
or business in the U.S.).

     There can be no assurance that the Company and its subsidiaries will not
become PHCs in the future because of factors including legal and factual
uncertainties regarding the application of the constructive ownership rules, the
makeup of the Company's shareholder base and other circumstances that could
change the application of the PHC rules to the Company and its subsidiaries. In
addition, if the Company or any of its subsidiaries were to become PHCs there
can be no assurance that the amount of PHC income will be immaterial.

TAXATION OF NOTEHOLDERS

  BERMUDA TAXATION

     Currently, there is no Bermuda withholding tax on interest paid by the
Company.

  UNITED STATES TAXATION

     The following summary sets forth the material United States federal income
tax considerations related to the purchase, ownership and disposition of the
notes. Unless otherwise stated, this summary deals only with holders of notes
that are U.S. holders (as defined below) who purchase their notes in this
offering and who hold their notes as capital assets. The following discussion is
only a discussion of the material United States federal income tax matters as
described herein and does not purport to address all of the U.S. federal income
tax consequences that may be relevant to a particular noteholder in light of
such noteholder's specific circumstances. In addition, the following summary
does not describe the U.S. federal income tax consequences that may be relevant
to certain holders of notes, such as financial institutions, insurance
companies, regulated investment companies, real estate investment trusts,
financial asset securitization investment trusts, dealers in securities or
traders that adopt a mark-to-market method of tax accounting, tax exempt
organizations, expatriates, or persons who hold the notes as part of a hedging
or conversion transaction or as part of a short-sale or straddle, who may be
subject to special rules or treatment under the Code. This discussion is based
upon the Code, the Treasury regulations promulgated thereunder and any relevant
administrative rulings or pronouncements or judicial decisions, all as in effect
on the date hereof and as currently interpreted, and does not take into account
possible changes in such tax laws or interpretations thereof, which may apply
retroactively. This discussion does not include any description of the tax laws
of any state or local governments within the United States, or of any foreign
government, that may be applicable to the notes or the holders of notes. Persons
considering making an investment in the notes should consult their own tax
advisors concerning the application of the U.S. federal tax laws to their
particular situations as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction prior to making such investment.

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     If a partnership holds the notes, the tax treatment of a partner will
generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding the notes, you should
consult your tax advisor.

     For purposes of this discussion, the term "U.S. holder" means a beneficial
owner of the notes that is, for U.S. federal income tax purposes:

        (i) a citizen or resident of the United States,

        (ii) a corporation or entity treated as a corporation created or
     organized in or under the laws of the United States, or any political
     subdivision thereof,

        (iii) an estate the income of which is subject to U.S. federal income
     taxation regardless of its source, or

        (iv) a trust if either (x) a court within the United States is able to
     exercise primary supervision over the administration of such trust and one
     or more United States persons have the authority to control all substantial
     decisions of such trust or (y) the trust has a valid election in effect to
     be treated as a United States Person for U.S. federal income tax purposes
     or any other person or entity that is trusted for U.S. federal income tax
     purposes as if it were one of the foregoing.

     Interest Payments.  Interest paid to a U.S. holder on a note will be
includible in such holder's gross income as ordinary interest income in
accordance with the holder's regular method of tax accounting. In addition,
interest on the notes will be treated as foreign source income for U.S. federal
income tax purposes. For foreign tax credit limitation purposes, interest on the
notes generally will constitute passive income, or, in the case of certain U.S.
holders, financial services income.

     Sale, Exchange, Redemption and Other Disposition of Notes.  Upon the sale,
exchange, redemption or other disposition of a note, a U.S. holder will
recognize taxable gain or loss equal to the difference, if any, between the
amount realized on the sale, exchange, redemption or other disposition (other
than accrued but unpaid interest which will be taxable as interest) and the
holder's adjusted tax basis in such note. A U.S. holder's adjusted tax basis in
a note generally will equal the cost of such note and any such gain or loss
generally will be capital gain or loss. The deductibility of capital losses is
subject to certain limitations. Any gain or loss realized by a U.S. holder on
the sale, exchange, redemption or other disposition of a note generally will be
treated as U.S. source gain or loss, as the case may be.

     Information Reporting and Backup Withholding.  Information returns may be
filed with the IRS in connection with payments of interest on the notes and the
proceeds from a sale or other disposition of the notes unless the holder of the
notes establishes an exemption from the information reporting rules. A holder of
notes that does not establish such an exemption may be subject to U.S. backup
withholding tax on these payments if the holder fails to provide its taxpayer
identification number or otherwise comply with the backup withholding rules. The
amount of any backup withholding from a payment to a U.S. holder will be allowed
as a credit against the U.S. holder's U.S. federal income tax liability and may
entitle the U.S. holder to a refund, provided that the required information is
furnished to the IRS.

  UNITED STATES TAXATION OF NON-U.S. NOTEHOLDERS

     The following discussion is limited to the United States federal income tax
consequences relevant to a beneficial owner of a note that is a "non-U.S.
holder". For purposes of this discussion, a "non-U.S. holder" is a holder of the
notes that is a nonresident alien or a corporation, estate or trust that is not
a U.S. holder.

     Interest and Disposition.  In general (and subject to the discussion below
under "Information Reporting and Backup Withholding"), a non-U.S. holder will
not be subject to U.S. federal income or withholding tax with respect to
payments of interest on, or gain upon the disposition of, notes, unless:

     - the interest or gain is effectively connected with the conduct by the
       non-U.S. holder of a trade or business in the United States; or

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     - in the case of gain upon the disposition of notes, the non-U.S. holder is
       an individual who is present in the U.S. for 183 days or more in the
       taxable year and certain other conditions are met.

     Interest or gain that is effectively connected with the conduct by the
non-U.S. holder of a trade or business in the United States will generally be
subject to regular U.S. federal income tax in the same manner as if it were
realized by a U.S. holder. In addition, if such non-U.S. holder is a non-U.S.
corporation, such interest or gain may be subject to a branch profits tax at a
rate of 30% (or such lower rate as is provided by an applicable income tax
treaty).

     Information Reporting and Backup Withholding.  If the notes are held by a
non-U.S. holder through a non-U.S. (and non-U.S. related) broker or financial
institution, information reporting and backup withholding generally would not be
required. Information reporting, and possibly backup withholding, may apply if
the notes are held by a non-U.S. holder through a U.S. (or U.S. related) broker
or financial institution and the non-U.S. holder fails to provide appropriate
information. Non-U.S. holders should consult their tax advisors concerning the
application of the information reporting and backup withholding rules.

  EUROPEAN UNION SAVINGS TAX DIRECTIVE

     On June 3, 2003 the European Union ("EU") Council of Economic and Finance
Ministers adopted a new directive regarding the taxation of savings income. The
directive is scheduled to be applied by EU member states ("Member States") from
January 1, 2005, provided that certain non-EU countries adopt similar measures
from the same date. Under the directive each Member State will be required to
provide to the tax authorities of another Member State details of payments of
interest or other similar income paid by a person within its jurisdiction to an
individual resident in that other Member State; however, Austria, Belgium and
Luxembourg may instead apply a withholding system for a transitional period in
relation to such payments. The transitional period is to commence on the date
from which the directive is to be applied by Member States and to terminate at
the end of the first fiscal year following agreement by certain non-EU countries
to the exchange of information relating to such payments.

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                            DESCRIPTION OF THE NOTES

GENERAL

     The notes will be issued under an indenture, to be dated as of
          ,2003, between us and The Bank of New York, as trustee, as
supplemented by the first supplemental indenture, dated as of,           , 2003.
We have summarized material provisions of the indenture below. The summary is
not complete and is subject to, and is qualified in its entirety by reference
to, all provisions of the indenture, including the definitions of certain terms
in the indenture and those terms to be made a part of the indenture by the Trust
Indenture Act of 1939, as amended. The form of indenture is filed as an exhibit
to the registration statement of which this prospectus is a part and you should
read the indenture for provisions that may be important to you. In this summary,
we have included reference to section numbers in the indenture so that you can
easily locate these provisions. Capitalized terms used in this summary have the
meanings specified in the indenture. In this summary, "we", "our" or "us" means
solely Montpelier Re Holdings Ltd. and its successors under the indenture and
not any of its subsidiaries.

     The indenture does not limit the aggregate principal amount of the debt
securities which we may issue under it and provides that we may issue debt
securities under it from time to time in one or more series. The indenture does
not limit the amount of other indebtedness or the debt securities which we or
our subsidiaries may issue.

     The notes will be our direct, unsecured obligations and will rank equally
with all of our other existing and future unsecured and unsubordinated
indebtedness.

     The notes will be issued in registered form only in denominations of $1,000
and integral multiples of $1,000. We will issue the notes initially in the
aggregate principal amount of $200,000,000. We may, at any time or from time to
time, without the consent of the existing holders of the notes, re-open the
series and issue additional notes having the same interest rate, maturity and
other terms as the notes except for the issue price, issue date, and in some
cases, first interest payment date. The notes and any additional notes
subsequently issued under the indenture will be treated as a single class for
all purposes under the indenture, including, without limitation, waivers,
amendments and redemptions.

     Each note will bear interest at an annual rate of      %, computed on the
basis of a 360-day year of twelve 30-day months, from           , 2003 or from
the most recent interest payment date to which interest has been paid or
provided for. We will pay interest semi-annually in arrears on           and
          of each year, which we refer to as the interest payment dates,
beginning on           , 2004 to the persons in whose names the notes are
registered at the close of business on the applicable record date, which is the
          or           , immediately preceding such interest payment date.
Unless previously redeemed, the notes will mature, and the principal amount of
the notes will become payable, on           .

     If any interest payment date falls on a day that is not a business day, the
interest payment shall be postponed to the next day that is a business day, and
no interest on such payment shall accrue for the period from and after such
interest payment date. If the maturity date of the notes falls on a day that is
not a business day, the payment of interest and principal may be made on the
next succeeding business day, and no interest on such payment shall accrue for
the period from and after the maturity date. Interest payments for the notes
will include accrued interest from and including the date of issue or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, the interest payment date or the date of maturity, as
the case may be. Interest on the notes which have a redemption date after a
regular record date, and on or before the following interest payment date, will
also be payable to the persons in whose names the notes are so registered.

     The indenture does not contain any provisions that would limit our ability
to incur indebtedness or that would afford holders of the notes protection in
the event of a sudden and significant decline in our credit quality or a
takeover, recapitalization or highly leveraged or similar transaction involving
us. Accordingly, we could in the future enter into transactions that could
increase the amount of indebtedness outstanding at that time or otherwise affect
our capital structure or credit rating.

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OPTIONAL REDEMPTION

     We may redeem the notes at any time, in whole or in part, at a "make-whole"
redemption price equal to the greater of (1) the principal amount being redeemed
or (2) the sum of the present values of the remaining scheduled payments of the
principal and interest (other than accrued interest) on the notes being
redeemed, discounted to the redemption date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus
basis points, plus in either case accrued and unpaid interest to the redemption
date.

     "Treasury Rate" means, for any redemption date, the rate per year equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for the redemption
date.

     "Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes being redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate notes of comparable maturity to the remaining
term of such notes.

     "Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by us after consultation with the trustee.

     "Comparable Treasury Price" means, for any redemption date, (1) the average
of the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) on the third business day
preceding the redemption date, as set forth in the daily statistical release (or
any successor release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or
(2) if that release (or any successor release) is not published or does not
contain those prices on that business day, (A) the average of the Reference
Treasury Dealer Quotations for the redemption date, after excluding the highest
and lowest Reference Treasury Dealer Quotations for that redemption date, or (B)
if we obtain fewer than four Reference Treasury Dealer Quotations, the average
of all the Reference Treasury Dealer Quotations obtained.

     "Reference Treasury Dealer Quotations" means, for each Reference Treasury
Dealer and any redemption date, the average, as determined by the trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the trustee
by the Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
business day preceding the redemption date for the notes being redeemed.

     "Reference Treasury Dealer" means (1) each of Banc of America Securities
LLC and Credit Suisse First Boston LLC and, in each case, their respective
successors; provided, however, that if either of them ceases to be a primary
U.S. Government securities dealer in New York City, we will appoint another
primary U.S. Government securities dealer as a substitute and (2) any other U.S.
Government securities dealers selected by us.

SELECTION AND NOTICE

     We will send the holders of the notes to be redeemed a notice of redemption
by first-class mail at least 30 and not more than 60 days prior to the date
fixed for redemption. If we elect to redeem fewer than all the notes, the
trustee will select in a fair and appropriate manner the notes to be redeemed.

     Unless we default in payment of the redemption price, the notes called for
redemption shall cease to accrue any interest on or after the redemption date.

RANKING

     The notes will be senior debt. They will rank equally with all our current
and future unsecured and unsubordinated indebtedness. The notes will be
effectively subordinated to all our current and future secured indebtedness to
the extent of the value of the assets securing such indebtedness and
structurally subordinated
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to all existing and future liabilities of our subsidiaries. We are a holding
company, and we conduct all of our operations through our direct and indirect
subsidiaries. As of March 31, 2003, the liabilities of our subsidiaries that are
structurally senior to the notes would have been approximately $653.5 million
(including reinsurance liabilities).

LIMITATIONS ON LIENS ON STOCK OF SUBSIDIARIES

     Under the indenture, we will covenant that, so long as any notes are
outstanding, we will not, nor will we permit any subsidiary to, create, assume,
incur, guarantee or otherwise permit to exist any Indebtedness secured by any
mortgage, pledge, lien, security interest or other encumbrance upon any shares
of capital stock of any Designated Subsidiary (whether such shares of stock are
now owned or hereafter acquired) without effectively providing concurrently that
the notes (and, if we so elect, any other Indebtedness of ours that is not
subordinate to the notes and with respect to which the governing instruments
require, or pursuant to which we are otherwise obligated, to provide such
security) will be secured equally and ratably with such Indebtedness for at
least the time period such other Indebtedness is so secured. (Section 4.7 of the
indenture)

     For purposes of the indenture, "capital stock" of any person means any and
all shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) equity of such person,
including preferred stock, but excluding any debt securities convertible into
such equity. (Section 1.1 of the indenture)

     The term "Designated Subsidiary" means any present or future consolidated
subsidiary of ours, the consolidated book value of which constitutes at least
10% of our consolidated book value. As of June 30, 2003, our only Designated
Subsidiary was Montpelier Reinsurance Ltd.

     The term "Indebtedness" means, with respect to any person:

        (1) the principal of and any premium and interest on (a) indebtedness of
     such person for money borrowed and (b) indebtedness evidenced by notes,
     debentures, bonds or other similar instruments for the payment of which
     such person is responsible or liable;

        (2) all capitalized lease obligations of such person;

        (3) all obligations of such person issued or assumed as the deferred
     purchase price of property, all conditional sale obligations and all
     obligations under any title retention agreement (but excluding trade
     accounts payable arising in the ordinary course of business);

        (4) all obligations of such person for the reimbursement of any obligor
     on any letter of credit, banker's acceptance or similar credit transaction
     (other than obligations with respect to letters of credit securing
     obligations (other than obligations described in (1) through (3) above)
     entered into in the ordinary course of business of such person to the
     extent such letters of credit are not drawn upon or, if and to the extent
     drawn upon, such drawing is reimbursed no later than the third business day
     following receipt by such person of a demand for reimbursement following
     payment on the letter of credit);

        (5) all obligations of the type referred to in clauses (1) through (4)
     of other persons and all dividends of other persons for the payment of
     which, in either case, such person is responsible or liable as obligor,
     guarantor or otherwise;

        (6) all obligations of the type referred to in clauses (1) through (5)
     of other persons secured by any mortgage, pledge, lien, security interest
     or other encumbrance on any property or asset of such person (whether or
     not such obligation is assumed by such person), the amount of such
     obligation being deemed to be the lesser of the value of such property or
     assets or the amount of the obligation so secured; and

        (7) any amendments, modifications, refundings, renewals or extensions of
     any indebtedness or obligation described as Indebtedness in clauses (1)
     through (6) above. (Section 1.1 of the indenture)

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LIMITATIONS ON DISPOSITION OF STOCK OF DESIGNATED SUBSIDIARIES

     The indenture also provides that, so long as any notes are outstanding and
except in a transaction otherwise governed by such indenture, we will not issue,
sell, assign, transfer or otherwise dispose of any shares of, securities
convertible into, or warrants, rights or options to subscribe for or purchase
shares of, capital stock (other than preferred stock having no voting rights of
any kind) of any Designated Subsidiary, and will not permit any Designated
Subsidiary to issue (other than to us or another Designated Subsidiary) any
shares (other than director's qualifying shares) of, or securities convertible
into, or warrants, rights or options to subscribe for or purchase shares of,
capital stock (other than preferred stock having no voting rights of any kind)
of any Designated Subsidiary, if, after giving effect to any such transaction
and the issuance of the maximum number of shares issuable upon the conversion or
exercise of all such convertible securities, warrants, rights or options, we
would own, directly or indirectly, less than 80% of the shares of capital stock
of such Designated Subsidiary (other than preferred stock having no voting
rights of any kind); provided, however, that (1) any issuance, sale, assignment,
transfer or other disposition permitted by us may only be made for at least a
fair market value consideration as determined by our board pursuant to a
resolution adopted in good faith and (2) the foregoing will not prohibit any
such issuance or disposition of securities if required by any law or any
regulation or order of any governmental or insurance regulatory authority.

     Notwithstanding the foregoing, (1) we may merge, amalgamate or consolidate
any Designated Subsidiary into or with another direct or indirect subsidiary of
ours, the shares of capital stock of which we own at least 70%, and (2) we may,
subject to the provisions described under "-- Consolidation, Amalgamation,
Merger and Sale of Assets" below, sell, assign, transfer or otherwise dispose of
the entire capital stock of any Designated Subsidiary at one time for at least a
fair market value consideration as determined by our Board pursuant to a
resolution adopted in good faith. (Section 4.8 of the indenture)

CONSOLIDATION, AMALGAMATION, MERGER AND SALE OF ASSETS

     The indenture provides that we may not (1) consolidate or amalgamate with
or merge into any person or convey, transfer or lease our properties and assets
as an entirety or substantially as an entirety to any person, or (2) permit any
person to consolidate or amalgamate with or merge into us, or convey, transfer
or lease its properties and assets as an entirety or substantially as an
entirety to us, unless (a) in the case of (1) above, such person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia, Bermuda or any country which is, on
the date of the indenture, a member of the Organization of Economic Cooperation
and Development and will expressly assume, by supplemental indenture
satisfactory in form to the trustee, the due and punctual payment of the
principal of, any premium and interest on and any additional amounts with
respect to the notes issued thereunder, and the performance of our obligations
under the indenture and the notes issued thereunder; (b) immediately after
giving effect to such transaction and treating any indebtedness which becomes an
obligation of ours or of a Designated Subsidiary as a result of such transaction
as having been incurred by us or such subsidiary at the time of such
transaction, no event of default, and no event which after notice or lapse of
time or both would become an event of default, will have happened and be
continuing; and (c) certain other documents are delivered.

     The Company's violation of the conditions relating to amalgamation,
consolidation, merger or sale of assets stated above, and the continuation of
such violation for 60 days after notice is given to the Company as provided in
the indenture, will constitute an event of default under the indenture.

CERTAIN OTHER COVENANTS

     Existence.  Except as otherwise permitted under "-- Limitations on Liens of
Stock of Subsidiaries" and "-- Consolidation, Amalgamation, Merger and Sale of
Assets" described above, we will do or cause to be done all things necessary to
maintain in full force and effect our legal existence, rights (charter and
statutory) and franchises. We are not, however, required to preserve any right
or franchise if we determine that it is no longer desirable in the conduct of
our business and the loss is not disadvantageous in any material respect to the
holders of any notes. (Section 4.5 of the indenture)

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EVENTS OF DEFAULT

     The following events will constitute an event of default under the
indenture with respect to the notes (whatever the reason for such event of
default and whether it will be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

        (1) default in the payment of any interest on the notes, or any
     additional amounts payable with respect thereto, when such interest becomes
     or such additional amounts become due and payable, and continuance of such
     default for a period of 30 days;

        (2) default in the payment of the principal of or any premium on the
     notes, or any additional amounts payable with respect thereto, when such
     principal or premium becomes or such additional amounts become due and
     payable either at maturity, upon any redemption, by declaration of
     acceleration or otherwise;

        (3) default in the performance, or breach, of any covenant or warranty
     of ours contained in the indenture, and the continuance of such default or
     breach for a period of 60 days after there has been given written notice as
     provided in the indenture;

        (4) if any event of default as defined in any mortgage, indenture or
     instrument under which there may be issued, or by which there may be
     secured or evidenced, any of our indebtedness for borrowed money (other
     than indebtedness which is non-recourse to us) happens and consists of
     default in the payment of more than $50,000,000 in principal amount of such
     indebtedness when due (after giving effect to any applicable grace period),
     and such default is not cured or such acceleration is not rescinded or
     annulled within a period of 30 days after there has been given written
     notice as provided in the indenture;

        (5) we shall fail within 60 days to pay, bond or otherwise discharge any
     uninsured judgment or court order for the payment of money in excess of
     $50,000,000, which is not stayed on appeal or is not otherwise being
     appropriately contested in good faith; and

        (6) certain events relating to our bankruptcy, insolvency or
     reorganization.

     If an event of default with respect to the notes (other than an event of
default described in clause (6) of the preceding paragraph) occurs and is
continuing, either the trustee or the holders of at least 25% in principal
amount of the outstanding notes by written notice as provided in the indenture
may declare the principal amount of all outstanding notes to be due and payable
immediately. At any time after a declaration of acceleration has been made, but
before a judgment or decree for payment of money has been obtained by the
trustee, and subject to applicable law and certain other provisions of the
indenture, the holders of a majority in aggregate principal amount of the notes
may, under certain circumstances, rescind and annul such acceleration. An event
of default described in clause (6) of the preceding paragraph will cause the
principal amount and accrued interest to become immediately due and payable
without any declaration or other act by the trustee or any holder.

     The indenture provides that, within 60 days after the occurrence of any
event which is, or after notice or lapse of time or both would become, an event
of default with respect to the notes, the trustee will transmit, in the manner
set forth in the indenture and subject to the exceptions described below, notice
of such default to the holders of the notes unless such default has been cured
or waived. However, except in the case of a default in the payment of principal
of, or premium, if any, or interest on, or additional amounts with respect to,
any notes, the trustee may withhold such notice if and so long as our board,
executive committee or a trust committee of directors and/or responsible
officers of the trustee in good faith determine that the withholding of such
notice is in the best interest of the holders of the notes. In addition, in the
case of any default of the character described in clause (5) of the second
preceding paragraph, no such notice to holders will be given until at least 30
days after the default occurs.

     If an event of default occurs and is continuing with respect to the notes,
the trustee may in its discretion proceed to protect and enforce its rights and
the rights of the holders of the notes by all appropriate judicial
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<PAGE>

proceedings. The indenture provides that, subject to the duty of the trustee
during any default to act with the required standard of care, the trustee will
be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders of the notes, unless
such holders shall have offered to the trustee reasonable indemnity. Subject to
such provisions for the indemnification of the trustee, and subject to
applicable law and certain other provisions of the indenture, the holders of a
majority in aggregate principal amount of the outstanding notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee, or exercising any trust or power conferred on
the trustee, with respect to the notes.

     Under the Companies Act, any payment or other disposition of property made
by us within six months prior to the commencement of our winding up will be
invalid if made with the intent to fraudulently prefer one or more of our
creditors at a time that we were unable to pay our debts as they became due.

     In addition, an event of default with respect to us will occur as described
in "-- Consolidation, Amalgamation, Merger and Sale of Assets" above.

MODIFICATION AND WAIVER

     We and the trustee may modify or amend the indenture with the consent of
the holders of not less than a majority in aggregate principal amount of the
notes; provided, however, that no such modification or amendment may, without
the consent of the holder of each outstanding debt security affected thereby,

     - change the stated maturity of the principal of, or any premium or
       installment of interest on, or any additional amounts with respect to,
       the notes,

     - reduce the principal amount of, or the rate (or modify the calculation of
       such principal amount or rate) of interest on, or any additional amounts
       with respect to, or any premium payable upon the redemption of, the
       notes,

     - change our obligation to pay additional amounts with respect to the
       notes,

     - change the redemption provisions of the notes or, following the
       occurrence of any event that would entitle a holder to require us to
       redeem or repurchase the notes at the option of the holder, adversely
       affect the right of redemption or repurchase at the option of such
       holder, of the notes,

     - change the place of payment or the coin or currency in which the
       principal of, any premium or interest on or any additional amounts with
       respect to, the notes is payable,

     - impair the right to institute suit for the enforcement of any payment on
       or after the stated maturity of the notes (or, in the case of redemption,
       on or after the redemption date or, in the case of repayment at the
       option of any holder, on or after the repayment date),

     - reduce the percentage in principal amount of the notes, the consent of
       whose holders is required in order to take specific actions,

     - reduce the requirements for quorum or voting by holders of the notes in
       the applicable section of the indenture,

     - modify any of the provisions in the indenture regarding the waiver of
       past defaults and the waiver of certain covenants by the holders of the
       notes except to increase any percentage vote required or to provide that
       other provisions of the indenture cannot be modified or waived without
       the consent of the holder of each note affected thereby, or

     - modify any of the above provisions.

     We and the trustee may modify or amend the indenture and the notes without
the consent of any holder in order to, among other things:

     - provide for our successor pursuant to a consolidation, amalgamation,
       merger or sale of assets that complies with the merger covenant;

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<PAGE>

     - add to our covenants for the benefit of the holders of the notes or to
       surrender any right or power conferred upon us by the indenture;

     - provide for a successor trustee with respect to the notes;

     - cure any ambiguity or correct or supplement any provision in the
       indenture which may be defective or inconsistent with any other
       provision, or to make any other provisions with respect to matters or
       questions arising under the indenture which will not adversely affect the
       interests of the holders of the notes;

     - change the conditions, limitations and restrictions on the authorized
       amount, terms or purposes of issue, authentication and delivery of the
       notes under the indenture;

     - add any additional events of default with respect to the notes;

     - provide for conversion or exchange rights of the holders of the notes; or

     - make any other change that does not materially adversely affect the
       interests of the holders of the notes. (Section 10.1 of the indenture)

     The holders of at least a majority in aggregate principal amount of the
notes may, on behalf of the holders of the notes, waive compliance by us with
certain restrictive provisions of the indenture. (Section 4.9 of the indenture)
The holders of not less than a majority in aggregate principal amount of the
notes may, on behalf of the holders of the notes, waive any past default and its
consequences under the indenture with respect to the notes, except a default (1)
in the payment of principal of, any premium or interest on or any additional
amounts with respect to the notes or (2) in respect of a covenant or provision
of the indenture that cannot be modified or amended without the consent of the
holder of each note. (Section 6.10 of the indenture)

     Under the indenture, we are required to furnish the trustee annually a
statement as to performance by us of certain of our obligations under the
indenture and as to any default in such performance. We are also required to
deliver to the trustee, within five days after occurrence thereof, written
notice of any event of default or any event which after notice or lapse of time
or both would constitute an event of default. (Section 4.6 of the indenture)

DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE

     We may discharge certain obligations to holders of the notes that have not
already been delivered to the trustee for cancellation and that either have
become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by depositing with the trustee, in
trust, funds in U.S. dollars in an amount sufficient to pay the entire
indebtedness on the notes with respect to principal and any premium, interest
and additional amounts to the date of such deposit (if the notes have become due
and payable) or with respect to principal, any premium and interest to the
maturity or redemption date thereof, as the case may be. (Section 12.1 of the
indenture)

     The indenture provides that, unless the provisions of Section 12.6 are made
inapplicable to the notes pursuant to Section 3.1 of the indenture, we may elect
either (1) to defease and be discharged from any and all obligations with
respect to the notes (except for, among other things, the obligation to pay
additional amounts, if any, upon the occurrence of certain events of taxation,
assessment or governmental charge with respect to payments on the notes and
other obligations to register the transfer or exchange of the notes, to replace
temporary or mutilated, destroyed, lost or stolen notes, to maintain an office
or agency with respect to the notes and to hold moneys for payment in trust)
("defeasance") or (2) to be released from our obligations with respect to the
notes under certain covenants and any omission to comply with such obligations
will not constitute a default or an event of default with respect to the notes
("covenant defeasance"). Defeasance or covenant defeasance, as the case may be,
will be conditioned upon the irrevocable deposit by us with the trustee, in
trust, of an amount in U.S. dollars, or Government Obligations (as defined
below), or both, applicable to such debt securities which through the scheduled
payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of, any premium

                                        93
<PAGE>

and interest on the notes on the scheduled due dates or any prior redemption
date. (Section 12.3 of the indenture)

     Such a trust may only be established if, among other things:

        (1) the applicable defeasance or covenant defeasance does not result in
     a breach or violation of, or constitute a default under or any material
     agreement or instrument to which we are a party or by which we are bound,

        (2) no event of default or event which with notice or lapse of time or
     both would become an event of default with respect to the notes to be
     defeased will have occurred and be continuing on the date of establishment
     of such a trust after giving effect to such establishment and, with respect
     to defeasance only, no bankruptcy proceeding will have occurred and be
     continuing at any time during the period ending on the 91st day after such
     date,

        (3) we have delivered to the trustee an opinion of counsel (as specified
     in the indenture) to the effect that the holders of the notes will not
     recognize income, gain or loss for U.S. federal income tax purposes as a
     result of such defeasance or covenant defeasance and will be subject to
     U.S. federal income tax on the same amounts, in the same manner and at the
     same times as would have been the case if such defeasance or covenant
     defeasance had not occurred, and such opinion of counsel, in the case of
     defeasance, must refer to and be based upon a letter ruling of the Internal
     Revenue Service received by us, a Revenue Ruling published by the Internal
     Revenue Service or a change in applicable U.S. federal income tax law
     occurring after the date of the indenture, and

        (4) with respect to defeasance, we have delivered to the trustee an
     officers' certificate as to solvency and the absence of intent of
     preferring holders over our other creditors. (Section 12.6 of the
     indenture)

     "Government Obligations" means debt securities which are (1) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (2) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America which, in the case
of clauses (1) and (2), are not callable or redeemable at the option of the
issuer or issuers thereof, and will also include a depository receipt issued by
a bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of or any other
amount with respect to any such Government Obligation held by such custodian for
the account of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian with respect to the Government Obligation or the specific
payment of interest on or principal of or any other amount with respect to the
Government Obligation evidenced by such depository receipt. (Section 1.1 of the
indenture)

     In the event we effect covenant defeasance with respect to the notes and
the notes are declared due and payable because of the occurrence of any event of
default other than an event of default with respect to any covenant as to which
there has been covenant defeasance, the Government Obligations on deposit with
the trustee, will be sufficient to pay amounts due on the notes at the time of
the stated maturity or redemption date but may not be sufficient to pay amounts
due on the notes at the time of the acceleration resulting from such event of
default. However, we would remain liable to make payment of such amounts due at
the time of acceleration.

PAYMENT OF ADDITIONAL AMOUNTS

     We will make all payments of principal of and premium, if any, interest and
any other amounts on, or in respect of, the notes without withholding or
deduction at source for, or on account of, any present or future taxes, fees,
duties, assessments or governmental charges of whatever nature imposed or levied
by or on behalf of Bermuda or any other jurisdiction in which we are organized
(a "taxing jurisdiction") or any political subdivision or taxing authority
thereof or therein, unless such taxes, fees, duties, assessments or governmental
charges are required to be withheld or deducted by (x) the laws (or any
regulations or rulings promulgated
                                        94
<PAGE>

thereunder) of a taxing jurisdiction or any political subdivision or taxing
authority thereof or therein or (y) an official position regarding the
application, administration, interpretation or enforcement of any such laws,
regulations or rulings (including, without limitation, a holding by a court of
competent jurisdiction or by a taxing authority in a taxing jurisdiction or any
political subdivision thereof). If a withholding or deduction at source is
required, we will, subject to certain limitations and exceptions described
below, pay to the holder of any note such additional amounts as may be necessary
so that every net payment of principal, premium, if any, interest or any other
amount made to such holder, after the withholding or deduction, will not be less
than the amount provided for in such note to be then due and payable.

     We will not be required to pay any additional amounts for or on account of:

        (1) any tax, fee, duty, assessment or governmental charge of whatever
     nature which would not have been imposed but for the fact that such holder
     (a) was a resident, domiciliary or national of, or engaged in business or
     maintained a permanent establishment or was physically present in, the
     relevant taxing jurisdiction or any political subdivision thereof or
     otherwise had some connection with the relevant taxing jurisdiction other
     than by reason of the mere ownership of, or receipt of payment under, such
     note, (b) presented, where presentation is required, such note for payment
     in the relevant taxing jurisdiction or any political subdivision thereof,
     unless such note could not have been presented for payment elsewhere, or
     (c) presented such note for payment more than 30 days after the date on
     which the payment in respect of such note became due and payable or
     provided for, whichever is later, except to the extent that the holder
     would have been entitled to such additional amounts if it had presented
     such note for payment on any day within that 30-day period;

        (2) any estate, inheritance, gift, sale, transfer, personal property or
     similar tax, assessment or other governmental charge;

        (3) any tax, assessment or other governmental charge that is imposed or
     withheld by reason of the failure by the holder or the beneficial owner of
     such note to comply with any reasonable request by us addressed to the
     holder within 90 days of such request (a) to provide information concerning
     the nationality, residence or identity of the holder or such beneficial
     owner or (b) to make any declaration or other similar claim or satisfy any
     information or reporting requirement, which is required or imposed by
     statute, treaty, regulation or administrative practice of the relevant
     taxing jurisdiction or any political subdivision thereof as a precondition
     to exemption from all or part of such tax, assessment or other governmental
     charge;

        (4) any withholding or deduction required to be made pursuant to any EU
     Directive on the taxation of savings implementing the conclusions of the
     ECOFIN Council meetings of 26-27 November 2000, 3 June 2003 or any law
     implementing or complying with, or introduced in order to conform to, such
     EU Directive; or

        (5) any combination of items (1), (2), (3) and (4).

     In addition, we will not pay additional amounts with respect to any payment
of principal of, or premium, if any, interest or any other amounts on, any such
note to any holder who is a fiduciary or partnership or other than the sole
beneficial owner of such note if such payment would be required by the laws of
the relevant taxing jurisdiction (or any political subdivision or relevant
taxing authority thereof or therein) to be included in the income for tax
purposes of a beneficiary or partner or settlor with respect to such fiduciary
or a member of such partnership or a beneficial owner to the extent such
beneficiary, partner or settlor would not have been entitled to such additional
amounts had it been the holder of the note. (Section 4.10 of the indenture)

REDEMPTION FOR TAX PURPOSES

     We may redeem the notes at our option, in whole but not in part, at a
redemption price equal to 100% of the principal amount, together with accrued
and unpaid interest and Additional Amounts, if any, to the date fixed for
redemption, at any time we receive an opinion of counsel that as a result of (i)
any change in or amendment to the laws or treaties (or any regulations or
rulings promulgated under these laws or treaties) of Bermuda or any taxing
jurisdiction (or of any political subdivision or taxation authority affecting
taxation) or
                                        95
<PAGE>

any change in the application or official interpretation of such laws,
regulations or rulings, or (ii) any action taken by a taxing authority of
Bermuda or any taxing jurisdiction (or any political subdivision or taxing
authority affecting taxation) which action is generally applied or is taken with
respect to the Company, or (iii) a decision rendered by a court of competent
jurisdiction in Bermuda or any taxing jurisdiction (or any political
subdivision) whether or not such decision was rendered with respect to us, there
is a substantial probability that we will be required as of the next interest
payment date to pay Additional Amounts with respect to the notes as provided in
"Payment of Additional Amounts" above and such requirements cannot be avoided by
the use of reasonable measures (consistent with practices and interpretations
generally followed or in effect at the time such measures could be taken) then
available. If we elect to redeem the notes under this provision, we will give
written notice of such election to the trustee.

BOOK-ENTRY SYSTEM

     We will issue the notes in the form of one or more fully registered global
notes. The global notes will be deposited upon issuance with, or on behalf of,
The Depository Trust Company, New York, New York, which we refer to as DTC. DTC
will act as depositary. The notes will be registered in the name of DTC or its
nominee.

     Ownership of beneficial interests in a global note will be limited to DTC
participants and to persons that may hold interests through institutions that
have accounts with DTC, which we refer to as the participants. Beneficial
interests in a global note will be shown on, and transfers of those ownership
interests will be effected only through, records maintained by DTC and its
participants for that global note. The conveyance of notices and other
communications by DTC to its participants and by its participants to owners of
beneficial interests in the notes will be governed by arrangements among them,
subject to any statutory or regulatory requirements in effect.

     DTC holds the securities of its participants and facilitates the clearance
and settlement of securities transactions among its participants through
electronic book-entry changes in accounts of its participants. The electronic
book-entry system eliminates the need for physical certificates. DTC's
participants include:

     - securities brokers and dealers (including the underwriters);

     - banks;

     - trust companies;

     - clearing corporations; and

     - other organizations (some of which, and/or their representatives, own
       DTC).

     Banks, brokers, dealers, trust companies and others that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly, also have access to DTC's book-entry system.

     We will make principal and interest payments on the notes represented by a
global note to DTC or its nominee, as the case may be, as the sole registered
owner and the sole holder of the notes represented by the global note for all
purposes under the indenture. Accordingly, we, the trustee and any paying agent
will have no responsibility or liability for:

     - any aspect of DTC's records relating to, or payments made on account of,
       beneficial ownership interests in a note represented by a global note;

     - any other aspect of the relationship between DTC and its participants or
       the relationship between those participants and the owners of beneficial
       interests in a global note held through those participants; or

     - the maintenance, supervision or review of any of DTC's records relating
       to those beneficial ownership interests.

     We provide the following description of the operations and procedures of
DTC solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to changes

                                        96
<PAGE>

by it from time to time. We take no responsibility for these operations and
procedures and urge investors to contact DTC or its participants directly to
discuss these matters.

     DTC has advised us that upon receipt of any payment of principal of or
interest on a global note, DTC will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of that global note as shown on DTC's records. The underwriters will
initially designate the accounts to be credited. Payments by participants to
owners of beneficial interests in a global note will be governed by standing
instructions and customary practices, as is the case with securities held for
customer accounts registered in "street name," and will be the sole
responsibility of those participants.

     A global note can only be transferred:

     - as a whole by DTC to one of its nominees;

     - as a whole by a nominee of DTC to DTC or another nominee of DTC; or

     - as a whole by DTC or a nominee of DTC to a successor of DTC or a nominee
       of that successor.

     The notes represented by a global note can be exchanged for definitive
notes in registered form only if:

     - DTC notifies us that it is unwilling or unable to continue as depositary
       for that global note;

     - at any time DTC ceases to be a clearing agency registered under the
       Exchange Act;

     - we in our sole discretion determine that the global note will be
       exchangeable for definitive notes in registered form and notify the
       trustee of our decision; or

     - an event of default with respect to the notes represented by that global
       note has occurred and is continuing.

     A global note that can be exchanged under the preceding sentence will be
exchanged for definitive notes that are issued in authorized denominations in
registered form for the same aggregate amount. Those definitive notes will be
registered in the names of the owners of the beneficial interests in the global
note as directed by DTC.

     Except as provided above, (1) owners of beneficial interests in such global
note will not be entitled to receive physical delivery of notes in definitive
form and will not be considered the holders of the notes for any purpose under
the indenture and (2) no notes represented by a global note will be
exchangeable. Accordingly, each person owning a beneficial interest in a global
note must rely on the procedures of DTC (and if that person is not a
participant, on the procedures of the participant through which that person owns
its interest) to exercise any rights of a holder under the indenture or that
global note. The laws of some jurisdictions require that some purchasers of
securities take physical delivery of the securities in definitive form. Those
laws may impair the ability to transfer beneficial interests in a global note.

     Beneficial interests in a global note will trade in DTC's same day
settlement system until maturity or redemption or until issuance of definitive
notes in registered form as provided for in the indenture.

     We understand that under existing industry practices, if we request holders
to take any action, or if an owner of a beneficial interest in a global note
desires to take any action which a holder is entitled to take under the
indenture, then (1) DTC would authorize the participants holding the relevant
beneficial interests to take that action and (2) those participants would
authorize the beneficial owners owning through those participants to take that
action or would otherwise act on the instructions of beneficial owners owning
through them.

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<PAGE>

GOVERNING LAW

     The indenture and the notes will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
or instruments entered into and, in each case, performed in that state.

INFORMATION CONCERNING THE TRUSTEE

     The Bank of New York is to be the trustee and paying agent under the
indenture and is one of a number of banks with which Montpelier Re Holdings Ltd.
and its subsidiaries maintain banking relationships in the ordinary course of
business. The Bank of New York is part of the syndicate of commercial banks
under the term loan facility. The Bank of New York will receive a portion of the
proceeds from this offering as a result of our repayment of all amounts
outstanding under the term loan facility. The Bank of New York is a party in the
letter of credit facility which Montpelier Re entered into on June 20, 2003.

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<PAGE>

                                  UNDERWRITING

     Under the terms and subject to the conditions contained in an underwriting
agreement dated           , 2003, we have agreed to sell to the underwriters
named below, for whom Banc of America Securities LLC and Credit Suisse First
Boston LLC are acting as representatives, the following respective principal
amounts of the notes:

<Table>
<Caption>
                                                                PRINCIPAL
                                                                  AMOUNT
NAME                                                             OF NOTES
----                                                           ------------
<S>                                                            <C>
Banc of America Securities LLC..............................   $
Credit Suisse First Boston LLC..............................   $
                                                               ------------

     Total..................................................   $200,000,000
                                                               ============
</Table>

     The underwriting agreement provides that the underwriters are obligated to
purchase all of the notes if any are purchased. The underwriting agreement also
provides that if an underwriter defaults, the purchase commitments of
non-defaulting underwriters may be increased or the offering of the notes may be
terminated.

     The underwriters propose to offer the notes initially at the public
offering price on the cover page of this prospectus and to selling group members
at that price less a selling concession of    % of the principal amount per
note. The underwriters and selling group members may allow a discount of    % of
the principal amount per note on sales to other broker-dealers. After the
initial public offering the underwriters may change the public offering price
and concession and discount to broker-dealers.

     We estimate that our out of pocket expenses for this offering will be
approximately $          .

     The notes are a new issue of securities with no established trading market.
One or more of the underwriters intend to make a secondary market for the notes.
However, they are not obligated to do so and may discontinue making a secondary
market for the notes at any time without notice. No assurance can be given as to
the liquidity or development of the trading market for the notes will be.

     We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.

     In connection with the offering, the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.

     - Stabilizing transactions permit bids to purchase the underlying security
       so long as the stabilizing bids do not exceed a specified maximum.

     - Over-allotment involves sales by the underwriters of notes in excess of
       the principal amount of the notes the underwriters are obligated to
       purchase, which creates a syndicate short position.

     - Syndicate covering transactions involve purchases of the notes in the
       open market after the distribution has been completed in order to cover
       syndicate short positions. A short position is more likely to be created
       if the underwriters are concerned that there may be downward pressure on
       the price of the notes in the open market after pricing that could
       adversely affect investors who purchase in the offering.

     - Penalty bids permit the representatives to reclaim a selling concession
       from a syndicate member when the notes originally sold by the syndicate
       member are purchased in a stabilizing transaction or a syndicate covering
       transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may have the effect of raising or maintaining the market price of the notes or
preventing or retarding a decline in the market price of the notes. As a result,
the price of the notes may be higher than the price that might otherwise exist
in the open market. These transactions, if commenced, may be discontinued at any
time.

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<PAGE>

     Banc of America Securities LLC and Credit Suisse First Boston LLC will make
securities available for distribution on the Internet through a proprietary Web
site and/or a third-party system operated by Market Axess Inc., an
Internet-based communications technology provider. Market Axess Inc. is
providing the system as a conduit for communications between Banc of America
Securities LLC and Credit Suisse First Boston LLC and their customers and is not
a party to any transactions. We do not believe that Market Axess Inc. will
function as an underwriter or agent of the issuer, nor do we believe that Market
Axess Inc. will act as a broker for any customer of Banc of America Securities
LLC and Credit Suisse First Boston LLC. Market Axess Inc., a registered
broker-dealer, will receive compensation from Banc of America Securities LLC and
Credit Suisse First Boston LLC based on transactions the underwriter conducts
through the system. Banc of America Securities LLC and Credit Suisse First
Boston LLC will make securities available to its customers through the Internet
distributions, whether made through a proprietary or third party system, on the
same terms as distributions made through other channels.

RELATIONSHIP WITH UNDERWRITERS

     From time to time certain of the underwriters have provided us, and
continued to provide us, with commercial, investment banking and other financial
services. See "Certain Relationships and Related Transactions -- Relationships
with Strategic Investors and Underwriters." Bank of America, N.A., an affiliate
of Banc of America Securities LLC, one of the underwriters in this offering,
participates and acts as the administrative agent and a lender in our credit
facilities. Credit Suisse First Boston, an affiliate of Credit Suisse First
Boston LLC, one of the underwriters in this offering, is also a lender in our
credit facilities. Under these facilities, we have a revolving credit line with
a $50 million borrowing limit and have a three-year term loan of $150 million.
We intend to use a portion of the net proceeds of this offering to repay all
amounts outstanding under the term loan facility, and as a result affiliates of
some of the underwriters will receive more than 10% of the net proceeds.
Accordingly, we are conducting this offer pursuant to NASD Conduct Rule
2710(c)(8). Affiliates of both Banc of America Securities LLC and Credit Suisse
First Boston LLC are participants in the letter of credit facility which
Montpelier Re entered into on June 20, 2003. Mr. Kamil M. Salame, one of our
directors, is a director of the Private Equity Group of Credit Suisse First
Boston, an affiliate of Credit Suisse First Boston LLC which includes entities
that own our shares. Also, Banc of America Securities LLC is one of our
warrantholders and Bank of America Corporation is one of our shareholders.

                                 LEGAL MATTERS

     Certain matters as to U.S. law in connection with this offering will be
passed upon for us by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited
liability partnership including professional corporations, New York, New York,
and Cahill Gordon & Reindel, LLP, special tax counsel to the Company. Certain
matters as to Bermuda law in connection with this offering will be passed upon
for us by Conyers Dill & Pearman, Hamilton, Bermuda. Certain legal matters as to
U.S. law in connection with this offering will be passed upon for the
underwriters by Davis Polk & Wardwell.

                                    EXPERTS

     The audited combined financial statements of the Company and its
subsidiaries as of December 31, 2002 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers (Bermuda),
independent accountants, given on the authority of that firm as experts in
auditing and accounting.

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the Securities and Exchange Commission, a registration
statement on Form S-1 under the Securities Act with respect to the notes offered
by this prospectus. This prospectus, filed as part of the registration
statement, does not contain all of the information set forth in the registration
statement and its exhibits and schedules, portions of which have been omitted as
permitted by the rules and regulations of the SEC. For further information about
us and the notes, we refer you to the registration statement and to its exhibits
and schedules. Statements in this prospectus about the contents of any contract,
agreement or other document are not necessarily complete and, in each instance,
we refer you to the copy of such contract,
                                       100
<PAGE>

agreement or document filed as an exhibit to the registration statement, with
each such statement being qualified in all respects by reference to the document
to which it refers. Anyone may inspect the registration statement and its
exhibits and schedules without charge at the public reference facilities the SEC
maintains at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
copies of all or any part of these materials from the SEC upon the payment of
certain fees prescribed by the SEC. You may obtain further information about the
operation of the SEC's Public Reference Room by calling the SEC at
1-800-SEC-0330. You may also inspect these reports and other information without
charge at a web site maintained by the SEC. The address of this site is
http://www.sec.gov.

     We are subject to the informational requirements of the Exchange Act.
Accordingly, we file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may inspect and copy these reports, proxy
statements and other information at the public reference facilities maintained
by the SEC at the address noted above. You also may obtain copies of this
material from the Public Reference Room of the SEC as described above, or
inspect them without charge at the SEC's web site or at our web site, the
address of which is http://www.montpelierre.bm. We also furnish our shareholders
with annual reports containing combined financial statements audited by an
independent accounting firm. Our website is not incorporated into or otherwise a
part of this prospectus.

                                       101
<PAGE>

                      ENFORCEABILITY OF CIVIL LIABILITIES
         UNDER UNITED STATES FEDERAL SECURITIES LAWS AND OTHER MATTERS

     We are organized under the laws of Bermuda. In addition, some of our
directors and officers reside outside the United States, and all or a
substantial portion of their assets and our assets are or may be located in
jurisdictions outside the United States. Therefore, it may be difficult for
investors to effect service of process within the United States upon our
non-U.S. directors and officers or to recover against our Company, or our
non-U.S. directors and officers on judgments of U.S. courts, including judgments
predicated upon the civil liability provisions of the U.S. federal securities
laws. However, we may be served with process in the United States with respect
to actions against us arising out of or in connection with violations of U.S.
federal securities laws relating to offers and sales of the notes made hereby by
serving CT Corporation System, 111 Eighth Avenue, New York, New York 10011, our
U.S. agent irrevocably appointed for that purpose.

     We have been advised by Conyers Dill & Pearman, our Bermuda counsel, that
there is doubt as to whether the courts of Bermuda would enforce judgments of
U.S. courts obtained in actions against us or our directors and officers, as
well as the experts named herein, who reside outside the United States
predicated upon the civil liability provisions of the U.S. federal securities
laws or original actions brought in Bermuda against us or such persons
predicated solely upon U.S. federal securities laws. We have also been advised
by Conyers Dill & Pearman that there is no treaty in effect between the United
States and Bermuda providing for such enforcement, and there are grounds upon
which Bermuda courts may not enforce judgments of U.S. courts. Some remedies
available under the laws of U.S. jurisdictions, including some remedies
available under the U.S. federal securities laws, may not be allowed in Bermuda
courts as contrary to that jurisdiction's public policy.

                             ---------------------

     We will deliver a copy of this prospectus to the Registrar of Companies in
Bermuda for filing pursuant to the Companies Act. However, the BMA and Registrar
of Companies in Bermuda accept no responsibility for the financial soundness of
any proposal or for the correctness of any of the statements made or opinions
expressed in this prospectus.

                                       102
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                               PAGE
                                                               ----
<S>                                                            <C>
Report of Independent Accountants...........................    F-2
Combined Balance Sheets as at December 31, 2002 and 2001....    F-3
Combined Statements of Operations and Comprehensive Income
  for the year ended December 31, 2002 and for the period
  from November 14, 2001 to December 31, 2001...............    F-4
Combined Statements of Shareholders' Equity for the year
  ended December 31, 2002 and for the period from November
  14, 2001 to December 31, 2001.............................    F-5
Combined Statements of Cash Flows for the year ended
  December 31, 2002 and for the period from November 14,
  2001 to December 31, 2001.................................    F-6
Notes to Combined Financial Statements as at December 31,
  2002 and 2001.............................................    F-7
Unaudited Consolidated Financial Statements as at March 31,
  2003 and 2002
  Consolidated Balance Sheets as at March 31, 2003 and
     December 31, 2002......................................   F-24
  Consolidated Statements of Operations and Comprehensive
     Income for the three months ended March 31, 2003 and
     2002...................................................   F-25
  Consolidated Statements of Shareholder's Equity for the
     three months ended March 31, 2003 and 2002.............   F-26
  Consolidated Statements of Cash Flows for the three months
     ended March 31, 2003 and 2002..........................   F-27
  Notes to Consolidated Financial Statements for the three
     months ended March 31, 2003 and 2002...................   F-28
</Table>

                                       F-1
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

February 26, 2003

To the Board of Directors and Shareholders of Montpelier Re Holdings Ltd.

     In our opinion, the accompanying combined balance sheets and the related
combined statements of operations and comprehensive income, shareholders' equity
and cash flows present fairly, in all material respects, the financial position
of Montpelier Re Holdings Ltd. at December 31, 2002 and 2001, and the results of
their operations and their cash flows for the year ended December 31, 2002 and
the period from November 14, 2001 (date of incorporation) to December 31, 2001,
in conformity with accounting principles generally accepted in the United States
of America. These combined financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
combined financial statements based on our audits. We conducted our audits of
these financial statements in accordance with auditing standards generally
accepted in the United States of America which require that we plan and perform
the audits to obtain reasonable assurance about whether the combined financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall combined financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

/s/ PricewaterhouseCoopers
Chartered Accountants
Hamilton, Bermuda

                                       F-2
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                            COMBINED BALANCE SHEETS
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)

<Table>
<Caption>
                                                                    AS AT               AS AT
                                                              DECEMBER 31, 2002   DECEMBER 31, 2001
                                                              -----------------   -----------------
<S>                                                           <C>                 <C>
ASSETS
  Fixed maturities, at fair value (amortized cost:
     2002 -- $1,322,256; 2001 -- $638,525)..................     $1,354,845          $  640,403
  Equity investment, unquoted, at estimated fair (cost:
     $60,758)...............................................         63,691                  --
                                                                 ----------          ----------
     TOTAL INVESTMENTS......................................      1,418,536             640,403
  Cash and cash equivalents, at fair value..................        162,925             350,606
  Unearned premium ceded....................................          3,752                  --
  Reinsurance premiums receivable...........................        147,208                 133
  Funds withheld............................................         20,507                  --
  Deferred acquisition costs................................         44,881                  16
  Reinsurance recoverable...................................         16,656                  --
  Accrued investment income.................................         13,057               1,699
  Deferred financing costs..................................          1,325               2,005
  Common voting shares subscriptions receivable.............             --              26,000
  Other assets..............................................          5,071                 936
                                                                 ----------          ----------
     Total Assets...........................................     $1,833,918          $1,021,798
                                                                 ==========          ==========
LIABILITIES
  Loss and loss adjustment expense reserves.................        146,115                  --
  Unearned premium..........................................        241,000                 142
  Reinsurance balances payable..............................          2,448                  --
  Investment trades pending.................................         34,280                  --
  Long-term debt............................................        150,000             150,000
  Accounts payable, accrued expenses and other
     liabilities............................................          7,540              10,429
  Amount due to affiliates..................................             --                 574
                                                                 ----------          ----------
     Total Liabilities......................................     $  581,383          $  161,145
                                                                 ==========          ==========
SHAREHOLDERS' EQUITY
  Common voting shares: 1/6 cent par value; authorized
     1,200,000,000 shares; issued and outstanding at
     December 31, 2002; 63,392,600 shares
     (2001 -- 52,440,000)...................................            106                  87
  Additional paid-in capital................................      1,126,435             920,306
  Accumulated other comprehensive income....................         35,567               1,878
  Retained earnings (accumulated deficit)...................         90,427             (61,618)
                                                                 ----------          ----------
     Total Shareholders' Equity.............................      1,252,535             860,653
                                                                 ----------          ----------
     Total Liabilities and Shareholders' Equity.............     $1,833,918          $1,021,798
                                                                 ==========          ==========
</Table>

       The accompanying Notes to the Combined Financial Statements are an
               integral part of the Combined Financial Statements
                                       F-3
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

           COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT EARNINGS PER SHARE AND
                                 SHARE AMOUNTS)

<Table>
<Caption>
                                                                                     PERIOD FROM
                                                                YEAR ENDED       NOVEMBER 14, 2001 TO
                                                             DECEMBER 31, 2002    DECEMBER 31, 2001
                                                             -----------------   --------------------
<S>                                                          <C>                 <C>
REVENUES
  Gross premiums written..................................      $   607,688           $      150
  Reinsurance premiums ceded..............................          (41,779)                  --
                                                                -----------           ----------
  Net premiums written....................................          565,909                  150
  Change in net unearned premiums.........................         (235,983)                (142)
                                                                -----------           ----------
  Net premiums earned.....................................          329,926                    8
  Net investment income...................................           39,748                1,139
  Net realized gains on investments.......................            7,716                   --
  Net foreign exchange gains..............................            1,681                   --
                                                                -----------           ----------
  Total Revenues..........................................          379,071                1,147
                                                                -----------           ----------
EXPENSES
  Loss and loss adjustment expenses.......................          133,310                   --
  Acquisition costs.......................................           62,926                    1
  General and administrative expenses.....................           26,278                1,207
  Interest on long-term debt..............................            4,460                  236
  Fair value of warrants issued...........................               --               61,321
                                                                -----------           ----------
  Total Expenses..........................................          226,974               62,765
                                                                -----------           ----------
INCOME (LOSS) BEFORE TAXES................................          152,097              (61,618)
                                                                -----------           ----------
Income tax expense........................................               52                   --
                                                                -----------           ----------
NET INCOME (LOSS).........................................      $   152,045           $  (61,618)
                                                                ===========           ==========
COMPREHENSIVE INCOME (LOSS)
  Net income (loss).......................................      $   152,045           $  (61,618)
  Other comprehensive income..............................           33,689                1,878
                                                                -----------           ----------
  Comprehensive income (loss).............................      $   185,734           $  (59,740)
                                                                ===========           ==========
PER SHARE DATA
  Weighted average number of common and common equivalent
     shares outstanding:
     Basic................................................       55,178,150           52,440,000
     Diluted..............................................       55,457,141           52,440,000
  Basic earnings (loss) per common share..................      $      2.76           $    (1.18)
                                                                ===========           ==========
  Diluted earnings (loss) per common share................      $      2.74           $    (1.18)
                                                                ===========           ==========
</Table>

       The accompanying Notes to the Combined Financial Statements are an
               integral part of the Combined Financial Statements
                                       F-4
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                  COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                                                      PERIOD FROM
                                                                 YEAR ENDED       NOVEMBER 14, 2001 TO
                                                              DECEMBER 31, 2002    DECEMBER 31, 2001
                                                              -----------------   --------------------
<S>                                                           <C>                 <C>
COMMON SHARES
  Balance -- beginning of period............................     $       87             $     --
  Issue of common shares....................................             19                   87
                                                                 ----------             --------
     Balance -- end of period...............................            106                   87
                                                                 ----------             --------
ADDITIONAL PAID-IN-CAPITAL
  Balance -- beginning of period............................        920,306                   --
  Issue of common shares....................................        219,034              873,912
  Direct equity offering expenses...........................        (18,300)             (14,927)
  Compensation recognized under stock option plan...........          5,395                   --
  Fair value of warrants qualifying as equity...............             --               61,321
                                                                 ----------             --------
     Balance -- end of period...............................      1,126,435              920,306
                                                                 ----------             --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
  Balance -- beginning of period............................          1,878                   --
  Net change in currency translation adjustments............             47                   --
  Net change in unrealized gains on investments.............         33,642                1,878
                                                                 ----------             --------
     Balance -- end of period...............................         35,567                1,878
                                                                 ----------             --------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
  Balance -- beginning of period............................        (61,618)                  --
  Net income (loss).........................................        152,045              (61,618)
                                                                 ----------             --------
     Balance -- end of period...............................         90,427              (61,618)
                                                                 ----------             --------
     TOTAL SHAREHOLDERS' EQUITY.............................     $1,252,535             $860,653
                                                                 ==========             ========
</Table>

       The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-5
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                       COMBINED STATEMENTS OF CASH FLOWS
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                                                      PERIOD FROM
                                                                 YEAR ENDED       NOVEMBER 14, 2001 TO
                                                              DECEMBER 31, 2002    DECEMBER 31, 2001
                                                              -----------------   --------------------
<S>                                                           <C>                 <C>
Cash flows provided by (used in) operating activities:
  Net income (loss).........................................     $   152,045           $ (61,618)
  Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
     Accretion (amortization) of premium/(discount) on fixed
       maturities...........................................           3,803                 (27)
     Depreciation...........................................             364                  --
     Compensation recognized under stock option plan........           5,395                  --
     Net realized gains on fixed maturities.................          (7,716)                 --
     Amortization of deferred financing costs...............             680              (2,005)
     Net change in currency translation adjustments.........              47                  --
     Fair value of warrants issued..........................              --              61,321
  Change in:
     Unearned premium ceded.................................          (3,752)                 --
     Reinsurance premiums receivable........................        (147,075)               (133)
     Reinsurance recoverable................................         (16,656)                 --
     Funds withheld.........................................         (20,507)                 --
     Accrued investment income..............................         (11,358)             (1,699)
     Deferred acquisition costs.............................         (44,865)                (16)
     Other assets...........................................          (1,387)               (936)
     Loss and loss adjustment expense reserves..............         146,115                  --
     Unearned premium.......................................         240,858                 142
     Reinsurance balances payable...........................           2,448                  --
     Accounts payable, accrued expenses and other
       liabilities..........................................          (3,453)                497
     Amount due to affiliates...............................            (324)                324
     Interest accrued on long-term debt.....................             564                 236
                                                                 -----------           ---------
  Net cash provided by (used in) operating activities.......         295,226              (3,914)
                                                                 -----------           ---------
Cash flows from investing activities:
  Purchases of investments..................................      (1,922,773)           (638,498)
  Proceeds from sale of investments.........................       1,216,475                  --
  Purchases of equipment....................................          (3,112)                 --
                                                                 -----------           ---------
  Net cash used in investing activities.....................        (709,410)           (638,498)
                                                                 -----------           ---------
Cash flows provided by financing activities:
  Issue of common shares....................................         245,053             848,250
  Amount paid to affiliate for overpayment of
     subscription...........................................            (250)                 --
  Direct equity offering expenses...........................         (18,300)             (5,232)
  Issue of long-term debt...................................              --             150,000
                                                                 -----------           ---------
  Net cash provided by financing activities.................         226,503             993,018
                                                                 -----------           ---------
  Increase (decrease) in cash and cash equivalents..........        (187,681)            350,606
                                                                 -----------           ---------
  Cash and cash equivalents -- Beginning of period..........         350,606                  --
                                                                 -----------           ---------
  Cash and cash equivalents -- End of period................     $   162,925           $ 350,606
                                                                 ===========           =========
</Table>

       The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-6
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS,
           EXCEPT PER SHARE AMOUNTS OR AS WHERE OTHERWISE DESCRIBED)

1.  GENERAL

     Montpelier Re Holdings Ltd. (the "Company") was incorporated under the laws
of Bermuda on November 14, 2001. The Company, through its principal operating
subsidiary Montpelier Reinsurance Ltd. ("Montpelier Re"), is a provider of
global specialty property insurance and reinsurance products. Montpelier Re is
incorporated in Bermuda and is registered as a Class 4 insurer under The
Insurance Act 1978 (Bermuda), Amendments Thereto and Related Regulations ("The
Act"). The Company's bye-laws provide that the Board of Directors of Montpelier
Re shall consist of persons who first have been elected as designated directors
by a resolution in a general meeting of the shareholders of the Company. The
Board of Directors of the Company must then vote all shares of Montpelier Re
owned by the Company to elect such designated directors as Montpelier Re
directors. The bye-law provisions with respect to the removal of directors of
Montpelier Re operate similarly.

     Montpelier Re has two subsidiaries: Montpelier Marketing Services (UK)
Limited ("MMSL") and Montpelier Holdings (Barbados) SRL ("MHB"). MMSL was
incorporated on November 19, 2001, and provides business introduction and other
support services to Montpelier Re. MHB, a Barbados registered Society with
Restricted Liability incorporated on July 25, 2002, has not yet commenced
operations. MHB will be the registered holder of certain types of securities,
including United States equity securities, purchased as part of the overall
Montpelier Re investment portfolio. On December 3, 2002, Montpelier Re
established a trust known as the Montpelier Re Foundation to promote or carry
out charitable purposes.

     In October 2002, the Company completed an initial public offering ("IPO")
of 10,952,600 common shares. The Company's common shares began trading on the
New York Stock Exchange on October 10, 2002. The offering raised approximately
$201.2 million in net proceeds, which was contributed to Montpelier Re.

2.  SIGNIFICANT ACCOUNTING POLICIES

  BASIS OF PRESENTATION

     Montpelier Re's Board of Directors, who are elected as described above,
have unilateral authority, except for certain actions that require approval by
the Company as sole shareholder, to manage the affairs of Montpelier Re.
Accordingly, the accompanying financial statements have been prepared on a
combined basis, rather than on a consolidated basis. The combined financial
statements include the financial statements of Montpelier Re Holdings Ltd. and
its wholly owned subsidiaries. All significant inter-company balances have been
eliminated on combination.

     These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP"). The
preparation of financial statements in accordance with GAAP requires management
to make estimates and assumptions that affect reported and disclosed amounts of
assets and liabilities, as well as disclosure of contingent assets and
liabilities as at the balance sheet date and the reported amounts of revenues
and expenses during the reporting period. Estimates also affect the reported
amounts of income and expenses for the reporting period. Actual results could
differ materially from those estimates.

  PREMIUMS AND RELATED COSTS

     Premiums are recognized as written for the full period of the reinsurance
contract as of the date that the contract is bound. The Company writes both
excess of loss and pro-rata contracts.

                                       F-7
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     For excess of loss contracts, written premium is based on the minimum and
deposit premium as defined in the contract. Subsequent adjustments to the
minimum and deposit premium are recognized in the period they are determined.
For pro-rata contracts, written premiums are recognized based on estimates of
ultimate premiums from the underlying insurance policies provided by the ceding
companies. Initial estimates of written premium are recognized in the period in
which the underlying risks incept. Subsequent adjustments, based on reports of
actual premium by the ceding companies, are recorded in the period they are
determined.

     Premiums are earned ratably over the term of the reinsurance contract. The
portion of the premium related to the unexpired portion of the contract is
reflected in unearned premium.

     Premiums receivable are recorded at amounts due less any required provision
for doubtful accounts.

     Where contract terms require the reinstatement of coverage after a ceding
company's loss, the mandatory reinstatement premiums are recorded as written
premiums when the loss event occurs, and are earned ratably over the remaining
contract risk period.

     Acquisition costs are comprised of ceding commissions, brokerage, premium
taxes, profit commission and other expenses that relate directly to the writing
of reinsurance contracts and are deferred and amortized over the terms of the
related contracts. Deferred acquisition costs are limited to their estimated
realizable value based on the related unearned premium, anticipated claims
expenses and investment income.

  REINSURANCE

     For certain pro-rata contracts, including quota share contracts, the
subject direct insurance contracts will carry underlying reinsurance protection
from third party reinsurers. The Company records its pro-rata share of gross
premiums from the direct insurance contracts as gross written premiums and
records amounts incurred by the ceding company for the underlying third party
reinsurance coverage as reinsurance premiums ceded.

     Reinsurance recoverable includes the Company's share of balances due from
the underlying third party reinsurance contracts for paid losses, unpaid loss
and loss adjustment expenses and reserves for losses incurred but not reported.
Initial estimates of reinsurance recoverable are recognized in the period in
which the loss event occurs. Subsequent adjustments, based on reports of actual
amounts recoverable by ceding companies, are recorded in the period they are
determined. In the event that ceding companies are unable to collect amounts due
from the underlying third party reinsurers, the Company's losses will increase.
The Company records provisions for uncollectible underlying reinsurance
recoverable when collection becomes unlikely.

  FUNDS WITHHELD

     Funds held by reinsured companies represent premiums retained by ceding
companies for a period in accordance with contractual terms. The Company
generally earns investment income on these balances during the period funds are
held.

  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

     Loss and loss adjustment expense reserves include estimates of unpaid
claims and claims expenses on reported losses as well as an estimate of losses
incurred but not reported ("IBNR"). The reserve is based on loss reports on
individual claims, case reserves and other reserve estimates reported by
insureds and ceding companies, external actuarial determinations as well as
management estimates of ultimate losses.

     A significant portion of the Company's business is property catastrophe and
other classes with higher attachment points of coverage. Reserving for losses in
such programs is inherently complicated in that losses in excess of the
attachment level of the Company's policies are characterized by high severity
and low frequency and other factors which could vary significantly as claims are
settled. This limits the volume of industry
                                       F-8
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

claims experience available from which to reliably predict ultimate losses
following a loss event. In addition, the Company has limited past loss
experience due to its short operating history, which increases the inherent
uncertainty in estimating ultimate loss levels. The reserve for losses incurred
but not reported is estimated by management using industry data, and
professional judgment to estimate the ultimate loss to the Company from
reinsurance contracts exposed to a loss event. These estimates are subject to a
corroborative review by external actuaries, based on loss development patterns
determined by reference to the Company's underwriting practices, the policy
form, type of insurance program and industry data. Delays in ceding companies
reporting losses to the Company, together with the potential for unforeseen
adverse developments, may result in loss and loss adjustment expenses
significantly greater or less than the reserve provided at the time of the loss
event. Reserving can prove especially difficult should a significant loss event
take place near the end of an accounting period, particularly if the loss is a
catastrophic event. These estimates are regularly reviewed and updated, as
experience develops and new information becomes known. Any resulting adjustments
are reflected in income in the period in which they become known.

  INVESTMENTS AND CASH

     Investments in fixed maturities are classified as available for sale and
are carried at fair value, based on quoted market prices. The net unrealized
appreciation or depreciation on fixed maturities is included in accumulated
other comprehensive income.

     Investments in unquoted equity securities are carried at estimated fair
value, based on reported net asset values and other information available to
management.

     Investments are reviewed to determine if they have sustained an impairment
in value that is considered to be other than temporary. The identification of
potentially impaired investments involves significant management judgment, which
includes the determination of their fair value and the assessment of whether any
decline in value is other than temporary. Unrealized depreciation in the value
of individual investments, considered by management to be other than temporary,
is charged to income in the period it is determined.

     Investments are recorded on a trade date basis. Gains and losses on sales
of investments are determined based on the basis of first-in, first-out and are
included in investment income when realized.

     Net investment income is stated net of investment management and custody
fees. Interest income is recognized when earned and includes the amortization of
premiums and the accretion of discounts on fixed maturities purchased at amounts
different from their par value.

     Cash and cash equivalents include amounts held in banks and time deposits
with maturities of less than three months from the date of purchase.

  EARNINGS (LOSS) PER SHARE

     The calculation of basic earnings (loss) per common share is based on the
weighted average number of common shares and excludes any dilutive effects of
warrants and options. The calculation of diluted earnings (loss) per common
share assumes the exercise of all dilutive warrants and options, using the
treasury stock method. Warrants and options are considered dilutive when the
quoted market value of the Company's common stock exceeds the strike price of
the warrants or options.

  FOREIGN CURRENCY TRANSLATION

     The Company's functional currency is the United States dollar. Assets and
liabilities of foreign operations whose functional currency is not the United
States dollar are translated at exchange rates in effect at the balance sheet
date. Revenue and expenses of such foreign operations are translated at average
exchange rates

                                       F-9
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

during the year. The effect of translation adjustments for foreign subsidiaries
is included in accumulated other comprehensive income.

     Other monetary assets and liabilities denominated in foreign currencies
have been translated to United States dollars at the rates of exchange
prevailing at the balance sheet date. Income and expense transactions
originating in foreign currencies are translated at the average rate of exchange
prevailing on the date of the transaction. Gains and losses on foreign currency
translation are recognized in income.

  EMPLOYEE INCENTIVE PLANS

     Performance Unit Plan (the "PUP").  Performance units are granted to
executive officers and certain other key employees. The ultimate value of these
performance units, which vest at the end of three-year performance periods, is
dependent upon the Company's achievement of specific performance targets over
the course of the overlapping three-year periods and the market value of the
Company's shares at the date of redemption. Performance units are payable in
cash, common stock or a combination of both. The liability is expensed over the
vesting period of the performance units granted. The liability is recalculated
as the relevant financial results and share price of the Company evolve. Any
adjustments are included in income in the period in which they are determined.

     Option Plan.  The Company has adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-based Compensation." Accordingly, the
Company recognizes the compensation expense for stock option grants based on the
fair value of the award on the date of grant. The compensation expense is
recognized over the vesting period of each grant, with a corresponding
recognition of the equity expected to be issued in Additional paid-in capital.

     Deferred Compensation Plan.  The Company provides a deferred compensation
plan ("DCP") to executive officers and certain other key employees, whereby the
individual can elect to defer receipt of compensation by choosing to
theoretically transfer compensation to certain investment options, including a
phantom share investment option and investment fund options. The DCP would be an
unfunded obligation of the Company and would be included within accounts
payable, accrued expenses and other liabilities.

  RECENT ACCOUNTING PRONOUNCEMENT

     The Financial Accounting Standards Board issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46") an interpretation of
ARB No. 51 "Consolidated Financial Statements," in January 2003. FIN 46
clarifies the accounting and reporting for certain entities in which equity
investors do not have the characteristics of a controlling financial interest.
As disclosed in Notes 1 and 2, the financial statements at December 31, 2002 are
prepared on a combined basis as a result of the fact that Montpelier Re's and
the Company's bye-laws include certain restrictions relating to the election of
directors of Montpelier Re. FIN 46 becomes effective in the first quarter of
2003. The impact of adoption of FIN 46 will be that the Company's financial
statements for the quarter ending March 31, 2003 and for future periods will be
presented on a consolidated basis instead of on a combined basis. There is no
impact on the Company's net income or shareholders' equity as presented in these
combined financial statements as a result of the adoption of FIN 46.

                                       F-10
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3.  INVESTMENTS

     The amortized cost, fair value and related gross unrealized gains and
losses on investments are as follows:

<Table>
<Caption>
                                           COST OR       GROSS        GROSS
                                          AMORTIZED    UNREALIZED   UNREALIZED
AT DECEMBER 31, 2002                         COST        GAINS        LOSSES     FAIR VALUE
--------------------                      ----------   ----------   ----------   ----------
<S>                                       <C>          <C>          <C>          <C>
Fixed Maturities:
  U.S. government and agency............  $  785,312    $18,827        $ --      $  804,139
  Corporate debt securities.............     312,323     13,177          --         325,500
  Mortgage-backed and asset-backed
     securities.........................     224,621        710         125         225,206
                                          ----------    -------        ----      ----------
                                           1,322,256     32,714         125       1,354,845
                                          ----------    -------        ----      ----------
Equity Investment.......................      60,758      2,933          --          63,691
                                          ----------    -------        ----      ----------
                                          $1,383,014    $35,647        $125      $1,418,536
                                          ==========    =======        ====      ==========
</Table>

<Table>
<Caption>
                                              COST OR      GROSS        GROSS
                                             AMORTIZED   UNREALIZED   UNREALIZED
AT DECEMBER 31, 2001                           COST        GAINS        LOSSES     FAIR VALUE
--------------------                         ---------   ----------   ----------   ----------
<S>                                          <C>         <C>          <C>          <C>
Fixed Maturities:
  U.S. government and agency...............  $638,525      $1,878       $  --       $640,403
  Corporate debt securities................        --          --          --             --
  Mortgage-backed and asset-backed
     securities............................        --          --          --             --
                                             --------      ------       -----       --------
                                             $638,525      $1,878       $  --       $640,403
                                             ========      ======       =====       ========
</Table>

     The following table sets forth the composition of the cost or amortized
cost of fixed maturities by ratings assigned by rating agencies (e.g. Standard &
Poor's Corporation).

<Table>
<Caption>
                                                              AMORTIZED
AT DECEMBER 31, 2002                                             COST        %
--------------------                                          ----------   -----
<S>                                                           <C>          <C>
RATINGS
  U.S. government and agency................................  $  785,312    59.4%
  AAA.......................................................     272,552    20.6
  AA........................................................      54,092     4.1
  A.........................................................     201,965    15.3
  BBB+......................................................       8,335     0.6
                                                              ----------   -----
                                                              $1,322,256   100.0%
                                                              ==========   =====
</Table>

<Table>
<Caption>
                                                              AMORTIZED
AT DECEMBER 31, 2001                                            COST        %
--------------------                                          ---------   -----
<S>                                                           <C>         <C>
RATINGS
  U.S. government and agency................................  $638,525    100.0%
  AAA.......................................................        --       --
  AA........................................................        --       --
  A.........................................................        --       --
                                                              --------    -----
                                                              $638,525    100.0%
                                                              ========    =====
</Table>

                                       F-11
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

  LIQUIDITY AND INTEREST RATE RISK

     The amortized cost and estimated fair value amounts for fixed maturity
investments held at December 31, 2002 are shown by contractual maturity:

<Table>
<Caption>
                                                              AMORTIZED
                                                                 COST      FAIR VALUE
                                                              ----------   ----------
<S>                                                           <C>          <C>
Due within one year.........................................  $   94,894   $   96,514
Due after one year through five years.......................     886,675      915,231
Due after five years through ten years......................     116,066      117,894
Mortgage-backed and asset-backed securities.................     224,621      225,206
                                                              ----------   ----------
                                                              $1,322,256   $1,354,845
                                                              ==========   ==========
</Table>

     Actual maturity may differ from contractual maturity because certain
borrowers have the right to call or prepay certain obligations with or without
call or prepayment penalties.

     Proceeds from sales of available for sale securities for the year ended
December 31, 2002 were $1,216 million. There were no sales of fixed maturity
investments during the period ended December 31, 2001. Gross realized losses did
not include any provisions for declines considered to be other than temporary.

     The analysis of net realized gains and the change in net unrealized gains
on investments is as follows:

<Table>
<Caption>
                                                                             PERIOD FROM
                                                        YEAR ENDED       NOVEMBER 14, 2001 TO
                                                     DECEMBER 31, 2002    DECEMBER 31, 2001
                                                     -----------------   --------------------
<S>                                                  <C>                 <C>
Gross realized gains...............................       $ 8,828               $   --
Gross realized losses..............................        (1,112)                  --
                                                          -------
Net realized gains on investments..................         7,716                   --
Net unrealized gains...............................        33,642                1,878
                                                          -------               ------
Total realized and unrealized gains on
  investments......................................       $41,358               $1,878
                                                          =======               ======
</Table>

     The components of net investment income are as follows:

<Table>
<Caption>
                                                                             PERIOD FROM
                                                        YEAR ENDED       NOVEMBER 14, 2001 TO
                                                     DECEMBER 31, 2002    DECEMBER 31, 2001
                                                     -----------------   --------------------
<S>                                                  <C>                 <C>
Interest on fixed maturities.......................       $44,137               $  697
Net amortization of premium/discount on fixed
  maturities.......................................        (3,803)                  27
Interest on cash and cash equivalents..............         1,677                  491
                                                          -------               ------
                                                           42,011                1,215
Net investment expenses(1).........................        (2,263)                 (76)
                                                          -------               ------
                                                          $39,748               $1,139
                                                          =======               ======
</Table>

---------------

(1) $2.2 million relates to White Mountains Advisors LLC

     In the normal course of business, the Company provides security to
reinsureds as required under contract provisions. Such security takes the form
of a letter of credit. Letters of credit are issued by a bank at the request of
the Company. The Company has made arrangements with Fleet National Bank and
Barclay's Bank PLC for the provision of evergreen standby letters of credit in
favor of ceding companies in an amount up to $200.0 million and $100.0 million,
respectively, at December 31, 2002. Total letters of credit outstanding at

                                       F-12
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 2002 were approximately $119.8 million, and are secured by cash and
investments of approximately $127.8 million. The Company did not have any
letters of credit outstanding at December 31, 2001.

  EQUITY INVESTMENT

     Pursuant to a subscription and shareholders agreement (the "agreement"),
the Company invested a total of L40.0 million (or $60.8 million) in the common
shares of Aspen Insurance Holdings Limited ("Aspen") (formerly Exali Reinsurance
Holdings Limited), the Bermuda-based holding company of Aspen Insurance UK
Limited ("Aspen Re") (formerly Wellington Re Limited). At December 31, 2002,
Montpelier Re held approximately 7% of Aspen on an undiluted basis and
approximately 6% on a fully diluted basis.

     As part of the agreement, the Company has agreed to provide quota share
reinsurance to Aspen Re comprising annual assumed premiums to the Company of
approximately $60.0 million per year for the underwriting years 2003, 2004 and
2005. These arrangements cover mainly property and casualty risks.

     Aspen is an unquoted investment. The investment is carried at estimated
fair value based on reported net asset values and other information available to
management, with any unrealized gain or loss included in other comprehensive
income as a separate component of shareholders' equity.

4.  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

     Loss and loss adjustment expense reserves are estimates subject to
variability, and the variability could be material in the near term. The
variability arises because all events affecting the ultimate settlement of
claims have not taken place and may not take place for some time. Variability
can be caused by receipt of additional claim information, changes in judicial
interpretation of contracts or significant changes in the severity or frequency
of claims from historical trends.

     Loss and loss adjustment expense reserve estimates are based on all
relevant information available to the Company. Methods of estimation are used
which the Company believes produce reasonable results given current information.
Management believes that the reserves for loss and loss adjustment expenses are
sufficient to cover losses that fall within coverages assumed by the Company;
however, there can be no assurance that losses will not exceed the Company's
total reserves.

     The Company was incorporated on November 14, 2001 and wrote only one
contract during the period ended December 31, 2001. Given the absence of
reported loss events during the period, the Company did not establish a loss and
loss adjustment expense reserve at December 31, 2001. In the period to December
31, 2001, the Company did not purchase reinsurance.

                                       F-13
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     Activity in the reserve for loss and loss adjustment expenses is summarized
as follows:

<Table>
<Caption>
                                                                                     PERIOD FROM
                                                                YEAR ENDED       NOVEMBER 14, 2001 TO
                                                             DECEMBER 31, 2002    DECEMBER 31, 2001
                                                             -----------------   --------------------
<S>                                                          <C>                 <C>
Net reserves at January 1..................................      $     --               $  --
Net losses incurred related to:
  Current year.............................................       133,310                  --
  Prior period.............................................            --                  --
                                                                 --------               -----
Total net incurred losses..................................       133,310                  --
Net paid losses related to:
  Current year.............................................         4,193                  --
  Prior period.............................................            --                  --
                                                                 --------               -----
Total net paid losses......................................         4,193                  --
Effect of foreign exchange movements.......................           342                  --
                                                                 --------               -----
Total net reserves as of December 31.......................       129,459                  --
Losses recoverable as of December 31.......................        16,656                  --
                                                                 --------               -----
Total gross reserves as of December 31.....................      $146,115               $  --
                                                                 ========               =====
</Table>

     The December 31, 2002 balance comprises reserves for reported claims of
$37,979 and reserves for claims incurred but not reported of $108,136.

5.  LONG-TERM DEBT

     On incorporation, the Company entered into a three-year term loan agreement
with Bank of America, N.A. and a syndicate of commercial banks, with an
aggregate borrowing limit of $150 million. As of December 31, 2002 and 2001, the
Company had borrowed all $150 million under this facility. The term loan
agreement requires that the Company and/or certain of its subsidiaries maintain
specific covenants, including maintaining: (i) a ratio of debt to total capital
of no greater than 30%; (ii) a tangible net worth equal to at least the sum of:
(x) $525 million; (y) 50% of positive net income (with no reduction for net
losses); and (z) 50% of any net proceeds, minus certain dividends; and (iii) the
ratio of aggregate statutory net premiums to the net worth of all of the
Company's insurance subsidiaries at a level of no greater than 1:5 to 1 at the
end of any fiscal quarter.

     These covenants also restrict the Company's other borrowings, the ability
to merge, consolidate, make acquisitions, sell any assets or assign any
receivables, create liens on any assets, make certain capital expenditures and
to hold margin stock. In addition, a change of control of the Company or final
judgments against the Company which exceeds $5 million (excluding any portion
thereof which will likely be recovered through insurance) each constitute an
event of default. The Company has been in compliance with all covenants
throughout the year and is in compliance at December 31, 2002.

     Under this facility, the Company may not pay dividends to shareholders
until April 1, 2003. After this date, the Company may only pay dividends up to
an amount equal to 50% of net income in any quarter, excluding all extraordinary
gains and losses. If dividends in excess of this amount are paid, the Company is
required to reduce the term loan facility by an amount equal to at least 43% of
the excess payment.

     No principal payments are required on the loan prior to its final maturity
date of December 12, 2004. The loan bears interest on the outstanding principal
at a rate equal to various base rates plus a margin of between 50 and 125 basis
points, depending on certain conditions. The interest rate was variable from
inception of the

                                       F-14
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

loan until April 20, 2002. Thereafter, the interest rate was fixed at 2.96% from
April 21, 2002 until October 21, 2002 and has been fixed at 2.59% for the period
from October 21, 2002 until April 21, 2003. After April 21, 2003, the rate
reverts back to a floating rate, unless another fixed rate is agreed upon. At
December 31, 2002 and 2001, the Company accrued interest expense of $800 and
$236 respectively, at an average interest rate of 2.80% and 2.99%, respectively.
The Company paid interest of $3,457 for the year ended December 31, 2002 and did
not pay any interest during the period ended December 31, 2001.

6.  RELATED PARTY TRANSACTIONS

     White Mountains Insurance Group and Benfield Holdings Limited sponsored the
formation of the Company in 2001, and invested $180.0 million and $25.0 million,
respectively, in the initial private placement. Certain officers and directors
of White Mountains also invested in the Company and some of these individuals
also serve as officers and directors of the Company. In addition, White
Mountains and Benfield Holdings Limited were granted warrants entitling them to
purchase 4,781,571.7 common shares and 2,390,785.8 common shares, respectively.
In connection with the Company's formation in 2001, White Mountains and Benfield
established a trust in Bermuda to fund start-up expenses. After the Company's
formation and funding, White Mountains and Benfield were reimbursed $400 each
for the amounts they had contributed to the trust. Included in Amount due to
affiliates at December 31, 2001 is $324 due to White Mountains and Benfield for
reimbursement of these funds. In addition, the Company paid Benfield Advisory
Services, an affiliate of Benfield, advisory fees of $3,300 during the period
ended December 31, 2001 in connection with the formation of the Company. These
expenses are included as Direct equity offering expenses within Additional
paid-in-capital at December 31, 2001. Described below are some of the
transactions the Company has entered into with related parties. The Company
believes that each of the transactions described below was on terms no less
favorable than could have been obtained from unrelated parties.

     The Company's Chairman is also the Chairman of the Board of Directors of
White Mountains Insurance Group, who beneficially owns 22.9% and 29.7% of the
Company at December 31, 2002 and 2001, respectively. The Chief Financial Officer
is also a Director of White Mountains Insurance Group and a director of Amlin,
one of the Company's qualifying quota share cedents.

     Four directors, including the Company's Chairman, are employed by White
Mountains Insurance Group.

     The Company has engaged White Mountains Advisors LLC, a wholly owned
indirect subsidiary of White Mountains Insurance Group, to provide investment
advisory and management services. This agreement may be terminated by either
party upon 30 days written notice. The Company's Chairman of the Finance
Committee of the Board is also a Managing Director of OneBeacon Insurance Group
LLC, Deputy Chairman of the Board of White Mountains Insurance Group, the
Principal Executive Officer of White Mountains Advisors LLC and is either
general manager or investment manager of various funds which own less than 5% of
the Company. The Company pays investment fees based on the month-end market
values held under custody. The fees, which vary depending on the amount of
assets under management, are between 0.15% and 0.30% and are included in net
investment income. The Company incurred an average fee of 0.19% and 0.20% for
the periods ended December 31, 2002 and 2001, respectively. For the periods
ended December 31, 2002 and 2001, the Company expensed investment management
fees of approximately $2.1 million and $76, respectively, and has recorded an
amount payable for these services of $630 and $74, respectively.

     For the periods ended December 31, 2002 and 2001, consulting fees of $95
and $75, respectively, were paid to two officers of the Company for services
related to the incorporation of the Company.

     In January 2002, the Company entered into an agreement with Remetrics, a
subsidiary of Benfield, for the provision of certain risk management services.
As a result of this agreement, the Company paid

                                       F-15
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

approximately L589 (or $879) for risk management services during the year ended
December 31, 2002. This agreement is no longer in place at December 31, 2002.

     In addition, in the ordinary course of business, the Company has entered
into four reinsurance agreements with OneBeacon Insurance Group during the year
ended December 31, 2002. The Company will receive $728 in aggregate annual
premiums from these contracts.

     In addition, the Company pays brokerage commissions to Benfield Greig
Limited, a subsidiary of Benfield Holdings Limited, on business brought in by
Benfield Greig Limited. These commissions are consistent with commissions paid
to other brokers in the ordinary course of business and totaled $6.8 million for
the year ended December 31, 2002.

     Included in Amount due to affiliates at December 31, 2001 is $250 due to a
shareholder for an overpaid subscription payment.

7.  COMMON VOTING SHARES SUBSCRIPTIONS RECEIVABLE

     At December 31, 2001, $26,000 of subscriptions for common shares was due
from shareholders. On January 3, 2002, payment of the outstanding amount was
received in full.

8.  SHAREHOLDERS' EQUITY

  AUTHORIZED AND ISSUED

     At December 31, 2002 and 2001, the total authorized common voting shares of
the Company were 1,200,000,000, with a par value of 1/6 cent each.

     At December 31, 2002 and 2001, the total issued and outstanding shares of
the Company were 63,392,600 and 52,440,000, respectively, with a par value of
1/6 cent each. The holders of common voting shares are entitled to receive
dividends and are allocated one vote per share, provided that, if the controlled
shares of any shareholder or group of related shareholders constitute more than
9.5 percent of the outstanding common shares of the Company, their voting power
will be reduced to 9.5 percent. There are various restrictions on the ability of
certain shareholders to dispose of their shares.

     In the period to December 31, 2001, the Company received cash of $848,000
in respect of subscriptions of common shares. On January 3, 2002, payment of the
remaining outstanding subscriptions totaling $26,000 was received from
shareholders. All issued and outstanding common voting shares were fully paid at
December 31, 2002.

     On September 20, 2002, the Board of Directors of the Company authorized a
six-for-one share split of the Company's common shares. The share split has been
reflected in the December 31, 2001 comparative financial information, and all
applicable references as to the number of common shares, common share
equivalents, including exercise prices where applicable, and per share
information have been represented.

     On October 15, 2002, the Company completed an initial public offering
("IPO") and issued 10,952,600 common shares for proceeds, net of fees, discounts
and commissions of approximately $201.2 million. The Company's common shares
began trading on the New York Stock Exchange on October 10, 2002. Costs
associated with the sale of the shares, totaling approximately $18.3 million,
were deducted from the related proceeds. The net amount received in excess of
common share par value was recorded in Additional paid-in capital.

  WARRANTS

     The Company's founders provided their insurance industry expertise,
resources and relationships during the fourth quarter of 2001 to ensure that the
Company would be fully operational with key management in
                                       F-16
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

place in time for the January 2002 renewal season. In consideration for the
founders' position and commitment, the Company issued warrants to the founding
shareholders to purchase, in the aggregate, up to 7,319,160.1 common shares.
Warrants will expire either five or ten years from the date of issue depending
on the grant terms, and will be exercisable at a price per share of $16.67,
equal to the price per share paid by investors in the initial private offering.

     The warrant contracts may be settled using either the physical settlement
or net-share settlement methods. The warrants have been classified as equity
instruments, in accordance with EITF 00-19: "Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company's Own Stock." The
warrants were initially measured at an aggregate fair value of $61,321 and
reported as an expense and an addition to Additional paid-in-capital for the
period ended December 31, 2001.

     The fair value of each warrant grant was estimated on the date of grant
using the Black-Scholes option-pricing model. The volatility assumption used, of
approximately 30.0%, was derived from the historical volatility of the share
price of a range of publicly-traded Bermuda reinsurance companies of a similar
business nature to the Company. No allowance was made for any potential
liquidity associated with the private trading of the Company's shares. The other
assumptions used for grants in 2001 were as follows: risk free interest rate of
4.5%, expected life of five or ten years as appropriate, and a dividend yield of
nil%.

  DIVIDENDS

     The Company did not declare any dividends for the periods ended December
31, 2002 and 2001.

9.  SEGMENT REPORTING

     Management has determined that the Company operates in one segment only.
The Company focuses on writing global specialty property and other classes of
insurance and reinsurance business. During the period ended December 31, 2001,
the Company wrote one specialty reinsurance policy with a premium of $150. This
policy was for worldwide risks.

     The following table sets forth a breakdown of the Company's gross premiums
written by line of business and by geographic area of risks insured for the year
ended December 31, 2002:

                         GROSS PREMIUMS WRITTEN BY LINE

<Table>
<Caption>
                                                                 YEAR ENDED
                                                              DECEMBER 31, 2002
                                                              -----------------
                                                               ($ IN MILLIONS)
<S>                                                           <C>        <C>
Property Specialty..........................................  $230.3      37.9%
Property Catastrophe........................................   141.4      23.3
Qualifying Quota Share......................................   171.7      28.2
Other Specialty.............................................    64.3      10.6
                                                              ------     -----
Total.......................................................  $607.7     100.0%
                                                              ======     =====
</Table>

                                       F-17
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

           GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA OF RISK INSURED

<Table>
<Caption>
                                                                 YEAR ENDED
                                                              DECEMBER 31, 2002
                                                              -----------------
                                                               ($ IN MILLIONS)
<S>                                                           <C>        <C>
Worldwide(1)................................................  $306.4      50.4%
USA and Canada..............................................   207.4      34.1
Japan.......................................................    23.3       3.8
Western Europe, excluding the United Kingdom and Ireland....    17.8       2.9
United Kingdom and Ireland..................................    11.8       1.9
Worldwide, excluding USA and Canada(2)......................    11.4       1.9
Other (1.5% or less)........................................    29.6       5.0
                                                              ------     -----
Total.......................................................  $607.7     100.0%
                                                              ======     =====
</Table>

---------------

(1) "Worldwide" comprises insurance and reinsurance contracts that insure or
    reinsure risks on a worldwide basis.

(2) "Worldwide, excluding USA and Canada" comprises insurance and reinsurance
    contracts that insure or reinsure risks on a worldwide basis but
    specifically exclude the USA and Canada.

     The Qualifying Quota Share contracts and substantial amounts of other lines
of business are world-wide in nature, with the majority of business related to
North America and Europe.

     In the year ended December 31, 2002, 85% of gross written premium was
produced by four brokers as follows: Benfield Greig Limited $180.5 million;
Willis Group $140.2 million; Guy Carpenter $107.3 million; and Aon Re $90.4
million.

10.  EARNINGS (LOSS) PER SHARE

     The reconciliation of basic and diluted earnings (loss) per share is as
follows:

<Table>
<Caption>
                                                                                     PERIOD FROM
                                                                YEAR ENDED       NOVEMBER 14, 2001 TO
                                                             DECEMBER 31, 2002    DECEMBER 31, 2001
                                                             -----------------   --------------------
<S>                                                          <C>                 <C>
BASIC EARNINGS PER COMMON SHARE:
Net income (loss) available to common shareholders.........     $   152,045          $   (61,618)
Weighted average common shares outstanding -- Basic........      55,178,150           52,440,000
                                                                -----------          -----------
BASIC EARNINGS (LOSS) PER COMMON SHARE.....................     $      2.76          $     (1.18)
                                                                -----------          -----------
DILUTED EARNINGS PER COMMON SHARE:
Net income (loss) available to common shareholders.........     $   152,045          $   (61,618)
Weighted average common shares outstanding -- Basic........      55,178,150           52,440,000
Dilutive effect of Warrants................................         263,070                   --
Dilutive effect of Share Options...........................          15,921                   --
                                                                -----------          -----------
Weighted average common and common equivalent shares
  outstanding -- Diluted...................................      55,457,141           52,440,000
                                                                -----------          -----------
DILUTED EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT
  SHARE....................................................     $      2.74          $     (1.18)
                                                                -----------          -----------
</Table>

     There were no dilutive securities at December 31, 2001.

                                       F-18
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

11.  COMMITMENTS AND CONTINGENCIES

  LETTERS OF CREDIT

     In order for the Company to write Lloyd's Qualifying Quota Share business,
it must provide an evergreen letter of credit in favor of The Society and
Council of Lloyd's ("Lloyd's") in accordance with Lloyd's rules. The Company has
made arrangements with Fleet National Bank for the provision of a standby letter
of credit in a form acceptable to Lloyd's in an amount of up to $200.0 million.
Letters of credit outstanding under this facility at December 31, 2002 were
approximately $99.9 million (L62.1 million) and have been secured by investments
of approximately $107.5 million.

     In addition, as of December 31, 2002, the Company made arrangements with
Barclay's Bank PLC for the provision of an additional evergreen letter of credit
facility in favor of certain U.S. ceding companies in an amount of up to $100
million. Letters of credit outstanding under this facility at December 31, 2002
were approximately $19.9 million and are secured by cash of approximately $20.3
million.

     There were no letters of credit outstanding at December 31, 2001.

  LEASE COMMITMENTS

     The Company and its subsidiaries lease office space in the countries in
which they operate under operating leases, which expire at various dates. The
Company has also entered into operating leases for office equipment and
furniture. Future minimum annual commitments under existing leases are expected
to be as follows: 2003 -- $427; 2004 -- $412; 2005 -- $396; 2006 -- $107; and
2007 -- $107.

  CONCENTRATION OF CREDIT RISK

     The investment portfolio is managed following prudent standards of
diversification. Specific provisions limit the allowable holdings of a single
issue or issuer. The Company believes that there are no significant
concentrations of credit risk associated with its investments. Concentrations of
credit risk with respect to reinsurance balances are limited due to their
dispersion across various companies and geographies.

  CREDIT FACILITIES

     On December 12, 2001, the Company obtained a $50,000 revolving loan
facility from a syndicate of lenders, with the Company and its subsidiaries as
borrowers and guarantors. The facility is for general corporate purposes, and
requires that the Company and/or certain of its subsidiaries maintain specific
covenants, including a tangible net worth covenant and a maximum leverage
covenant. At December 31, 2002 and 2001, no amounts had been drawn down under
this facility.

12.  EMPLOYEE INCENTIVE PLANS

  LONG-TERM INCENTIVE PLAN ("LTIP")

     On January 8, 2002, the Company adopted a Long-Term Incentive Plan (the
"LTIP"). Pursuant to the terms of the LTIP, at the discretion of the
Compensation Committee of the Board of Directors (the "Committee"), various
types of share-based incentive awards, including phantom performance shares,
performance units and options to acquire common shares, may be granted to
executive officers, and certain other principal employees.

  PERFORMANCE UNIT PLAN (THE "PUP")

     The PUP is the Company's primary executive long-term incentive scheme.
Pursuant to the terms of the PUP, at the discretion of the Compensation
Committee of the Board of the Directors (the "Committee"),

                                       F-19
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

performance units may be granted to executive officers and certain other key
employees. Performance units entitle the recipient to receive, without payment
to the Company, all, double, or a part of the value of the units granted,
depending on the achievement of specific financial or operating goals.
Performance units vest at the end of a three-year performance cycle, and can be
denominated in common shares at market value and are payable in cash, common
shares or a combination thereof at the discretion of the Committee.

     For the 2002-2004 cycle, the current performance target for a 100% harvest
of value of the units granted is an average combined ratio of 70% for the
financial years 2002, 2003, and 2004. The target for a maximum harvest of 200%
of the value of the units granted is a combined ratio of 50% or less. A combined
ratio of 95% or more will result in a harvest of nil. Straight line
interpolation is used between these points. Determination of actual performance
and amount of payment is at the sole discretion of the Committee.

     A total of 936,000 performance units are authorized under the PUP at
December 31, 2002 (or up to 1,872,000 common shares should the maximum harvest
of 200% of units apply). On January 8, 2002, the Committee approved the grant of
up to 312,000 performance units for the three year performance period covering
financial years 2002, 2003 and 2004. The Company granted 264,390 and nil
performance units for the periods ended December 31, 2002 and 2001,
respectively. The Company accrues the projected value of these units and
expenses the value in the income statement over the course of each three-year
performance period. The accrual is based on the number of units granted, the
share price at December 31, 2002, and an assumption of a 100% harvest ratio. The
Company recalculates their liability under the PUP as the Company's financial
results evolve, and the share price changes, and reflects such adjustments in
the income statement in the period in which they are determined. The associated
accrual for the performance unit expense was $2,538 and $nil for the periods
ended December 31, 2002 and 2001, respectively. 47,610 performance units in the
2002-2004 performance cycles have not been granted, and may be granted in future
periods.

  OPTION PLAN

     Under the option plan, options expire ten years after the award date, and
are subject to various vesting periods. Options granted under the option plan
may be exercised for common shares upon vesting. A total of 2,550,000 were
issued under the plan for the year ended December 31, 2002, which represents the
maximum number of common shares that may be issued under the option plan under
current Committee approvals. There were no options issued or outstanding for the
period ended December 31, 2001.

     A summary of options issued and outstanding for the year ended December 31,
2002 is as follows:

<Table>
<Caption>
                                                              OPTIONS FOR   AVERAGE
                                                                COMMON      EXERCISE
                                                                SHARES       PRICE
                                                              -----------   --------
<S>                                                           <C>           <C>
Balance at January 1, 2002..................................          --         --
Options granted.............................................   2,550,000     $18.08
Options exercised...........................................          --         --
Options forfeited...........................................          --         --
Options expired.............................................          --         --
Balance at December 31, 2002................................   2,550,000     $18.08
</Table>

                                       F-20
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table summarizes the range of exercise prices for outstanding
options at December 31, 2002:

<Table>
<Caption>
                                                         WEIGHTED
                                                          AVERAGE     WEIGHTED                 WEIGHTED
                                                         REMAINING    AVERAGE                  AVERAGE
                                            OPTIONS     CONTRACTUAL   EXERCISE     OPTIONS     EXERCISE
            EXERCISE PRICES               OUTSTANDING      LIFE        PRICE     EXERCISABLE    PRICE
            ---------------               -----------   -----------   --------   -----------   --------
<S>                                       <C>           <C>           <C>        <C>           <C>
$16.67..................................     510,000    9.00 years     $16.67      510,000      $16.67
$17.50..................................     637,500    9.15 years     $17.50           --          --
$18.33..................................     637,500    9.15 years     $18.33           --          --
$19.17..................................     637,500    9.15 years     $19.17           --          --
$20.00..................................     127,500    9.75 years     $20.00
                                           ---------                               -------      ------
                                           2,550,000                               510,000      $16.67
                                           =========                               =======      ======
</Table>

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 2002: risk free interest rate of 3.8% to 4.8%
based on the applicable zero-coupon bond interest rates, expected life of two
years after vesting date as detailed below, expected volatility of 30.0% to
31.2% and a dividend yield of 0.0%.

     The weighted average fair value of options granted during 2002 is detailed
below:

<Table>
<Caption>
                                                                ASSUMPTION OF
                              OPTIONS                          EXPECTED LIFE AT   FAIR VALUE ON
     EXERCISE PRICES        OUTSTANDING      VESTING DATE       DATE OF GRANT     DATE OF GRANT
     ---------------        -----------   ------------------   ----------------   -------------
<S>                         <C>           <C>                  <C>                <C>
$16.67....................     510,000    December 31, 2002        3 years           $ 2,116
$17.50....................     510,000    December 31, 2003        4 years             2,384
$17.50....................     127,500    September 30, 2003       3 years               636
$18.33....................     510,000    December 31, 2004        5 years             2,639
$18.33....................     127,500    September 30, 2004       4 years               707
$19.17....................     510,000    December 31, 2005        6 years             2,885
$19.17....................     127,500    September 30, 2005       5 years               776
$20.00....................     127,500    September 30, 2006       6 years               842
                             ---------                                               -------
                             2,550,000                                               $12,985
                             =========                                               =======
</Table>

     A compensation expense of $5,395 was recorded in general and administrative
expenses for the year ended December 31, 2002, with a corresponding increase to
Additional paid-in capital. The expense represents the proportionate accrual of
the fair value of each grant based on the remaining vesting period.

  DEFERRED COMPENSATION PLAN ("DCP")

     The DCP gives executive officers the ability to defer receipt of executive
compensation, including performance unit payouts, at no cost to the Company.
Under the DCP, various investment options are available including a phantom
Company share tracking option, a fixed income investment option and an equity
fund investment option. The DCP would be a non-funded general obligation of the
Company.

13.  TAXATION

  BERMUDA

     The Company has received an undertaking from the Bermuda government
exempting it from all local income, withholding and capital gains taxes until
March 28, 2016. At the present time, no such taxes are levied in Bermuda.

                                       F-21
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

  UNITED STATES

     The Company does not consider itself to be engaged in trade or business in
the United States and, accordingly, does not expect to be subject to United
States taxation.

  OTHER

     MMSL is subject to the taxation laws of the United Kingdom and has accrued
the estimated tax expense for the year ended December 31, 2002.

14.  STATUTORY REQUIREMENTS

     Montpelier Re is registered under The Act. Under the Act, Montpelier Re is
required to prepare Statutory Financial Statements and to file a Statutory
Financial Return annually. The Act also requires Montpelier Re to maintain a
minimum share capital of $1.0 million and to meet a minimum solvency margin
equal to the greater of $100.0 million, 50% of net premiums written or 15% of
the loss and loss adjustment expense reserves. To satisfy these requirements,
Montpelier Re was required to maintain a minimum level of statutory capital and
surplus of $282.9 million and $100.0 million at December 31, 2002 and 2001,
respectively. Montpelier Re's statutory capital and surplus was $1.3 billion and
$980.1 million at December 31, 2002 and 2001, respectively, of which $1.2
billion and $980.7 million respectively, is fully paid up share capital.

     The Act limits the maximum amount of annual dividends or distributions paid
by Montpelier Re to the Company without the prior notification to, and in
certain cases the approval of, the Bermuda Monetary Authority of such payment.
The maximum amount of dividends that could be paid by Montpelier Re to the
Company, without such notification, was $151.4 million and $39 at December 31,
2002 and 2001, respectively.

     Montpelier Re is also required to maintain a minimum liquidity ratio, which
was met for both periods ended December 31, 2002 and 2001.

15.  SUBSEQUENT EVENT

     In May 2003, the Board of Directors of the Company authorized a public
issue of unsecured debt securities of up to $300 million.

     The terms of the transaction will be finalized prior to the closing of the
offering. Net proceeds of the offering will be used to repay amounts outstanding
under our existing term loan facility and for other general corporate purposes.

                                       F-22
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

15.  UNAUDITED QUARTERLY FINANCIAL DATA(1)

<Table>
<Caption>
                                 QUARTER ENDED   QUARTER ENDED   QUARTER ENDED   QUARTER ENDED   PERIOD ENDED
                                   MARCH 31,       JUNE 30,      SEPTEMBER 30,   DECEMBER 31,    DECEMBER 31,
                                     2002            2002            2002           2002(3)        2001(2)
                                 -------------   -------------   -------------   -------------   ------------
<S>                              <C>             <C>             <C>             <C>             <C>
Gross premiums written.........   $   203,679     $   136,339     $   193,736     $    73,934    $       150
Net premiums written...........   $   189,359     $   131,811     $   172,875     $    71,864    $       150
Net premiums earned............   $    36,611     $    81,434     $   106,496     $   105,385    $         8
Net investment income..........         7,633          11,322          10,040          10,753          1,139
Net realized gains on
  investments..................           484           1,013           4,005           2,214             --
Net foreign exchange gains
  (losses).....................            --              --           2,505            (824)            --
Total revenues.................        44,728          93,769         123,046         117,528          1,147
Loss and loss adjustment
  expenses.....................        14,367          38,975          69,031          10,937             --
Acquisition costs..............         6,467          14,707          20,404          21,348              1
General & administrative
  expenses.....................         4,240           5,873           5,843          10,322          1,207
Interest on long-term debt.....           995           1,118           1,155           1,192            236
Fair value of warrants
  issued.......................            --              --              --              --         61,321
Total expenses.................        26,069          60,673          96,433          43,799         62,765
Income (loss) before taxes.....        18,659          33,096          26,613          73,729        (61,618)
Income tax expense.............            --              --              50               2             --
Net income (loss)..............   $    18,659     $    33,096     $    26,563     $    73,727        (61,618)
Basic earnings (loss) per
  common share.................   $      0.36     $      0.63     $      0.51     $      1.16    $     (1.18)
Diluted earnings (loss) per
  common share.................   $      0.36     $      0.63     $      0.50     $      1.11    $     (1.18)
Weighted average
  shares -- basic..............    52,440,000      52,440,000      52,440,000      63,392,600     52,440,000
Weighted average
  shares -- diluted............    52,440,000      52,603,995      53,129,393      66,629,482     52,440,000
Loss ratio.....................          39.2%           47.9%           64.8%           10.4%           n/a
Expense ratio..................          29.3%           25.3%           24.7%           30.0%           n/a
Combined ratio.................          68.5%           73.2%           89.5%           40.4%           n/a
</Table>

---------------

(1) As the Company was incorporated November 14, 2001, only one period of
    information is available for the period ended December 31, 2001.

(2) The financial information for this period reflects the Company's results
    from November 14, 2001, the date of incorporation, to December 31, 2001.

(3) The Company completed their IPO during the fourth quarter of 2002.

                                       F-23
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                          CONSOLIDATED BALANCE SHEETS
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)

<Table>
<Caption>
                                                                  AS AT              AS AT
                                                              MARCH 31, 2003   DECEMBER 31, 2002
                                                              --------------   -----------------
                                                               (UNAUDITED)         (AUDITED)
<S>                                                           <C>              <C>
ASSETS
Fixed maturities, at fair value (amortized cost:
  2003 -- $1,535,755; 2002 -- $1,322,256)...................    $1,567,483        $1,354,845
Equity investment, unquoted, at estimated fair value (cost:
  $60,758)..................................................        63,691            63,691
                                                                ----------        ----------
TOTAL INVESTMENTS...........................................     1,631,174         1,418,536
Cash and cash equivalents, at fair value....................       106,982           162,925
Unearned premium ceded......................................        31,123             3,752
Reinsurance premiums receivable.............................       277,407           147,208
Funds withheld..............................................         1,555            20,507
Deferred acquisition costs..................................        69,931            44,881
Reinsurance recoverable.....................................        16,316            16,656
Accrued investment income...................................        14,298            13,057
Deferred financing costs....................................         1,155             1,325
Other assets................................................         4,547             5,071
                                                                ----------        ----------
     Total Assets...........................................    $2,154,488        $1,833,918
                                                                ==========        ==========
LIABILITIES
Loss and loss adjustment expense reserves...................       183,621           146,115
Unearned premium............................................       415,730           241,000
Reinsurance balances payable................................        11,419             2,448
Investment trades pending...................................        30,000            34,280
Long-term debt..............................................       150,000           150,000
Accounts payable, accrued expenses and other liabilities....         7,145             7,540
                                                                ----------        ----------
     Total Liabilities......................................    $  797,915        $  581,383
                                                                ==========        ==========
SHAREHOLDERS' EQUITY
Common voting shares: 1/6 cent par value; authorized
  1,200,000,000 shares; issued and outstanding 63,392,600
  shares....................................................           106               106
Additional paid-in capital..................................     1,127,498         1,126,435
Accumulated other comprehensive income......................        34,701            35,567
Retained earnings...........................................       194,268            90,427
                                                                ----------        ----------
     Total Shareholders' Equity.............................     1,356,573         1,252,535
                                                                ----------        ----------
     Total Liabilities and Shareholders' Equity.............    $2,154,488        $1,833,918
                                                                ==========        ==========
</Table>

     The accompanying Notes to the Consolidated Financial Statements are an
            integral part of the Consolidated Financial Statements.
                                       F-24
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)

<Table>
<Caption>
                                                                 2003          2002
                                                              -----------   -----------
                                                                     (UNAUDITED)
<S>                                                           <C>           <C>
REVENUES
  Gross premiums written....................................  $   366,563   $   203,679
  Reinsurance premiums ceded................................      (34,267)      (14,320)
                                                              -----------   -----------
  Net premiums written......................................      332,296       189,359
  Change in net unearned premiums...........................     (147,641)     (152,748)
                                                              -----------   -----------
  Net premiums earned.......................................      184,655        36,611
  Net investment income.....................................       11,684         7,633
  Net realized gains on investments.........................        4,681           484
  Net foreign exchange gains................................        1,359            --
                                                              -----------   -----------
  Total Revenues............................................      202,379        44,728
EXPENSES
  Loss and loss adjustment expenses.........................       47,690        14,367
  Acquisition costs.........................................       40,998         6,467
  General and administrative expenses.......................        8,884         4,240
  Interest on long-term debt................................          965           995
                                                              -----------   -----------
  Total Expenses............................................       98,537        26,069
                                                              -----------   -----------
INCOME BEFORE TAXES.........................................      103,842        18,659
Income tax expense..........................................            1            --
                                                              -----------   -----------
NET INCOME..................................................  $   103,841   $    18,659
                                                              ===========   ===========
COMPREHENSIVE INCOME
  Net income................................................  $   103,841   $    18,659
  Other comprehensive loss..................................         (866)      (13,592)
                                                              -----------   -----------
  Comprehensive income......................................  $   102,975   $     5,067
                                                              ===========   ===========
PER SHARE DATA
  Weighted average number of common and common equivalent
     shares outstanding:
     Basic..................................................   63,392,600    52,440,000
     Diluted................................................   66,479,220    52,440,000
  Basic earnings per common share...........................  $      1.64   $      0.36
                                                              ===========   ===========
  Diluted earnings per common share.........................  $      1.56   $      0.36
                                                              ===========   ===========
</Table>

     The accompanying Notes to the Consolidated Financial Statements are an
            integral part of the Consolidated Financial Statements.
                                       F-25
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                                 2003        2002
                                                              ----------   --------
                                                                   (UNAUDITED)
<S>                                                           <C>          <C>
COMMON VOTING SHARES
     Balance -- beginning and end of period.................  $      106   $     87
                                                              ----------   --------
ADDITIONAL PAID-IN-CAPITAL
  Balance -- beginning of period............................   1,126,435    920,306
  Direct equity offering expenses...........................          --        (61)
  Compensation recognized under stock option plan...........       1,063      1,227
                                                              ----------   --------
     Balance -- end of period...............................   1,127,498    921,472
                                                              ----------   --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
  Balance -- beginning of period............................      35,567      1,878
  Net change in currency translation adjustments............          (6)        --
  Net change in unrealized losses on investments............        (860)   (13,592)
                                                              ----------   --------
     Balance -- end of period...............................      34,701    (11,714)
                                                              ----------   --------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
  Balance -- beginning of period............................      90,427    (61,618)
  Net income................................................     103,841     18,659
                                                              ----------   --------
     Balance -- end of period...............................     194,268    (42,959)
                                                              ----------   --------
TOTAL SHAREHOLDERS' EQUITY..................................  $1,356,573   $866,886
                                                              ==========   ========
</Table>

     The accompanying Notes to the Consolidated Financial Statements are an
            integral part of the Consolidated Financial Statements.
                                       F-26
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                                2003        2002
                                                              ---------   ---------
                                                                   (UNAUDITED)
<S>                                                           <C>         <C>
Cash flows provided by operating activities:
  Net income................................................  $ 103,841   $  18,659
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Accretion (amortization) of premium/(discount) on fixed
      maturities............................................      2,678         874
     Depreciation...........................................        206          30
     Compensation recognized under stock option plan........      1,063       1,227
     Net realized gains on fixed maturities.................     (4,681)       (484)
     Amortization of deferred financing costs...............        170         171
     Net change in currency translation adjustments.........         (6)         --
  Change in:
     Unearned premium ceded.................................    (27,371)    (13,002)
     Reinsurance premiums receivable........................   (130,199)   (119,656)
     Funds withheld.........................................     18,952          --
     Deferred acquisition costs.............................    (25,050)    (26,074)
     Reinsurance recoverable................................        340        (644)
     Accrued investment income..............................     (1,241)     (7,068)
     Other assets...........................................        445         (40)
     Loss and loss adjustment expense reserves..............     37,506      15,011
     Unearned premium.......................................    174,730     165,750
     Reinsurance balances payable...........................      8,971          --
     Accounts payable, accrued expenses and other
      liabilities...........................................       (340)      1,317
     Amount due to affiliates...............................         --        (324)
     Interest accrued on long-term debt.....................        (55)        (93)
                                                              ---------   ---------
  Net cash provided by operating activities.................    159,959      35,654
                                                              ---------   ---------
Cash flows from investing activities:
  Purchases of investments..................................   (603,651)   (282,842)
  Proceeds from sale and maturity of investments............    387,875          --
  Purchases of equipment....................................       (126)         --
                                                              ---------   ---------
  Net cash used in investing activities.....................   (215,902)   (282,842)
                                                              ---------   ---------
Cash flows provided by financing activities:
  Issue of common shares....................................         --      26,000
  Amount paid to affiliate for overpayment of
     subscription...........................................         --        (250)
  Direct equity offering expenses...........................         --      (9,660)
                                                              ---------   ---------
  Net cash provided by financing activities.................         --      16,090
                                                              ---------   ---------
  Decrease in cash and cash equivalents.....................    (55,943)   (231,098)
  Cash and cash equivalents -- Beginning of period..........    162,925     350,606
                                                              ---------   ---------
  Cash and cash equivalents -- End of period................  $ 106,982   $ 119,508
                                                              =========   =========
</Table>

     The accompanying Notes to the Consolidated Financial Statements are an
            integral part of the Consolidated Financial Statements.
                                       F-27
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS,
             EXCEPT SHARE AMOUNTS OR AS WHERE OTHERWISE DESCRIBED)
                                  (UNAUDITED)

1.  BASIS OF PRESENTATION AND CONSOLIDATION

     These interim unaudited consolidated financial statements include the
accounts of Montpelier Re Holdings Ltd. (the "Company") and its wholly owned
operating subsidiary Montpelier Reinsurance Ltd. ("Montpelier Re"). Montpelier
Re has two subsidiaries: Montpelier Marketing Services (UK) Limited ("MMSL") and
Montpelier Holdings (Barbados) SRL ("MHB"). MMSL provides business introduction
and other support services to Montpelier Re. MHB, a Barbados registered Society
with Restricted Liability, has not yet commenced operations. MHB will be the
registered holder of certain types of securities, including United States equity
securities, purchased as part of the overall Montpelier Re investment portfolio.
On December 3, 2002, Montpelier Re established a trust known as the Montpelier
Re Foundation to promote or carry out charitable purposes.

     The Company, through Montpelier Re, is a provider of global specialty
property insurance and reinsurance products.

     The unaudited consolidated financial statements have been prepared on the
basis of accounting principles generally accepted in the United States ("GAAP")
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete consolidated financial
statements. This report on Form 10-Q should be read in conjunction with
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission. In the opinion of management, these unaudited consolidated financial
statements reflect all the normal recurring adjustments considered necessary for
a fair presentation of the Company's financial position at the end of and for
the periods presented. The results of operations and cash flows for any interim
period will not necessarily be indicative of the results of the operations and
cash flows for the full fiscal year or subsequent quarters. All significant
intercompany accounts and transactions have been eliminated on consolidation.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

2.  SECURITIES LENDING

     During the first quarter of 2003, the Company entered into a Securities
Lending Agreement to participate in a program whereby certain of its fixed
maturity investments are loaned to other institutions for short periods of time
through a lending agent. The Company maintains control over the securities it
lends, retains the earnings and cash flows associated with the loaned securities
and receives a fee from the borrower for the temporary use of the asset.
Collateral is required at a rate of 102-105% of the market value of the loaned
securities, depending on the type of collateral used. The Company does not have
any securities on loan at March 31, 2003.

3.  REINSURANCE

     For certain pro-rata contracts, including quota share contracts, the
subject direct insurance contracts will carry underlying reinsurance protection
from third party reinsurers. The Company records its pro-rata share of gross
premiums from the direct insurance contracts as gross written premiums and
records amounts incurred by the ceding company for the underlying third party
reinsurance coverage as reinsurance premiums ceded. In addition, during the
three months ended March 31, 2003, the Company purchased retrocessional

                                       F-28
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

protection on its own account for the direct insurance and facultative
reinsurance programs on an "any one risk" basis to limit the Company's exposure
from losses at one location.

     Reinsurance recoverable includes the Company's share of balances due from
the underlying third party reinsurance contracts for paid losses, unpaid loss
and loss adjustment expenses and reserves for losses incurred but not reported.
Initial estimates of reinsurance recoverable are recognized in the period in
which the loss event occurs. Subsequent adjustments, are recorded in the period
they are determined. The earned reinsurance premiums ceded were $6.9 million and
$1.3 million for the three months ended March 31, 2003 and 2002, respectively.
Total recoveries netted against loss and loss adjustment expenses was $(0.3)
million and $0.6 million for the three months ended March 31, 2003 and 2002,
respectively.

     The Company remains liable in the event that ceding companies, and the
Company, are unable to collect amounts due from the underlying third party
reinsurers. The Company records provisions for uncollectible underlying
reinsurance recoverable when collection becomes unlikely. There are no such
provisions recorded at March 31, 2003 or 2002.

4.  RECENT ACCOUNTING PRONOUNCEMENT

     The Financial Accounting Standards Board issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46") an interpretation of
ARB No. 51 "Consolidated Financial Statements" in January 2003. FIN 46 clarifies
the accounting and reporting for certain entities in which equity investors do
not have the characteristics of a controlling financial interest. The financial
statements included with the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2002 were prepared on a combined basis as a result of
the fact that Montpelier Re's and the Company's bye-laws include certain
restrictions relating to the election of directors of Montpelier Re. The Company
adopted FIN 46 in the first quarter of 2003. The impact of adoption of FIN 46 is
that the Company's financial statements are now prepared on a consolidated basis
instead of on a combined basis. There is no impact on the Company's net income
or shareholders' equity as presented in these consolidated financial statements
as a result of the adoption of FIN 46.

5.  EARNINGS PER SHARE

     The reconciliation of basic and diluted earnings per share is as follows:

<Table>
<Caption>
                                                            THREE MONTHS     THREE MONTHS
                                                               ENDED            ENDED
                                                           MARCH 31, 2003   MARCH 31, 2002
                                                           --------------   --------------
<S>                                                        <C>              <C>
BASIC EARNINGS PER COMMON SHARE:
Net income available to common shareholders..............   $   103,841      $    18,659
Weighted average common shares outstanding -- Basic......    63,392,600       52,440,000
                                                            -----------      -----------
BASIC EARNINGS PER COMMON SHARE..........................   $      1.64      $      0.36
                                                            -----------      -----------
DILUTED EARNINGS PER COMMON SHARE:
Net income available to common shareholders..............   $   103,841      $    18,659
Weighted average common shares outstanding -- Basic......    63,392,600       52,440,000
Dilutive effect of warrants..............................     2,672,006               --
Dilutive effect of share options.........................       414,614               --
                                                            -----------      -----------
Weighted average common and common equivalent shares
  outstanding -- Diluted.................................    66,479,220       52,440,000
                                                            -----------      -----------
DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT
  SHARE..................................................   $      1.56      $      0.36
                                                            -----------      -----------
</Table>

                                       F-29
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  SEGMENT REPORTING

     Management has determined that the Company operates in one segment only.
The Company focuses on writing global specialty property and other classes of
insurance and reinsurance business.

     The following table sets forth a breakdown of the Company's gross premiums
written by line of business and by geographic area of risks insured for the
periods indicated ($ in millions):

                         GROSS PREMIUMS WRITTEN BY LINE

<Table>
<Caption>
                                                        THREE MONTHS     THREE MONTHS
                                                           ENDED            ENDED
                                                       MARCH 31, 2003   MARCH 31, 2002
                                                       --------------   --------------
<S>                                                    <C>      <C>     <C>      <C>
Property Specialty...................................  $ 90.6    24.7%  $ 35.6    17.5%
Property Catastrophe.................................   150.8    41.1     79.1    38.8
Qualifying Quota Share...............................    76.4    20.9     73.8    36.2
Other Specialty......................................    48.8    13.3     15.2     7.5
                                                       ------   -----   ------   -----
Total................................................  $366.6   100.0%  $203.7   100.0%
                                                       ======   =====   ======   =====
</Table>

           GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA OF RISKS INSURED

<Table>
<Caption>
                                                        THREE MONTHS     THREE MONTHS
                                                           ENDED            ENDED
                                                       MARCH 31, 2003   MARCH 31, 2002
                                                       --------------   --------------
<S>                                                    <C>      <C>     <C>      <C>
Worldwide(1).........................................  $174.0    47.5%  $112.0    55.0%
USA and Canada.......................................   133.0    36.3     59.0    29.0
United Kingdom and Ireland...........................    21.3     5.8      5.4     2.6
Worldwide, excluding USA and Canada(2)...............    12.2     3.3      9.1     4.5
Western Europe, excluding the United Kingdom and
  Ireland............................................     9.8     2.7      5.1     2.5
Japan................................................     1.6     0.4      3.1     1.5
Others (1.5% or less)................................    14.7     4.0     10.0     4.9
                                                       ------   -----   ------   -----
Total................................................  $366.6   100.0%  $203.7   100.0%
                                                       ======   =====   ======   =====
</Table>

---------------

(1) "Worldwide" comprises insurance and reinsurance contracts that insure or
    reinsure risks on a worldwide basis.

(2) "Worldwide, excluding USA and Canada" comprises insurance and reinsurance
    contracts that insure or reinsure risks on a worldwide basis but
    specifically exclude the USA and Canada.

     The Qualifying Quota Share contracts and substantial amounts of other lines
of business are world-wide in nature, with the majority of business related to
North America and Europe.

                                       F-30
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table sets forth a breakdown of the Company's gross premiums
written by broker for the periods indicated ($ in millions):

<Table>
<Caption>
                                                        THREE MONTHS     THREE MONTHS
                                                           ENDED            ENDED
                                                       MARCH 31, 2003   MARCH 31, 2002
                                                       --------------   --------------
<S>                                                    <C>      <C>     <C>      <C>
Benfield(1)..........................................  $101.6    29.3%  $ 74.4    36.5%
Willis Group(1)......................................    82.8    23.9     53.7    26.4
Guy Carpenter........................................    75.8    21.9     35.2    17.3
Aon Re Worldwide.....................................    42.1    12.1     24.9    12.2
Others brokers.......................................    44.7    12.8     15.5     7.6
                                                       ------   -----   ------   -----
Total brokers........................................   347.0   100.0%   203.7   100.0%
                                                       ------   -----   ------   -----
Direct (no broker)...................................    19.6               --
                                                       ------   -----   ------   -----
Total................................................  $366.6           $203.7
                                                       ======   =====   ======   =====
</Table>

---------------

(1) Includes QQS gross premiums written. Benfield represents gross premiums
    written through Benfield Greig Limited and Benfield Blanch, subsidiaries of
    Benfield Holdings Limited.

7.  LONG-TERM DEBT

     On incorporation, the Company entered into a three-year term loan agreement
with Bank of America, N.A. and a syndicate of commercial banks, with an
aggregate borrowing limit of $150.0 million. As of March 31, 2003 and 2002, the
Company had borrowed all $150.0 million under this facility. The term loan
agreement requires that the Company and/or certain of its subsidiaries maintain
specific covenants, including a tangible net worth covenant and a maximum
leverage covenant, and has a final maturity date of December 12, 2004. The
facility also restricts the payment of dividends. The Company has been in
compliance with all covenants throughout the three months ended and as at March
31, 2003 and 2002.

     The interest rate was fixed at 2.59% for the period from October 21, 2002
until April 21, 2003. From April 21, 2003, the rate is fixed at 2.07% until July
21, 2003. The Company incurred interest expense for the three months ended March
31, 2003 and 2002 of $965 and $995, respectively, at an average annual interest
rate of 2.59% and 2.65%, respectively, and paid interest of $959 and $1,069,
respectively. In order to hedge the interest rate risk of the loan, the Company
has entered into an interest rate swap contract with Bank of America, which
becomes effective April 22, 2003 and expires on December 11, 2004, the last day
of the term-loan facility. Under the terms of the interest rate swap contract,
the Company pays interest at a fixed rate of 1.88% plus a margin dependent on
leverage, and receives interest at a variable rate equal to the offshore LIBOR
rate.

8.  RELATED PARTIES

     The Company's Chairman is also the Chairman of the Board of Directors of
White Mountains Insurance Group, which beneficially owns 22.9% and 27.2% of the
Company as at March 31, 2003 and 2002, respectively. The Chief Financial Officer
is also a Director of White Mountains Insurance Group and a director of Amlin,
one of the Company's qualifying quota share cedents.

     Four directors, including the Company's Chairman, are employed by White
Mountains Insurance Group.

     The Company has engaged White Mountains Advisors LLC, a wholly owned
indirect subsidiary of White Mountains Insurance Group, to provide investment
advisory and management services. The fees, which vary depending on the amount
of assets under management, are between 0.15% and 0.30% and are included in net

                                       F-31
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

investment income. The Company incurred an average fee of 0.17% and 0.20% for
the three months ended March 31, 2003 and 2002, respectively. For the three
months ended March 31, 2003 and 2002, the Company expensed investment management
fees of approximately $692 and $523, respectively, and has recorded an amount
payable for these services of $705 and $525, respectively. The Company's
Chairman of the Finance Committee is Deputy Chairman of the Board of Directors
of White Mountains Insurance Group, the Principal Executive Officer of White
Mountains Advisors LLC and is either general manager or investment manager of
various funds which own less than 5% of the Company.

     In January 2002, the Company entered into an agreement with Remetrics, a
subsidiary of Benfield Holdings Limited, which beneficially owns 5.9% of the
Company, for the provision of certain risk management services. This agreement
was no longer in place at December 31, 2002. As a result of this agreement, the
Company accrued approximately $nil and $650 for the three months ended March 31,
2003 and 2002, respectively, for risk management services.

     In addition, in the ordinary course of business, the Company entered into
four reinsurance agreements with OneBeacon Insurance Group, a subsidiary of
White Mountains Insurance Group, during the three months ended March 31, 2002.
The Company received $728 in aggregate annual premiums from these contracts
during the year ended December 31, 2002. The Company has not entered into any
reinsurance agreements with OneBeacon Insurance Group during the three months
ended March 31, 2003.

     In addition, the Company pays brokerage commissions to Benfield Greig
Limited and Benfield Blanch ("Benfield"), subsidiaries of Benfield Holdings
Limited, on business brought in by Benfield. These commissions are consistent
with commissions paid to other brokers in the ordinary course of business and
totaled $5.8 million and $3.2 million for the three months ended March 31, 2003
and 2002, respectively.

9.  COMMITMENTS AND CONTINGENCIES

  LETTERS OF CREDIT

     In order for the Company to write Lloyd's Qualifying Quota Share business,
it must provide an evergreen letter of credit in favor of The Society and
Council of Lloyd's ("Lloyd's") in accordance with Lloyd's rules. The Company has
made arrangements with Fleet National Bank for the provision of a standby letter
of credit in a form acceptable to Lloyd's in an amount of up to $200.0 million.
Letters of credit outstanding under this facility at March 31, 2003 were
approximately $125.8 million (L79.6 million) and have been secured by
investments of approximately $138.3 million. There were no letters of credit
outstanding at March 31, 2002.

     In addition, as of December 31, 2002, Company has made arrangements with
Barclay's Bank PLC for the provision of an additional evergreen letter of credit
facility in favor of certain U.S. ceding companies in an amount of up to $100.0
million. Letters of credit outstanding under this facility at March 31, 2003
were approximately $20.8 million and are secured by investments of approximately
$22.9 million.

  CREDIT FACILITIES

     On December 12, 2001, the Company obtained a $50.0 million revolving loan
facility from a syndicate of lenders, with the Company and its subsidiaries as
borrowers and guarantors. The facility is for general corporate purposes, and
requires that the Company and/or certain of its subsidiaries maintain specific
covenants, including a tangible net worth covenant and a maximum leverage
covenant. At March 31, 2003 and 2002, no amounts had been drawn down under this
facility.

                                       F-32
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10.  STATUTORY REQUIREMENTS

     Montpelier Re is registered under The Insurance Act 1978 (Bermuda),
Amendments Thereto and Related Regulations ("The Act"). Under The Act,
Montpelier Re is required to annually prepare and file Statutory Financial
Statements and a Statutory Financial Return. The Act also requires Montpelier Re
to maintain a minimum share capital of $1.0 million and to meet a minimum
solvency margin equal to the greater of $100.0 million, 50% of net premiums
written or 15% of the loss and loss adjustment expense reserves. For the three
months ended March 31, 2003 and 2002, Montpelier Re satisfied these
requirements.

     The Act limits the maximum amount of annual dividends or distributions paid
by Montpelier Re to the Company without the prior notification to, and in
certain cases the approval of, the Bermuda Monetary Authority of such payment.
The maximum amount of dividends that could be paid by Montpelier Re to the
Company, without such notification, was $255.7 million and $14.3 at March 31,
2003 and 2002, respectively.

     Montpelier Re is also required to maintain a minimum liquidity ratio, which
was met for both periods ended March 31, 2003 and 2002.

11.  SUBSEQUENT EVENT

     In May 2003, the Board of Directors of the Company authorized a public
issue of unsecured debt securities of up to $300 million.

     The terms of the transaction will be finalized prior to the closing of the
offering. Net proceeds of the offering will be used to repay amounts outstanding
under our existing term loan facility and for other general corporate purposes.

                                       F-33
<PAGE>

        GLOSSARY OF SELECTED REINSURANCE, INSURANCE AND INVESTMENT TERMS

ATTACHMENT POINT:.............   The amount of loss (per occurrence or in the
                                 aggregate, as the case may be) above which
                                 excess of loss reinsurance becomes operative.

BROKER:.......................   One who negotiates contracts of insurance or
                                 reinsurance, receiving a commission for
                                 placement and other service rendered, between
                                 (1) a policyholder and a primary insurer, on
                                 behalf of the insured party, (2) a primary
                                 insurer and reinsurer, on behalf of the primary
                                 insurer, or (3) a reinsurer and a
                                 RETROCESSIONAIRE, on behalf of the reinsurer.

CASUALTY INSURANCE:...........   Insurance that is primarily concerned with the
                                 losses caused by injuries to third persons (in
                                 other words, persons other than the
                                 policyholder) and the legal liability imposed
                                 on the insured resulting therefrom.

CATASTROPHE EXCESS OF LOSS
REINSURANCE:..................   A form of excess of loss reinsurance that,
                                 subject to a specified limit, indemnifies the
                                 ceding company for the amount of loss in excess
                                 of a specified RETENTION with respect to an
                                 accumulation of losses incurred in a
                                 catastrophic event or series of events.

CEDE; CEDENT; CEDING
COMPANY:......................   When a party reinsures its liability with
                                 another, it "cedes" business and is referred to
                                 as the "cedent" or "ceding company."

COMBINED RATIO:...............   A combination of the underwriting expense ratio
                                 and the loss and loss adjustment expense ratio,
                                 determined in accordance with either STATUTORY
                                 ACCOUNTING PRINCIPLES ("SAP") or GAAP. The
                                 underwriting expense ratio measures the ratio
                                 of UNDERWRITING EXPENSES to net premiums
                                 written, if determined in accordance with SAP,
                                 or the ratio of underwriting expenses (adjusted
                                 by deferred policy acquisition costs) to earned
                                 premiums if deter-mined in accordance with
                                 GAAP. The loss and loss adjustment expense
                                 ratio measures the ratio of losses and loss
                                 adjustment expenses to earned premiums
                                 determined in accordance with either SAP or
                                 GAAP. A combined ratio below 100% generally
                                 indicates profitable underwriting prior to the
                                 consideration of investment income. A combined
                                 ratio over 100% generally indicates
                                 unprofitable underwriting prior to the
                                 consideration of investment income.

COMMERCIAL LINES:.............   The various kinds of insurance that are written
                                 for businesses.

EXCESS OF LOSS REINSURANCE:...   A generic term describing reinsurance that
                                 indemnifies the reinsured against all or a
                                 specified portion of losses on underlying
                                 insurance policies in excess of a specified
                                 amount, which is called a "level" or
                                 "retention." Also known as non-proportional
                                 reinsurance. Excess of loss reinsurance is
                                 written in LAYERS. A reinsurer or group of
                                 reinsurers accepts a band of coverage up to a
                                 specified amount. The total coverage purchased
                                 by the cedent is referred to as a "program" and
                                 will typically be placed with predetermined
                                 reinsurers in pre-negotiated layers. Any
                                 liability exceeding the outer limit of the
                                 program reverts to the ceding company, which
                                 also bears the credit risk of a reinsurer's
                                 insolvency.

                                       G-1
<PAGE>

GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES ("U.S. GAAP"):.....   United States generally accepted accounting
                                 principles as defined by the American Institute
                                 of Certified Public Accountants or statements
                                 of the Financial Accounting Standards Board.
                                 U.S. GAAP is the method of accounting to be
                                 used by the Company for reporting to
                                 shareholders.

GROSS PREMIUMS WRITTEN:.......   Total premiums for insurance written and
                                 assumed reinsurance during a given period.

INCURRED BUT NOT REPORTED
(IBNR):.......................   Reserves for estimated losses that have been
                                 incurred by insureds and reinsureds but not yet
                                 reported to the insurer or reinsurer including
                                 unknown future developments on losses which are
                                 known to the insurer or reinsurer.

LAYER:........................   The interval between the retention or
                                 attachment point and the maximum limit of
                                 indemnity for which a reinsurer is responsible.

LOSS ADJUSTMENT EXPENSES
(LAE):........................   The expenses of settling claims, including
                                 legal and other fees and the portion of general
                                 expenses allocated to claim settlement costs.
                                 Also known as claim adjustment expenses.

LOSS RATIO:...................   The ratio of incurred losses and LAE to net
                                 premiums earned, determined in accordance with
                                 either SAP or U.S. GAAP. Incurred losses
                                 include a provision for IBNR.

LOSS RESERVES:................   Liabilities established by insurers and
                                 reinsurers to reflect the estimated cost of
                                 claims payments and the related expenses that
                                 the insurer or reinsurer will ultimately be
                                 required to pay in respect of insurance or
                                 reinsurance it has written. Reserves are
                                 established for losses and for loss adjustment
                                 expenses.

NET PREMIUMS EARNED:..........   The portion of net premiums written during or
                                 prior to a given period that was actually
                                 recognized as income during such period.

NET PREMIUMS WRITTEN:.........   Gross premiums written for a given period less
                                 premiums ceded to reinsurers and
                                 retrocessionaires during such period.

PERSONAL LINES:...............   Types of insurance written for individuals or
                                 families, rather than for businesses.

PROPERTY INSURANCE:...........   Insurance that is primarily concerned with
                                 financial loss arising out of the loss of
                                 property or its use caused by an insured
                                 danger.

QUALIFYING QUOTA SHARE OR
QQS:..........................   A reinsurance arrangement under which premiums
                                 paid by a Lloyd's syndicate to a reinsurer
                                 qualify under the Lloyd's Bye-laws to be
                                 set-off against the syndicate's aggregate
                                 premiums received, thereby increasing the
                                 syndicate's underwriting capacity.

REINSURANCE:..................   An arrangement in which an insurance company,
                                 the reinsurer, agrees to indemnify another
                                 insurance or reinsurance company, the ceding
                                 company, against all or a portion of the
                                 insurance or reinsurance risks underwritten by
                                 the ceding company under one or more policies.
                                 Reinsurance can provide a ceding company with
                                 several benefits, including a reduction in net
                                 liability on individual risks and catastrophe
                                 protection from large or multiple losses.
                                       G-2
<PAGE>

                                 Reinsurance also provides a ceding company with
                                 additional underwriting capacity by permitting
                                 it to accept larger risks and write more
                                 business than would be possible without a
                                 concomitant increase in capital and surplus,
                                 and facilitates the maintenance of acceptable
                                 financial ratios by the ceding company.
                                 Reinsurance does not legally discharge the
                                 primary insurer from its liability with respect
                                 to its obligations to the insured.

RESERVES:.....................   Liabilities established by insurers and
                                 reinsurers to reflect the estimated costs of
                                 claim payments and the related expenses that
                                 the insurer or reinsurer will ultimately be
                                 required to pay in respect of insurance or
                                 reinsurance it has written. Reserves are
                                 established for losses, for LAE and for
                                 unearned premiums. Loss reserves consist of
                                 "case reserves," or reserves established with
                                 respect to individual reported claims, and
                                 "IBNR reserves." For reinsurers, LAE reserves
                                 are generally not significant because
                                 substantially all of the LAE associated with
                                 particular claims are incurred by the primary
                                 insurer and reported to reinsurers as losses.
                                 Unearned premium reserves constitute the
                                 portion of premium paid in advance for
                                 insurance or reinsurance that has not yet been
                                 provided. See also "Loss Reserves."

RETENTION:....................   The amount or portion of risk that an insurer
                                 retains for its own account. Losses in excess
                                 of the retention level up to the outer limit of
                                 the program, if any, are paid by the reinsurer.
                                 In proportional treaties, the retention may be
                                 a percentage of the original policy's limit. In
                                 excess of loss business, the retention is a
                                 dollar amount of loss, a loss ratio or a
                                 percentage.

RETROCESSIONAL REINSURANCE;
RETROCESSIONAIRE:.............   A transaction whereby a reinsurer cedes to
                                 another reinsurer, the retrocessionaire, all or
                                 part of the reinsurance that the first rein-
                                 surer has assumed. Retrocessional reinsurance
                                 does not legally discharge the ceding reinsurer
                                 from its liability with respect to its
                                 obligations to the reinsured. Reinsurance
                                 companies cede risks to retrocessionaires for
                                 reasons similar to those that cause primary
                                 insurers to purchase reinsurance: to reduce net
                                 liability on individual risks, to protect
                                 against catastrophic losses, to stabilize
                                 financial ratios and to obtain additional
                                 underwriting capacity.

RISK EXCESS OF LOSS
REINSURANCE:..................   A form of excess of loss reinsurance that
                                 covers a loss of the reinsured on a single
                                 "risk" in excess of its retention level of the
                                 type reinsured, rather than to aggregate losses
                                 for all covered risks, as does CATASTROPHE
                                 EXCESS OF LOSS REINSURANCE. A "risk" in this
                                 context might mean the insurance coverage on
                                 one building or a group of buildings or the
                                 insurance coverage under a single policy that
                                 the reinsured treats as a single risk.

STATUTORY ACCOUNTING
PRINCIPLES ("SAP"):...........   Recording transactions and preparing financial
                                 statements in accordance with the rules and
                                 procedures prescribed or permitted by United
                                 States state insurance regulatory authorities
                                 including the NAIC, which in general reflect a
                                 liquidating, rather than going concern, concept
                                 of accounting.

                                       G-3
<PAGE>

UNDERWRITING:.................   The insurer's or reinsurer's process of
                                 reviewing applications submitted for insurance
                                 coverage, deciding whether to accept all or
                                 part of the coverage requested and determining
                                 the applicable premiums.

UNDERWRITING CAPACITY:........   The maximum amount that an insurance company
                                 can underwrite. The limit is generally
                                 determined by the company's retained earnings
                                 and investment capital. Reinsurance serves to
                                 increase a company's underwriting capacity by
                                 reducing its exposure from particular risks.

UNDERWRITING EXPENSES:........   The aggregate of policy acquisition costs,
                                 including commissions and the portion of
                                 administrative, general and other expenses
                                 attributable to underwriting operations.

                                       G-4
<PAGE>

                              [MONTPELIER RE LOGO]
<PAGE>

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the expenses payable by the Registrant in
connection with the issuance and distribution of the notes being registered
hereby. All of such expenses are estimates, other than the filing and quotation
fees payable to the Securities and Exchange Commission.

<Table>
<S>                                                           <C>
Filing Fee -- Securities and Exchange Commission............  $ 16,180
Fees and Expenses of Counsel................................  $      *
Printing Expenses...........................................  $      *
Fees and Expenses of Accountants............................  $      *
Blue Sky Fees and Expenses..................................  $      *
Miscellaneous Expenses......................................  $      *
                                                              --------
Total.......................................................  $      *
                                                              ========
</Table>

---------------

* To be provided by amendment.

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Bye-law 31 of the Registrant's bye-laws provides, among other things, that
the Registrant shall indemnify its directors and officers to the fullest extent
possible, except as prohibited under the Act and, without limitation, that: (a)
the directors and officers of the Registrant, any person appointed to any
committee of the Board of Directors of the Registrant or any person who is or
was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise (including any employee benefit plan) and employers of the Company
acting in relation to any of the affairs of the Registrant and the liquidator or
trustee (if any) and their heirs, executors and administrators, shall be
indemnified and secured harmless out of the assets of the Registrant from and
against all actions, costs, charges, losses, damages and expenses (including,
without limitation, attorney's fees) which they or any of them, their heirs,
executors or administrators, shall or may incur or sustain by or by reason of
any act done, concurred in or omitted in or about the execution of their duty,
or supposed duty, or in their respective offices or trusts, including, without
limitation, acts taken or omitted with regard to subsidiary companies of the
Registrant, and none of them shall be answerable for the acts, receipts,
neglects or defaults of the others of them or for joining in any receipts for
the sake of conformity, or for any bankers or other persons with whom any moneys
or effects belonging to the Registrant shall or may be lodged or deposited for
safe custody, or for insufficiency or deficiency of any security upon which any
moneys of or belonging to the Registrant shall be placed out on or invested, or
for any other loss, misfortune or damage which may happen in the execution of
their respective offices or trusts, or in relation thereto; provided, that this
indemnity shall not extend to any matter prohibited by the Companies Act 1981 of
Bermuda which may attach to any of said persons.

     Bye-law 32 of the Registrant's bye-laws provides that each shareholder
agrees to waive any claim or right of action it might have, whether individually
or by or in the right of the Registrant, against any director or officer on
account of any action taken by such director or officer, or the failure of such
director or officer to take any action in the performance of his duties with or
for the Registrant, provided that such waiver shall not extend to any matter in
respect of any fraud or dishonesty which may attach to such director or officer.

     Reference is made to the form of Underwriting Agreement to be filed as
Exhibit 1.1 hereto for provisions providing that the Underwriters are obligated,
under certain circumstances, to indemnify the directors, certain officers and
the controlling persons of the Registrant against certain liabilities under the
Securities Act of 1933, as amended (the "Securities Act").

                                       II-1
<PAGE>

     Reference is made to the Shareholders Agreement to be filed as Exhibit 10.1
hereto for provisions providing that the Registrant and certain holders of
common shares and warrants are each obligated to indemnify the other for certain
actions.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     As part of its formation, the Registrant issued unregistered securities as
described below. None of these transactions involved any underwriters,
underwriting discounts or commissions, or any public offering and the Registrant
believes that each transaction, if deemed to be a sale of a security, was exempt
from the registration requirements of the Securities Act by virtue of Section
4(2) thereof, Regulation D promulgated thereunder, Rule 701 pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701 or Regulation S for offerings of securities outside of the United
States. The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, such securities were
restricted as to transfers and appropriate legends were affixed to the share
certificates and instruments issued in such transactions.

     (1) On December 12, 2001, the Registrant sold 8,480,000 common shares to
certain accredited investors for an aggregate price of $848 million. The sales
of shares were made in reliance on Regulation D.

     (2) On January 3, 2002, the Registrant sold 260,000 common shares to
certain accredited investors for an aggregate price of $26 million and issued
1,186,610 warrants to purchase common shares. The sales of shares and warrants
were made in reliance on Regulation D.

     (3) Since its inception in November 2001, the Registrant has granted
options to certain principal employees and officers under its Share Option Plan
covering an aggregate of 2,550,000 of the Registrant's common shares. All
options granted under the Share Option Plan have subsequently been registered
under, and in accordance with, the Securities Act of 1933, as amended.

     (4) Since its inception in November 2001, the Registrant has issued 600,000
performance units to principal employees and officers. Each performance unit
represents the fair value of a common share. Performance units are conditional
grants that entitle the recipient to receive, all, double, or part of the value
of performance units payable in cash, common shares or a combination of both at
the Registrant's discretion. Performance units are granted pursuant to the
Registrant's Performance Unit Plan.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) Exhibits

<Table>
<Caption>
EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT
-------                     -----------------------
<C>       <S>
 1.1      Form of Underwriting Agreement.*
 3.1      Memorandum of Association (incorporated herein by reference
          to Exhibit 3.1 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-89408)).
 3.2      Amended and Restated Bye-Laws (incorporated herein by
          reference to Exhibit 3.1 to the Company's Current Report on
          Form 8-K dated May 20, 2003).
 4.1      Form of Indenture.*
 4.2      Form of Supplemental Indenture.*
 4.3      Form of global note (included as Exhibit A to Exhibit 4.1
          herein).*
 5.1      Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.*
 8.1      Opinion of Cahill Gordon & Reindel LLP*
10.1      Shareholders Agreement, dated as of December 12, 2001, among
          the Registrant and each of the persons listed on Schedule 1
          thereto, as amended by Amendment No. 1, dated December 24,
          2001 (incorporated herein by reference to Exhibit 10.1 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.2      Service Agreement, dated as of December 12, 2001, between
          Anthony Taylor, the Registrant and Montpelier Reinsurance
          Ltd. (incorporated herein by reference to Exhibit 10.2 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
</Table>

                                       II-2
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT
-------                     -----------------------
<C>       <S>
10.3      Service Agreement, dated as of January 24, 2002, between
          Anthony Taylor and Montpelier Marketing Services (UK)
          Limited (incorporated herein by reference to Exhibit 10.3 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.4      Service Agreement, dated as of January 1, 2002, between C.
          Russell Fletcher, III and Montpelier Reinsurance Ltd.
          (incorporated herein by reference to Exhibit 10.4 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)).
10.5      Service Agreement, dated as of January 1, 2002, between
          Thomas George Story Busher and Montpelier Reinsurance Ltd.
          (incorporated herein by reference to Exhibit 10.5 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)).
10.6      Service Agreement, dated as of January 24, 2002, between
          Thomas George Story Busher and Montpelier Marketing Services
          (UK) Limited (incorporated herein by reference to Exhibit
          10.6 to the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.7      Service Agreement, dated as of January 24, 2002, between
          Nicholas Newman-Young and Montpelier Marketing Services (UK)
          Limited (incorporated herein by reference to Exhibit 10.6 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.8      Credit Agreement, dated as of December 12, 2001, among the
          Registrant and Various Financial Institutions, as amended by
          Amendment Agreement, dated as of December 26, 2001, by
          Second Amendment Agreement, dated as of June 17, 2002 and by
          Third Amendment Agreement, dated as of August 1, 2002
          (incorporated herein by reference to Exhibit 10.8 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)) and by Fourth Amendment Agreement, dated as
          of December 11, 2002 (incorporated herein by reference to
          Exhibit 10.1 to the Company's Current Report on Form 8-K
          filed on April 8, 2003).
10.9      Share Option Plan (incorporated herein by reference to
          Exhibit 10.9 to the Company's Registration Statement on Form
          S-1 (Registration No. 333-89408)).
10.10     Performance Unit Plan (incorporated herein by reference to
          Exhibit 10.10 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-89408)).
10.11     Standby Letter of Credit Agreement, among Montpelier Re and
          Fleet National Bank, dated as of February 26, 2002,
          (incorporated herein by reference to Exhibit 10.11 to the
          Company's Annual Report on Form 10-K for the year ended
          December 31, 2002).
10.12     Standby Letter of Credit Agreement, among Montpelier Re and
          Barclays Bank PLC, dated as of November 21, 2002,
          (incorporated herein by reference to Exhibit 10.12 to the
          Company's Annual Report on Form 10-K for the year ended
          December 31, 2002).
10.13     Service Agreement, dated as of March 18, 2003, between K.
          Thomas Kemp and Montpelier Re Holdings Ltd., (incorporated
          herein by reference to Exhibit 10.13 to the Company's Annual
          Report on Form 10-K for the year ended December 31, 2002).
10.14     Letter of Credit Reimbursement and Pledge Agreement, among
          Montpelier Re and Fleet National Bank, dated June 20, 2003
          (incorporated herein by reference to Exhibit 10.14 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-105896)).*
12.1      Statement Regarding Calculation of Ratio of Earnings to
          Fixed Charges.
12.2      Statement Regarding Calculation of Pro Forma Ratio of
          Earnings to Fixed Charges.*
21.1      Subsidiaries of the Registrant (incorporated herein by
          reference to Exhibit 21.1 to the Company's Registration
          Statement on Form S-1 (Registration No. 333-89408)).
23.1      Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.(included
          in Exhibit 5.1).*
23.2      Consent of PricewaterhouseCoopers (Bermuda).
23.3      Consent of Cahill Gordon & Reindel LLP (included in Exhibit
          8.1).*
23.4      Consent of Conyers Dill & Pearman.*
24.1      Power of Attorney by John J. (Jack) Byrne.
24.2      Power of Attorney by Anthony Taylor.
24.3      Power of Attorney by K. Thomas Kemp.
24.4      Power of Attorney by John D. Gillespie.
24.5      Power of Attorney by Raymond Barrette.
24.6      Power of Attorney by G. Thompson Hutton.
24.7      Power of Attorney by Raymond M. Salter.
</Table>

                                       II-3
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT
-------                     -----------------------
<C>       <S>
24.8      Power of Attorney by Allen W. Fulkerson.
24.9      Power of Attorney by William Spiegel.
24.10     Power of Attorney by Steven J. Gilbert.
24.11     Power of Attorney by Kamil M. Salame.
25.1      Statement of Eligibility of The Bank of New York on Form
          T-1, as trustee for the senior notes under the indenture.*
99.1      Form F-N.*
</Table>

---------------

 * To be filed by amendment.

ITEM 17.  UNDERTAKINGS

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

     The undersigned Registrant hereby undertakes that:

     (1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

     (2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

                                       II-4
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Pembroke, Bermuda, on
the 9th day of July, 2003.

                                          MONTPELIER RE HOLDINGS LTD.

                                          By:/s/ THOMAS GEORGE STORY BUSHER

                                            ------------------------------------
                                            Name: Thomas George Story Busher
                                            Title:  Chief Operating Officer

<Table>
<Caption>
                       SIGNATURE                                                  TITLE
                       ---------                                                  -----
<S>     <C>                                                    <C>

                           *                                                    Chairman
 ------------------------------------------------------
                  John J. (Jack) Byrne


                           *                                    President and Chief Executive Officer and
 ------------------------------------------------------          Director (Principal Executive Officer)
                     Anthony Taylor


                           *                                      Chief Financial Officer and Director
 ------------------------------------------------------               (Principal Financial Officer)
                     K. Thomas Kemp


                     /s/ NEIL MCCONACHIE                             (Principal Accounting Officer)
 ------------------------------------------------------
                    Neil McConachie


                           *                                                    Director
 ------------------------------------------------------
                   John D. Gillespie


                           *                                                    Director
 ------------------------------------------------------
                    Raymond Barrette


                           *                                                    Director
 ------------------------------------------------------
                   G. Thompson Hutton


                           *                                                    Director
 ------------------------------------------------------
                   Raymond M. Salter


                           *                                                    Director
 ------------------------------------------------------
                   Allan W. Fulkerson


                           *                                                    Director
 ------------------------------------------------------
                    William Spiegel


                           *                                                    Director
 ------------------------------------------------------
                   Steven J. Gilbert
</Table>

                                       II-5
<PAGE>

<Table>
<Caption>
                       SIGNATURE                                                  TITLE
                       ---------                                                  -----

<S>     <C>                                                    <C>

                           *                                                    Director
 ------------------------------------------------------
                    Kamil M. Salame


                           *
 ------------------------------------------------------
                   John D. Gillespie
    (authorized representative in the United States)


          *By:  /s/ THOMAS GEORGE STORY BUSHER
 ------------------------------------------------------
               Thomas George Story Busher
                    Attorney-in-fact
</Table>

                                       II-6
<PAGE>

                     INDEX TO FINANCIAL STATEMENT SCHEDULES

<Table>
<Caption>
                                                                     SCHEDULE
                                                              PAGE    NUMBER
                                                              ----   --------
<S>                                                           <C>    <C>
Report of Independent Accountants on Financial Statement
  Schedules.................................................  S-2
Summary of Investments -- Other than Investments in Related
  Parties at December 31, 2002..............................  S-3    I
Condensed Financial Information of Registrant...............  S-4    II
Supplementary Insurance Information.........................  S-7    III
Reinsurance.................................................  S-8    IV
</Table>

Note: Other Schedules have been omitted as they are not applicable to the
Company.

                                       S-1
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                      REPORT OF INDEPENDENT ACCOUNTANTS ON

                         FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Shareholders of
Montpelier Re Holdings Ltd.

Our audits of the combined financial statements referred to in our report dated
February 26, 2003, appearing on page F-2 in this Form S-1 also included an audit
of the financial statement schedules I, II, III and IV. In our opinion, these
financial statement schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the related combined
financial statements.

PricewaterhouseCoopers
Chartered Accountants

Hamilton, Bermuda
February 26, 2003

                                       S-2
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                                   SCHEDULE I

  COMBINED SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES
                            AS AT DECEMBER 31, 2002
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                        COST OR       ESTIMATED     AMOUNT SHOWN IN
TYPE OF INVESTMENT                                   AMORTIZED COST   FAIR VALUE   THE BALANCE SHEET
------------------                                   --------------   ----------   -----------------
<S>                                                  <C>              <C>          <C>
Fixed Maturities:
  Bonds and notes:
     U.S. Government and agency....................    $  785,312     $  804,139      $  804,139
     Corporate debt securities.....................       312,323        325,500         325,500
     Mortgage-backed securities....................       224,621        225,206         225,206
                                                       ----------     ----------      ----------
          Total Fixed Maturities...................     1,322,256      1,354,845       1,354,845
Equity Investment:.................................        60,758         63,691          63,691
                                                       ----------     ----------      ----------
          Total Investments........................    $1,383,014     $1,418,536      $1,418,536
                                                       ----------     ----------      ----------
</Table>

                                       S-3
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE II

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                CONDENSED BALANCE SHEETS -- PARENT COMPANY ONLY
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                                 AS AT          AS AT
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  2002           2001
                                                              ------------   ------------
<S>                                                           <C>            <C>
ASSETS
Cash and cash equivalents, at fair value....................   $    5,418     $   10,183
Investment in combined subsidiaries, on an equity basis.....    1,353,973        982,645
Common voting shares subscriptions receivable...............           --         26,000
Other assets................................................        8,449          2,330
                                                               ----------     ----------
     Total Assets...........................................   $1,367,840     $1,021,158
                                                               ==========     ==========
LIABILITIES
Accounts payable and accrued liabilities....................   $      872     $   10,505
Long-term debt..............................................      150,000        150,000
                                                               ----------     ----------
     Total Liabilities......................................   $  150,872     $  160,505
                                                               ==========     ==========
SHAREHOLDERS' EQUITY
Common voting shares: 1/6 cent par value; authorized
  1,200,000,000 shares; issued and outstanding at December
  31, 2002; 63,392,600 shares (2001 -- 52,440,000)..........   $      106     $       87
Additional paid-in capital..................................    1,126,435        920,306
Accumulated other comprehensive income......................           --          1,878
Retained earnings (accumulated deficit).....................       90,427        (61,618)
                                                               ----------     ----------
     Total Shareholders' Equity.............................    1,216,968        860,653
                                                               ----------     ----------
     Total Liabilities and Shareholders' Equity.............   $1,367,840     $1,021,158
                                                               ==========     ==========
</Table>

                                       S-4
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE II

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                 STATEMENT OF OPERATIONS -- PARENT COMPANY ONLY
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                                                     PERIOD FROM
                                                                YEAR ENDED       NOVEMBER 14, 2001 TO
                                                             DECEMBER 31, 2002    DECEMBER 31, 2001
                                                             -----------------   --------------------
<S>                                                          <C>                 <C>
REVENUES
  Equity in net earnings of subsidiaries...................      $151,487              $     39
  Management fee from subsidiary...........................         8,000                    --
  Net investment income....................................           165                    43
                                                                 --------              --------
     Total Revenue.........................................       159,652                    82

EXPENSES
  Interest on long-term debt...............................         4,460                    --
  Fair value of warrants issued............................            --                61,321
  Other expenses...........................................         3,147                   379
                                                                 --------              --------
     Total Expenses........................................         7,607                61,700
                                                                 --------              --------

NET INCOME (LOSS)..........................................      $152,045              $(61,618)
                                                                 ========              ========
ACCUMULATED DEFICIT -- BEGINNING OF PERIOD.................       (61,618)                   --
                                                                 --------              --------
RETAINED EARNINGS (ACCUMULATED DEFICIT) -- END OF PERIOD...      $ 90,427              $(61,618)
                                                                 --------              --------
</Table>

                                       S-5
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.
                                  SCHEDULE II

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                STATEMENTS OF CASH FLOWS -- PARENT COMPANY ONLY
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                                                     PERIOD FROM
                                                                YEAR ENDED       NOVEMBER 14, 2001 TO
                                                             DECEMBER 31, 2002    DECEMBER 31, 2001
                                                             -----------------   --------------------
<S>                                                          <C>                 <C>
Cash flows used in operating activities:
  Net income (loss)........................................      $ 152,045            $ (61,618)
  Adjustments to reconcile net income (loss) to net cash
     used in operating activities:
     Equity in net earnings (loss) of subsidiaries.........       (151,487)                 (39)
     Compensation recognized under stock option plan.......          5,395                   --
     Fair value of warrants issued.........................             --               61,321
     Other assets and liabilities..........................        (14,938)              (1,771)
     Interest accrued on long-term debt....................           (564)                  --
                                                                 ---------            ---------
  Net cash used in operating activities....................         (9,549)              (2,107)
                                                                 ---------            ---------
Cash flows from investing activity:
  Net Capital contribution to subsidiary...................       (221,719)            (980,728)
                                                                 ---------            ---------
  Net cash used in investing activity......................       (221,719)            (980,728)
                                                                 ---------            ---------
Cash flows provided by financing activities:
  Issue of common shares...................................        245,053              843,018
  Amount paid to affiliate for overpayment of
     subscription..........................................           (250)                  --
  Direct equity offering expenses..........................        (18,300)                  --
  Issue of long-term debt..................................             --              150,000
                                                                 ---------            ---------
  Net cash provided by financing activities................        226,503              993,018
                                                                 ---------            ---------
  Increase (decrease) in cash and cash equivalents.........         (4,765)              10,183
                                                                 ---------            ---------
  Cash and cash equivalents -- Beginning of period.........         10,183                   --
                                                                 ---------            ---------
  Cash and cash equivalents -- End of period...............      $   5,418            $  10,183
                                                                 =========            =========
</Table>

                                       S-6
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE III

                      SUPPLEMENTARY INSURANCE INFORMATION
           AS AT AND FOR THE PERIODS ENDED DECEMBER 31, 2002 AND 2001
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
<Table>
<Caption>
                                                                                            NET BENEFITS,   AMORTIZATION
                        DEFERRED       FUTURE POLICY                                           CLAIMS,      OF DEFERRED
                         POLICY      BENEFITS, LOSSES,                NET         NET        LOSSES AND        POLICY
                       ACQUISITION      CLAIMS AND       UNEARNED   PREMIUMS   INVESTMENT    SETTLEMENT     ACQUISITION
                          COSTS        LOSS EXPENSES     PREMIUMS    EARNED      INCOME       EXPENSES         COSTS
                       -----------   -----------------   --------   --------   ----------   -------------   ------------
<S>                    <C>           <C>                 <C>        <C>        <C>          <C>             <C>
2002 -- Property and
  Casualty...........    $44,881         $146,115        $241,000   $329,926    $39,748       $133,310        $62,926
2001 -- Property and
  Casualty...........    $    16         $      0        $    142   $      8    $ 1,139       $      0        $     1

<Caption>

                         OTHER      GROSS
                       OPERATING   PREMIUMS
                       EXPENSES    WRITTEN
                       ---------   --------
<S>                    <C>         <C>
2002 -- Property and
  Casualty...........   $26,278    $607,688
2001 -- Property and
  Casualty...........   $ 1,207    $    150
</Table>

Notes:

1.  There are no material comparative figures as the Company did not commence
operations until December 16, 2001.

                                       S-7
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE IV

                                  REINSURANCE
           AS AT AND FOR THE PERIODS ENDED DECEMBER 31, 2002 AND 2001
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                               CEDED TO     ASSUMED                  PERCENTAGE OF
                                     DIRECT      OTHER     FROM OTHER                AMOUNT ASSUMED
                                     AMOUNT    COMPANIES   COMPANIES    NET AMOUNT       TO NET
                                     -------   ---------   ----------   ----------   --------------
<S>                                  <C>       <C>         <C>          <C>          <C>
2002 -- Property and Casualty......  $76,100    $41,779     $531,588     $565,909          94%
2001 -- Property and Casualty......  $    --    $    --     $    150     $    150         100%
</Table>

Notes:

1.  There are no material comparative figures as the Company did not commence
operations until December 16, 2001.

                                       S-8
<PAGE>

                                 EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT
-------                     -----------------------
<C>       <S>
 1.1      Form of Underwriting Agreement.*
 3.1      Memorandum of Association (incorporated herein by reference
          to Exhibit 3.1 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-89408)).
 3.2      Amended and Restated Bye-Laws (incorporated herein by
          reference to Exhibit 3.1 to the Company's Current Report on
          Form 8-K dated May 20, 2003).
 4.1      Form of Indenture.*
 4.2      Form of Supplemental Indenture.*
 4.3      Form of global note (included as Exhibit A to Exhibit 4.1
          herein).*
 5.1      Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.*
 8.1      Opinion of Cahill Gordon & Reindel LLP.*
10.1      Shareholders Agreement, dated as of December 12, 2001, among
          the Registrant and each of the persons listed on Schedule 1
          thereto, as amended by Amendment No. 1, dated December 24,
          2001 (incorporated herein by reference to Exhibit 10.1 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.2      Service Agreement, dated as of December 12, 2001, between
          Anthony Taylor, the Registrant and Montpelier Reinsurance
          Ltd. (incorporated herein by reference to Exhibit 10.2 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.3      Service Agreement, dated as of January 24, 2002, between
          Anthony Taylor and Montpelier Marketing Services (UK)
          Limited (incorporated herein by reference to Exhibit 10.3 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.4      Service Agreement, dated as of January 1, 2002, between C.
          Russell Fletcher, III and Montpelier Reinsurance Ltd.
          (incorporated herein by reference to Exhibit 10.4 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)).
10.5      Service Agreement, dated as of January 1, 2002, between
          Thomas George Story Busher and Montpelier Reinsurance Ltd.
          (incorporated herein by reference to Exhibit 10.5 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)).
10.6      Service Agreement, dated as of January 24, 2002, between
          Thomas George Story Busher and Montpelier Marketing Services
          (UK) Limited (incorporated herein by reference to Exhibit
          10.6 to the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.7      Service Agreement, dated as of January 24, 2002, between
          Nicholas Newman-Young and Montpelier Marketing Services (UK)
          Limited (incorporated herein by reference to Exhibit 10.6 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.8      Credit Agreement, dated as of December 12, 2001, among the
          Registrant and Various Financial Institutions, as amended by
          Amendment Agreement, dated as of December 26, 2001, by
          Second Amendment Agreement, dated as of June 17, 2002 and by
          Third Amendment Agreement, dated as of August 1, 2002
          (incorporated herein by reference to Exhibit 10.8 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)) and by Fourth Amendment Agreement, dated as
          of December 11, 2002 (incorporated herein by reference to
          Exhibit 10.1 to the Company's Current Report on Form 8-K
          filed on April 8, 2003).
10.9      Share Option Plan (incorporated herein by reference to
          Exhibit 10.9 to the Company's Registration Statement on Form
          S-1 (Registration No. 333-89408)).
10.10     Performance Unit Plan (incorporated herein by reference to
          Exhibit 10.10 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-89408)).
10.11     Standby Letter of Credit Agreement, among Montpelier Re and
          Fleet National Bank, dated as of February 26, 2002,
          (incorporated herein by reference to Exhibit 10.11 to the
          Company's Annual Report on Form 10-K for the year ended
          December 31, 2002).
10.12     Standby Letter of Credit Agreement, among Montpelier Re and
          Barclays Bank PLC, dated as of November 21, 2002,
          (incorporated herein by reference to Exhibit 10.12 to the
          Company's Annual Report on Form 10-K for the year ended
          December 31, 2002).
</Table>
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT
-------                     -----------------------
<C>       <S>
10.13     Service Agreement, dated as of March 18, 2003, between K.
          Thomas Kemp and Montpelier Re Holdings Ltd., (incorporated
          herein by reference to Exhibit 10.13 to the Company's Annual
          Report on Form 10-K for the year ended December 31, 2002).
10.14     Letter of Credit Reimbursement and Pledge Agreement, among
          Montpelier Re and Fleet National Bank, dated June 20, 2003
          (incorporated herein by reference to Exhibit 10.14 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-105896)).*
12.1      Statement Regarding Calculation of Ratio of Earnings to
          Fixed Charges.
12.2      Statement Regarding Calculation of Pro Forma Ratio of
          Earnings to Fixed Charges.*
21.1      Subsidiaries of the Registrant (incorporated herein by
          reference to Exhibit 21.1 to the Company's Registration
          Statement on Form S-1 (Registration No. 333-89408)).
23.1      Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included
          in Exhibit 5.1).*
23.2      Consent of PricewaterhouseCoopers (Bermuda).
23.3      Consent of Cahill Gordon & Reindel LLP (included in Exhibit
          8.1).*
23.4      Consent of Conyers Dill & Pearman.*
24.1      Power of Attorney by John J. (Jack) Byrne.
24.2      Power of Attorney by Anthony Taylor.
24.3      Power of Attorney by K. Thomas Kemp.
24.4      Power of Attorney by John D. Gillespie.
24.5      Power of Attorney by Raymond Barrette.
24.6      Power of Attorney by G. Thompson Hutton.
24.7      Power of Attorney by Raymond M. Salter.
24.8      Power of Attorney by Allen W. Fulkerson.
24.9      Power of Attorney by William Spiegel.
24.10     Power of Attorney by Steven J. Gilbert.
24.11     Power of Attorney by Kamil M. Salame.
25.1      Statement of Eligibility of The Bank of New York on Form
          T-1, as trustee for the senior notes under the indenture.*
99.1      Form F-N.*
</Table>

---------------

 * To be filed by amendment.
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As filed with the Securities and Exchange Commission on July 9, 2003.

                                                    Registration No. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                    FORM S-1
                             REGISTRATION STATEMENT
                        UNDER THE SECURITIES ACT OF 1933
                             ---------------------
                          MONTPELIER RE HOLDINGS LTD.
             (Exact name of Registrant as specified in its charter)
BERMUDA                                    6331                                NOT APPLICABLE
    (State or other jurisdiction of            (Primary Standard Industrial                   (I.R.S. Employer
     incorporation or organization)            Classification Code Number)                  Identification No.)
MINTFLOWER PLACE
                              8 PAR-LA-VILLE ROAD
                                 HAMILTON HM 08
                                    BERMUDA
                           TELEPHONE: (441) 296-5550
              (Address, including zip code, and telephone number,
       including area code, of Registrant's principal executive offices)
                             ---------------------

                             CT CORPORATION SYSTEM
                               111 EIGHTH AVENUE
                            NEW YORK, NEW YORK 10011
                           TELEPHONE: (212) 590-9200
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)
                             ---------------------
                                   COPIES TO:
MICHAEL GROLL, ESQ.                    JOSEPH D. FERRARO, ESQ.                  RICHARD J. SANDLER, ESQ.
 LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.   LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.            ETHAN T. JAMES, ESQ.
          125 WEST 55TH STREET                     NO. 1 MINSTER COURT                     DAVIS POLK & WARDWELL
        NEW YORK, NY 10019-5389                        MINCING LANE                         450 LEXINGTON AVENUE
       TELEPHONE: (212) 424-8000                     LONDON, EC3R 7AA                        NEW YORK, NY 10017
       FACSIMILE: (212) 424-8500              TELEPHONE: 011-44-207-459-5000             TELEPHONE: (212) 450-4000
                                              FACSIMILE: 011-44-207-459-5099             FACSIMILE: (212) 450-4800
---------------------
    APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC:  As soon as practicable after the Registration Statement becomes
effective.

    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]

    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]

    If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]

    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.  [ ]

                        CALCULATION OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
               TITLE OF EACH CLASS OF                      PROPOSED MAXIMUM AGGREGATE                     AMOUNT OF
             SECURITIES TO BE REGISTERED                        OFFERING PRICE(1)                     REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
% Senior Notes due     ..........................             $200,000,000                             $16,180
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457 under the Securities Act of 1933, as amended.
                             ---------------------
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

                   SUBJECT TO COMPLETION, DATED JULY   , 2003

                                  $200,000,000

                              [MONTPELIER RE LOGO]
                                % SENIOR NOTES DUE
                            ------------------------

     Montpelier Re Holdings Ltd. is offering $200 million aggregate principal
amount of    % Senior Notes due           . Interest on the notes will be paid
semi-annually in arrears on           and           of each year, beginning on
          , 2003.

     We may redeem the notes at any time and from time to time, in whole or in
part, at a "make-whole" redemption price described in this prospectus in the
section entitled "Description of the Notes -- Optional Redemption."

     The notes will be senior obligations of our company and will rank equally
with all of our other existing and future unsecured and unsubordinated
indebtedness. We do not intend to apply for listing of the notes on a national
securities exchange.

     INVESTING IN OUR NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
8.
UNDERWRITING
                                                          PRICE TO        DISCOUNTS      PROCEEDS TO
                                                         PUBLIC(1)     AND COMMISSIONS    COMPANY(1)
                                                        ------------   ---------------   ------------
Per Note..............................................             %               %                %
Total.................................................   $               $                $
---------------

(1) Plus accrued interest, if any, from August   , 2003, if settlement occurs
    after that date.

     Delivery of the notes in book-entry form only will be made on or about
August   , 2003 through the facilities of the Depository Trust Company.

     None of the Securities and Exchange Commission, any state securities
commission, the Registrar of Companies in Bermuda or the Bermuda Monetary
Authority has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Joint Book-Running Managers
BANC OF AMERICA SECURITIES LLC  CREDIT SUISSE FIRST BOSTON
The date of this prospectus is          , 2003.
TABLE OF CONTENTS
PAGE
                                        ----
PROSPECTUS SUMMARY....................    1
RISK FACTORS..........................    8
FORWARD-LOOKING STATEMENTS............   20
USE OF PROCEEDS.......................   21
CAPITALIZATION........................   22
SELECTED FINANCIAL DATA...............   23
MANAGEMENT'S DISCUSSION AND ANALYSIS
  OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.......................   25
BUSINESS..............................   49
REGULATION............................   63
MANAGEMENT............................   68
PRINCIPAL SHAREHOLDERS................   77
PAGE
                                        ----
CERTAIN RELATIONSHIPS AND RELATED
  TRANSACTIONS........................   80
MATERIAL TAX CONSIDERATIONS...........   82
DESCRIPTION OF THE NOTES..............   87
UNDERWRITING..........................   99
LEGAL MATTERS.........................  100
EXPERTS...............................  100
WHERE YOU CAN FIND MORE INFORMATION...  100
ENFORCEABILITY OF CIVIL LIABILITIES
  UNDER UNITED STATES FEDERAL
  SECURITIES LAWS AND OTHER MATTERS...  102
INDEX TO FINANCIAL STATEMENTS.........  F-1
GLOSSARY OF SELECTED REINSURANCE,
  INSURANCE AND INVESTMENT TERMS......  G-1
---------------------

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

                                        i
PROSPECTUS SUMMARY

     This summary highlights information contained elsewhere in this prospectus
and may not contain all of the information that may be important to you. In this
prospectus, references to the "Company," "we," "us" or "our" refer to Montpelier
Re Holdings Ltd. and/or its subsidiaries, Montpelier Reinsurance Ltd., its
wholly owned Bermuda reinsurance company subsidiary, Montpelier Marketing
Services (UK) Limited, its wholly owned marketing subsidiary, and any other
direct or indirect subsidiary, unless the context suggests otherwise. References
to "Montpelier Re" refer solely to Montpelier Reinsurance Ltd. References in
this prospectus to "dollars" or "$" are to the lawful currency of the United
States of America, unless the context otherwise requires. Although this summary
contains important information about the Company and this offering, you should
read it together with the more detailed information and our financial statements
and the notes to those statements appearing elsewhere in this prospectus. You
should read this entire prospectus carefully, including "Risk Factors" and
"Forward-Looking Statements," to determine how suitable an investment in the
Company would be for you. For your convenience, we have provided a glossary,
beginning on page G-1, of selected reinsurance, insurance and investment terms
and have printed these terms in boldfaced type the first time they are used in
this prospectus.

                                  OUR COMPANY

OVERVIEW

     Montpelier Re Holdings Ltd., through its wholly owned operating subsidiary
Montpelier Reinsurance Ltd., is a Bermuda-based provider of global specialty
PROPERTY INSURANCE and REINSURANCE products. We were founded by White Mountains
Insurance Group, Ltd. and Benfield Holdings Limited and commenced operations in
December 2001 with approximately $1.0 billion of capital. We have assembled a
senior management team with significant industry expertise and longstanding
industry relationships. We seek to identify attractive insurance and reinsurance
opportunities by capitalizing on our management's significant UNDERWRITING
experience, using catastrophe modeling software and our own risk pricing and
capital allocation models. We underwrote $366.6 million and $607.7 million in
GROSS PREMIUMS WRITTEN for the three months ended March 31, 2003 and the year
ended December 31, 2002, respectively, which was spread between various classes
of business and geographic areas. We have well-established market relationships
with the world's top reinsurance BROKERS including Guy Carpenter & Company, Inc.
(a subsidiary of Marsh & McLennan Companies Inc.), Aon Re Worldwide (a
subsidiary of Aon Corporation), Benfield plc and Willis Group Holdings Ltd.,
among others.

MARKET OPPORTUNITIES AND INDUSTRY TRENDS

     There is substantial evidence that insurance and reinsurance prices rise in
the short term for property and other classes of insurance and reinsurance in
the aftermath of significant catastrophic events. We believe that the relatively
high current price levels for property and certain other "short-tail" insurance
and reinsurance products we write are principally due to a supply/demand
imbalance in capacity caused by losses sustained by the global insurance and
reinsurance industry resulting from the September 11th terrorist attacks, a
general decline of global equity markets thereafter, and the more recent
significant loss reserve strengthening of major insurance and reinsurance
companies. Through Montpelier Re, we seek to help fulfill the need for
additional UNDERWRITING CAPACITY in the global property and casualty insurance
and reinsurance market. We intend to take advantage of current conditions in
that market by providing capacity to ceding companies at prices commensurate
with the risk we assume.

     During 2002, Standard & Poors downgraded a large number of reinsurers and
upgraded very few. Many global property and casualty insurers and reinsurers are
experiencing significantly reduced capital as a result of several years of
excessively competitive pricing, expanding coverage terms, significant increases
in RESERVES from asbestos liability, a decline in the U. S. and global equity
markets and poor investment performance. We believe that this reduction in
global underwriting capacity together with continued low interest rates has
resulted in more favorable pricing terms and conditions for reinsurers such as
us.

                                        1
OUR COMPETITIVE STRENGTHS

     We believe we distinguish ourselves from our competitors as follows:

     - Disciplined Underwriting and Risk Management.  We focus on underwriting
       profitability and seek to limit our loss exposure while earning an
       underwriting profit on all business we write by applying the professional
       insurance disciplines of pricing, underwriting and risk management.

     - Proven and Experienced Management Who Think and Act Like Owners.  Our
       seven underwriters, including our President and Chief Executive Officer,
       Anthony Taylor, who also serves as our Chief Underwriting Officer, have
       an average of 24 years of experience in the insurance and reinsurance
       industry. All of our executive officers participate in our long-term
       incentive program that ties compensation to the achievement of specific
       goals relating to our underwriting performance.

     - Well-Established Market Relationships.  Our underwriting team has the
       knowledge, experience and personal relationships that provide us with
       access to brokers and clients, and we believe we have established a broad
       level of support as a lead reinsurer among many of the largest
       reinsurance brokers worldwide, including Guy Carpenter, Aon Re Worldwide,
       Benfield and Willis Group. As a result of being in a lead position on a
       number of programs, we have the opportunity to analyze a broad range of
       opportunities and exercise selectivity on risks we underwrite.

     - No Historical Liabilities or Contingencies.  We are a recently formed
       company with a balance sheet unencumbered by any historical losses
       relating to the September 11th terrorist attacks, asbestos and other
       legacy exposures affecting our industry. As a result, we have no risk
       that deteriorating LOSS RESERVES related to legacy exposures prior to our
       formation will impact our future financial results.

     - Excellent Financial Strength.  Montpelier Re has a capital base of over
       $1.5 billion and has been assigned an "A" (Excellent) rating by A.M. Best
       Company Inc., the third highest rating of fifteen rating levels. This
       rating reflects A.M. Best's opinion of the results of our first year of
       operations, our capitalization and management. Montpelier Re has been
       assigned an "A3" (Good) rating by Moody's Investors Service, the seventh
       highest rating of twenty-one rating levels. This rating reflects Moody's
       opinion of the ability of Montpelier Re to punctually repay senior
       policyholder claims and obligations. These ratings are not evaluations
       directed to investors in the notes or a recommendation to buy, sell or
       hold the notes.

     - Strong Strategic Sponsorship.  We were founded by White Mountains and
       Benfield, each of whom has a strong reputation in the industry. White
       Mountains has substantial experience in managing companies and sponsoring
       the development of other insurance companies, while Benfield is the third
       largest reinsurance broker in the world ranked by reinsurance brokerage
       revenues for the year ended December 31, 2001.

RISKS RELATING TO OUR COMPANY

     As part of your evaluation of our company, you should take into account the
risks we face in our business and not solely our competitive strengths and
strategies. These risks include:

     - Short Operating History.  We have completed only one full fiscal year of
       operating and financial history and, therefore, our historical financial
       results may not accurately indicate our future performance.

     - Dependence on Principal Employees.  Our success is dependent in part upon
       our ability to attract and retain our principal employees. Our location
       in Bermuda and Bermuda employment restrictions may make it more difficult
       to do so.

     - Cyclical Nature of Reinsurance Business.  The reinsurance business has
       historically been cyclical. Although premium levels for many products
       have increased over the past year, the supply of reinsurance may
       increase, either by capital provided by new entrants or by the commitment
       of additional capital by existing reinsurers, which may cause prices to
       decrease.

                                        2
- Severe or Unanticipated Losses.  We may not adequately manage our
       exposure to severe or unanticipated risks. This could lead to losses that
       have a material adverse effect on our financial condition or results of
       operations.

     For more information about these and other risks, see "Risk Factors"
beginning on page 7. You should carefully consider these risk factors together
with all the other information included in this prospectus.

OUR STRATEGY

     We aim to maximize sustainable long-term growth in shareholder value by
pursuing the following strategies:

     - Manage Capital Prudently and Maintain a Disciplined Balance Sheet.  We
       focus on generating underwriting profits while maintaining a disciplined
       balance sheet and manage our capital prudently relative to our risk
       exposure in an effort to maximize sustainable long-term growth in
       shareholder value.

     - Enhance Our Lead Position With Brokers and CEDENTS.  We often take a lead
       position on underwriting treaties, which provides us with enhanced access
       to business and allows us to exercise superior risk selection. We believe
       this has allowed us to continue to build a substantial book of
       reinsurance business exhibiting superior performance.

     - Combine Subjective Underwriting Methods With Objective Modeling
       Tools.  We attempt to exploit pricing inefficiencies that may exist in
       the market from time to time through the use of sophisticated property
       risk modeling tools, both proprietary and third party, together with
       market knowledge and judgment, to seek the most favorable terms per unit
       of risk assumed by our portfolio.

     - Develop and Maintain Balanced Portfolio of Reinsurance Risks.  We are
       building a balanced portfolio of primarily property-related risks,
       diversified by class, product, geography and marketing source. We believe
       a more balanced portfolio of risks reduces the volatility of returns and
       optimizes the growth of shareholder value.

     - Deliver Customized, Innovative, and Timely Insurance and Reinsurance
       Solutions for Our Clients. We are establishing ourselves as a premier
       provider of global specialty property insurance and reinsurance products,
       such as property catastrophe, property specialty (retrocessional
       coverage, property RISK EXCESS OF LOSS REINSURANCE), other specialty
       (aviation, marine, personal accident, casualty) and QUALIFYING QUOTA
       SHARE, while developing an industry reputation for innovative and timely
       quotes for difficult technical risks.

                             ---------------------

     Our principal executive offices are located at Mintflower Place, 8
Par-La-Ville Road, Hamilton HM 08, Bermuda. Our telephone number is (441)
296-5550.

                                        3
THE OFFERING

Securities Offered............   $200,000,000 aggregate principal amount of
                                      % Senior Notes due

Interest Rate.................        %

Maturity Date.................        ,

Interest Payment Dates........   Semi-annually on each      and      ,
                                 commencing      , 2003.

Ranking.......................   The notes will rank senior in right of payment
                                 to all of our existing and future subordinated
                                 indebtedness and equal in right of payment to
                                 all of our other existing and future unsecured
                                 and
                                 unsubordinated indebtedness. The notes will be
                                 structurally subordinated to all of the
                                 liabilities of our subsidiaries.

Optional Redemption...........   We may redeem some or all of the notes at any
                                 time or from time to time at the "make-whole"
                                 redemption price described in "Description of
                                 the Notes -- Optional Redemption."

Tax Redemption................   We may redeem all of the notes at any time
                                 certain tax events occur as described in
                                 "Description of the Notes -- Redemption for Tax
                                 Purposes."

Certain Covenants.............   The notes will be issued under an indenture
                                 with The Bank of New York, as trustee. The
                                 indenture contains various covenants, including
                                 limitations on liens on the stock of designated
                                 subsidiaries, restrictions as to the
                                 disposition of the stock of designated
                                 subsidiaries and limitations on mergers,
                                 amalgamations and consolidations.

Use of Proceeds...............   We estimate the net proceeds from the offering
                                 of the notes, after deducting the underwriting
                                 discounts and commissions and estimated
                                 offering expenses we will pay, will be
                                 approximately $     million. We intend to use a
                                 portion of the proceeds from this offering to
                                 repay $150 million in aggregate principal
                                 amount outstanding under our existing term loan
                                 facility and to use the remaining proceeds for
                                 general corporate purposes.

No Trading Market.............   The notes are a new issue of securities for
                                 which there is currently no established trading
                                 market. Although the underwriters have informed
                                 us that they currently intend to make a market
                                 in the notes, they are not obligated to do so
                                 and any such market may be discontinued at any
                                 time without notice.

Form of the Notes.............   The notes will be represented by one or more
                                 global notes registered in the name of The
                                 Depository Trust Company or its nominee. This
                                 means that holders will not receive a
                                 certificate for their notes and the notes will
                                 not be registered in their names. Ownership
                                 interests in the notes will be shown on, and
                                 transfers of the notes will be effected only
                                 through, records maintained by participants in
                                 The Depository Trust Company. The Depository
                                 Trust Company and the paying agent for the
                                 notes will be responsible for interest payments
                                 to you.

                                        4
SUMMARY FINANCIAL INFORMATION

     The following table sets forth our summary historical financial information
for the periods ended and as of the dates indicated. Montpelier Re commenced
operations on December 16, 2001. The summary income statement data for the
period from inception (November 14, 2001) through December 31, 2001 and for the
year ended December 31, 2002 and the summary balance sheet data as at December
31, 2002 are derived from our audited financial statements included elsewhere in
this prospectus, which have been prepared in accordance with U.S. GAAP and have
been audited by PricewaterhouseCoopers (Bermuda), our independent auditors. The
summary income statement data for the three months ended March 31, 2003 and
March 31, 2002 and the summary balance sheet data as at March 31, 2003 are
derived from our unaudited financial statements included elsewhere in this
prospectus. The unaudited financial statements have been prepared on the same
basis as our audited financial statements and, in our opinion, include all
adjustments, consisting only of normal recurring adjustments, which we consider
necessary for a fair presentation of our results of operations and financial
position for these periods. These historical results are not necessarily
indicative of results to be expected from any future period, and the results
presented below are not necessarily indicative of our full year performance. You
should read the following summary financial information along with the
information contained in this prospectus, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and related notes included elsewhere in this prospectus.
THREE MONTHS ENDED
                                                      MARCH 31,                 PERIODS ENDED DECEMBER 31,
                                           -------------------------------   ---------------------------------
                                                2003             2002             2002             2001(1)
                                           --------------   --------------   ---------------   ---------------
                                           (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS AND PERCENTAGES)
                                                     (UNAUDITED)
SUMMARY INCOME STATEMENT DATA:
  Gross premiums written.................   $   366,563      $   203,679       $   607,688       $       150
  Net premiums written...................       332,296          189,359           565,909               150
  Net premiums earned....................       184,655           36,611           329,926                 8
  Net investment income..................        11,684            7,633            39,748             1,139
  Loss and loss adjustment expenses......       (47,690)         (14,367)         (133,310)               --
  Interest on long-term debt.............          (965)            (995)           (4,460)             (236)
Fair value of warrants issued............            --               --                --           (61,321)
Net income (loss)........................   $   103,841      $    18,659       $   152,045       $   (61,618)
Basic earnings (loss) per share..........   $      1.64      $      0.36       $      2.76       $     (1.18)
Diluted earnings (loss) per share........   $      1.56      $      0.36       $      2.74       $     (1.18)
Basic weighted average common shares
  outstanding............................    63,392,600       52,440,000        55,178,150        52,440,000
Diluted weighted average common shares
  outstanding............................    66,479,220       52,440,000        55,457,141        52,440,000
SELECTED RATIOS (BASED ON U.S. GAAP
  INCOME STATEMENT DATA):
Loss ratio(2)............................          25.8%            39.2%             40.4%              n/a
Acquisition costs ratio(3)...............          22.2             17.7              19.1               n/a
General and administrative expense
  ratio(4)...............................           4.8             11.6               7.9               n/a
                                            -----------      -----------       -----------       -----------
Combined ratio(5)........................          52.8%            68.5%             67.4%              n/a
                                            -----------      -----------       -----------       -----------
5
AS AT             AS AT
                                                                MARCH 31,       DECEMBER 31,
                                                                   2003             2002
                                                              --------------   ---------------
                                                              (IN THOUSANDS, EXCEPT SHARE AND
                                                                   PER SHARE AMOUNTS AND
                                                                        PERCENTAGES)
                                                               (UNAUDITED)
SUMMARY BALANCE SHEET DATA:
Fixed maturities, equities, cash and cash equivalents.......   $ 1,738,156       $ 1,581,461
Total assets................................................     2,154,488         1,833,918
Loss and loss adjustment expense reserves...................       183,621           146,115
Unearned premium............................................       415,730           241,000
Long-term debt..............................................       150,000           150,000
Total shareholders' equity..................................     1,356,573         1,252,535

PER SHARE DATA (BASED ON U.S. GAAP BALANCE SHEET DATA)
Book value per share (6)....................................   $     21.40       $     19.76
Fully converted book value per share (7)....................   $     20.81       $     19.39
---------------

(1) The financial information for this period reflects our results from November
    14, 2001, the date of incorporation, to December 31, 2001.

(2) The LOSS RATIO is calculated by dividing loss and LOSS ADJUSTMENT EXPENSES
    by NET PREMIUMS EARNED.

(3) The acquisition costs ratio is calculated by dividing acquisition costs by
    net premiums earned.

(4) The general and administrative expense ratio is calculated by dividing
    general and administrative expenses by net premiums earned.

(5) The COMBINED RATIO is the sum of the loss ratio, the acquisition costs ratio
    and the general and administrative expense ratio.

(6) Book value per share is based on total shareholders' equity divided by basic
    shares outstanding of 63,392,600 as at March 31, 2003 and December 31, 2002.

(7) Fully converted book value per share is a non-GAAP measure calculated based
    on total shareholders' equity plus the assumed proceeds from the exercise of
    dilutive options and warrants in the amount of $168.1 million, divided by
    73,261,760 fully converted shares. We believe that this is the best single
    measure of the return made by our shareholders as it takes into account the
    effect of all dilutive securities.

                                        6
RATIO OF EARNINGS TO FIXED CHARGES

     The following table sets forth our ratio of earnings to fixed charges and
the pro forma ratio of earnings to fixed charges for the periods ended December
31, 2001 and 2002 and the three months ended March 31, 2002 and 2003:
THREE MONTHS
                                                               ENDED        PERIOD ENDED
                                                             MARCH 31,      DECEMBER 31,
                                                           -------------   --------------
                                                           2003    2002    2002   2001(1)
                                                           -----   -----   ----   -------
Ratio of Earnings to Fixed Charges.......................  89.5    16.7    29.8   (226.4)
Pro Forma Ratio of Earnings to Fixed Charges(2)..........
                                                                   ----           ------
For purposes of computing these ratios, earnings consist of net income.
Fixed charges consist of interest expense, amortization of capitalized debt
expenses, and an imputed interest component for rental expense.
---------------

(1) We were formed on November 14, 2001 and commenced insurance operations on
    December 16, 2001. We incurred certain one-time expenses in connection with
    our formation including a $61.3 million charge for the fair value of
    warrants issued. The warrants were issued to certain founding shareholders,
    and qualify as equity for accounting purposes, therefore $61.3 million of
    additional paid-in capital was also created with a net neutral impact on
    shareholders' equity. The net loss of $61.6 million for the period was
    almost entirely due to the charge related to the warrants. Fixed charges
    exceeded earnings by $61.9 million for the period ended December 31, 2001.

(2) Assumes the sale of $200,000,000 aggregate principal amount of notes in this
    offering bearing an interest rate of      %, a portion of the net proceeds
    of which are applied as discussed under "Use of Proceeds."

                                        7
RISK FACTORS

     An investment in the notes involves a number of risks. You should carefully
consider the following information about these risks, together with the other
information contained in this prospectus, before investing in the notes. The
risks and uncertainties described below are not the only ones we face. However,
these are the risks our management believes are material. Additional risks not
presently known to us or that we currently deem immaterial may also impair our
business or results of operations. Any of the risks described below could result
in a significant or material adverse effect on our results of operations or
financial condition, and a corresponding adverse effect on our ability to
satisfy our obligations to you under the notes. You could lose all or part of
your investment.

     This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors,
including the risks described below and elsewhere in this prospectus. See
"Forward-Looking Statements."

RISKS RELATED TO OUR COMPANY

OUR FUTURE PERFORMANCE IS DIFFICULT TO PREDICT BECAUSE WE HAVE A LIMITED
OPERATING HISTORY.

     We were formed in November 2001, and we have completed only one full fiscal
year of operating and financial history. As a result, there is limited
historical financial and operating information available to help you evaluate
our performance. Companies in their initial stages of development present
substantial business and financial risks and may suffer significant losses. They
must successfully develop business relationships, establish operating
procedures, hire staff, install management information and other systems and
complete other tasks necessary to conduct their intended business activities. We
cannot assure you that we will be successful in accomplishing these necessary
tasks. In addition, because we did not have a full complement of underwriters
until the end of the second quarter of 2002, we did not underwrite as much gross
premium as would be expected in a full year and our historical financial results
may not accurately indicate our future performance.

WE COULD BE ADVERSELY AFFECTED BY THE LOSS OF ONE OR MORE PRINCIPAL EMPLOYEES OR
BY AN INABILITY TO ATTRACT AND RETAIN STAFF OR INDEPENDENT DIRECTORS.

     Our success will depend in substantial part upon our ability to attract and
retain our principal employees. As of June 2, 2003, we had forty full-time
employees and depend upon them for the generation and servicing of our business.
We rely substantially upon the services of Anthony Taylor, our Chief Executive
Officer, President and the Chief Underwriting Officer of Montpelier Re. Although
to date we have generally been successful in recruiting employees, our location
in Bermuda may be an impediment to attracting and retaining experienced
personnel, particularly if they are unable to secure work permits, as described
below. Furthermore, although we are not aware of any planned departures, if we
were to lose the services of members of our management team, our business could
be adversely affected. We do not currently maintain key man life insurance
policies with respect to our employees except for Anthony Taylor.

     We also may experience difficulty in attracting and retaining qualified
independent directors in the increasingly regulated corporate governance
environment. Independent directors are generally individuals other than our
employees, officers or their family members or shareholders of more than 10% of
our common shares and who do not have a significant financial relationship with
our Company, although the ultimate determination of independence may be based on
all relevant facts and circumstances.

OUR ABILITY TO CONDUCT OUR BUSINESS MAY BE ADVERSELY AFFECTED BY BERMUDA
EMPLOYMENT RESTRICTIONS.

     Under Bermuda law, non-Bermudians (other than spouses of Bermudians) may
not engage in any gainful occupation in Bermuda without specific permission in
the form of a work permit issued by the Bermuda Department of Immigration. Such
a work permit may be granted or extended upon showing that, after proper public
advertisement, no Bermudian (or spouse of a Bermudian) is available who meets
the minimum

                                        8
standards for the advertised position. The Bermuda government has a policy that
limits the duration of work permits to six years, subject to certain exemptions
for key employees.

     None of our senior management team (and possibly other officers) based in
Bermuda are Bermudian. Of our employees in Bermuda, twenty-four are Bermudian.
Anthony Taylor, our Chief Executive Officer, Russell Fletcher, our Chief
Reinsurance Officer, and Thomas Busher, our Chief Operating Officer, are working
under work permits that will expire after three years from the date of issue,
unless renewed, and K. Thomas Kemp, our Chief Financial Officer, is working
under a one-year periodic work permit renewable annually in June, which was
recently re-approved in June 2003. If work permits are not obtained or renewed
for our principal employees, we could lose their services, which could
materially affect our business.

WE COULD FACE UNANTICIPATED LOSSES FROM WAR, TERRORISM AND POLITICAL UNREST, AND
THESE OR OTHER UNANTICIPATED LOSSES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     We may have substantial exposure to large, unexpected losses resulting from
future man-made catastrophic events, such as acts of war, acts of terrorism and
political instability. Although we may attempt to exclude losses from terrorism
and certain other similar risks from some coverages we write, we may not be
successful in doing so. In addition, we have written and will continue to write
some policies explicitly covering acts of terrorism. These risks are inherently
unpredictable and recent events may lead to increased frequency and severity of
losses. It is difficult to predict the timing of such events with statistical
certainty or to estimate the amount of loss that any given occurrence will
generate. To the extent that losses from such risks occur, our financial
condition and results of operations could be materially adversely affected.

OUR FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED BY THE OCCURRENCE OF NATURAL
DISASTERS.

     We may have substantial exposure to losses resulting from natural disasters
and other catastrophic events. Catastrophes can be caused by various events,
including hurricanes, tornadoes, earthquakes, hailstorms, explosions, severe
winter weather and fires. The incidence and severity of such catastrophes are
inherently unpredictable and our losses from catastrophes could be substantial.
The occurrence of claims from catastrophic events is likely to result in
substantial volatility in our financial condition or results for any fiscal
quarter or year and could have a material adverse effect on our financial
condition or results and our ability to write new business. This volatility is
compounded by accounting regulations that do not permit reinsurers to reserve
for such catastrophic events until they occur. We expect that increases in the
values and concentrations of insured property will increase the severity of such
occurrences in the future. Although we will attempt to manage our exposure to
such events, a single catastrophic event could affect multiple geographic zones,
or the frequency or severity of catastrophic events could exceed our estimates,
either of which could have a material adverse effect on our financial condition
or results of operations.

IF ACTUAL CLAIMS EXCEED OUR LOSS RESERVES, OUR FINANCIAL RESULTS COULD BE
SIGNIFICANTLY ADVERSELY AFFECTED.

     Our success depends upon our ability to assess accurately the risks
associated with the businesses that we reinsure. To the extent actual claims
exceed our expectations we will be required to recognize immediately the less
favorable experience as we become aware of it. This could cause a material
increase in our liabilities and a reduction in our profitability, including an
operating loss and reduction of capital. To date, we have not been required to
make any of these adjustments. However, it is early in our history and the
number and size of reported claims may increase, and their size could exceed our
expectations.

     A significant portion of the Company's business is property catastrophe and
other classes with high ATTACHMENT POINTS of coverage. Reserving for losses in
the property catastrophe market is inherently complicated in that losses in
excess of the attachment level of the Company's policies are characterized by
high severity and low frequency, and other factors which could vary
significantly as claims are settled. This limits the volume of relevant industry
claims experience available from which to reliably predict ultimate losses
following a loss event.

                                        9
In addition, there always exists a reporting lag between a loss event
taking place and the reporting of the loss to the Company. These incurred but
not reported losses are inherently difficult to predict. Because of the
variability and uncertainty associated with loss estimation, it is possible that
our individual case reserves for each catastrophic event and other case reserves
are incorrect, possibly materially.

     These factors require us to make significant assumptions when establishing
loss reserves. Since the Company has insufficient past loss experience,
management supplements this information with industry data. This industry data
may not match the risk profile of the Company, which introduces a further degree
of uncertainty into the process. Accordingly, actual claims and claim expenses
paid may deviate, perhaps substantially, from the reserve estimates reflected in
our financial statements.

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

     If our loss reserves are determined to be inadequate, we will be required
to increase loss reserves at the time of such determination with a corresponding
reduction in our net income in the period in which the deficiency is rectified.
It is possible that claims in respect of events that have occurred could exceed
our loss reserves and have a material adverse effect on our results of
operations or our financial condition in general. In addition, unlike the loss
reserves of U.S. reinsurers, our loss reserves are not regularly examined by
U.S. or other insurance regulators.

THE FAILURE OF ANY OF THE LOSS LIMITATION METHODS WE EMPLOY COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION OR OUR RESULTS OF OPERATIONS.

     We seek to limit our loss exposure by writing a number of our reinsurance
contracts on an excess of loss basis, adhering to maximum limitations on
reinsurance written in defined geographical zones, limiting program size for
each client and prudent underwriting of each program written. In the case of
proportional treaties, we seek per occurrence limitations or loss ratio caps to
limit the impact of losses from any one event. We cannot be sure that any of
these loss limitation methods will be effective. We also seek to limit our loss
exposure by geographic diversification. Geographic zone limitations involve
significant underwriting judgments, including the determination of the area of
the zones and the inclusion of a particular policy within a particular zone's
limits. There can be no assurance that various provisions of our policies, such
as limitations or exclusions from coverage or choice of forum, will be
enforceable in the manner we intend. Disputes relating to coverage and choice of
legal forum may also arise. Underwriting is inherently a matter of judgment,
involving important assumptions about matters that are inherently unpredictable
and beyond our control, and for which historical experience and probability
analysis may not provide sufficient guidance. One or more catastrophic or other
events could result in claims that substantially exceed our expectations, which
could have a material adverse effect on our financial condition or our results
of operations.

WE ARE A COMPANY WITH A LIMITED OPERATING HISTORY AND MAY ENCOUNTER DIFFICULTIES
ESTABLISHING THE INFORMATION TECHNOLOGY SYSTEMS NECESSARY TO RUN OUR BUSINESS.

     The performance of our information technology systems is critical to our
business, our reputation, and our ability to process transactions and provide
high quality customer service. Such technology is and will continue to be a very
important part of our underwriting process. We currently purchase risk modeling
services from AIR Worldwide Corporation ("AIR"), EQECAT, Inc. ("EQE") and Risk
Management Solutions, Inc. ("RMS"). In addition, we continue to work with Black
Diamond Group, an insurance consulting firm, on enhancing proprietary modeling
technologies.

     We cannot be certain that we would be able to replace these service
providers or consultants without slowing our underwriting response time, or that
our proprietary technology will operate as intended. Any defect or error in our
information technology systems could result in a loss or delay of revenues,
higher than expected loss levels, diversion of management resources, harm to our
reputation or an increase in costs.
                                        10
OUR FOUNDERS AND CERTAIN OF OUR DIRECTORS AND OFFICERS MAY HAVE CONFLICTS OF
INTEREST WITH US.

     Our founders, White Mountains and Benfield Holdings Limited, beneficially
own 22.9% (assuming the exercise of White Mountains' warrants) and 4.5%
(assuming the exercise of Benfield Holdings Limited's warrants), respectively,
of our common shares. In addition, four of our directors are affiliated with our
founders.

     Our founders engage in certain commercial activities and transactions or
agreements with us, which may give rise to conflicts of interest. We may also
enter into commercial arrangements with related parties in the ordinary course
of business. In addition, White Mountains conducts a reinsurance business
through some of its subsidiaries, and we may compete with such subsidiaries for
the same prospective clients. The founders or their affiliates have sponsored,
and may in the future sponsor, other entities engaged in or intending to engage
in insurance and reinsurance underwriting, some of which, together with the
founders, may compete with us. Our founders and their affiliates have also
entered into agreements with and made investments in numerous companies that may
compete with us. In particular:

     - John J. (Jack) Byrne, Chairman of our Board of Directors and a member of
       our Compensation and Nominating Committee, is also Chairman of the Board
       of Directors of White Mountains Insurance Group.

     - K. Thomas Kemp, our Chief Financial Officer and a member of our Board of
       Directors, is a member of the Board of Directors of White Mountains
       Insurance Group and is also a director of Amlin plc, which accounts for a
       significant proportion of our Qualifying Quota Shares ("QQS") premiums.

     - Raymond Barrette, a member of our Board of Directors and a member of the
       Underwriting Policy Committee of our Board of Directors, is President and
       Chief Executive Officer of White Mountains Insurance Group.

     - John Gillespie, a member of our Board of Directors and Chairman of the
       Finance Committee of our Board, is Deputy Chairman of the Board of
       Directors of White Mountains Insurance Group. Mr. Gillespie is Chairman
       and President of White Mountains Advisors LLC, a wholly owned subsidiary
       of White Mountains Insurance Group, which we have engaged to provide
       investment advisory and management services. In addition, Mr. Gillespie
       is either general manager or investment manager of various funds, which
       own less than 5% of our common shares.

     - Folksamerica Reinsurance Company, a reinsurance subsidiary of White
       Mountains Insurance Group, has entered into a quota share arrangement
       with Olympus Reinsurance Ltd., a Bermuda insurance and reinsurance
       company that is one of our competitors. Certain of the directors,
       officers and affiliates of White Mountains Insurance Group own
       approximately 5% of the shares of the parent holding company of Olympus,
       and a member of the Board of Directors of White Mountains Insurance Group
       is Chairman of that holding company.

     - We have in the past purchased certain risk management services from
       Benfield and may purchase other services from them in the future. We also
       pay brokerage commissions to Benfield. These commissions are consistent
       with commissions that we pay to other brokers in the ordinary course of
       business.

     We may not be in a position to influence any party's decision to engage in
activities that would give rise to a conflict of interest, and they may take
actions that are not in our shareholders' best interests.

IF WE CHOOSE TO PURCHASE REINSURANCE, WE MAY BE UNABLE TO DO SO.

     We did not purchase reinsurance for our own account in 2002. In order to
limit the effect of large and multiple losses upon our financial condition, we
have since purchased and may continue to purchase reinsurance in the future.
This type of insurance is known as "RETROCESSIONAL REINSURANCE." A reinsurer's
insolvency or inability to make payments under the terms of its reinsurance
treaty with us could have a material adverse effect on us. In 2003 we purchased
specific retrocessional protection for our direct insurance

                                        11
and facultative reinsurance programs and our property reinsurance programs,
excluding most other specialty lines. We may purchase additional retrocessional
protection for our own account in 2003.

     From time to time, market conditions have limited, and in some cases have
prevented, insurers and reinsurers from obtaining the types and amounts of
reinsurance, which they consider adequate for their business needs. Following
the September 11th terrorist attacks, terms and conditions in the retrocessional
market generally became less attractive. Accordingly, we may not be able to
obtain our desired amounts of retrocessional reinsurance. In addition, even if
we are able to obtain such retrocessional reinsurance, we may not be able to
negotiate terms that we deem appropriate or acceptable or from entities with
satisfactory creditworthiness.

SINCE WE DEPEND ON A FEW BROKERS FOR A LARGE PORTION OF OUR REVENUES, LOSS OF
BUSINESS PROVIDED BY THEM COULD ADVERSELY AFFECT US.

     We market our reinsurance and insurance worldwide primarily through
brokers. Subsidiaries and affiliates of Benfield (one of our founders and a
shareholder), Willis Group, Guy Carpenter and Aon Re Worldwide provided 29.3%,
23.9%, 21.9% and 12.1% (for a total of 87.2%), respectively, of our gross
premiums written sourced through brokers for the three months ended March 31,
2003. Affiliates of two of these brokers, Aon and Guy Carpenter, have also
co-sponsored the formation of Bermuda reinsurance companies that may compete
with us, and these brokers may favor these reinsurers over other companies. Loss
of all or a substantial portion of the business provided by one or more of these
brokers could have a material adverse effect on our business.

OUR RELIANCE ON REINSURANCE BROKERS SUBJECTS US TO THEIR CREDIT RISK.

     In accordance with industry practice, we frequently pay amounts owed on
claims under our policies to reinsurance brokers, and these brokers, in turn,
pay these amounts over to the ceding insurers that have reinsured a portion of
their liabilities with us. In some jurisdictions, if a broker fails to make such
a payment, we might remain liable to the ceding insurer for the deficiency.
Conversely, in certain jurisdictions, when the ceding insurer pays premiums for
these policies to reinsurance brokers for payment over to us, these premiums are
considered to have been paid and the ceding insurer will no longer be liable to
us for those amounts, whether or not we have actually received the premiums.
Consequently, consistent with the industry, we assume a degree of credit risk
associated with brokers around the world.

OUR INVESTMENT PERFORMANCE MAY AFFECT OUR FINANCIAL RESULTS AND ABILITY TO
CONDUCT BUSINESS.

     Our funds are invested on a discretionary basis by a professional
investment advisory management firm, White Mountains Advisors LLC, a wholly
owned subsidiary of White Mountains Insurance Group, subject to policy
guidelines, which are periodically reviewed by the Finance Committee of our
Board of Directors. See "Business -- Investments." Although our investment
policies stress diversification of risks, conservation of principal and
liquidity, our investments are subject to market-wide risks and fluctuations, as
well as to risks inherent in particular securities.

     In particular, the volatility of our claims submissions may force us to
liquidate securities, which may cause us to incur capital losses. If we
structure our investments improperly relative to our reinsurance liabilities, we
may be forced to liquidate investments prior to maturity at a significant loss
to cover such liabilities. Realized and unrealized investment losses resulting
from an other than temporary decline in value could significantly decrease our
assets, thereby affecting our ability to conduct business.

OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY CURRENCY FLUCTUATIONS.

     Our functional currency is the U.S. dollar. We expect that approximately
one-third of our premiums will be written in currencies other than the U.S.
dollar. A portion of our loss reserves are also in non-U.S. currencies. We may,
from time to time, experience losses resulting from fluctuations in the values
of these non-U.S. currencies, which could adversely affect our operating
results.

                                        12
At present we have no currency hedges in place, nor are we aware of any
significant exposures to loss payments that will be paid in non-U.S. currencies.
We intend to consider using hedges when we are advised of known or probable
significant losses that will be paid in non-U.S. currencies. We can, therefore,
choose to manage currency fluctuation exposure during the period between advice
and ultimate payment. However, we would not normally hedge against this possible
exposure for the portion of our loss reserves that represent losses INCURRED BUT
NOT REPORTED ("IBNR"). Reserves for IBNR will be a substantial part of our total
loss reserves.

WE ARE RATED BY RATING AGENCIES AND A DECLINE IN OUR RATINGS COULD AFFECT OUR
STANDING AMONG BROKERS AND CUSTOMERS AND CAUSE OUR REVENUE AND EARNINGS TO
DECREASE.

     Ratings have become an increasingly important factor in establishing the
competitive position of reinsurance companies. A.M. Best assigned Montpelier Re
a financial strength rating of "A" (Excellent), which is the third highest of
fifteen rating levels. The objective of A.M. Best's rating system is to provide
an opinion of an insurer's financial strength and ability to meet ongoing
obligations to its policyholders. Our rating reflects A.M. Best's opinion of the
results of our first year of operations, our capitalization and management.
Montpelier Re has been assigned an "A3" (Good) rating by Moody's Investors
Service, the seventh highest rating of twenty-one rating levels. This rating
reflects Moody's opinion of the ability of Montpelier Re to punctually repay
senior policyholder claims and obligations. These ratings are not evaluations
directed to investors in the notes or a recommendation to buy, sell or hold the
notes. Our ratings are subject to periodic review by, and may be revised
downward or revoked at the sole discretion of, A.M. Best and Moody's and we
cannot assure you that we will be able to retain these ratings.

     If our ratings are reduced from their current levels by A.M. Best and
Moody's, our competitive position in the insurance industry would suffer and it
would be more difficult for us to market our products. A significant downgrade
could result in a substantial loss of business as ceding companies, and brokers
that place such business, move to other reinsurers with higher ratings.

WE MAY REQUIRE ADDITIONAL CAPITAL IN THE FUTURE.

     Our future capital requirements depend on many factors, including our
ability to write new business successfully and to establish premium rates and
reserves at levels sufficient to cover losses. To the extent that the funds
generated by our initial capitalization, initial public offering and our
operations are insufficient to fund future operating requirements and cover
claim payments, we may need to raise additional funds through financings or
curtail our growth and reduce our assets. Any equity or debt financing, if
available at all, may be on terms that are not favorable to us. If we cannot
obtain adequate capital, our business, operating results and financial condition
could be adversely affected.

IF OUR SUBSIDIARY IS UNABLE TO OBTAIN THE NECESSARY CREDIT, WE MAY NOT BE ABLE
TO OFFER REINSURANCE IN CERTAIN MARKETS.

     Montpelier Re is not licensed or admitted as an insurer in any jurisdiction
other than Bermuda. Because many jurisdictions do not permit insurance companies
to take credit for reinsurance obtained from unlicensed or non-admitted insurers
on their statutory financial statements unless appropriate security mechanisms
are in place, it is anticipated that our reinsurance clients will typically
require us to post a letter of credit or other collateral. In order for
Montpelier Re to write Lloyd's QQS business, it must provide a letter of credit
in favor of The Society and Council of Lloyd's ("Lloyd's") in accordance with
Lloyd's rules. We have made arrangements with Fleet National Bank for the
provision of a standby letter of credit in a form acceptable to Lloyd's in an
amount of up to $250 million, and in favor of certain U.S. ceding companies in
an amount of up to $200 million. The Company has also made arrangements with
Barclay's Bank PLC for the provision of an additional letter of credit facility
in favor of certain U.S. ceding companies in an amount of up to $100 million. We
consider the letter of credit facilities sufficient to support Montpelier Re's
estimated obligations for the next 12 months.

                                        13
If Montpelier Re were to become unable to obtain the necessary credit,
Montpelier Re could be limited in its ability to write business for certain of
our clients.

RISKS RELATED TO OUR INDUSTRY

SUBSTANTIAL NEW CAPITAL INFLOWS INTO THE REINSURANCE INDUSTRY WILL INCREASE
COMPETITION.

     The reinsurance industry is highly competitive. We compete, and will
continue to compete, with major U.S. and non-U.S. reinsurers, many of which have
greater financial, marketing and management resources than we have. We also
compete with several other Bermuda-based reinsurers that write reinsurance and
that target the same market as we do and utilize similar business strategies,
and some of these companies currently have more capital than we have. We also
compete with financial products, such as risk securitization, the usage of which
has grown in volume. Established competitors have recently completed or may be
planning to complete additional capital raising transactions. New companies
continue to be formed to enter the reinsurance market. The full extent and
effect of this additional capital on the reinsurance market will not be known
for some time and current market conditions could reverse. Ultimately, this
competition could affect our ability to attract or retain business or to write
business at premium rates sufficient to cover losses. If competition limits our
ability to write new business at adequate rates, our return on capital may be
adversely affected.

RECENT EVENTS MAY RESULT IN POLITICAL, REGULATORY AND INDUSTRY INITIATIVES,
WHICH COULD ADVERSELY AFFECT OUR BUSINESS.

     The supply of property catastrophe reinsurance coverage has decreased due
to the withdrawal of capacity and substantial reductions in capital resulting
from, among other things, the September 11th terrorist attacks. This tightening
of supply has resulted in government intervention in the insurance and
reinsurance markets, both in the United States and worldwide. For example, in
response to the tightening of supply in certain insurance and reinsurance
markets resulting from, among other things, the September 11th terrorist
attacks, the Terrorism Risk Insurance Act of 2002 was enacted to ensure the
availability of insurance coverage for terrorist acts in the United States. This
law establishes a federal assistance program that will continue through the end
of 2005 to help the commercial insurers and reinsurers in the property and
CASUALTY INSURANCE industry cover claims related to future terrorism related
losses and regulates the terms of insurance relating to terrorism coverage. This
law could adversely affect our business by increasing our competitors'
underwriting capacity for terrorism-related coverage in the United States. We
are currently unable to predict the extent to which the foregoing new initiative
may affect the demand for our products or the risks that may be available for us
to consider reinsuring. In addition, the insurance and reinsurance regulatory
framework has been subject to increased scrutiny by individual U.S. state
governments.

     This government intervention and the possibility of future interventions
have created uncertainty in the insurance and reinsurance markets about the
definition of terrorist acts and the extent to which future coverages will
extend to terrorist acts. Government regulators are generally concerned with the
protection of policyholders to the exclusion of other constituencies, including
holders of the notes. While we cannot predict the exact nature, timing or scope
of possible governmental initiatives, such proposals could adversely affect our
business by:

     - Providing insurance and reinsurance capacity in markets and to consumers
       that we target;

     - Requiring our participation in industry pools and guaranty associations;

     - Regulating the terms of insurance and reinsurance policies; or

     - Disproportionately benefiting the companies of one country over those of
       another.

     The insurance industry is also affected by political, judicial and legal
developments that may create new and expanded theories of liability. Such
changes may result in delays or cancellations of products and services by
insurers and reinsurers, which could adversely affect our business.

                                        14
COMPETITION IN THE INSURANCE INDUSTRY COULD REDUCE OUR OPERATING MARGINS.

     Competition in the insurance industry has increased as industry
participants seek to enhance their product and geographic reach, client base,
operating efficiency and general market power through organic growth, mergers
and acquisitions, and reorganization activities. As the insurance industry
evolves, competition for customers may become more intense and the importance of
acquiring and properly servicing each customer will grow. We could incur greater
expenses relating to customer acquisition and retention, which could reduce our
operating margins. There are also many potential initiatives by capital market
participants to produce alternative products that may compete with the existing
catastrophe reinsurance markets. Over time, these numerous initiatives could
significantly affect supply, pricing and competition in our industry.

THE REINSURANCE BUSINESS IS HISTORICALLY CYCLICAL, AND WE EXPECT TO EXPERIENCE
PERIODS WITH EXCESS UNDERWRITING CAPACITY AND UNFAVORABLE PREMIUMS.

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

WE MAY BE ADVERSELY AFFECTED BY INTEREST RATE CHANGES.

     Our operating results depend, in part, on the performance of our investment
portfolio. Our investment portfolio contains interest rate sensitive
instruments, such as bonds, which may be adversely affected by changes in
interest rates. Changes in interest rates could also have an adverse effect on
our investment income and results of operations.

     Interest rates are highly sensitive to many factors, including governmental
monetary policies, domestic and international economic and political conditions
and other factors beyond our control. Any measures we take that are intended to
manage the risks of operating in a changing interest rate environment may not
effectively mitigate such interest rate sensitivity.

RISKS RELATED TO THIS OFFERING OF NOTES

BECAUSE OF OUR HOLDING COMPANY STRUCTURE, THE NOTES WILL BE SUBORDINATED TO ALL
INDEBTEDNESS AND LIABILITIES OF OUR SUBSIDIARIES.

     We are a holding company and conduct substantially all of our operations
through our subsidiaries. As a result, claims of holders of the notes will be
effectively subordinated to the indebtedness and other liabilities of our
subsidiaries. Therefore, in the event of the bankruptcy, liquidation or
dissolution of a subsidiary, following payment by such subsidiary of its
liabilities, such subsidiary may not have sufficient assets remaining to make
payments to us as a shareholder or otherwise. As of March 31, 2003, the
liabilities of our subsidiaries that are structurally senior to the notes would
have been approximately $653.5 million (including reinsurance liabilities).

     In the event of a default under our subsidiaries' letter of credit
facilities, their creditors could elect to declare all amounts borrowed,
together with accrued and unpaid interest and other fees, to be due and payable

                                        15
prior to any distributions by any such subsidiaries to us to pay interest or
principal due on the notes. In addition, if we caused a subsidiary to pay a
dividend to enable us to make payments in respect of the notes, and such
transfer were deemed a fraudulent transfer or unlawful distribution, the holders
of the notes could be required to return the payment to (or for the benefit of)
the creditors of such subsidiary. This would adversely affect our ability to
make payments to holders of the notes.

WE WILL DEPEND UPON DIVIDENDS FROM MONTPELIER RE TO MEET OUR OBLIGATIONS UNDER
THE NOTES.

     Dividends and other permitted distributions from Montpelier Re are expected
to be our sole source of funds to meet ongoing cash requirements, including debt
service payments and other expenses. Bermuda law and regulations, including, but
not limited to Bermuda insurance regulation, limit the declaration and payment
of dividends and the making of distributions by Montpelier Re to us and in
certain cases requires the prior notification to, or the approval of, the
Bermuda Monetary Authority. Subject to such laws, the directors of Montpelier Re
have the authority to determine whether or not to declare dividends to us. The
maximum amount of dividends that could have been paid by Montpelier Re to us at
March 31, 2003, without such notification, was $255.7 million. There is no
assurance that dividends will be declared or paid in the future.

     The inability of Montpelier Re to pay dividends to us in an amount
sufficient to enable us to meet our cash requirements at the holding company
level could have a material adverse effect on our operations and ability to
satisfy our obligations to you under the notes. See "Dividend Policy" and
"Regulation -- Bermuda Insurance Regulation -- Minimum Solvency Margin and
Restrictions on Dividends and Distributions" and "-- Certain Bermuda Law
Considerations."

     Montpelier Re has no obligation to pay interest or principal due on the
notes or to make funds available to us for that purpose, whether in the form of
loans, dividends or other distributions. Accordingly, our ability to repay the
notes at maturity or otherwise may be dependent upon our ability to refinance
the notes, which will in turn depend, in large part, upon factors beyond our
control.

OUR OPTION TO REDEEM THE NOTES IN CERTAIN CIRCUMSTANCES MAY ADVERSELY AFFECT
YOUR RETURN ON THE NOTES.

     The notes will be redeemable at our option if certain tax events occur.
Redemption may occur at a time when prevailing interest rates are relatively
low. If this happens, you generally will not be able to reinvest the redemption
proceeds in a comparable security at an effective interest rate as high as that
of the redeemed notes. See "Description of the Notes -- Redemption for Tax
Purposes" for a more detailed discussion of redemption of the notes.

THERE CURRENTLY EXISTS NO MARKET FOR THE NOTES AND WE CANNOT ASSURE YOU THAT AN
ACTIVE TRADING MARKET WILL DEVELOP.

     Prior to this offering, there has been no market for the notes. We have
been informed by the underwriters that they intend to make a market in the notes
after the offering is completed. However, the underwriters may cease their
market-making at any time without notice. The liquidity of the trading market in
the notes, and the market price quoted for the notes, may be adversely affected
by many factors, including changes in the overall market for debt securities
generally or the interest of securities dealers in making a market in the notes
and by changes in our financial performance or prospects or in the prospects for
companies in our industry generally.

YOU MAY HAVE DIFFICULTY EFFECTING SERVICE OF PROCESS ON US OR ENFORCING
JUDGMENTS AGAINST US IN THE UNITED STATES.

     We are incorporated pursuant to the laws of Bermuda and our business is
based in Bermuda. In addition, certain of our directors and officers reside
outside the United States, and all or a substantial portion of our

                                        16
assets and the assets of such persons are located in jurisdictions outside the
United States. As such, we have been advised that there is doubt as to whether:

     - A holder of the notes would be able to enforce, in the courts of Bermuda,
       judgments of U.S. courts against persons who reside in Bermuda based upon
       the civil liability provisions of the United States federal securities
       laws;

     - A holder of the notes would be able to enforce, in the courts of Bermuda,
       judgments of U.S. courts based upon the civil liability provisions of the
       U.S. federal securities laws;

     - A holder of the notes would be able to bring an original action in the
       Bermuda courts to enforce liabilities against us or our directors and
       officers, as well as the experts named in this prospectus, who reside
       outside the United States based solely upon U.S. federal securities laws.

     Further, we have been advised that there is no treaty in effect between the
United States and Bermuda providing for the enforcement of judgments of U.S.
courts, and there are grounds upon which Bermuda courts may not enforce
judgments of U.S. courts. Because judgments of U.S. courts are not automatically
enforceable in Bermuda, it may be difficult for you to recover against us based
upon such judgments.

RISKS RELATED TO TAXATION

WE AND OUR SUBSIDIARIES MAY BE SUBJECT TO U.S. TAX.

     We and Montpelier Re are organized under the laws of Bermuda and believe,
based on the advice of counsel, that we operate in a manner such that we are not
subject to U.S. taxation on our income (other than excise taxes on insurance and
reinsurance premium income attributable to insuring or reinsuring U.S. risks and
U.S. withholding taxes on certain U.S. source investment income). However,
because there is considerable uncertainty as to the activities which constitute
being engaged in a trade or business within the United States, there can be no
assurances that the U.S. Internal Revenue Service will not contend successfully
that we or Montpelier Re are engaged in a trade or business in the United
States. If we or Montpelier Re were considered to be engaged in a business in
the United States, we could be subject to U.S. corporate income and branch
profits taxes on the portion of our earnings effectively connected to such U.S.
business.

     Personal Holding Company Rules.  We or a subsidiary might be subject to
U.S. tax on a portion of our income that is earned from U.S. sources if we or a
subsidiary are considered a personal holding company ("PHC") for U.S. federal
income tax purposes. This status will depend on the portion of our shareholder
base, based on value that consists of or is deemed to consist of individuals and
the percentage of our income, or the income of our subsidiaries, as determined
for U.S. federal income tax purposes, that consists of "personal holding company
income." We believe, based on the advice of counsel, that neither we nor any of
our subsidiaries will be considered a PHC, but we cannot assure you that this
will be the case or that the amount of U.S. tax that would be imposed if it were
not the case would be immaterial.

WE MAY BECOME SUBJECT TO U.S. TAX LEGISLATION CONCERNING BERMUDA CORPORATIONS.

     Congress has been discussing legislation intended to eliminate certain
perceived tax advantages of (1) U.S. companies that have changed their legal
domiciles to Bermuda and (2) U.S. insurance companies having Bermuda affiliates.
These legislative proposals do not contain provisions that would adversely
affect companies that were formed outside the United States and do not have any
U.S. affiliates. It is difficult to predict what any final legislation will look
like given the current political environment. Therefore, while currently there
is no specific legislative proposal which, if enacted, would adversely affect
us, Montpelier Re or our securityholders, broader-based legislative proposals
could emerge that could conceivably have an adverse impact on us, Montpelier Re
or our securityholders.

                                        17
WE MAY BECOME SUBJECT TO TAXES IN BERMUDA AFTER 2016, WHICH MAY HAVE A MATERIAL
ADVERSE EFFECT ON OUR FINANCIAL CONDITION.

     The Bermuda Minister of Finance, under the Exempted Undertaking Tax
Protection Act 1966, as amended, of Bermuda, has given us assurance that if any
legislation is enacted in Bermuda that would impose tax on profits or income, or
computed on any capital asset, gain or appreciation, or any tax in the nature of
estate duty or inheritance tax, then the imposition of any such tax will not be
applicable to us or any of our operations or our shares, debentures or other
obligations until March 28, 2016. We cannot assure you that we will not be
subject to any Bermuda tax after that date.

THE IMPACT OF BERMUDA'S LETTER OF COMMITMENT TO THE ORGANIZATION FOR ECONOMIC
COOPERATION AND DEVELOPMENT TO ELIMINATE HARMFUL TAX PRACTICES IS UNCERTAIN AND
COULD ADVERSELY AFFECT OUR TAX STATUS IN BERMUDA.

     The Organization for Economic Cooperation and Development, which is
commonly referred to as the OECD, has published reports and launched a global
dialogue among member and non-member countries on measures to limit harmful tax
competition. These measures are largely directed at counteracting the effects of
tax havens and preferential tax regimes in countries around the world. In the
OECD's report dated June 26, 2000, Bermuda was not listed as a tax haven
jurisdiction because it had previously signed a letter committing itself to
eliminate harmful tax practices by the end of 2005 and to embrace international
tax standards for transparency, exchange of information and the elimination of
any aspects of the regimes for financial and other services that attract
business with no substantial domestic activity. We are not able to predict what
changes will arise from the commitment or whether such changes will subject us
to additional taxes.

RISKS RELATED TO REGULATION

IF WE BECOME SUBJECT TO INSURANCE STATUTES AND REGULATIONS IN JURISDICTIONS
OTHER THAN BERMUDA OR THERE IS A CHANGE TO BERMUDA LAW OR REGULATIONS OR
APPLICATION OF BERMUDA LAW OR REGULATIONS, THERE COULD BE A SIGNIFICANT AND
NEGATIVE IMPACT ON OUR BUSINESS.

     Montpelier Re, our wholly owned operating subsidiary, is a registered
Bermuda Class 4 insurer. As such, it is subject to regulation and supervision in
Bermuda. Bermuda insurance statutes, regulations and policies of the Bermuda
Monetary Authority require Montpelier Re to, among other things:

     - Maintain a minimum level of capital, surplus and liquidity;

     - Satisfy solvency standards;

     - Restrict dividends and distributions;

     - Obtain prior approval of ownership and transfer of shares;

     - Maintain a principal office and appoint and maintain a principal
       representative in Bermuda; and

     - Provide for the performance of certain periodic examinations of
       Montpelier Re and its financial condition.

     These statutes and regulations may, in effect, restrict our ability to
write reinsurance policies, to distribute funds and to pursue our investment
strategy.

     We do not presently intend that Montpelier Re will be admitted to do
business in any jurisdiction in the United States, the United Kingdom or
elsewhere (other than Bermuda). However, we cannot assure you that insurance
regulators in the United States, the United Kingdom or elsewhere will not review
the activities of Montpelier Re or related companies or its agents and claim
that Montpelier Re is subject to such jurisdiction's licensing requirements. If
any such claim is successful and Montpelier Re must obtain a license, we may be
subject to taxation in such jurisdiction. In addition, Montpelier Re is subject
to indirect regulatory requirements imposed by jurisdictions that may limit its
ability to provide insurance or reinsurance. For example, Montpelier Re's
ability to write insurance or reinsurance may be subject, in certain cases, to
arrangements satisfactory to applicable regulatory bodies. Proposed legislation
and regulations may have the

                                        18
effect of imposing additional requirements upon, or restricting the market for,
alien insurers or reinsurers with whom domestic companies place business.

     Generally, Bermuda insurance statutes and regulations applicable to
Montpelier Re are less restrictive than those that would be applicable if it
were governed by the laws of any state in the United States. In the past, there
have been congressional and other initiatives in the United States regarding
proposals to supervise and regulate insurers domiciled outside the United
States. If in the future we become subject to any insurance laws of the United
States or any state thereof or of any other jurisdiction, we cannot assure you
that we would be in compliance with those laws or that coming into compliance
with those laws would not have a significant and negative effect on our
business.

     The process of obtaining licenses is very time consuming and costly, and we
may not be able to become licensed in a jurisdiction other than Bermuda, should
we choose to do so. The modification of the conduct of our business resulting
from our becoming licensed in certain jurisdictions could significantly and
negatively affect our business. In addition, our inability to comply with
insurance statutes and regulations could significantly and adversely affect our
business by limiting our ability to conduct business as well as subjecting us to
penalties and fines.

     Because we are incorporated in Bermuda, we are subject to changes of
Bermuda law and regulation that may have an adverse impact on our operations,
including imposition of tax liability or increased regulatory supervision. In
addition, we will be exposed to changes in the political environment in Bermuda.
The Bermuda insurance and reinsurance regulatory framework recently has become
subject to increased scrutiny in many jurisdictions, including in the United
States and in various states within the United States. We cannot predict the
future impact on our operations of changes in the laws and regulations to which
we are or may become subject.

                                        19
FORWARD-LOOKING STATEMENTS

     Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus may include
forward-looking statements which reflect our current views with respect to
future events and financial performance. These statements include
forward-looking statements both with respect to us specifically and the
insurance sector in general. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Statements that include the words "expect," "intend," "plan," "believe,"
"project," "anticipate," "will" and similar statements of a future or
forward-looking nature identify forward-looking statements for purposes of the
federal securities laws or otherwise.

     All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that could
cause our actual results to differ materially from those indicated in these
statements. Important events that could cause the actual results to differ
include, but are not necessarily limited to: our short operating history; our
dependence on principal employees; the cyclical nature of the reinsurance
business; the levels of new and renewal business achieved; the possibility of
severe or unanticipated losses from natural or man-made catastrophes; the impact
of terrorist activities on us or the economy; our reliance on reinsurance
brokers; the impact of currency exchange rates and interest rates on our
investment results; competition in the reinsurance industry; and rating agency
policies and practices. In addition, due in part to these assumptions and
factors, any projections of growth in our gross premiums written, net premiums
earned, revenues or other similar financial information would not necessarily
result in commensurate levels of underwriting and operating profits. The
Company's forward-looking statements concerning market fundamentals could be
affected by changes in demand, pricing and policy term trends and competition.
These and other events that could cause actual results to differ are discussed
in detail in the "Risk Factors" section. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
dates on which they are made.

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

                                        20
USE OF PROCEEDS

     We estimate the net proceeds from this offering, after deducting the
underwriting discounts and commissions and our estimated offering expenses, will
be approximately $     million. We intend to use a portion of the net proceeds
from this offering to repay $150 million in aggregate principal amount
outstanding under our existing term loan facility and to use the remaining
proceeds for general corporate purposes. This debt is due in December 2004 and
currently bears interest at LIBOR plus an applicable margin which is effectively
hedged into a fixed rate of 2.38% through an interest rate swap agreement which
will terminate upon repayment of the debt. Following this offering, we also
intend to terminate our existing revolving credit facility. There are currently
no amounts outstanding under this facility.

                                        21
CAPITALIZATION

     The following table sets forth our combined capitalization on an actual
basis as of March 31, 2003, and as adjusted to give effect to the sale of the
notes offered by us in this offering, after deducting estimated underwriting
discounts and commissions and our estimated offering expenses.

     You should read this table in conjunction with "Selected Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes that are included
elsewhere in this prospectus.
AS OF MARCH 31, 2003
                                                              ------------------------
                                                                               AS
                                                                ACTUAL     ADJUSTED(1)
                                                              ----------   -----------
                                                                   (IN THOUSANDS)
LONG-TERM DEBT:
    % Senior Notes due......................................  $        0   $
  Bank debt(2)..............................................     150,000            0
                                                              ----------   ----------
  Total long-term debt......................................  $  150,000   $

SHAREHOLDERS' EQUITY:
  Common shares.............................................  $      106   $
  Additional paid-in capital................................   1,127,498
  Accumulated other comprehensive income....................      34,701
  Retained earnings.........................................     194,268
                                                              ----------   ----------
  Total shareholders' equity................................   1,356,573
                                                              ----------   ----------
TOTAL CAPITALIZATION........................................  $1,506,573   $
                                                              ==========   ==========
---------------

(1) As Adjusted column reflects the deduction of estimated underwriting
    discounts and commissions and our estimated offering expenses.

(2) We are a party to a $150 million term loan facility with Bank of America,
    N.A. and a syndicate of commercial banks. As of March 31, 2003, we had
    borrowed all $150 million under this facility. We intend to use the proceeds
    from this offering to repay all outstanding amounts under, and terminate,
    this term loan facility.

                                        22
SELECTED FINANCIAL DATA

     The following table sets forth our summary historical financial information
for the periods ended and as of the dates indicated. Montpelier Re commenced
operations on December 16, 2001. The summary income statement data for the
period from inception (November 14, 2001) through December 31, 2001 and for the
year ended December 31, 2002 and the summary balance sheet data as at December
31, 2002 are derived from our audited financial statements included elsewhere in
this prospectus, which have been prepared in accordance with U.S. GAAP and have
been audited by PricewaterhouseCoopers (Bermuda), our independent auditors. The
summary income statement data for the three months ended March 31, 2003 and
March 31, 2002 and the summary balance sheet data as at March 31, 2003 are
derived from our unaudited financial statements included elsewhere in this
prospectus. The unaudited financial statements have been prepared on the same
basis as our audited financial statements and, in our opinion, include all
adjustments, consisting only of normal recurring adjustments, which we consider
necessary for a fair presentation of our results of operations and financial
position for these periods. These historical results are not necessarily
indicative of results to be expected from any future period, and the results
presented below are not necessarily indicative of our full year performance. You
should read the following summary financial information along with the
information contained in this prospectus, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and related notes included elsewhere in this prospectus.
THREE MONTHS ENDED                     PERIODS ENDED
                                                       MARCH 31,                         DECEMBER 31,
                                           ---------------------------------   ---------------------------------
                                                2003              2002              2002             2001(1)
                                           ---------------   ---------------   ---------------   ---------------
                                            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS AND PERCENTAGES)
                                                      (UNAUDITED)
SUMMARY INCOME STATEMENT DATA:
  Gross premiums written.................    $   366,563       $   203,679       $   607,688       $       150
  Reinsurance premiums ceded(2)..........        (34,267)          (14,320)          (41,779)               --
                                             -----------       -----------       -----------       -----------
  Net premiums written...................        332,296           189,359           565,909               150
  Change in net unearned premiums........       (147,641)         (152,748)         (235,983)             (142)
                                             -----------       -----------       -----------       -----------
  Net premiums earned....................    $   184,655       $    36,611       $   329,926       $         8
  Net investment income..................         11,684             7,633            39,748             1,139
  Net realized gains on investments......          4,681               484             7,716                --
  Net foreign exchange gains.............          1,359                --             1,681                --
  Loss and loss adjustment expenses......        (47,690)          (14,367)         (133,310)               --
  Acquisition costs......................        (40,998)           (6,467)          (62,926)               (1)
  General and administrative expenses....         (8,884)           (4,240)          (26,278)           (1,207)
  Interest on long-term debt.............           (965)             (995)           (4,460)             (236)
  Fair value of warrants issued..........             --                --                --           (61,321)
                                             -----------       -----------       -----------       -----------
Income (loss) before taxes...............    $   103,842       $    18,659       $   152,097       $   (61,618)
                                             -----------       -----------       -----------       -----------
Net income (loss)........................    $   103,841       $    18,659       $   152,045       $   (61,618)
                                             ===========       ===========       ===========       ===========
Basic earnings (loss) per share..........    $      1.64       $      0.36       $      2.76       $     (1.18)
Diluted earnings (loss) per share........    $      1.56       $      0.36       $      2.74       $     (1.18)
Basic weighted average common shares
  outstanding............................     63,392,600        52,440,000        55,178,150        52,440,000
Diluted weighted average common shares
  outstanding............................     66,479,220        52,440,000        55,457,141        52,440,000
SELECTED RATIOS (BASED ON U.S. GAAP
  INCOME STATEMENT DATA):
Loss ratio(3)............................           25.8%             39.2%             40.4%              n/a
Acquisition costs ratio(4)...............           22.2              17.7              19.1               n/a
General and administrative expense
  ratio(5)...............................            4.8              11.6               7.9               n/a
                                             -----------       -----------       -----------       -----------
Combined ratio(6)........................           52.8%             68.5%             67.4%              n/a
                                             -----------       -----------       -----------       -----------
23
AS AT                  AS AT
                                                               MARCH 31, 2003        DECEMBER 31, 2002
                                                              -----------------     --------------------
                                                              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE
                                                                       AMOUNTS AND PERCENTAGES)
                                                                 (UNAUDITED)
SUMMARY BALANCE SHEET DATA:
ASSETS
  Fixed maturities, equities, cash and cash equivalents.....     $1,738,156              $1,581,461
  Reinsurance premiums receivable...........................        277,407                 147,208
  Other assets..............................................        138,925                 105,249
                                                                 ----------              ----------
Total assets................................................     $2,154,488              $1,833,918
                                                                 ==========              ==========
LIABILITIES
  Loss and loss adjustment expense reserves.................     $  183,621              $  146,115
  Unearned premium..........................................        415,730                 241,000
  Long-term debt............................................        150,000                 150,000
  Other liabilities.........................................         48,564                  44,268
                                                                 ----------              ----------
Total liabilities...........................................     $  797,915              $  581,383
                                                                 ==========              ==========
Total shareholders' equity..................................     $1,356,573              $1,252,535
                                                                 ==========              ==========
Total liabilities and shareholders' equity..................     $2,154,488              $1,833,918
                                                                 ==========              ==========

PER SHARE DATA (BASED ON U.S. GAAP BALANCE SHEET DATA)
Book value per share (7)....................................     $    21.40              $    19.76
Fully converted book value per share (8)....................     $    20.81              $    19.39
---------------

(1) The financial information for this period reflects our results from November
    14, 2001, the date of incorporation, to December 31, 2001.

(2) The syndicates with which we have qualifying quota share contracts have
    purchased retrocessional cover, which inures to our benefit. In 2003 we have
    also purchased retrocessional protection on our own account for our own
    direct insurance and facultative reinsurance programs.

(3) The loss ratio is calculated by dividing loss and loss adjustment expenses
    by net premiums earned.

(4) The acquisition costs ratio is calculated by dividing acquisition costs by
    net premiums earned.

(5) The general and administrative expense ratio is calculated by dividing
    general and administrative expenses by net premiums earned.

(6) The combined ratio is the sum of the loss ratio, the acquisition costs ratio
    and the general and administrative expense ratio.

(7) Book value per share is based on total shareholders' equity divided by basic
    shares outstanding of 63,392,600 as at March 31, 2003 and December 31, 2002.

(8) Fully converted book value per share is a non-GAAP measure calculated based
    on total shareholders' equity plus the assumed proceeds from the exercise of
    dilutive options and warrants in the amount of $168.1 million, divided by
    73,261,760 fully converted shares. We believe that this is the best single
    measure of the return made by our shareholders as it takes into account the
    effect of all dilutive securities.

                                        24
MANAGEMENT'S DISCUSSION AND ANALYSIS
                  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    OVERVIEW

     Montpelier Re Holdings Ltd. and Montpelier Re were formed on November 14,
2001, and Montpelier Re commenced operations on December 16, 2001. Neither
company had any prior operating history. Accordingly, there are limited
meaningful comparisons between 2002 and 2001. The following is a discussion and
analysis of our results of operations for the three months ended March 31, 2003
and 2002 and for the year ended December 31, 2002 and, if relevant, for the
period from November 14, 2001, the date of incorporation, to December 31, 2001.
The following also includes a discussion of our financial condition at March 31,
2003. This discussion and analysis should be read in conjunction with the
unaudited consolidated financial statements and related notes thereto for the
three months ended March 31, 2003 and 2002 and the audited combined financial
statements and related notes thereto for the periods ended December 31, 2002 and
2001 included in this prospectus.

     This prospectus contains forward-looking statements that are not historical
facts, including statements about the Company's beliefs and expectations. These
statements are based upon current plans, estimates and projections. Our actual
results may differ materially from those projected in these forward-looking
statements as a result of various factors and therefore undue reliance should
not be placed on them. See "Forward-Looking Statements" and "Risk Factors"
contained elsewhere in this prospectus.

     We derive our revenues primarily from premiums from our insurance and
reinsurance contracts and, to a lesser extent, income from our investment
portfolio. Premiums are a function of the number and type of contracts we write,
as well as prevailing market prices. Renewal dates for reinsurance business
tends to be concentrated at the beginning of quarters, and the timing of premium
written varies by line of business. Most property catastrophe business is
written in the January 1, April 1 and July 1 renewal periods, while the property
specialty and other specialty lines are written throughout the year. Written
premiums are generally lower during the fourth quarter of the year as compared
to other quarters. Gross premiums written for pro-rata contracts, including QQS
programs, are initially booked as estimated and are adjusted as actual results
are reported by the cedents during the period. Earned premiums do not
necessarily follow the written premium pattern as certain written premiums are
earned ratably over the contract term, which ordinarily is twelve months,
although many pro-rata contracts are written on a risks attaching basis and are
generally earned over a 24 month period, consistent with industry practice.
Earned premiums are affected by our growing book of business; as written premium
levels increase, earned premium levels will correspondingly increase over the
earning period. Premiums are generally due in installments.

     The following are the main categories of gross premiums written:

     Property Specialty -- Contracts in this category include risk excess of
loss, property pro-rata and direct insurance and facultative reinsurance
business. Risk excess of loss reinsurance protects insurance companies on their
primary insurance risks and facultative reinsurance transactions on a "single
risk" basis. Coverage is usually triggered by a large loss sustained by an
individual risk rather than by smaller losses which fall below the specified
retention of the reinsurance contract.

     We also write direct insurance and facultative reinsurance coverage on
commercial property risks where we assume all or part of a risk under a single
insurance contract. We generally write such coverage on an excess of loss basis.

     We also write property pro-rata reinsurance contracts which are comprised
of property risk programs written on a proportional basis rather than on an
excess of loss basis.

     Property Catastrophe -- These contracts are typically "all risk" in nature,
providing protection against losses from earthquakes and hurricanes, as well as
other natural and man-made catastrophes such as floods, tornadoes, fires and
storms. The predominant exposures covered are losses stemming from property
damage and business interruption coverage resulting from a covered peril.
Certain risks, such as war, nuclear contamination and terrorism, are generally
excluded from these contracts. Property catastrophe reinsurance is
                                        25
written on an excess of loss basis, which provides coverage to primary insurance
companies when aggregate claims and claims expenses from a single occurrence
from a covered peril exceed a certain amount specified in a particular contract.

     To a lesser extent, we also write retrocessional coverage contracts, which
provide reinsurance protection to other reinsurers, also called retrocedents.
Coverage generally provides catastrophe protection for the property portfolios
of other reinsurers. Retrocessional contracts typically carry a higher degree of
volatility than reinsurance contracts as they protect against concentrations of
exposures written by retrocedents, which in turn may experience an aggregation
of losses from a single catastrophic event.

     Qualifying Quota Share -- This category represents whole account quota
share reinsurance to select Lloyd's syndicates. Under QQS contracts, we assume a
specified portion of the risk on a specified coverage in exchange for an equal
proportion of the premiums. Gross premiums written related to QQS arrangements
have been recorded gross of original commissions to the syndicates. This
accounting treatment, when compared to recording such premiums net of original
commissions, has the effect of increasing gross premiums written and increasing
acquisition costs by an equal amount.

     Other Specialty -- Reinsurance contracts of aviation liability, aviation
war, marine, personal accident catastrophe, workers' compensation, terrorism,
casualty and other reinsurance business are included in this category. Marine
and aviation contracts are primarily written on a retrocessional excess of loss
basis.

     Since the classes of business we underwrite have large aggregate exposures
to natural and man-made disasters, we expect that our claims experience will
predominantly be the result of relatively few events of significant severity.
The occurrence of claims from catastrophic events is likely to result in
substantial volatility in, and could have a material adverse effect on, our
financial condition and results of operations and our ability to write new
business. This volatility will affect our results in the period that the loss
occurs because accounting principles do not permit reinsurers to reserve for
such catastrophic events until they occur. Catastrophic events of significant
magnitude have historically been relatively infrequent, although we believe the
property catastrophe reinsurance market has experienced a high level of
worldwide catastrophic losses in terms of both frequency and severity from 1987
to the present as compared to prior years. We also expect that increases in the
values and concentrations of insured property will increase the severity of such
occurrences in the future. We seek to reflect these trends as we price our
reinsurance.

     In October 2002, we completed an initial public offering of 10,952,600
common shares. Our common shares began trading on the New York Stock Exchange on
October 10, 2002. The offering raised approximately $201.2 million in net
proceeds, substantially all of which was contributed to our principal operating
subsidiary, Montpelier Re, for use in its underwriting operations.

     Income from our investment portfolio is primarily comprised of interest on
fixed maturity investments net of investment expenses, and to a lesser extent
from realized gains and losses on the sale of investments.

     Our expenses consist primarily of three types: loss and loss adjustment
expenses, acquisition costs and general and administrative expenses. In the
period ended December 31, 2001, our first period of operations, we also incurred
nonrecurring organizational expenses and an expense associated with the issuance
of warrants to our founders.

     Loss and loss adjustment expenses are a function of the amount and type of
insurance and reinsurance contracts we write and of the loss experience of the
underlying risks. We estimate loss and loss adjustment expenses based on an
actuarial analysis of the estimated losses we expect to be reported on contracts
written. Under U.S. GAAP, we reserve for catastrophic losses as soon as a loss
event is known to have occurred. The ultimate loss and loss adjustment expenses
will depend on the actual costs to settle claims. We will increase or decrease
our initial loss estimates as actual claims are reported and settled. Our
ability to estimate loss and loss adjustment expenses accurately at the time of
pricing our contracts will be a critical factor in determining our
profitability.

     Acquisition costs consist principally of brokerage expenses and commissions
that represent a percentage of the premiums on reinsurance contracts written,
and vary depending upon the amount and types of contracts

                                        26
written, and to a lesser extent ceding commissions paid to ceding insurers and
excise taxes. Under certain contracts we may also pay profit commission to
cedents. This will vary depending on the loss experience on the contract.

     General and administrative expenses consist primarily of salaries,
benefits, professional fees and related costs, including costs associated with
awards under our bonus plan, performance unit plan and our share option plan.
Other than bonuses and performance units, expenses are primarily fixed in nature
and do not vary with the amount of premiums written or losses incurred.

     At the discretion of the Compensation and Nominating Committee of the Board
of Directors, the Company has awarded, and will in the future award, performance
units to executive officers and certain other key employees. The ultimate value
of these performance units, which vest at the end of three-year performance
periods, is dependent upon the Company's achievement of specified performance
targets over the course of the overlapping three-year periods and the market
value of the Company's shares at the date of redemption. Performance units are
payable in cash, common stock or a combination of both. The liability is
expensed over the vesting period of the performance units granted. The liability
is recalculated as the relevant financial results and share price of the Company
evolve. Any adjustments are reflected in the income statement in the period in
which they are determined.

     As part of our formation, we granted 2,040,000 share options to our
President and Chief Executive Officer, Anthony Taylor. In September 2002,
510,000 additional options for common shares were granted to other senior
executives. From inception, we have adopted FAS 123 "Accounting for Stock-Based
Compensation," which recommends the recognition of compensation expense for the
fair value of stock compensation awards on the date of grant. The compensation
expense is recognized over the vesting period of each grant, with a
corresponding recognition of the equity expected to be issued in Additional
paid-in capital.

     Our fixed maturity investments are classified as available for sale under
U.S. GAAP and are carried at fair value based on quoted market prices.
Unrealized gains and losses on these investments are included in accumulated
other comprehensive income as a separate component of shareholders' equity. If
management has determined that an investment has sustained an impairment in
value that is determined to be other than temporary, the unrealized loss will be
charged to income in the period it is determined.

     Currently, we have an equity investment in Aspen Insurance Holdings Limited
("Aspen"), the unquoted Bermuda-based holding company of Aspen Insurance UK
Limited ("Aspen Re"). Under U.S. GAAP, such unquoted investments are carried at
estimated fair value. Unrealized gains and losses on these investments are also
included in accumulated other comprehensive income as a separate component of
shareholders' equity.

RESULTS OF OPERATIONS

  FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002

     As we only commenced operations on December 16, 2001, the quarter ended
March 31, 2002 was our first complete quarter of operations. We did not have our
full complement of underwriters in place until the end of the second quarter of
2002 and, therefore, we were unable to fully participate in the January 2002
renewal season. As a result, some comparisons between the March 31, 2003 and
2002 quarters may not be meaningful.

     We ended the first quarter of 2003 with a fully converted book value per
share (as defined below) of $20.81, an increase of $4.28 from March 31, 2002.
This increase of 25.9%, was primarily caused by the following factors:

     - Our participation in the 2003 renewal season as a result of having our
       full complement of underwriters in place;

     - Continued high premium rate levels across the major classes that we
       specialize in; and

                                        27
- Relatively low levels of catastrophe/large loss frequency during the
       calendar year 2002, continuing into the first quarter of 2003.

     In addition, investment income was greater in the first quarter of 2003
compared to the first quarter of 2002 due to the positive effect of a larger
capital base, which outweighed the reduction in interest rates earned by our
fixed maturity portfolio.

     The following table summarizes our book values per common share as at the
periods indicated:
AS AT            AS AT
                                                           MARCH 31, 2003   MARCH 31, 2002
                                                           --------------   --------------
Book value per share(1)..................................      $21.40           $16.53
Fully converted book value per share(2)..................      $20.81           $16.53
---------------

(1) Based on total shareholders' equity divided by basic shares outstanding.

(2) This is a non-GAAP measure, based on total shareholders' equity plus the
    assumed proceeds from the exercise of dilutive options and warrants in the
    amount of $168.1 million, divided by fully converted shares outstanding of
    73,261,760 shares. The Company believes this to be the best single measure
    of the return made by our shareholders as it takes into account the effect
    of all dilutive securities.

     The following table summarizes our financial results for the periods
indicated ($ in millions):
THREE MONTHS     THREE MONTHS
                                                               ENDED            ENDED
                                                           MARCH 31, 2003   MARCH 31, 2002
                                                           --------------   --------------
Net premiums earned......................................      $184.7           $36.6
Investment income and net foreign exchange gains.........        13.0             7.6
Net realized gains on fixed maturity investments.........         4.7             0.5
Loss and loss adjustment expenses........................       (47.7)          (14.4)
Acquisition costs........................................       (41.0)           (6.4)
Interest on long-term debt...............................        (1.0)           (1.0)
General and administrative and tax expenses..............        (8.9)           (4.2)
                                                               ------           -----
Net income...............................................      $103.8           $18.7
                                                               ======           =====
Basic earnings per common share..........................      $ 1.64           $0.36
                                                               ======           =====
Diluted earnings per common share........................      $ 1.56           $0.36
                                                               ======           =====
Gross Premiums Written

     We focus on writing global specialty property and other specialty classes
of insurance and reinsurance business.

     Details of gross premiums written by line of business and by geographic
area of risks insured are provided below ($ in millions):

                         GROSS PREMIUMS WRITTEN BY LINE
THREE MONTHS ENDED   THREE MONTHS ENDED
                                                     MARCH 31, 2003       MARCH 31, 2002
                                                   ------------------   ------------------
Property Specialty...............................  $ 90.6       24.7%   $ 35.6       17.5%
Property Catastrophe.............................   150.8       41.1      79.1       38.8
Qualifying Quota Share...........................    76.4       20.9      73.8       36.2
Other Specialty..................................    48.8       13.3      15.2        7.5
                                                   ------      -----    ------      -----
Total............................................  $366.6      100.0%   $203.7      100.0%
                                                   ======      =====    ======      =====
28
GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA OF RISKS INSURED
THREE MONTHS ENDED   THREE MONTHS ENDED
                                                     MARCH 31, 2003       MARCH 31, 2002
                                                   ------------------   ------------------
Worldwide(1).....................................  $174.0       47.5%   $112.0       55.0%
USA and Canada...................................   133.0       36.3      59.0       29.0
United Kingdom and Ireland.......................    21.3        5.8       5.4        2.6
Worldwide, excluding USA and Canada(2)...........    12.2        3.3       9.1        4.5
Western Europe, excluding the United Kingdom and
  Ireland........................................     9.8        2.7       5.1        2.5
Japan............................................     1.6        0.4       3.1        1.5
Others (1.5% or less)............................    14.7        4.0      10.0        4.9
                                                   ------      -----    ------      -----
Total............................................  $366.6      100.0%   $203.7      100.0%
                                                   ======      =====    ======      =====
---------------

(1) "Worldwide" comprises insurance and reinsurance contracts that insure or
    reinsure risks on a worldwide basis.

(2) "Worldwide, excluding USA and Canada" comprises insurance and reinsurance
    contracts that insure or reinsure risks on a worldwide basis but
    specifically exclude the USA and Canada.

     The QQS contracts and substantial amounts of other lines of business are
worldwide in nature, with the majority of business related to North America and
Europe.

     The volume of gross premiums written has increased during the first quarter
of 2003 compared to the first quarter of 2002, with all four categories of
premium written increasing in volume for the following reasons:

     - Property catastrophe has increased as a proportion by only a small
       amount, but the total volume has increased compared to 2002 as we
       benefited from full participation in the January 1, 2003 renewal season;

     - Property specialty has primarily increased because during the three
       months ended March 31, 2002 our full complement of direct insurance and
       facultative reinsurance underwriters were not yet in place;

     - QQS has decreased as a percentage of gross premiums written but the level
       of premium written has remained consistent with the prior year. We
       renewed the same syndicates as we participated in during 2002; and

     - Other specialty has increased as we wrote more specialty lines during the
       first quarter of 2003, such as casualty and terrorism, compared to the
       comparable period in 2002.

     The proportion of property catastrophe gross premium written as a
percentage of total gross premiums written is greater in the three months ended
March 31, 2003 than we expect it to be for the remainder of the year because
proportionally higher volumes of property catastrophe business are traditionally
written in the first quarter, as compared to other quarters in the fiscal year.
Other lines of business are written throughout the year, with the least amount
of premiums being written during the fourth quarter.

     During the first quarter of 2003, we renewed the three QQS contracts that
we participated in during 2002. The premium levels on a dollar basis are
expected to be broadly consistent with 2002, but will be a lower percentage of
our total premiums written as we focus on our short-tail property specialty
lines, although ultimate premiums written will depend on the volume of premium
actually written by the syndicates.

     As part of a subscription and shareholders agreement with Aspen, a company
in which we have a 7% interest in on an undiluted basis and approximately a 6%
interest on a fully diluted basis, Montpelier Re has agreed to provide quota
share reinsurance to a subsidiary company, Aspen Re, comprising annual assumed
premiums by Montpelier Re of approximately $60.0 million for the underwriting
years 2003, 2004 and 2005. For the three months ended March 31, 2003, $19.0
million was recorded in gross premiums written under these arrangements, which
cover mainly property and casualty risks.

                                        29
We recorded reinstatement premiums of $0.1 million and $nil during the
three months ended March 31, 2003 and 2002, respectively. The lack of
reinstatement premiums was due to the minimal amount of reported losses during
these periods. In the remainder of 2003, we would expect to record greater
levels of reinstatement premiums as additional losses are notified, consistent
with our loss reserve estimates discussed below.

     Reinsurance Premiums Ceded

     Reinsurance premiums ceded for the three months ended March 31, 2003 and
2002 were $34.3 million and $14.3 million, respectively. Reinsurance purchased
by the QQS syndicates with respect to the contracts in which we participate
accounted for 79% of the reinsurance premiums ceded during the three months
ended March 31, 2003. The remainder relates to the purchase of retrocessional
protection on our own account for our direct insurance and facultative
reinsurance programs. We did not purchase retrocessional protection on our own
account during 2002 and the reinsurance premiums ceded for 2002 were
attributable solely to the reinsurance purchased by the QQS syndicates with
respect to the contracts in which we participate. We may purchase further
retrocessional protection for our own account in 2003.

     Reinsurance premiums ceded represented approximately 35.6% and 19.4% of
gross premiums assumed from the QQS syndicates for the three months ended March
31, 2003 and 2002, respectively. The reason for the increase in the ratio of
gross premiums written to reinsurance premiums ceded from 2002 to 2003 is due to
the timing of the purchase of reinsurance by the QQS syndicates. We expect that
this ratio will decrease over 2003 as the majority of reinsurance is purchased
by the QQS syndicates in the earlier months of the year.

     Net Premiums Earned

     Net premiums earned for the three months ended March 31, 2003 and 2002 were
$184.7 million and $36.6 million, respectively. Approximately two-thirds of
earned premium for the three months ended March 31, 2003 relates to the 2002
underwriting year and the remainder to business written in 2003. Net premiums
earned will continue to lag net premium written until the level of premium
written stabilizes at a constant level year on year. As our gross premiums
written continues to increase, our earned premiums are catching up with our
gross premiums written, which has resulted in an earned premium to written
premium ratio of 50.4% for the three months ended March 31, 2003, compared to
18.0% for the same period in 2002. In addition, we continue to write a minority
of our business, principally some underlying business contained in the QQS
contracts, on a risks attaching basis, for which premiums are generally earned
over a longer period. These factors combined will result in an acceleration of
earned premium throughout 2003.

     Loss and Loss Adjustment Expenses

     The underwriting results of an insurance or reinsurance company are often
measured by reference to its loss ratio and expense ratio. The loss ratio is
calculated by dividing loss and loss adjustment expenses incurred (including
estimates for incurred but not reported losses) by net premiums earned. The
expense ratio is calculated by dividing acquisition costs combined with general
and administrative expenses by net premiums earned. The combined ratio is the
sum of the loss ratio and the expense ratio.

     For comparative purposes, our combined ratio and components thereof are set
out below for the periods indicated:
THREE MONTHS     THREE MONTHS
                                                               ENDED            ENDED
                                                           MARCH 31, 2003   MARCH 31, 2002
                                                           --------------   --------------
Loss ratio...............................................       25.8%            39.2%
Expense ratio............................................       27.0%            29.3%
                                                                ----             ----
Combined ratio...........................................       52.8%            68.5%
                                                                ====             ====
Loss and loss adjustment expenses were $47.7 million and $14.4 million for
the three months ended March 31, 2003 and 2002, respectively. Reinsurance
recoveries of $(0.3) million and $0.6 million were netted

                                        30
against loss and loss adjustment expenses for the three months ended March 31,
2003 and 2002, respectively. Reinsurance recoveries for the three months ended
March 31, 2003 related to QQS and the direct and facultative business written.
Reinsurance recoveries for the three months ended March 31, 2002 related to QQS
business written only. We paid losses of $10.1 million for the three months
ended March 31, 2003 and did not pay any losses for the three months ended March
31, 2002.

     The following are our gross and net loss and loss adjustment expense
reserves and our net loss ratios by line of business for the periods indicated
($ in millions):
GROSS LOSS AND LOSS ADJUSTMENT   NET LOSS AND LOSS ADJUSTMENT        NET LOSS RATIOS
                           EXPENSE RESERVES AS AT          EXPENSE RESERVES AS AT      FOR THE THREE MONTHS ENDED
                               MARCH 31, 2003                  MARCH 31, 2003              MARCH 31, 2003(1)
                       ------------------------------   ----------------------------   --------------------------
Property Specialty...              $ 71.6                          $ 70.8                         33.0%
Property
  Catastrophe........                26.6                            26.6                         (4.0)
Qualifying Quota
  Share..............                68.5                            53.0                         60.0
Other Specialty......                16.9                            16.9                         40.0
                                   ------                          ------
Total................              $183.6                          $167.3                         25.8%
                                   ======                          ======
---------------

(1) The gross loss ratio for the three months ended March 31, 2003 was 24.7%.

     At March 31, 2003 net loss and loss adjustment expense reserves included an
estimate for losses incurred but not yet reported of $130.1 million and case
reserves of $37.2 million.
GROSS LOSS AND LOSS
                                ADJUSTMENT            NET LOSS AND LOSS ADJUSTMENT        NET LOSS RATIOS
                          EXPENSE RESERVES AS AT         EXPENSE RESERVES AS AT      FOR THE THREE MONTHS ENDED
                              MARCH 31, 2002                 MARCH 31, 2002              MARCH 31, 2002(1)
                       ----------------------------   ----------------------------   --------------------------
Property Specialty...             $  4.0                         $  4.0                         66.0%
Property
  Catastrophe........                 --                             --                          0.0
Qualifying Quota
  Share..............                9.5                            8.9                         70.0
Other Specialty......                1.5                            1.5                         54.9
                                  ------                         ------
Total................             $ 15.0                         $ 14.4                         39.2%
                                  ======                         ======
---------------

(1) The gross loss ratio for the three months ended March 31, 2002 was 39.2%.

     At March 31, 2002, net loss and loss adjustment expense reserves included
an estimate for losses incurred but not yet reported of $13.7 million and case
reserves of $0.7 million.

     The variation in loss ratios between the first quarter of 2002 compared to
the first quarter of 2003 results from the fact that in 2002 we did not have the
benefit of prior years' loss history on which to base our loss reserve analysis
and, accordingly, we relied more heavily on industry experience and professional
judgement to estimate our loss and loss adjustment expense reserves. The
negative loss ratio for the property catastrophe category in the 2003 quarter
results from reductions in estimates of losses incurred in 2002, combined with
the fact that we were not materially affected by any catastrophes during the
quarter. Overall, the reduction in loss ratios has resulted from the receipt of
additional information from ceding companies during the first quarter of 2003
which indicates that projected losses are lower than originally expected,
combined with the unusually low level of catastrophes incurred. As our business
has developed over 2002 and into 2003, we have supplemented industry information
with our own specific experience in our actuarial analysis which has led to
reduced projections of ultimate losses.

     Minimal losses reported during the first quarter of 2003, combined with
reductions in the estimate of losses incurred in 2002, has resulted in a net
loss ratio to 25.8% for the three months ended March 31, 2003, compared to the
net loss ratio for the three months ended March 31, 2002 of 39.2% and 40.4% for
the year ended December 31, 2002.

                                        31
The following tables set forth a reconciliation of our gross and net loss
and loss adjustment expense reserves by line of business between December 31,
2002 and March 31, 2003 ($ in millions):

GROSS LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
CHANGE IN
                                                   DECEMBER 2002       GROSS PAID LOSSES
                          GROSS LOSS AND LOSS     GROSS INCURRED       ON DECEMBER 2002                         GROSS LOSS AND LOSS
                          ADJUSTMENT EXPENSE    ESTIMATE DURING THE   RESERVES DURING THE   ADDITION OF GROSS   ADJUSTMENT EXPENSE
                            RESERVES AS AT      THREE MONTHS ENDED    THREE MONTHS ENDED    RESERVES FOR THE      RESERVES AS AT
                           DECEMBER 31, 2002      MARCH 31, 2003        MARCH 31, 2003       CURRENT QUARTER      MARCH 31, 2003
                          -------------------   -------------------   -------------------   -----------------   -------------------
Property Specialty......        $ 54.1                $(13.4)               $ (3.4)               $34.3               $ 71.6
Property Catastrophe....          32.5                  (5.7)                 (3.5)                 3.3                 26.6
Qualifying Quota
  Share.................          50.5                  (1.8)                 (3.2)                23.0                 68.5
Other Specialty.........           9.0                   1.0                    --                  6.9                 16.9
                                ------                ------                ------                -----               ------
Total...................        $146.1                $(19.9)               $(10.1)               $67.5               $183.6
                                ======                ======                ======                =====               ======
NET LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
CHANGE IN
                                               DECEMBER 2002 NET    NET PAID LOSSES ON
                          NET LOSS AND LOSS    INCURRED ESTIMATE       DECEMBER 2002                           NET LOSS AND LOSS
                          ADJUSTMENT EXPENSE    DURING THE THREE    RESERVES DURING THE    ADDITION OF NET    ADJUSTMENT EXPENSE
                            RESERVES AS AT        MONTHS ENDED      THREE MONTHS ENDED    RESERVES FOR THE      RESERVES AS AT
                          DECEMBER 31, 2002      MARCH 31, 2003       MARCH 31, 2003       CURRENT QUARTER      MARCH 31, 2003
                          ------------------   ------------------   -------------------   -----------------   -------------------
Property Specialty......        $ 54.1               $(13.4)              $ (3.4)               $33.5               $ 70.8
Property Catastrophe....          32.5                 (5.7)                (3.5)                 3.3                 26.6
Qualifying Quota
  Share.................          33.9                 (0.2)                (3.2)                22.5                 53.0
Other Specialty.........           9.0                  1.0                   --                  6.9                 16.9
                                ------               ------               ------                -----               ------
Total...................        $129.5               $(18.3)              $(10.1)               $66.2               $167.3
                                ======               ======               ======                =====               ======
The first quarter of 2003 includes approximately $18.3 million of positive
development of net losses incurred during 2002, $3.7 million relating to case
reserves and the remainder relating to a release of IBNR. In total, positive
prior period development benefited the loss ratio in the quarter by
approximately 10%.

     The positive development during the three months ended March 31, 2003 of
losses incurred during 2002 primarily resulted from the following:

     - In the Property Specialty Category, reported losses on 2002 occurrences
       during the three months ended March 31, 2003 decreased by $1.6 million.
       Both the frequency and severity of reported losses were significantly
       less than the assumed reporting pattern of losses established for this
       line of business at December 31, 2002. The reduction in reported losses
       during the quarter, combined with the increasing weight placed on our
       actual experience, has led to the reduction in ultimate losses of $13.4
       million or 9% of the total reserve balance at December 31, 2002.

     - Property Catastrophe net loss and loss adjustment expense reserves as at
       December 31, 2002 included approximately $28 million in respect of the
       European floods which occurred in August 2002, and Hurricane Lili which
       occurred in October 2002. The remainder of the Property Catastrophe loss
       and loss adjustment expense reserve balance at December 31, 2002 related
       to several smaller identified loss events and several proportional
       contracts. During the three months ended March 31, 2003, our share of the
       losses reported by ceding companies as at December 31, 2002 declined by
       $2.1 million. The remainder of the positive development in the quarter
       was due to a reduction in anticipated ultimate losses, driven largely by
       the specific declines in our share of reported losses.

     - Due to the potential variability in ultimate premiums and the limited
       availability of underlying loss information relating to the QQS business,
       our actuaries selected an expected loss ratio based on a review of the
       information supplied by cedents and applied it to projected premiums.
       During the three
                                        32
months ended March 31, 2003, we reduced our expected gross loss ratio,
       which resulted in a reduction of $1.8 million in gross loss and loss
       adjustment expense reserves. After taking into account the effect of
       reinsurance purchased by the QQS syndicates with respect to the contracts
       in which we participate, net loss and loss adjustment expense reserves
       declined by $0.2 million for the three months ended March 31, 2003.

     - Based on the information provided to management by cedents and a review
       of our attachment point levels, we increased our expected loss ratio
       during the quarter resulting in an increase of $1.0 million in net loss
       and loss adjustment expense reserves for our Other Specialty business.

     At March 31, 2003, we estimated our gross and net reserves for loss and
loss adjustment expenses using the methodology as outlined in "-- Financial
Condition and Liquidity -- Loss and Loss Adjustment Expense Reserves."

     Other than the matters described above, we did not make any significant
changes in assumptions used in our reserving process during the three months
ended March 31, 2003. Because of our short operating history, our loss
experience is limited and reliable evidence of changes in trends of numbers of
claims incurred, average settlement amounts, numbers of claims outstanding and
average losses per claim will necessarily take years to develop.

     Management has determined that the best estimate for gross loss and loss
adjustment expense reserves at March 31, 2003 and 2002 was $183.6 million and
$15.0 million, respectively. Management's best estimate of a range of likely
outcomes around the estimate at March 31, 2003 is between $166.3 million and
$197.9 million.

     Management has determined that the best estimate for net loss and loss
adjustment expense reserves at March 31, 2003 and 2002 was $167.3 million and
$14.4 million, respectively. Management's best estimate of a range of likely
outcomes around this estimate at March 31, 2003 is between $151.5 million and
$180.8 million.

     The following are management's best estimate of the range of gross and net
loss and loss adjustment expense reserves by line of business ($ in millions):

GROSS LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES AT MARCH 31, 2003
LOW END OF              HIGH END OF
                                                       THE RANGE    SELECTED    THE RANGE
                                                       ----------   --------   -----------
Property Specialty...................................    $ 65.7      $ 71.6      $ 75.2
Property Catastrophe.................................      24.2        26.6        28.6
Qualifying Quota Share...............................      60.8        68.5        71.7
Other Specialty......................................      15.6        16.9        22.4
                                                         ------      ------      ------
Total................................................    $166.3      $183.6      $197.9
                                                         ======      ======      ======
NET LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES AT MARCH 31, 2003
LOW END OF              HIGH END OF
                                                       THE RANGE    SELECTED    THE RANGE
                                                       ----------   --------   -----------
Property Specialty...................................    $ 65.0      $ 70.8      $ 74.5
Property Catastrophe.................................      24.2        26.6        28.6
Qualifying Quota Share...............................      46.7        53.0        55.3
Other Specialty......................................      15.6        16.9        22.4
                                                         ------      ------      ------
Total................................................    $151.5      $167.3      $180.8
                                                         ======      ======      ======
A significant portion of our business is property catastrophe and other
classes with high attachment points of coverage. Reserving for losses in such
programs is inherently complicated in that losses in excess of the

                                        33
attachment level of the Company's policies are characterized by high severity
and low frequency. In addition, as a broker market reinsurer, we must rely on
loss information reported to such brokers by primary insurers who must estimate
their own losses at the policy level, often based on incomplete and changing
information. The ranges above have been actuarially determined based primarily
on industry loss experience. It is conceivable that in view of the high
attachment points of most of our business that there could be no increase in the
reserve for losses already incurred at March 31, 2003, and in addition that
there may be no further losses reported. Therefore, the IBNR element of the
above reserve ranges could turn out to be minimal. By contrast, a minimal amount
of new loss advices could cause our ultimate incurred losses to significantly
exceed the high end of the reserve ranges.

     Net Foreign Exchange Gains

     Net foreign exchange gains result from the effect of the fluctuation in
foreign exchange rates on the translation of foreign currency assets and
liabilities combined with realized gains resulting from the receipt of premium
installments in foreign currencies. Net foreign exchange gains were immaterial
at March 31, 2002 and were included in investment income.

     Underwriting Expenses

     UNDERWRITING EXPENSES consist of acquisition costs and general and
administrative expenses. Acquisition costs and general and administrative
expenses were $49.9 million and $10.7 million for the three months ended March
31, 2003 and 2002, respectively, representing expense ratios of 27.0% and 29.3%,
respectively. General and administrative expenses are comprised of fixed
expenses which include costs for salaries and benefits, stock options and office
and risk management expenses. Variable general and administrative expenses
include expenses related to our performance unit plan and bonuses. Acquisition
costs are generally driven by contract terms and are normally a set percentage
of premiums. If our premiums continue to increase in 2003 as anticipated,
acquisition costs will also increase as these costs vary directly with the level
of premiums written.

     Our premiums earned are increasing at a more rapid pace than general and
administrative expenses, which contributed to the lower expense ratio for the
three months ended March 31, 2003. Other factors could also affect the expense
ratio, including the mix of business written and the amount of acquisition costs
incurred. Partially offsetting this reduction is an increase in the accrual for
profit commission of $5.0 million for the first quarter of 2003, which is
included in acquisition costs. Depending on the development of incurred losses
in upcoming quarters, we may be required to record additional profit commission.
The expense ratio for the three months ended March 31, 2003 would have been 24%
excluding the effect of profit commissions.

     For the three months ended March 31, 2003 and 2002, acquisition costs
incurred were $41.0 million and $6.4 million, respectively, which were
principally due to brokerage commissions for our insurance and reinsurance
contracts of $24.6 million and $3.1 million respectively, commissions paid to
ceding insurers and other costs of $16.4 million and $3.5 million, respectively,
for the three months ended March 31, 2003 and 2002. An accrual was not required
for profit commission for the three months ended March 31, 2002.

     Acquisition costs as a percentage of premiums earned, excluding reinsurance
and profit commission, were 18.8% and 17.1% for the three months ended March 31,
2003 and 2002, respectively. The ratios are consistent between quarters, with
2003 being slightly higher as a result of an overall increase in pro-rata
business written.

                                        34
General and administrative expenses for the periods indicated consisted of
the following ($ in millions):
THREE MONTHS ENDED   THREE MONTHS ENDED
                                             MARCH 31, 2003       MARCH 31, 2002
                                           ------------------   ------------------
Fixed expenses, excluding stock
  options................................         $5.9                 $2.4
Bonus accrual............................          0.6                  0.2
Performance Unit Plan accrual............          1.4                  0.4
Fair value of stock options expense......          1.0                  1.2
                                                  ----                 ----
Total general and administrative
  expenses...............................         $8.9                 $4.2
                                                  ====                 ====
The increase in general and administrative expenses between the first
quarter of 2002 and the first quarter of 2003 relates to increased employment
costs, premises and office expenses, consistent with the increase in staff
numbers. We may be required to employ additional resources and occupy additional
office space as our business grows.

     Net Investment Income

     Net investment income for the three months ended March 31, 2003 and 2002
was $11.7 million and $7.6 million, respectively. Net investment income is
primarily composed of interest on coupon-paying bonds and bank interest,
partially offset by accretion of premium on bonds of $2.7 million and $0.9
million, respectively, and investment management and custodian fees of $0.7
million and $0.5 million, respectively, for the three months ended March 31,
2003 and 2002. Investment management fees are paid to White Mountains Advisors
LLC, a wholly owned indirect subsidiary of White Mountains Insurance Group, one
of our major shareholders. The fees charged are consistent with those that would
be charged by a non-related party.

     Because we provide short-tail insurance and reinsurance coverage for losses
resulting mainly from natural and man-made catastrophes, it is possible that we
could become liable to pay substantial claims on short notice. Accordingly, we
have structured our investment portfolio to preserve capital and provide us with
a high level of liquidity, which means that the large majority of our investment
portfolio contains shorter term fixed maturity investments, such as U.S.
government bonds, corporate bonds and mortgage-backed and asset-backed
securities.

     Based on the weighted average monthly investments held, and including net
unrealized losses of $0.8 million and $13.6 million for the three months ended
March 31, 2003 and 2002, respectively, the total investment return was 1.02%
(annualized return of 4%), and (0.5%), respectively. In 2003, as expected, our
investment income has increased as a result of our larger capital base, driven
by positive cash flow consistent with the low level of paid claims, offset
somewhat by lower interest rates.

     We did not experience any other-than-temporary impairment charges relating
to our portfolio of investments for the three months ended March 31, 2003 and
2002.

     Interest on Long-Term Debt

     For the three months ended March 31, 2003 and 2002, interest expensed
relating to the $150.0 million outstanding balance on our term loan facility was
$1.0 million for each period, representing an average rate of 2.59% and 2.65%,
respectively. The interest rate was fixed at 2.59% for the period from October
21, 2002 until April 21, 2003. From April 21, 2003, the rate was fixed at 2.07%
until July 21, 2003. In order to hedge the interest rate risk of the loan, the
Company entered into an interest rate swap contract with Bank of America, which
became effective April 22, 2003 and expires on December 11, 2004, the last day
of the term loan facility. Under the terms of the interest rate swap contract,
the Company pays interest at a fixed rate of 1.88% plus a margin dependent on
leverage, and receives interest at a variable rate equal to the offshore LIBOR
rate plus an applicable margin. Following this offering, we intend to repay all
amounts outstanding under the term loan facility and terminate such facility and
the related swap contract.

                                        35
We incurred interest expense of $1.0 million for each of the three months
ended March 31, 2003 and 2002, and paid interest of $1.0 million and $1.1
million, respectively.

     Net Realized Investment Gains

     Net realized investment gains for the three months ended March 31, 2003 and
2002 were $4.7 million and $0.5 million, respectively, which were due to gains
realized from the sale of fixed maturity investments.

     Comprehensive Income

     Comprehensive income for the three months ended March 31, 2003 and 2002
were $103.0 million and $5.1 million respectively, which includes the $103.8
million and $18.7 million of net income described above, and $0.8 million and
$13.6 million, respectively, of net unrealized losses on fixed maturity
investments and changes in currency translation adjustments.

     The cost or amortized cost, gross unrealized gains and losses, and carrying
values of our investments as at March 31, 2003 were as follows ($ in thousands):
COST OR       GROSS        GROSS
                                  AMORTIZED    UNREALIZED   UNREALIZED
INVESTMENTS                          COST        GAINS        LOSSES     FAIR VALUE
-----------                       ----------   ----------   ----------   ----------
Fixed maturity investments......  $1,535,755    $32,745       $1,017     $1,567,483
Equity investment (unquoted)....      60,758      2,933           --         63,691
FOR THE YEAR ENDED DECEMBER 31, 2002

     The Company ended the 2002 year with a fully converted book value per share
(as defined below) of $19.39, an increase of $2.98 from December 31, 2001. This
increase of 18.2% resulted from premium rate levels being relatively high across
the major classes that the Company specializes in, together with a relatively
low level of catastrophes during the year. The Company also benefited from a
positive total return of approximately 7.0% on its investment portfolio for the
year ended December 31, 2002.

     As the Company commenced writing business on December 16, 2001, it is not
meaningful to compare 2002 results with 2001 results. We only wrote one
reinsurance policy during 2001 and did not incur any related losses. In
addition, we incurred significant start-up expenses which included the results
of expensing the fair value of warrants issued to the founding shareholders.
Therefore, both the loss ratio and the expense ratio for the period ended
December 31, 2001 are not useful for comparative purposes and are not indicative
of future results.

     Our results for the 2002 year were primarily driven by the following
factors:

     - The extensive and diverse experience of our team of underwriters, who
       have particular expertise in the property and specialty areas;

     - High premium rate levels coupled with the relatively low levels of
       catastrophe/large loss frequency;

     - Our superior service capabilities driven by our investment in operational
       and modeling technologies;

     - The existence of a substantial capital base, with approximately $1
       billion raised from our initial capitalization in 2001, combined with an
       additional $201.2 million from the successful completion of our Initial
       Public Offering in October 2002; and

     - Our A.M. Best financial strength rating.

                                        36
The following table summarizes our book values per common share as at
December 31, 2002:
Book value per share(1).....................................  $19.76
Fully converted book value per share(2).....................  $19.39
---------------

(1) Based on total shareholders' equity divided by basic shares outstanding.

(2) This is a non-GAAP measure, based on total shareholders' equity plus the
    assumed proceeds from the exercise of dilutive options and warrants in the
    amount of $168.1 million, divided by fully converted shares outstanding of
    73,261,760 shares. The Company believes this to be the best single measure
    of the return made by our shareholders as it takes into account the effect
    of all dilutive securities.

    Gross Premiums Written

     Gross premiums written were $607.7 million for the year ended December 31,
2002. Details of gross premiums written by line of business and by geographic
area of risk insured for the year ended December 31, 2002 are provided below ($
in millions):

                         GROSS PREMIUMS WRITTEN BY LINE
YEAR ENDED
                                                              DECEMBER 31, 2002
                                                              -----------------
Property Specialty..........................................  $230.3      37.9%
Property Catastrophe........................................   141.4      23.3
Qualifying Quota Share......................................   171.7      28.2
Other Specialty.............................................    64.3      10.6
                                                              ------     -----
Total.......................................................  $607.7     100.0%
                                                              ======     =====
GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA OF RISKS INSURED
YEAR ENDED
                                                              DECEMBER 31, 2002
                                                              -----------------
Worldwide(1)................................................  $306.4      50.4%
USA and Canada..............................................   207.4      34.1
Japan.......................................................    23.3       3.8
Western Europe, excluding the United Kingdom and Ireland....    17.8       2.9
United Kingdom and Ireland..................................    11.8       1.9
Worldwide, excluding USA and Canada(2)......................    11.4       1.9
Others (1.5% or less).......................................    29.6       5.0
                                                              ------     -----
Total.......................................................  $607.7     100.0%
                                                              ======     =====
---------------

(1) "Worldwide" comprises insurance and reinsurance contracts that insure or
    reinsure risks on a worldwide basis.

(2) "Worldwide, excluding USA and Canada" comprises insurance and reinsurance
    contracts that insure or reinsure risks on a worldwide basis but
    specifically exclude the USA and Canada.

     The QQS contracts and substantial amounts of other lines of business are
worldwide in nature, with the majority of business related to North America and
Europe.

     During the year ended December 31, 2002, we recorded reinstatement premiums
on outstanding losses of approximately $4.7 million, primarily due to reinstated
coverages on assumed contracts impacted by losses arising from the flooding
which occurred in central Europe in August 2002 ("European floods"). The
reinstatement premiums are principally included in the property catastrophe
category, with the remainder in

                                        37
the property specialty and other specialty categories. Additional reinstatement
premiums may be recorded in future periods as additional losses are notified,
consistent with our loss reserve estimates discussed below.

     The QQS business incepting in the year ended December 31, 2002 is estimated
on the basis of projections for the twelve months of 2002 supplied by the
underlying syndicates, adjusted for actual reported results from the underlying
syndicates for the nine months ended September 30, 2002. Estimated annual
premiums can change based on revised projections supplied by the underlying
syndicates. The resulting changes in accrued premium are recorded in the period
in which they are determined.

     Reinsurance Premiums Ceded

     Reinsurance premiums ceded were $41.8 million for the year ended December
31, 2002. Reinsurance premiums ceded are attributable to the reinsurance
purchased by the QQS syndicates with respect to the contracts in which we
participate. Reinsurance premiums ceded represented approximately 24% of gross
premiums written from the syndicates for the year ended December 31, 2002. This
reinsurance inures to the benefit of the Company and will potentially result in
lower loss ratio volatility in the QQS book of business than in the remainder of
the book of business over which reinsurance protection was not purchased in
2002. We remain liable to the extent that any of the underlying reinsurers fails
to pay our claims; however, we have reviewed the financial condition of the
reinsurers on the QQS syndicates and do not consider it necessary to write off
any reinsurance recoverables.

     Net Premiums Earned

     Net premiums earned for the year ended December 31, 2002 were $329.9
million. In the fourth quarter we experienced an acceleration of premiums earned
as the majority of our business is written during the January 1, April 1 and
July 1 renewal periods and, therefore, it is reasonable to anticipate that the
net premiums earned would generally increase over the course of our first full
fiscal year as premiums written in earlier months are increasingly earned. We
also did not have our full complement of underwriters until the end of the
second quarter of 2002 and, therefore, we were not able to fully participate in
the 2002 renewal season, resulting in a higher level of unearned premium at
December 31, 2002.

     In addition, modest variances exist between the ratio of gross premiums
written to net premiums earned between prior quarters and the fourth quarter of
2002. These variances arose from the clarification over the year of the earnings
patterns on certain customers' proportional reinsurance contracts. The overall
effect is to defer some earned premium from 2002 into 2003. We would not expect
this to recur in 2003.

     Loss and Loss Adjustment Expenses

     Our combined ratio and components thereof are set out below for the year
ended December 31, 2002.
Loss ratio..................................................  40.4%
Expense ratio...............................................  27.0%
                                                              ----
Combined ratio..............................................  67.4%
                                                              ====
Loss and loss adjustment expenses were $133.3 million for the year ended
December 31, 2002, representing a net loss ratio of 40.4%. At December 31, 2002,
net loss reserves were $129.5 million of which $91.7 million related to an
estimate of losses incurred but not yet reported. Reinsurance recoverables of
$16.7 million related to the QQS business written were netted against loss and
loss adjustment expenses for the year ended December 31, 2002. We paid losses of
$4.2 million for the year ended December 31, 2002. Overall for the year ended
December 31, 2002, we have benefited from the relatively low level of
catastrophes.

     Pro-rata contracts, including QQS business incepting in the year ended
December 31, 2002 are estimated on the basis of projections supplied by the
underlying cedents, together with actual reported results for portions of 2002.
Estimated losses can change, based on revised projections supplied by the
underlying cedents. The resulting changes in incurred losses are recorded in the
period in which they are determined. Reported loss ratios for the 2002
underwriting year were generally lower than anticipated and our subsequent

                                        38
loss ratio selections reflect this improvement. We have estimated the QQS loss
ratios based on figures provided by the syndicates. We will monitor changes in
these estimates closely to determine any deviation from previously published
forecasts and any required adjustments will be recorded in income in the period
in which they are determined. In 2002 we experienced a year with a relatively
low level of claims activity. This may not be indicative of future results.

     Our net loss and loss adjustment expense reserves at December 31, 2002 and
our net loss ratios by line of business for the year ended December 31, 2002 are
set out below ($ in millions):
NET LOSS AND LOSS          NET LOSS RATIOS
                                             ADJUSTMENT EXPENSE RESERVES    FOR THE YEAR ENDED
                                               AT DECEMBER 31, 2002(1)     DECEMBER 31, 2002(2)
                                             ---------------------------   --------------------
Property Specialty.........................            $ 54.1                      55.7%
Property Catastrophe.......................              32.5                      25.7
Qualifying Quota Share.....................              33.9                      60.2
Other Specialty............................               9.0                      24.9
                                                       ------
Total......................................            $129.5                      40.4%
                                                       ======
---------------

(1) Gross loss and loss adjustment expense reserves per the balance sheet were
    $146.1 million which was reduced by $16.6 million in reinsurance recoverable
    related to the Qualifying Quota Share programs to derive the net loss and
    loss adjustment expense reserves of $129.5 million noted above.

(2) The gross loss ratio for the year ended December 31, 2002 was 41.0%.

     Underwriting Expenses

     Acquisition costs and general and administrative expenses were $89.2
million for the year ended December 31, 2002, representing an expense ratio of
27%. The expense ratio increased during the fourth quarter as a result of the
accrual of approximately $1.5 million in profit commission and the accrual of
additional variable compensation expense, driven by the lower combined ratio
than in prior quarters.

     General and administrative expenses for the year ended December 31, 2002
consisted of the following ($ in millions):
YEAR ENDED
                                                               DECEMBER 31,
                                                                   2002
                                                              ---------------
Fixed expenses, excluding stock options.....................       $15.7
Bonus accrual...............................................         2.7
Performance Unit Plan accrual...............................         2.5
Fair value of stock options expense.........................         5.4
                                                                   -----
Total general and administrative expenses...................       $26.3
                                                                   =====
For the year ended December 31, 2002, acquisition costs incurred were $62.9
million, which were principally due to brokerage commissions for our insurance
and reinsurance contracts of $29.6 million, commissions paid to ceding insurers
and other costs of $31.8 million and an accrual for profit commission of $1.5
million.

     Net Investment Income

     Net investment income for the year ended December 31, 2002 was $39.7
million. Net investment income for the period ended December 31, 2001 was $1.1
million which reflects the receipt of the private placement proceeds in
mid-December 2001. Net investment income is primarily composed of interest on
coupon-paying bonds and bank interest, partially offset by accretion of premium
on bonds of $3.8 million and $1.7 million, respectively, and investment
management and custodian fees of $2.3 million and $0.7 million, respectively,

                                        39
for the periods ended December 31, 2002 and 2001. The investment management fees
were paid to White Mountains Advisors LLC, a wholly owned indirect subsidiary of
White Mountains Insurance Group, one of our major shareholders. The fees charged
are consistent with those that would be charged by a non-related party.

     Based on the weighted average monthly investments held, and including net
unrealized gains of $33.6 million for the year ended December 31, 2002, the
total investment return was 7.0%. Interest rates declined in 2002, which
resulted in decreasing reinvestment yields on our portfolio.

     The performance results of our fixed maturity portfolio, with a comparison
to the Lehman Brothers Government/Corporate 1-3 Year Index, for the year ended
December 31, 2002 was as follows:
LEHMAN BROTHERS
                                               MONTPELIER RE       GOV'T/CORP.
PERFORMANCE                                   HOLDINGS LTD.(1)   1-3 YEAR INDEX
-----------                                   ----------------   ---------------
Total return................................        7.1%               6.3%
---------------

(1) Total return is calculated by dividing total net investment income on fixed
    maturity investments by the average of the sum of such investments at
    amortized cost at the end of each month in 2002.

     The Lehman Brothers Government/Corporate 1-3 Year Index is used for
comparative purposes as it lines up with our assets and the nature of our
business.

     We did not experience any other-than-temporary impairment charges relating
to our portfolio of investments for the year ended December 31, 2002.

     Interest on Long-Term Debt

     Interest expensed relating to the $150.0 million outstanding balance on our
long-term credit facility for the year ended December 31, 2002 and the period
ended December 31, 2001 was $4.5 million and $0.2 million, which represents an
average rate of 2.80% and 2.99%, respectively. The interest rate on the loan was
variable from the inception of the loan on December 12, 2001 until April 20,
2002. Thereafter, the interest rate was fixed at 2.96% from April 21, 2002 until
October 21, 2002 and was fixed at 2.59% for the period from October 21, 2002
until April 21, 2003. At December 31, 2002 and 2001, the Company accrued
interest expense of $800,000 and $236,000 and paid interest of $3.5 million and
$nil, respectively.

     Net Realized Investment Gains

     Net realized investment gains for the year ended December 31, 2002 were
$7.7 million, which were due to gains realized from the sale of fixed maturity
investments.

     Comprehensive Income

     Comprehensive income for the year ended December 31, 2002 was $185.7
million, which includes net income of $152.0 million and $33.7 million of net
unrealized gains on investments and changes in currency translation adjustments.

     The cost or amortized cost, gross unrealized gains and losses, and carrying
values of our investments as of December 31, 2002 were as follows ($ in
thousands):
COST OR       GROSS        GROSS
                               AMORTIZED    UNREALIZED   UNREALIZED
INVESTMENTS                       COST        GAINS        LOSSES     FAIR VALUE
-----------                    ----------   ----------   ----------   ----------
Fixed maturity investments...  $1,322,256    $32,714        $125      $1,354,845
Equity investment
  (unquoted).................      60,758      2,933          --          63,691
40
FINANCIAL CONDITION AND LIQUIDITY

     We are a holding company that conducts no operations of its own. We rely
primarily on cash dividends and management fees from Montpelier Re to pay our
operating expenses, interest on debt facilities and dividends, if any. There are
restrictions on the payment of dividends from Montpelier Re to the Company,
which are described in more detail below. It is our continuing policy to retain
earnings to support the growth of our business. We do not currently intend to
pay dividends.

CAPITAL RESOURCES

     The Company's shareholders' equity at March 31, 2003 was $1,356.6 million,
of which $194.3 million was retained earnings. The Company's capital base has
grown since December 31, 2002 as a result of an increase in net premiums earned
and the low level of losses incurred.

     Our capital resources, prior to the closing of this offering, also include
two senior credit facilities with Bank of America, N.A. and a syndicate of
commercial banks, consisting of the Bank of N.T. Butterfield & Son Limited,
Credit Suisse First Boston, The Bank of Bermuda Ltd., Fleet National Bank, The
Bank of New York, Barclays Bank PLC and Comerica Bank. We intend to use a
portion of the proceeds from this offering to repay all amounts outstanding
under, and terminate, our existing term loan facility. In addition, we intend to
terminate our revolving credit facility, thereby rendering inapplicable the
covenants under these facilities described below. The credit facilities consist
of a 364-day revolving credit facility with a $50.0 million borrowing limit and
a three-year term loan facility with a $150.0 million aggregate borrowing limit.
As of March 31, 2003, we had borrowed $150.0 million under the term loan
facility and had not accessed the revolving credit facility. These credit
facilities contain various restrictions and covenants which include maintaining:
(i) a ratio of debt to total capital no greater than 30%; (ii) a tangible net
worth equal to at least the sum of: (x) $525.0 million; (y) 50% of positive
quarterly net income (with no deduction for net losses); and (z) 50% of any net
equity proceeds, minus certain dividends; and (iii) the ratio of the aggregate
statutory net written premiums to the net worth of all our insurance
subsidiaries at a level no greater than 1.5 to 1 at the end of any fiscal
quarter. Also, these covenants restrict our other borrowings, the ability of our
subsidiaries to merge, consolidate, make acquisitions, sell any assets or assign
any receivables, and our ability to create liens on any assets, make certain
capital expenditures and to hold margin stock. In addition, a change in control
of our Company or unpaid final judgments against us which exceed an aggregate of
$5.0 million (excluding any portion thereof which will likely be recovered
through insurance) each constitute an event of default under our credit
facilities. These restrictions and covenants have all been met during the three
months ended and as at March 31, 2003 and 2002.

     Montpelier Re is registered under The Insurance Act 1978 (Bermuda), which
we refer to in this prospectus as the "Insurance Act". Under the Insurance Act,
Montpelier Re is required annually to prepare and file Statutory Financial
Statements and a Statutory Financial Return. The Insurance Act also requires
Montpelier Re to meet a minimum solvency margin equal to the greatest of (i)
$100.0 million, (ii) 50% of net premiums written or (iii) 15% of the reserve for
loss and loss adjustment expenses. For the three months ended March 31, 2003 and
2002, Montpelier Re satisfied these requirements.

     Bermuda law limits the maximum amount of annual dividends or distributions
payable by Montpelier Re to us and in certain cases requires the prior
notification to, or the approval of, the Bermuda Monetary Authority. Subject to
such laws, the directors of Montpelier Re have the unilateral authority to
declare or not to declare dividends to us. The maximum amount of dividends that
could have been paid by Montpelier Re to us at March 31, 2003, without such
notification, was $255.7 million. There is no assurance that dividends will be
declared or paid in the future.

     Montpelier Re is not licensed or admitted as an insurer or reinsurer in any
jurisdiction other than Bermuda. Because many jurisdictions do not permit
insurance companies to take credit for reinsurance obtained from unlicensed or
non-admitted insurers on their statutory financial statements unless appropriate
security mechanisms are in place, we anticipate that our reinsurance clients
will typically require Montpelier Re to post a letter of credit or other
collateral. In order for Montpelier Re to write Lloyd's QQS business, it must
provide a letter of credit in favor of Lloyd's in accordance with Lloyd's rules.
We have made arrangements with Fleet National Bank for the provision of a
standby letter of credit in a form acceptable to

                                        41
Lloyd's in an amount of up to $250.0 million. Letters of credit outstanding at
March 31, 2003 under the Fleet facility were approximately $125.8 million, which
were secured by investments of approximately $138.3 million. Montpelier Re has
the ability to provide sufficient unencumbered assets to support the standby
letter of credit.

     Effective June 20, 2003, Montpelier Re entered into a new Letter of Credit
Reimbursement and Pledge Agreement with Fleet National Bank and a syndicate of
lending institutions for the provision of a letter of credit facility in favor
of Lloyd's in an amount of up to $250.0 million, and in favor of certain U.S.
ceding companies in an amount of up to $200.0 million. Simultaneously, the
previously existing Pledge Agreement with Fleet National Bank in favor of
Lloyd's QQS business was superceded by the Letter of Credit Reimbursement and
Pledge Agreement, and the letters of credit issued under the previous facility
are now effectively issued under the new facility agreement. There have not yet
been any letters of credit issued under the new facility agreement in relation
to U.S. ceding companies. We consider this letter of credit facility sufficient
to support Montpelier Re's estimated obligations for the next 12 months.

     The Company has made arrangements with Barclay's Bank PLC for the provision
of an additional letter of credit facility in favor of certain U.S. ceding
companies in an amount of up to $100.0 million. Letters of credit outstanding at
March 31, 2003 under the Barclay's facility were approximately $20.8 million and
were secured by investments of approximately $22.9 million. Montpelier Re has
the ability to provide sufficient unencumbered assets to support the standby
letter of credit.

INVESTMENTS

     The following table shows the aggregate amount of investments available for
sale, equity investment and cash and cash equivalents comprising our portfolio
of invested assets ($ in thousands):
AS AT              AS AT
                                              MARCH 31, 2003   DECEMBER 31, 2002
                                              --------------   -----------------
Fixed maturities, available for sale, at
  fair value................................    $1,567,483        $1,354,845
Equity investment, unquoted, at estimated
  fair value................................        63,691            63,691
Cash and cash equivalents, at fair value....       106,982           162,925
                                                ----------        ----------
Total Invested Assets.......................    $1,738,156        $1,581,461
                                                ==========        ==========
Because a significant portion of our contracts provide short-tail
reinsurance coverage for damages resulting mainly from natural and man-made
catastrophes, it is possible that we could become liable for a significant
amount of losses on short-term notice. Accordingly, we have structured our
investment portfolio to preserve capital and provide us with a high level of
liquidity, which means that the large majority of our investment portfolio
contains shorter term fixed maturity investments, such as U.S. government bonds,
corporate bonds and mortgage-backed and asset-backed securities.

     The market value of our portfolio of fixed maturity investments comprises
investment grade corporate debt securities (26%), U.S. government and agency
bonds (62%) and mortgage-backed and asset-backed securities (12%). All of the
fixed maturity investments currently held by us were publicly traded at March
31, 2003. Based on the weighted average monthly investments held, and including
unrealized gains, our total return for the three months ended March 31, 2003 was
1.02%. The average duration of the portfolio was 1.9 years and the average
rating of the portfolio was AA+ at March 31, 2003.

     The Company has invested a total of L40.0 million (or $60.8 million) in the
common shares of Aspen. At March 31, 2003, Montpelier Re held approximately 7%
of Aspen on an undiluted basis and approximately 6% on a fully diluted basis.

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

     For most insurance and reinsurance companies, the most significant judgment
made by management is the estimation of the loss and loss adjustment expense
reserves. Due to the short-tail nature of our business,

                                        42
generally we expect that the majority of our losses will be paid relatively
quickly. However, this can be affected by such factors as the event causing the
loss, the location of the loss, and whether our losses are from policies with
insurers or reinsurers. Accordingly, it is necessary to estimate, as part of the
loss and loss adjustment expense reserve, an amount for IBNR.

     A significant portion of our business is property catastrophe and other
classes with high attachment points of coverage. Reserving for losses in such
programs is inherently complicated in that losses in excess of the attachment
level of the Company's policies are characterized by high severity and low
frequency. This limits the volume of industry claims experience available from
which to reliably predict ultimate loss levels following a loss event. In
addition, there always exists a reporting lag between a loss event taking place
and the reporting of the loss to the Company, which can sometimes be several
years, particularly on longer-tail classes of business such as casualty. During
this period, additional facts and trends will be revealed and as these factors
become apparent, reserves will be adjusted. These IBNRs are inherently difficult
to predict. Changes to our prior year loss reserves can impact our current
underwriting results by improving our results if the prior year reserves prove
to be redundant or reducing our results if the prior year reserves prove to be
insufficient. Because of the variability and uncertainty associated with loss
estimation, it is possible that our individual case reserves for each
catastrophic event and other case reserves are incorrect, possibly materially.
This volatility will affect our results in the period that the loss occurs
because U.S. GAAP does not permit reinsurers to reserve for such catastrophic
events until they occur which may give rise to a claim. As a result, no
allowance for the provision of a contingency reserve to account for expected
future losses can be recorded. Claims arising from future catastrophic events
can be expected to require the establishment of substantial reserves from time
to time.

     These factors require us to make significant assumptions when establishing
loss reserves. For losses which have been reported to the Company, we estimate
our ultimate loss using the following: (1) claims reports from insureds; (2) our
underwriters and management experience in setting claims reserves; and (3) the
use of computer models, where applicable. Since the Company has insufficient
past loss experience, management supplements this information with industry
data. This industry data may not match the risk profile of the Company, which
introduces a further degree of uncertainty into the process. For losses which
have been incurred but not reported, the reserving process is further
complicated.

     Our actuaries use a combination of the following methods in determining our
loss and loss adjustment expense reserves:

     The Reported Loss Development Method is a widely used actuarial technique
for estimating ultimate losses. This method analyzes the reporting pattern for a
body of losses over time and uses that pattern to predict future reported
incurred losses. The selected reporting pattern is used to create loss
development factors which are multiplied by reported losses to date to produce
ultimate loss estimates. Due to our limited operating history, we do not have
our own historical reporting patterns. Therefore, we have relied on selected
industry reporting patterns for similar classes of business.

     The Expected Loss Ratio Method assumes that ultimate losses vary
proportionately with premiums. Ultimate losses are calculated by multiplying the
selected expected loss ratio by the total amount of premium. The method is
independent of actual loss experience. This method is particularly useful in the
early stages of development for an underwriting year or when limited historical
or current loss information is available.

     The Bornheutter-Ferguson Reported Method is a combination of the Reported
Loss Development Method and the Expected Loss Ratio Method. Estimates of losses
incurred but not yet reported are based on an expected loss ratio assumption.
The expected loss ratio is modified to the extent that reported losses to date
differ from what would be expected based on the selected loss reporting pattern.
This method gives more weight to the actual reported loss experience as the
underwriting period matures.

     Based on the characteristics of each line of business and the amount of
loss information available, our actuaries weight the reliance on each reserving
methodology. The methods and assumptions used by our actuaries to estimate loss
reserves produce a point estimate by class, and we consider these point
estimates to be management's best estimate of reserves. The Company considers
these point estimates as its best

                                        43
estimates because the selections of expected loss ratios and expected reporting
patterns which underlie the estimates are based on the most current information
available to management. We have used these point estimates in establishing our
reserve for loss and loss adjustment expenses. For each line of business, we
have produced a range around management's best point estimate by selecting
upward and downward percentage variation bounds around the ultimate loss ratio.

     Having regard to the limited amount of loss information available due to
our short operating history and the low frequency and high severity nature of
many of our contracts, management uses the following methodology in determining
a range: (1) selection of downward and upward percentage variation bounds around
the ultimate loss selection for each class; and (2) establishment of the width
of the range around our best point estimate based on management's estimate of
the potential variability for each class and the reporting pattern assumptions.

     On pro-rata contracts, including QQS arrangements, we estimate ultimate
losses based on loss ratio forecasts as reported quarterly by cedents, which is
normally on a quarterly lag. We also review historical loss ratios from prior
years as provided by each cedent, as well as public reports. We base our
estimate of the ultimate losses on both of these factors. Estimated losses can
change, based on revised projections supplied by the underlying cedents and
actuarial support of the underwriting year forecasts. The resulting changes in
incurred losses are recorded in the period in which they are determined.

     These complications, together with the potential for unforeseen adverse
developments, may result in loss and loss adjustment expenses significantly
greater or less than the reserve provided. Reserving can prove especially
difficult should a significant loss event take place near the end of an
accounting period, particularly if it involves a catastrophic event.

     Loss and loss adjustment reserve estimates are regularly reviewed and
updated, as new information becomes known to us. Any resulting adjustments are
included in income in the period in which they become known.

CASH FLOWS

     Cash flows for three months ended March 31, 2003 and 2002.  Cash flows from
operations for the three months ended March 31, 2003 were $160.0 million
compared to $35.6 million for the first quarter of 2002. This increase
principally relates to a substantial increase in operating income in the 2003
period. Offsetting this increase is an increase in loss and loss adjustment
expense reserves in excess of paid losses of $10.1 million. We invested a net
amount of $215.8 million during the three months ended March 31, 2003, compared
to $282.8 million during the same period in 2002. At March 31, 2003, we had a
cash balance of $107.0 million.

     Cash flows for the year ended December 31, 2002.  In the year ended
December 31, 2002, we generated net cash flow from operations of $295.2 million,
primarily relating to premiums received by Montpelier Re. We paid losses of $4.2
million during the year ended December 31, 2002. We invested a net amount of
$706.3 million during the year ended December 31, 2002, and had a cash balance
of $162.9 million at December 31, 2002. The increase in liquidity has resulted
from premiums received and the addition of approximately $201.2 million in net
proceeds as a result of the successful completion of our initial public offering
of 10,952,600 common shares (including the exercise of the over-allotment
provision of 1,428,600 common shares) in October, 2002, which was offset by
equity raising costs of $18.3 million. We also received approximately $26.0
million in cash from the completion of our private placement of our common
shares which occurred in December, 2001. The Company's common shares began
trading on the New York Stock Exchange on October 10, 2002. The net proceeds of
the offering were contributed to our principal operating subsidiary, Montpelier
Re to provide additional capital for use in its underwriting operations. In
addition, the year ended December 31, 2002 was a year with a relatively low
level of catastrophes, resulting in a low level of claims payments.

     Our liquidity depends on operating, investing and financing cash flows as
described below.

                                        44
Our sources of funds primarily consist of the receipt of premiums written,
investment income and proceeds from sales and redemptions of investments. Our
operating subsidiary since inception has produced sufficient cash flows to meet
expected claim payments, pay operational expenses and purchase retrocessional
protection.

     Cash is used primarily to pay loss and loss adjustment expenses, brokerage
commissions, excise taxes, general and administrative expenses, to purchase new
investments and to pay interest on our long-term debt facility. We will also use
cash to pay for any premiums retroceded and any authorized share repurchases. In
2003 we have purchased specific retrocessional protection for our direct
insurance and facultative reinsurance programs on an "any one risk" basis to
limit our exposure from losses at one location. We may purchase additional
retrocessional protection for our own account in 2003.

     Our cash flows from operations represent the difference between premiums
collected and investment earnings realized, and the loss and loss adjustment
expenses paid, underwriting and other expenses paid and investment losses
realized. Cash flows from operations may differ substantially, however, from net
income. To date, we have invested substantially all cash flows not required for
operating purposes.

     Certain business we write has loss experience generally characterized as
having low frequency and high severity. This may result in volatility in both
our results and our operational cash flows. The potential for a large claim
under one of our insurance or reinsurance contracts means that substantial and
unpredictable payments may need to be made within relatively short periods of
time.

     We intend to manage these risks by structuring our investments in an effort
to anticipate the payout patterns of our liabilities under insurance or
reinsurance policies. No assurance can be given, however, that we will
successfully match the structure of Montpelier Re's investments with its
liabilities under insurance or reinsurance contracts. If our calculations with
respect to these reinsurance liabilities are incorrect, or if we improperly
structure our investments to match such liabilities, we could be forced to
liquidate investments prior to maturity, potentially at a significant loss.

     The market value of fixed maturity investments, our unquoted equity
investment and our cash and cash equivalents balance was $1,738.2 million as at
March 31, 2003, compared to $1,581.5 million at December 31, 2002. The primary
cause of this increase was the receipt of $161.5 million in premiums net of
acquisition costs, net investment income of $11.6 million, the change in net
unrealized losses on investments of $0.8 million offset by paid claims of $10.1
million.

     We anticipate leasing additional office space in Bermuda later in 2003, and
may incur related costs which we would expect to be less than those incurred in
2002.

     For the period from inception until March 31, 2003, we have had sufficient
cash flow from operations to meet our liquidity requirements. The cash generated
from our private placement in 2001 and the successful completion of our initial
public offering in October 2002, together with our credit facilities, and our
positive operating results for 2002 and for the first quarter of 2003 have
provided us with sufficient liquidity to enable Montpelier Re to meet its
Bermuda statutory requirements under the Insurance Act.

OUTLOOK

     In general, in 2003 we have experienced premium rate levels that are more
stable than in 2002 for the "short-tail" insurance and reinsurance products that
we write. In addition, premium rate levels are comparable to those of 2002
levels and we expect both of these trends to continue for the remainder of 2003.
Prices for the specific reinsurance contracts we write continue to be affected
primarily by the supply of, and demand for, capacity in the global reinsurance
market which is driven by: (1) the decline in recent years in the U.S. and
global equity markets; (2) significant reserve strengthening in insurance and
reinsurance companies; (3) poor investment performance; and (4) rating agency
downgrades of competitors. While we believe that overall price levels are
currently favorable for reinsurers and better than they have been in many years,
capital provided by newly-formed reinsurers or additional capital raised by
existing reinsurers may increase the supply of reinsurance capacity which could
impact negatively the prices that we receive for the products we write.
                                        45
Our financial results in 2003 continue to be affected positively by the
unusually low frequency of large natural catastrophic events impacting our
business. We would anticipate that we may be impacted in future periods on
average by a higher frequency of large natural catastrophic events than those
experienced in 2002 and into 2003. Such events could have a material adverse
impact on our financial position and results of operations. The worldwide
property and casualty insurance and reinsurance industry continues to be highly
competitive and some of our competitors possess significantly greater financial
and other resources than we do. This competition could also affect our financial
condition and results of operations.

QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK

     We believe that we are principally exposed to three types of market risk:
interest rate risk, foreign currency risk and credit risk.

     The use of derivative instruments is expressly prohibited by our investment
guidelines, other than the use of forward currency exchange contracts to
minimize the impact of exchange rate fluctuations.

     Interest Rate Risk.  Our primary market risk exposure is to changes in
interest rates. Our fixed maturity portfolio is exposed to interest rate risk.
Fluctuations in interest rates have a direct impact on the market valuation of
these investments. As interest rates rise, the market value of our fixed
maturity portfolio falls, and the converse is also true. We manage interest rate
risk by selecting investments with characteristics such as duration, yield,
currency and liquidity tailored to the anticipated cash outflow characteristics
of Montpelier Re's reinsurance liabilities.

     As of March 31, 2003, the impact on our portfolio from an immediate 100
basis point increase in market interest rates would have resulted in an
estimated decrease in market value of 1.9% or approximately $31.9 million and
the impact on our portfolio from an immediate 100 basis point decrease in market
interest rates would have resulted in an estimated increase in market value of
1.9% or approximately $31.9 million.

     As of March 31, 2003, we held $189.0 million, or 12.1% of our total
invested assets in mortgage-backed and asset-backed securities. These assets are
exposed to prepayment risk, which occurs when holders of individual mortgages
increase the frequency with which they prepay the outstanding principal before
the maturity date and refinance at a lower interest rate cost. Given the
proportion that these securities comprise of the overall portfolio, and the
current low interest rate environment, prepayment risk is not considered
significant at this time.

     Interest rate movements also affect the economic value of our long-term
debt obligation. The interest rate was fixed at 2.59% for the period from
October 21, 2002 until April 21, 2003. From April 21, 2003, the rate is fixed at
2.07% until July 21, 2003. The average interest rate for the three months ended
March 31, 2003 was 2.59%. In order to hedge the interest rate risk of the loan,
the Company entered into an interest rate swap contract with Bank of America,
which became effective April 22, 2003 and expires on December 11, 2004, the last
day of the term loan facility. Under the terms of the interest rate swap
contract, the Company pays interest at a fixed rate of 1.88% plus a margin
dependent on leverage, and receives interest at a variable rate equal to the
offshore LIBOR rate plus an applicable margin. Following this offering, we
intend to repay all amounts outstanding under the term loan facility and
terminate such facility and the related swap contract.

     Foreign Currency Risk.  In the event of a significant loss event which
requires settlement in a currency other than the United States dollar, we may
use forward foreign currency exchange contracts in an effort to hedge against
movements in the value of foreign currencies relative to the United States
dollar. A forward foreign currency exchange contract involves an obligation to
purchase or sell a specified currency at a future date at a price set at the
time of the contract. Foreign currency exchange contracts will not eliminate
fluctuations in the value of our assets and liabilities denominated in foreign
currencies but rather allow us to establish a rate of exchange for a future
point in time. We do not expect to enter into such contracts with respect to a
material amount of our assets. At March 31, 2003 we did not have any outstanding
forward foreign currency exchange contracts.

     Our functional currency is the United States dollar. The British pound is
the functional currency of our wholly owned subsidiary, Montpelier Marketing
Services (UK) Limited ("MMSL"). Accordingly, MMSL's
                                        46
assets and liabilities are translated at exchange rates in effect at the balance
sheet date. Revenue and expenses of MMSL are translated at average exchange
rates during the period. The effect of translation adjustments is not included
in our consolidated results of operations but is included in accumulated other
comprehensive income, a separate component of shareholders' equity. On a
consolidated basis, MMSL does not generate material revenue and expenses and,
therefore, the effects of changes in exchange rates during the period are not
material.

     Credit Risk.  We have exposure to credit risk primarily as a holder of
fixed maturity investments. In accordance with our investment guidelines as
approved by our Board of Directors, our risk management strategy and investment
policy is to invest in debt instruments of high credit quality issuers and to
limit the amount of credit exposure with respect to particular ratings
categories and any one issuer. At March 31, 2003, all fixed maturity investments
that we held were investment grade.

CURRENCY

     We write a portion of our business and receive premiums in currencies other
than United States dollars and may maintain a small portion of our investment
portfolio in investments denominated in currencies other than United States
dollars. We may experience exchange losses to the extent our foreign currency
exposure is not properly managed or otherwise hedged, which in turn would
adversely affect our statement of operations and financial condition.

EFFECTS OF INFLATION

     The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local economy. The anticipated effects on us are
considered in our catastrophe loss models. The effects of inflation are also
considered in pricing and in estimating reserves for loss and loss adjustment
expenses. The actual effects of inflation on our results cannot be accurately
known until claims are ultimately settled.

SUMMARY OF CRITICAL ACCOUNTING POLICIES

     The Company's consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("U.S. GAAP"). The preparation of financial statements in accordance
with U.S. GAAP requires management to make estimates and assumptions that affect
reported and disclosed amounts of assets and liabilities, as well as disclosure
of contingent assets and liabilities as at the balance sheet date and the
reported amounts of revenues and expenses during the reporting period. We
believe the following accounting policies are critical to our operations as
their application requires management to make the most significant judgments.

     Other significant accounting policies that we use to prepare our
consolidated financial statements are included in Note 2 to the December 31,
2002 Combined Financial Statements and in the notes to the March 31, 2003
Consolidated Financial Statements, both of which are included in this filing.

     Premiums.  Premium income is primarily earned ratably over the term of the
insurance policy. We also write certain pro-rata reinsurance policies on a risks
attaching basis which are generally earned over a 24-month period, consistent
with industry practice. The portion of the premium related to the unexpired
portion of the policy at the end of any reporting period is reflected in
unearned premium.

     We write both excess of loss and pro-rata contracts. On excess of loss
contracts, the minimum and deposit premium is defined in the contract wording
and this is the amount we record as written premium in the period the underlying
risks incept, therefore no management judgment is necessary. Subsequent
adjustments to the minimum and deposit premium are recorded in the period in
which they are determined.

     On pro-rata contracts, including QQS arrangements, premiums assumed are
estimated to ultimate levels based on information provided by the ceding
companies. An estimate of premium is recorded in the period in which the
underlying risks incept. When the actual premium is reported by the ceding
company, which may be reported on a quarterly or six month lag, it may be
significantly higher or lower than the estimate. Adjustments arising from the
reporting of actual premium by the ceding companies are recorded in the period
                                        47
in which they are determined. Estimates of premium are based on information
available, including previously reported premium and underlying economic
conditions. Premiums on pro-rata contracts are earned over the risk periods of
the related reinsurance contracts.

     Where contract terms require the reinstatement of coverage after a ceding
company's loss, the mandatory reinstatement premiums are recorded as written
premiums when the loss event occurs, and are recognized as earned premium
ratably over the remaining contract period. Accrual of reinstatement premiums is
based on our estimate of loss and loss adjustment expense reserves, which
involves management judgment as described below. Reinstatement premiums are not
accrued on reserves for losses incurred but not reported.

     Loss and Loss Adjustment Expense Reserves.  See "-- Financial Condition and
Liquidity -- Loss and Loss Adjustment Expense Reserves."

     Other Than Temporary Impairments in Investments.  In accordance with our
investment guidelines, our investments consist of high-grade marketable fixed
maturity investments and equity securities. Fixed maturity investments are
classified as available for sale and accordingly are carried at market value as
determined by the most recently traded price of each security at the balance
sheet date. For unquoted investments, estimated fair value is determined using
the financial information received, which includes reported net asset values,
other information available to management, and other economic and market
knowledge as appropriate. Investments are reviewed periodically to determine if
they have sustained an impairment in value that is considered to be other than
temporary. The identification of potentially impaired investments involves
significant management judgment. In our determination of other-than-temporary
impairment, we consider several factors and circumstances including the issuer's
overall financial condition, the issuer's credit and financial strength ratings,
a weakening of the general market conditions in the industry or geographic
region in which the issuer operates, a prolonged period (typically six months or
longer) in which the fair value of an issuer's securities remains below our cost
and any other factors that may raise doubt about the issuer's ability to
continue as a going concern. The current economic environment and recent
volatility of securities markets increases the difficulty in determining
impairment and whether the impairment is considered to be other than temporary.

     Unrealized depreciation in the value of individual investments, considered
by management to be other than temporary, is charged to income in the period it
is determined.

RECENT ACCOUNTING PRONOUNCEMENT

     The Financial Accounting Standards Board issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46") an interpretation of
ARB No. 51 "Consolidated Financial Statements" in January 2003. FIN 46 clarifies
the accounting and reporting for certain entities in which equity investors do
not have the characteristics of a controlling financial interest. The financial
statements included with the Company's December 31, 2002 Form 10-K were prepared
on a combined basis as a result of the fact that Montpelier Re's and the
Company's bye-laws include certain restrictions relating to the election of
directors of Montpelier Re. The Company adopted FIN 46 in the first quarter of
2003. The impact of adoption of FIN 46 is that the Company's financial
statements are now prepared on a consolidated basis instead of on a combined
basis. There is no impact on the Company's net income or shareholders' equity as
presented in these consolidated financial statements as a result of the adoption
of FIN 46.

                                        48
BUSINESS

OVERVIEW

     Montpelier Re Holdings Ltd. (the "Company"), through its wholly owned
operating subsidiary Montpelier Reinsurance Ltd. ("Montpelier Re"), is a
Bermuda-based provider of global specialty property insurance and reinsurance
products. We were founded by White Mountains Insurance Group, Ltd. and Benfield
Holdings Limited and commenced operations in December 2001 with approximately
$1.0 billion of capital. We have assembled a senior management team with
significant industry expertise and longstanding industry relationships. We seek
to identify attractive insurance and reinsurance opportunities by capitalizing
on our management's significant underwriting experience, using catastrophe
modeling software and our own risk pricing and capital allocation models. We
underwrote $366.6 million and $607.7 million in gross premiums written for the
three months ended March 31, 2003 and for the year ended December 31, 2002,
respectively, which was spread between various classes of business and
geographic areas. We have well-established market relationships with the world's
top reinsurance brokers including Guy Carpenter & Company, Inc. (a subsidiary of
Marsh & McLennan Companies Inc.), Aon Re Worldwide (a subsidiary of Aon
Corporation), Benfield plc ("Benfield") and Willis Group Holdings Ltd., among
others.

MARKET OPPORTUNITIES AND INDUSTRY TRENDS

     The prices of property and other insurance and reinsurance contracts have
historically often risen in the aftermath of significant catastrophic losses.
The occurrence of catastrophic events, the frequency and severity of which are
inherently unpredictable, affects both industry results and subsequent
prevailing market prices of our products. As claims are incurred, industry
surplus is depleted and the industry's capacity to write new business
diminishes. Market trends similar to those that have occurred in past cycles
have developed in the current environment.

     During 2002, Standard & Poors downgraded a large number of reinsurers and
upgraded very few. Many global property and casualty insurers and reinsurers are
experiencing significantly reduced capital as a result of several years of
excessively competitive pricing, expanding coverage terms, significant increases
in reserves from asbestos liability, a decline in the U.S. and global equity
markets and poor investment performance. This reduction in capacity has resulted
in more favorable pricing terms and conditions. Through Montpelier Re, we seek
to help fulfill the need for additional underwriting capacity in the global
property and casualty insurance and reinsurance market. We intend to take
advantage of current conditions in those markets by opportunistically providing
capacity to ceding companies at prices commensurate with the risk we assume.

     This tightening of supply has resulted in government intervention in the
insurance and reinsurance markets, both in the U.S. and worldwide. For example,
in response to the tightening of supply in certain insurance and reinsurance
markets resulting from, among other things, the September 11th terrorist
attacks, the Terrorism Risk Insurance Act of 2002 was enacted to ensure the
availability of insurance coverage for terrorist acts in the U.S. This law
establishes a federal assistance program that will continue through the end of
2005 to help the commercial property and casualty insurance industry cover
claims related to future terrorism related losses and regulates the terms of
insurance relating to terrorism coverage. This law could adversely affect our
business by increasing underwriting capacity for our competitors as well as by
requiring that coverage for terrorist acts be offered by insurers. We are in the
process of evaluating the likely impact of this law on our future operations. We
are currently unable to predict the extent to which the foregoing new initiative
may affect the demand for our products or the risks that may be available for us
to consider underwriting. In addition, the insurance and reinsurance regulatory
framework has been subject to increased scrutiny by individual U.S. state
governments. This government intervention and the possibility of future
intervention have created uncertainty in the insurance and reinsurance markets
about the definition of terrorist acts and the extent to which future coverages
will extend to terrorist acts. The extent to which coverage for terrorist acts
is offered in the future is also uncertain.

     At this time we believe that the "short-tail" insurance and reinsurance
market in which we participate seems to be in general price equilibrium. There
is under-capacity in some areas and over-capacity in others,

                                        49
but the market is generally stable. Overall price-levels are favorable for
insurers and reinsurers and better than they have been in many years. It appears
that for 2003 the market may be peaking but that pricing will remain more stable
for a longer period than we originally anticipated.

OUR COMPETITIVE STRENGTHS

     We believe we distinguish ourselves from our competitors as follows:

        Disciplined Underwriting and Risk Management.  We focus on underwriting
     profitability rather than growth in premium volume or market share. We
     write business with a view toward minimizing the loss ratio, which
     represents the ratio of our loss and loss adjustment expenses to premiums
     earned, and we do not rely on investment returns to achieve our pricing
     goals. We seek to limit and diversify our loss exposure while earning an
     underwriting profit on all business we write by applying the professional
     insurance disciplines of pricing, underwriting and risk management.

        Proven and Experienced Management Who Think and Act Like Owners.  Our
     management team is led by our President and Chief Executive Officer,
     Anthony Taylor, who also serves as our Chief Underwriting Officer,
     reflecting our underwriting emphasis. Mr. Taylor, formerly the Deputy
     Chairman of Wellington Underwriting plc, has substantial underwriting
     expertise, much of it a result of his underwriting experience at Lloyd's.
     Our seven underwriters have an average of 24 years of experience in the
     insurance and reinsurance industry. This experience creates the opportunity
     for disciplined and profitable underwriting, and the opportunity to take a
     lead position on underwriting treaties. Our Chairman, John (Jack) Byrne,
     our Chief Reinsurance Officer, C. Russell Fletcher III, and our Chief
     Financial Officer, K. Thomas Kemp, and Anthony Taylor have each invested in
     our common shares, and all of our executive officers participate in our
     long-term incentive program that ties compensation to the achievement of
     specific goals relating to our underwriting performance over the course of
     overlapping three-year periods. A substantial portion of each executive's
     total compensation depends upon our long-term underwriting performance. We
     believe that our incentive compensation program aligns our executive
     officers' interests with those of our shareholders.

        Well-Established Market Relationships.  Our underwriting team has the
     knowledge, experience and personal relationships that provide us with
     access to brokers and clients and to existing and new reinsurance programs.
     We believe we have established a broad level of support as a lead reinsurer
     among many of the largest reinsurance brokers worldwide, including Guy
     Carpenter, Aon Re Worldwide, Benfield and Willis Group, each of whom has
     provided significant business to us. As a result of being in a lead
     position on a number of programs, we expect to have the opportunity to
     analyze a broad range of opportunities and exercise selectivity on risks we
     underwrite.

        No Historical Liabilities or Contingencies.  We are a recently formed
     company with a balance sheet unencumbered by any historical losses relating
     to the September 11th terrorist attacks, asbestos and other legacy
     exposures affecting our industry. As a result, we have no risk that
     deteriorating loss reserves related to legacy exposures prior to our
     formation will impact our future financial results. To maximize our
     returns, we opportunistically price our products in line with many of our
     competitors, who are increasing market prices due to such factors.

        Excellent Financial Strength.  Montpelier Re has a capital base of over
     $1.5 billion, which provides a high degree of financial strength to our
     clients. A.M. Best Company Inc. assigned an "A" (Excellent) rating, the
     third highest of fifteen rating levels, to Montpelier Re. This rating
     reflects A.M. Best's opinion of the results of our first year of
     operations, our capitalization and management. Montpelier Re has been
     assigned an "A3" (Good) rating by Moody's Investors Service, the seventh
     highest rating of twenty-one rating levels. This rating reflects Moody's
     opinion of the ability of Montpelier Re to punctually repay senior
     policyholder claims and obligations. These ratings are not evaluations
     directed to investors in the notes or a recommendation to buy, sell or hold
     the notes.

        Strong Strategic Sponsorship.  We were founded by White Mountains
     Insurance Group, Ltd. ("White Mountains") and Benfield, each of whom has a
     strong reputation in the industry. White

                                        50
Mountains has substantial experience in managing companies and sponsoring
     the development of other insurance companies. Mr. Byrne, our Chairman and
     the Chairman of White Mountains, has worked in the insurance industry for
     over 50 years. Benfield is the third largest reinsurance broker in the
     world ranked by reinsurance brokerage revenues for the year ended December
     31, 2001.

CORPORATE STRATEGY

     We aim to maximize sustainable long-term growth in shareholder value by
pursuing the following strategies:

        Manage Capital Prudently and Maintain a Disciplined Balance Sheet.  We
     focus on generating underwriting profits while maintaining a disciplined
     balance sheet. We intend to manage our capital prudently relative to our
     risk exposure in an effort to maximize sustainable long-term growth in
     shareholder value. In 2003 we have purchased specific retrocessional
     protection for our direct insurance and facultative reinsurance programs
     and for our property reinsurance programs, excluding most other specialty
     lines. We may purchase additional retrocessional protection for our own
     account in 2003. Our capital management strategy will emphasize the
     appropriate use of leverage (borrowings) to augment capital when it can be
     fully and profitably used to support our underwriting. If we have idle or
     excess capital, we may, although we have no current plans to, reduce
     leverage and consider share repurchases or dividends to return capital to
     our owners. We employ a conservative investment policy, which aims to
     minimize any duration mismatch among our assets and liabilities, and we
     seek to establish appropriate loss reserves in order to minimize later
     adjustments.

        Enhance Our Lead Position With Brokers and Cedents.  We often take a
     lead position on underwriting treaties, which provides us with enhanced
     access to business and allows us to exercise superior risk selection. Our
     underwriters seek to identify those exposures which meet our objectives in
     terms of return on capital and underwriting criteria. By leading
     reinsurance programs, we believe our underwriters see a broad range of our
     clients' business which, in conjunction with sophisticated modeling tools,
     has allowed us to build a substantial book of reinsurance business
     exhibiting superior performance.

        Combine Subjective Underwriting Methods With Objective Modeling
     Tools.  We intend to exploit pricing inefficiencies that may exist in the
     market from time to time. To achieve this, we disseminate market
     information to our entire underwriting team through the development of
     knowledge management systems and personal contact among all underwriters.
     Generally, our underwriters use sophisticated property risk modeling tools,
     both proprietary and third party, together with their market knowledge and
     judgment, to seek the most favorable terms per unit of risk assumed by our
     portfolio.

        Develop and Maintain a Balanced Portfolio of Reinsurance Risks.  We aim
     to build a balanced portfolio of primarily property related risks,
     diversified by class, product, geography and marketing source. We actively
     seek to grow in classes experiencing improved or stable conditions and
     avoid classes suffering from intense price competition or poor
     fundamentals. Our approach to new business is flexible and dynamic because
     we have a centralized underwriting team in Bermuda, as opposed to a large
     decentralized structure that might encourage writings in particular
     geographic areas or product classes to justify previous commitments. We
     underwrite a variety of different products, and seek to avoid a focus on
     any particular region or class of business, including U.S. property
     catastrophe business. We employ risk management techniques to monitor
     correlation risk and seek to enhance the underwriting returns through
     careful risk selection using advanced capital allocation methodologies. We
     utilize industry modeling tools to stress test the portfolio by simulating
     large loss events. We believe a more balanced portfolio of risks reduces
     the volatility of returns and optimizes the growth of shareholder value.

        Deliver Customized, Innovative and Timely Insurance and Reinsurance
     Solutions for Our Clients. We intend to establish ourselves as a premier
     provider of global specialty property insurance and reinsurance products
     and seek to provide superior customer service. Our objective is to solidify
     long-term relationships with brokers and clients while developing an
     industry reputation for innovative and timely quotes for difficult
     technical risks.

                                        51
INSURANCE AND REINSURANCE PRODUCTS

     General.  The majority of the reinsurance products we seek to write are in
the form of treaty reinsurance contracts, which are contractual arrangements
that provide for automatic reinsuring of a type or category of risk underwritten
by our clients. When we write treaty reinsurance contracts, we do not evaluate
separately each of the individual risks assumed under the contracts and are
largely dependent on the individual underwriting decisions made by the cedent.
Accordingly, we carefully review and analyze the cedent's risk management and
underwriting practices in deciding whether to provide treaty reinsurance and in
appropriately pricing the treaty. We also write direct insurance and facultative
reinsurance contracts where we reinsure individual risks on a case by case
basis.

     Our contracts can be written on either a quota share, also known as
proportional or pro-rata, basis or on an excess of loss basis. With respect to
quota share reinsurance, we share the premiums as well as the losses and
expenses in an agreed proportion with the cedent. In the case of reinsurance
written on an excess of loss basis, we generally receive the premium for the
risk assumed and indemnify the cedent against all or a specified portion of
losses and expenses in excess of a specified dollar or percentage amount. In
both types of contracts, we may provide a ceding commission to the cedent.

     We seek to manage our risk by seeking profitable pricing, using contract
terms, diversification criteria, prudent underwriting, the use of our
proprietary modeling system, CATM, and varying the conditions based on the
nature and scope of coverage. Underwriting is primarily a matter of judgment,
involving important assumptions about matters that are inherently unpredictable
and beyond our control, and for which historical experience and probability
analysis may not provide sufficient guidance.

     Premiums are a function of the number and type of contracts we write, as
well as prevailing market prices. Renewal dates for reinsurance business tend to
be concentrated at the beginning of quarters, and the timing of premium written
varies by line of business. Most property catastrophe business is written in the
January 1, April 1 and July 1 renewal periods, while the property specialty and
other specialty lines are written throughout the year. Written premiums are
generally lower during the fourth quarter of the year as compared to prior
quarters. Gross premiums written for QQS programs are initially booked as
estimates and are adjusted as actual results are reported by the syndicates
during the period. Earned premiums do not necessarily follow the written premium
pattern as certain premiums written are earned ratably over the contract term,
which ordinarily is twelve months, although many pro-rata contracts are written
on a risks attaching basis and are generally earned over a 24 month period,
consistent with industry practice. Earned premiums are affected by our growing
book of business; as written premium levels increase, earned premium levels will
correspondingly increase over the earning period. Premiums are generally due in
installments.

     We believe our most significant opportunities, excluding QQS, are in the
short-tail property exposed business with higher levels of attachment, and in
our specialty lines. Details of gross premiums written by line of business for
the three months ended March 31, 2003 and the year ended December 31, 2002 are
provided below ($ in millions):

                         GROSS PREMIUMS WRITTEN BY LINE
THREE MONTHS ENDED         YEAR ENDED
                                                   MARCH 31, 2003       DECEMBER 31, 2002
                                                 ------------------     ------------------
Property Specialty.............................  $ 90.6       24.7%     $230.3       37.9%
Property Catastrophe...........................   150.8       41.1       141.4       23.3
Qualifying Quota Share.........................    76.4       20.9       171.7       28.2
Other Specialty................................    48.8       13.3        64.3       10.6
                                                 ------      -----      ------      -----
Total..........................................  $366.6      100.0%     $607.7      100.0%
                                                 ======      =====      ======      =====
Property Specialty.  Contracts in this category include risk excess of
loss, property pro-rata and direct insurance and facultative reinsurance. Risk
excess of loss reinsurance protects insurance companies on their primary
insurance risks and facultative reinsurance transactions on a "single risk"
basis. A "risk" in this

                                        52
context might mean the insurance coverage on one building or a group of
buildings or the insurance coverage under a single policy which the reinsured
treats as a single risk. Coverage is usually triggered by a large loss sustained
by an individual risk rather than by smaller losses which fall below the
specified RETENTION of the reinsurance contract. All property risk coverages are
written on an excess of loss basis, which provides the insured protection beyond
a specified amount up to the limit set within the reinsurance contract.

     Based on the heavy level of losses experienced by the overall market during
2001, prices for these types of risk coverages experienced substantial increases
over their expiring terms in 2002. We have seen continuing significant
restrictions on policy terms and conditions in 2003, which will improve the
underlying risk profile even further. For example, under current market
conditions, contracts generally allow a limited number of reinstatement
provisions during the policy period versus an unlimited number that was
previously available.

     We also write direct insurance and facultative reinsurance coverage on
commercial property risks where we assume all or part of a risk under a single
insurance contract. We generally write such coverage on an excess of loss basis.
Facultative reinsurance is normally purchased by clients where individual risks
are not covered by their reinsurance treaties, for amounts in excess of the
dollar limits of their reinsurance treaties, or for unusual risks.

     We also write property pro-rata reinsurance contracts which are comprised
of property risk programs written on a proportional basis rather than on an
excess of loss basis.

     Property Catastrophe.  Property catastrophe reinsurance contracts are
typically "all risk" in nature, providing protection against losses from
earthquakes and hurricanes, as well as other natural and man-made catastrophes
such as floods, tornadoes, fires and storms. The predominant exposures covered
are losses stemming from property damage and business interruption coverage
resulting from a covered peril. Certain risks, such as war, nuclear
contamination and various forms of terrorism, are generally excluded from our
contracts.

     Property catastrophe reinsurance is written on an excess of loss basis,
which provides coverage to primary insurance companies when aggregate claims and
claim expenses from a single occurrence from a covered peril exceed a certain
amount specified in a particular contract. Under these contracts, we provide
protection to an insurer for a portion of the total losses in excess of a
specified loss amount, up to a maximum amount per loss specified in the
contract. In the event of a loss, most contracts provide for coverage of a
second occurrence following the payment of a premium to reinstate the coverage
under the contract, which is referred to as a reinstatement premium. The
coverage provided under excess of loss reinsurance contracts may be on a
worldwide basis or limited in scope to specific regions or geographical areas,
while the underlying risks covered might be located throughout the world.
Coverage can also vary from "all property" perils, which is the most expansive
form of coverage, to more limited coverage of specified perils such as windstorm
only coverage.

     To a lesser extent we also write retrocessional coverage contracts, which
provide reinsurance protection to other reinsurers, also called retrocedents.
Coverage generally provides catastrophe protection for the property portfolios
of other reinsurers. Retrocessional contracts typically carry a higher degree of
volatility than reinsurance contracts as they protect against concentrations of
exposures written by retrocedents, which in turn may experience an aggregation
of losses from a single catastrophic event. In addition, the information
available to retrocessional underwriters concerning the original primary risk
can be less precise than the information received directly from primary
companies. Furthermore, exposures from retrocessional business can change within
a contract term as the underwriters of a retrocedent may alter their book of
business after retrocessional coverage has been bound.

     Qualifying Quota Share.  We currently provide whole account quota share
reinsurance, or QQS reinsurance, to select Lloyd's syndicates and may consider
similar contracts with similarly selected other insurers or reinsurers in the
future. We target syndicates which have a proven underwriting franchise, long-
term customer relationships and whose ability to write premiums is limited by
their stamp capacity. Stamp capacity is a measure of the amount of premium a
Lloyd's syndicate is authorized to write by the Council of Lloyd's and on which
it must pay subscriptions and contributions. For the 2002 underwriting year,
Lloyd's

                                        53
allowed syndicates to write up to 120% (in some special cases up to 130%) of
their stamp capacity, with the ability to cede the surplus income to quota share
reinsurers. We do not have exposure to underwriting in earlier years and the
contracts are expected to be commuted after 36 months, the point at which the
underwriting year is closed.

     Under QQS contracts, we assume a specified portion of the risk on a
specified coverage in exchange for an equal proportion of the premiums. The
ceding syndicate receives a commission, based on the amount of the premiums
ceded, which is intended to reimburse the insurer for costs of writing and
administering the business. The reinsurer is dependent on the ceding syndicate's
ability in underwriting, pricing and claims administration.

     QQS contracts provide us with premiums in the form of a diversified
portfolio of risks with a balanced spread of risks. We target business which is
property exposed and is consistent with our underwriting parameters. We believe
that the extensive relationships of our management provide us with the advantage
of identifying profitable syndicates which have a consistent track record of
underwriting profitability. This approach allows us to benefit from favorable
market conditions in the absence of having a full underwriting staff across a
wide variety of classes of business. Business assumed under QQS contracts
usually benefits from all reinsurance purchased by the syndicate, including
individual risk and excess of loss portfolio contracts.

     Other Specialty.  We also write specialty risks such as aviation liability,
aviation war, marine, personal accident catastrophe, worker's compensation,
terrorism, casualty and other reinsurance business. We diversify our risk by
writing predominantly short-tail lines of business. Marine and aviation
contracts are primarily written on a retrocessional excess of loss basis. A
limited number of terrorism specific risks, reinsurance treaties and national
pools are written as well. We also write a limited amount of aviation war risk
business, as prices renewed at multiples of their expiring prices following
significant industry losses from the September 11th and Sri Lanka terrorist
attacks. We expect to increase our other specialty and property specialty lines
of business based on our assessment of the current market environment.

     Our casualty portfolio of risks focuses on selected classes, with an
initial emphasis on casualty clash excess of loss reinsurance business. Under a
casualty clash reinsurance agreement, the ceding insurer retains an amount which
is generally higher than the limit on any one reinsured policy. Thus, two or
more coverages or policies issued by the ceding insurer generally must be
involved in a loss for coverage to apply under the reinsurance agreement. In
addition, we also write UK employers liability coverage and excess auto
liability coverage in the U.S.

     Coverage for worker's compensation and personal accident catastrophe
contracts are generally written to restrict recoveries by the cedent unless
normally at least a minimum of twenty insured persons are involved in the same
event. As a result of the number of fatalities arising from the September 11th
terrorist attacks, worker's compensation and personal accident reinsurers
experienced significant underwriting losses. Accordingly, many reinsurers were
reluctant to provide this type of cover in December 2001. In 2002, we quoted and
led what we believe to be the first treaties of this kind purchased after
September 11th. This business is generally written to provide coverage
worldwide.

     A very high percentage of the reinsurance contracts that we write do not
provide coverage for losses arising from acts of terrorism caused by nuclear,
biological or chemical attack. With respect to PERSONAL LINES risks, losses
arising from acts of terrorism occasioned by causes other than nuclear,
biological or chemical attack are usually covered by our reinsurance contracts.
Such losses relating to COMMERCIAL LINES risks are generally covered on a
limited basis, for example, where the covered risks fall below a stated insured
value or into classes or categories we deem less likely to be targets of
terrorism than others or where an act of terrorism does not meet the definition
of "act of terrorism" set forth in the Terrorism Risk Insurance Act of 2002. We
have written a limited number of reinsurance contracts, both on a proportional
and excess of loss basis, covering solely acts of terrorism. We have done so
only in instances where we believe we are able to obtain pricing that adequately
covers our exposure. These contracts typically exclude coverage protecting
against nuclear, biological or chemical attack.

                                        54
We pursue specialty reinsurance on a disciplined and opportunistic basis.
We plan to target short-tail lines of business, often with low frequency, high
severity profiles similar to catastrophe business. We also seek to manage the
correlations of this business with property catastrophe through the use of CATM,
our proprietary modeling system.

     Geographic Breakdown.  Since inception, we have sought to diversify our
exposure across geographic zones around the world in order to obtain the optimum
spread of risk. The exposures are also a function of market conditions and
opportunities. The following table sets forth a breakdown of our gross premiums
written by geographic area of risk insured for the three months ended March 31,
2003 and the year ended December 31, 2002 ($ in millions).

           GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA OF RISKS INSURED
THREE MONTHS ENDED         YEAR ENDED
                                                   MARCH 31, 2003       DECEMBER 31, 2002
                                                 ------------------     ------------------
Worldwide(1)...................................  $174.0       47.5%     $306.4       50.4%
USA and Canada.................................   133.0       36.3       207.4       34.1
Japan..........................................     1.6        0.4        23.3        3.8
Western Europe, excluding the United Kingdom
  and Ireland..................................     9.8        2.7        17.8        2.9
United Kingdom and Ireland.....................    21.3        5.8        11.8        1.9
Worldwide, excluding USA and Canada(2).........    12.2        3.3        11.4        1.9
Others (1.5% or less)..........................    14.7        4.0        29.6        5.0
                                                 ------      -----      ------      -----
Total..........................................  $366.6      100.0%     $607.7      100.0%
                                                 ======      =====      ======      =====
---------------

(1) "Worldwide" comprises insurance and reinsurance contracts that insure or
    reinsure risks on a worldwide basis.

(2) "Worldwide, excluding USA and Canada" comprises insurance and reinsurance
    contracts that insure or reinsure risks on a worldwide basis but
    specifically exclude the USA and Canada.

     The QQS contracts and substantial amounts of other lines of business are
worldwide in nature, with the majority of business related to North America and
Europe.

UNDERWRITING AND RISK MANAGEMENT

     During 2002 and through the first quarter of 2003, we believe we created a
balanced portfolio of risks, diversified by class, product, geography and
marketing source. For example, our current policy is to limit our exposure to
$100 million on any single contract. We attempt to limit the amount of potential
loss that may arise from a single catastrophic event. We also attempt to manage
our exposure against clash and correlation among risks.

     Our underwriting team is led by our President and Chief Executive Officer,
Anthony Taylor, who also serves as Montpelier Re's Chief Underwriting Officer.
C. Russell Fletcher III is our Chief Reinsurance Officer and is also a principal
member of our underwriting team. We underwrite to specific disciplines as set
out by the Chief Underwriting Officer, with the aim of maintaining the following
principles:

     - Assume excess of loss business with an attachment point above the
       expected level of attritional losses, thereby covering infrequent large
       losses;

     - Limit the scope of coverage on regular property classes to "traditional
       perils" and generally exclude perils that are difficult to measure such
       as cyber risks, pollution and nuclear, biological and chemical acts of
       terrorism;

     - Entertain difficult risks such as terrorism but only on a specific basis
       whereby exposures are carefully controlled through limits, terms and
       conditions and are appropriately priced;

                                        55
- Exclude "single risk" exposure from catastrophe and retrocessional
       business;

     - Be prepared to lead business but work with and follow respected existing
       leaders where appropriate; and

     - Use risk assessment models such as RMS, AIR and EQE to assist in the
       underwriting process and in the quantification of our catastrophe
       aggregate exposures.

     We have implemented underwriting guidelines that are designed to limit our
exposure to loss from any one contract. As part of our pricing and underwriting
process, we also assess a variety of other factors, including, but not limited
to:

     - The reputation of the proposed cedent and the likelihood of establishing
       a long-term relationship with the cedent;

     - The geographical location of the cedent's original risks;

     - Historical loss data of the cedent and, where available, of the industry
       as a whole in the relevant regions, in order to compare the cedent's
       historical catastrophe loss experience to industry averages; and

     - The perceived financial strength of the cedent.

     Our principal underwriting objective is to create a balanced portfolio of
risks, diversified by class, product, geography and marketing source. To help us
achieve this objective we have developed a sophisticated modeling tool to
analyze and manage the reinsurance exposures we assume from cedents, called
CATM. This proprietary computer-based underwriting system, the technical
components of which incorporate the fundamentals of modern portfolio theory, is
designed to measure the amount of capital required to support individual
contracts based on the degree of correlation between contracts that we
underwrite as well as other factors. CATM comprises risk assessment tools,
exposure databases and intelligent systems, and enables us to price contracts
according to actual exposures and estimate the amount of loss and volatility
associated with the contracts we assume.

     CATM is designed to use output from models developed by our actuarial staff
as well as from those of commercial vendors such as AIR, RMS and EQE. In
addition, CATM serves as a first step in the development of a dynamic financial
analysis model to be used as a guide in managing our exposure to liability,
asset and business risk. CATM was fully operational prior to the 2003 renewal
season.

     We frequently seek to be a part of the limited group of reinsurers who act
as the lead in our reinsurance contracts. Historically, one reinsurer acted as
the "lead" underwriter in negotiating principal policy terms and pricing of
reinsurance contracts with a reinsurance broker. In the current environment, a
consensus of price and terms is produced from a limited group of reinsurers, of
which we are very frequently a part. We believe that our financial strength, the
experience and reputation of our underwriters and the withdrawal of other
reinsurers from the reinsurance market permits us to be a part of this limited
group of reinsurers in underwriting many of our reinsurance contracts. We
believe that being a part of this group will be an important factor in achieving
long-term success because we believe that this limited group of underwriters
generally has greater influence in negotiation of policy terms, attachment
points and premium rates than following reinsurers. In addition, we believe that
reinsurers that are a part of this limited group are generally solicited for a
broader range of business than other reinsurers and have greater access to
preferred risks.

MARKETING

     Business is produced through brokers and reinsurance intermediaries. We
seek to establish an identity with brokers and ceding companies by providing:
(i) prompt and responsive service on underwriting submissions; (ii) innovative
and customized insurance and reinsurance solutions to clients; and (iii) timely
payment of claims. Our objective is to build long-term relationships with
brokers and ceding companies and provide financial strength and security. We
expect to support the existing market as we build our reputation and brand. All
brokerage transactions are entered into on an arm's length basis. We target
prospects that are

                                        56
capable of supplying detailed and accurate underwriting data and that
potentially add further diversification to our book of business.

     The following table shows our gross premiums written by broker ($ in
millions):
THREE MONTHS ENDED        YEAR ENDED
                                                  MARCH 31, 2003       DECEMBER 31, 2002
                                                ------------------     -----------------
Benfield(1)...................................  $101.6       29.3%      $180.5      29.7%
Willis Group(1)...............................    82.8       23.9        140.2      23.1
Guy Carpenter.................................    75.8       21.9        107.3      17.6
Aon Re Worldwide..............................    42.1       12.1         90.4      14.9
Other brokers.................................    44.7       12.8         89.3      14.7
                                                ------      -----      -------     -----
Total brokers.................................  $347.0      100.0%      $607.7     100.0%
                                                ------      -----      -------     -----
Direct (no broker)............................    19.6                      --
                                                ------                 -------
Total.........................................  $366.6                  $607.7
                                                ======                 =======
---------------

(1) Includes QQS gross premium written. Benfield represents gross premiums
    written through UK and U.S. brokerage subsidiaries of Benfield Holdings
    Limited.

     MMSL, our marketing subsidiary in London, experiences a flow of
introductions from brokers who are either seeking new markets into which to
channel their business or who desire a personal dialogue prior to rating and
acceptance by our Bermuda underwriters. MMSL regularly conducts meetings with
major London brokers, smaller brokers, UK cedents and international cedents
visiting London. In addition, MMSL conducts specific client trips to Japan,
Australia and Scandinavia.

CLAIMS MANAGEMENT

     Claims management includes the receipt of loss notifications, the
establishment of case loss reserves and approval of loss payments. Additionally,
if required, claims audits may be conducted for specific claims and claims
procedures at the offices of certain ceding companies. We recognize that fair
interpretation of our reinsurance agreements with our customers and timely
payment of covered claims is a valuable service to our clients and enhances our
reputation.

RESERVES

     Our policy is to establish prudent loss and loss adjustment expense
reserves for the ultimate settlement costs of all loss and loss adjustment
expenses incurred and incurred but not yet reported.

     Under U.S. GAAP, we are not permitted to establish loss and loss adjustment
expense reserves with respect to our property catastrophe portfolio until an
event which gives rise to a loss occurs. A significant portion of the Company's
business is property catastrophe and other classes with high attachment points
of coverage. Reserving for losses in the property catastrophe market is
inherently complicated in that losses in excess of the attachment level of the
Company's policies are characterized by high severity and low frequency and
other factors which could vary significantly as claims are settled. This limits
the volume of relevant industry claims experience available from which to
reliably predict ultimate losses following a loss event. The reserve for IBNR is
estimated by management using industry data and professional judgment to
estimate the ultimate loss to the Company from insurance and reinsurance
contracts exposed to a loss event. Such reserves are estimated by management
based upon reports received from ceding companies, supplemented by our own
estimates of reserves for which ceding company reports have not been received,
and our own historical experience. These estimates are subject to a
corroborative review by external actuaries, based on loss development patterns
determined by reference to the Company's underwriting practices, the policy
form, type of insurance program and industry data.

     Delays in ceding companies reporting losses to the Company together with
the potential for unforeseen adverse developments may result in losses and loss
expenses significantly greater or less than the reserve
                                        57
provided at the time of the loss event. Reserving can prove especially difficult
should a significant loss event take place near the end of an accounting period,
particularly if the loss is a catastrophic event. These estimates are regularly
reviewed and updated, as experience develops and new information becomes known.
Any resulting adjustments are reflected in income in the period in which they
become known. Loss and loss adjustment reserves represent estimates, including
actuarial and statistical projections at a given point in time, of our
expectations of the ultimate settlement and administration costs of claims
incurred, and it is likely that the ultimate liability may exceed or be less
than such estimates, perhaps significantly. Such estimates are not precise in
that, among other things, they are based on predictions of future developments
and estimates of future trends in loss severity and frequency and other variable
factors such as inflation. During the loss settlement period, it often becomes
necessary to refine and adjust the estimates of liability on a claim either
upward or downward. Even after such adjustments, ultimate liability may exceed
or be less than the revised estimates. To assist us in establishing appropriate
loss and loss adjustment reserves, we have access to commercially available
databases showing historical catastrophe losses. In addition, when reviewing a
proposed reinsurance contract, we typically receive loss experience information
with respect to the insured on such a contract. Reserve estimates by new
reinsurers may be inherently less reliable than the reserve estimates of a
reinsurer with a stable volume of business and an established claim history. As
our business has developed over 2002 and into 2003, we have supplemented
industry information with our own specific experience in our actuarial analysis
which has led to reduced projections of ultimate losses. As our mix of business
changes, we expect that our reserve process and practices will correspondingly
change to a degree in the future.

INVESTMENTS

     We follow a conservative investment strategy designed to emphasize the
preservation of invested assets and provide sufficient liquidity for the prompt
payment of claims. At March 31, 2003, our portfolio of fixed maturity
investments comprised investment grade corporate debt securities (26%), U.S.
government and agency bonds (62%) and mortgage-backed and asset-backed
securities (12%). All of the fixed maturity investments held by us were publicly
traded at March 31, 2003. The average duration of the portfolio was 1.9 years
and the average rating of the portfolio was AA+ at March 31, 2003. The Company
did not have an aggregate investment in a single entity, other than the U.S.
government, in excess of 10% of shareholders' equity at March 31, 2003. We also
have an equity investment in Aspen, the unquoted Bermuda-based holding company
of Aspen Re.

     In determining our investment decisions, we consider the impact of various
catastrophic events, particularly those to which our insurance and reinsurance
portfolio may be exposed, on our invested assets to protect our financial
position. Our intent is to look for opportunities to add a modest amount of
common equity securities over time. Over longer time horizons, we believe
investments in common equity securities will enhance returns without
significantly raising the risk profile of the portfolio. We do not plan to have
meaningful exposure to alternative asset classes, such as hedge funds or private
equity funds.

     Our Finance Committee establishes investment guidelines and supervises our
investment activity. These objectives and guidelines stress diversification of
risk, capital preservation, market liquidity, and stability of portfolio income.
The Finance Committee regularly monitors the overall investment results, reviews
compliance with our investment objectives and guidelines, and ultimately reports
the overall investment results to the Board. These guidelines specify minimum
criteria on the overall credit quality and liquidity characteristics of the
portfolio. They also include limitations on the size of certain holdings as well
as restrictions on purchasing certain types of securities or investing in
certain industries.

     We have engaged White Mountains Advisors LLC, a wholly owned indirect
subsidiary of White Mountains Insurance Group, one of our major shareholders, to
provide investment advisory and management services. We have agreed to pay
investment management fees based on the month-end market values held under
management. The fees, which vary depending on the amount of assets under
management, are between 0.15% and 0.30% and are deducted from net investment
income. The Company incurred an average fee of 0.17% and 0.20% for the three
months ended March 31, 2003, and 2002, respectively. The agreement may be
terminated by either party upon 30 days written notice. We expensed investment
management fees
                                        58
of approximately $692,000 and $523,000 for the three months ended March 31, 2003
and 2002, respectively, and have recorded an amount payable for these services
of approximately $705,000 and $525,000 for the three months ended March 31, 2003
and 2002, respectively.

     The types of securities in our portfolio and their amortized cost, fair
value and related gross unrealized gains and losses as at March 31, 2003 were as
follows ($ in thousands):
COST OR       GROSS        GROSS
                                          AMORTIZED    UNREALIZED   UNREALIZED
                                             COST        GAINS        LOSSES     FAIR VALUE
                                          ----------   ----------   ----------   ----------
Fixed Maturities:
  U.S. government and agency............  $  953,653    $16,928       $  669     $  969,912
  Corporate debt securities.............     393,626     15,059          111        408,574
  Mortgage-backed and asset-backed
     securities.........................     188,476        758          237        188,997
                                          ----------    -------       ------     ----------
                                           1,535,755     32,745        1,017      1,567,483
                                          ==========    =======       ======     ==========
Equity Investment.......................      60,758      2,933           --         63,691
                                          ----------    -------       ------     ----------
Total...................................  $1,596,513    $35,678       $1,017     $1,631,174
                                          ==========    =======       ======     ==========
The following table sets forth the composition of the cost or amortized
cost of fixed maturities by ratings assigned by rating agencies (e.g. Standard
and Poor's Corporation) as at March 31, 2003 ($ in thousands):
COST OR
RATINGS                                                      AMORTIZED COST    PERCENTAGE
-------                                                      --------------    ----------
U.S. government and agency.................................    $  953,653         62.1%
AAA........................................................       236,341         15.4
AA.........................................................        75,118          4.9
A..........................................................       262,337         17.1
BBB+.......................................................         8,306          0.5
                                                               ----------        -----
                                                               $1,535,755        100.0%
                                                               ==========        =====
The amortized cost and estimated fair value amounts for fixed maturity
investments held at March 31, 2003 are shown by contractual maturity ($ in
thousands):
COST OR
                                                             AMORTIZED COST   FAIR VALUE
                                                             --------------   ----------
Due within one year........................................    $   93,963     $   95,467
Due after one year through five years......................     1,195,157      1,224,803
Due after five years through ten years.....................        58,159         58,216
Mortgage-backed and asset-backed securities................       188,476        188,997
                                                               ----------     ----------
                                                               $1,535,755     $1,567,483
                                                               ==========     ==========
Actual maturity may differ from contractual maturity because certain
borrowers have the right to call or prepay certain obligations with or without
call or prepayment penalties.

                                        59
Our net investment returns for the periods indicated were as follows ($ in
millions):
AS AT              AS AT
                                                          MARCH 31, 2003   DECEMBER 31, 2002
                                                          --------------   -----------------
Net investment income...................................      $11.7              $39.7
Net realized investment gains...........................        4.7                7.7
Net increase (decrease) in unrealized investment gains
  (losses)..............................................       (0.8)              33.6
                                                              -----              -----
Total net investment return.............................      $15.6              $81.0
                                                              =====              =====
The performance results of our fixed maturity portfolio, with a comparison
to the Lehman Brothers Government/Corporate 1-3 Year Index for the year ended
December 31, 2002 was as follows:
LEHMAN BROTHERS
                                                          MONTPELIER RE       GOV'T/CORP.
                                                         HOLDINGS LTD.(1)   1-3 YEAR INDEX
                                                         ----------------   ---------------
PERFORMANCE
Total return...........................................        7.1%               6.3%
---------------

(1) Total return is calculated by dividing total net investment income on fixed
    maturity investments by the average of the sum of such investments at
    amortized cost at the end of each month in 2002.

     The Lehman Brothers Government/Corporate 1-3 Year Index is used for
comparative purposes as it lines up with our assets and the nature of our
business.

     The Company has invested a total of L40.0 million (or $60.8 million) in the
common shares of Aspen. At December 31, 2002, Montpelier Re held approximately
7% of Aspen on an undiluted basis and approximately 6% on a fully diluted basis.

     For additional information concerning the Company's investments, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere in
this prospectus.

RETROCESSIONS

     For certain pro-rata contracts, including QQS contracts, the subject
portfolios will carry underlying reinsurance protection from third party
reinsurers. We record our pro-rata share of gross premiums from the direct
insurance contracts as gross written premiums and record our proportionate share
of amounts incurred by the ceding company for the underlying third party
reinsurance coverage as reinsurance premiums ceded. For the year ended December
31, 2002, we recorded reinsurance premiums on QQS contracts only and did not
purchase reinsurance protection on our other lines of business. In 2003 we have
purchased specific retrocessional protection for our direct insurance and
facultative reinsurance programs and for our property reinsurance programs,
excluding most Other Specialty lines. We may purchase additional retrocessional
protection for our own account in 2003.

COMPETITION

     The insurance and reinsurance industries are highly competitive. We compete
with major U.S., Bermuda and other international insurers and reinsurers and
certain underwriting syndicates and insurers, some of which have greater
financial, marketing and management resources than we do. In particular, we
compete with insurers that provide property-based lines of insurance and
reinsurance, such as ACE Tempest Re, Converium, Everest Reinsurance Company, IPC
Re Limited, Lloyd's of London syndicates, Munich Re, PartnerRe Ltd., PXRE
Reinsurance Company, Renaissance Reinsurance Ltd., Swiss Re and XL Re. In
addition, there are other new Bermuda reinsurers, such as Allied World Assurance
Company, Ltd., Arch Reinsurance Ltd., AXIS Specialty Limited, Endurance
Specialty Insurance Ltd., Platinum Underwriters Holdings Ltd. and Olympus Re
Holdings, Ltd. with whom we also compete. Competition varies depending on

                                        60
the type of business being insured or reinsured and whether we are in a leading
position or acting on a following basis.

     In addition, established competitors have completed or may be planning to
complete additional capital raising transactions. New companies continue to be
formed to enter the reinsurance market. Competition in the types of business
that we underwrite is based on many factors, including:

     - Premiums charged and other terms and conditions offered;

     - Services provided;

     - Financial ratings assigned by independent rating agencies;

     - Speed of claims payment;

     - Reputation;

     - Perceived financial strength; and

     - The experience of the reinsurer in the line of reinsurance to be written.

     Increased competition could result in fewer submissions, lower premium
rates, and less favorable policy terms, which could adversely impact our growth
and profitability. In addition, capital market participants have recently
created alternative products that are intended to compete with reinsurance
products. We are unable to predict the extent to which these new, proposed or
potential initiatives may affect the demand for our products or the risks that
may be available for us to consider underwriting.

     We believe that we are well positioned in terms of client services and
underwriting expertise. We also believe that our capitalization and strong
financial ratios provide us with a competitive advantage in the marketplace.

RATINGS

     Ratings have become an increasingly important factor in establishing the
competitive position of reinsurance companies. A.M. Best has assigned Montpelier
Re a financial strength rating of "A" (Excellent), which is the third highest of
fifteen rating levels. The objective of A.M. Best's rating system is to provide
an opinion of an insurer's financial strength and ability to meet ongoing
obligations to its policyholders. Our rating reflects A.M. Best's opinion of the
results of our first year of operations, our capitalization and management.
Montpelier Re has been assigned an "A3" (Good) rating by Moody's Investors
Service, the seventh highest rating of twenty-one rating levels. This rating
reflects Moody's opinion of the ability of Montpelier Re to punctually repay
senior policyholder claims and obligations. These ratings are not evaluations
directed to investors in the notes or a recommendation to buy, sell or hold the
notes. Our ratings are subject to periodic review by, and may be revised
downward or revoked at the sole discretion of A.M. Best and Moody's, and we
cannot assure you that we will be able to retain these ratings.

PROPERTIES

     The Company leases office space in Hamilton, Bermuda, where the Company's
principal executive offices are located. The Company also leases office space in
London, United Kingdom, where the Company's subsidiary, Montpelier Marketing
Services (UK) Limited is located. We anticipate leasing additional office space
in Hamilton, Bermuda, during 2003.

EMPLOYEES

     As of June 2, 2003, we had forty employees. The majority of our employees
are employed by Montpelier Re or by Montpelier Marketing Services (UK) Limited.
None of our employees are subject to collective bargaining agreements, and we
know of no current efforts to implement such agreements.

                                        61
Many of our Montpelier Re employees, including all of our senior
management, are employed pursuant to work permits granted by the Bermuda
authorities. These permits expire at various times over the next several years.
We have no reason to believe that these permits would not be extended to our
principal employees at expiration upon request, although no assurances can be
given in this regard.

LEGAL PROCEEDINGS

     The Company, in common with the insurance and reinsurance industry in
general, is subject to litigation and arbitration in the normal course of its
business. We are not currently involved in any material pending litigation or
arbitration proceedings.

                                        62
REGULATION

BERMUDA INSURANCE REGULATION

     The following summary of Bermuda insurance regulation is based upon current
law and is for general information only.

     The Insurance Act.  As a holding company, Montpelier Re Holdings Ltd. is
not subject to Bermuda insurance regulations; however, Montpelier Re is subject
to regulations under the Insurance Act. No person shall carry on any insurance
business in or from within Bermuda unless registered as an insurer under the
Insurance Act by the Bermuda Monetary Authority, which we refer to as the BMA,
which has responsibility for the day-to-day supervision of insurers. Under the
Insurance Act, insurance business includes reinsurance business. The continued
registration of a company as an insurer under the Insurance Act is subject to
its complying with the terms of its registration and such other conditions as
the BMA may impose from time to time.

     An Insurance Advisory Committee appointed by the Bermuda Minister of
Finance advises the BMA on matters connected with the discharge of the BMA's
functions, and sub-committees thereof supervise and review the law and practice
of insurance in Bermuda, including reviews of accounting and administrative
procedures.

     The Insurance Act imposes on Bermuda insurance companies solvency and
liquidity standards and auditing and reporting requirements and grants to the
BMA powers to supervise, investigate and intervene in the affairs of insurance
companies. Certain significant aspects of the Bermuda insurance regulatory
framework are set forth below.

     Classification of Insurers.  The Insurance Act distinguishes between
insurers carrying on long-term business and insurers carrying on general
business. There are four classifications of insurers carrying on general
business, with Class 4 insurers subject to the strictest regulation. Montpelier
Re is registered to carry on general business as a Class 4 insurer in Bermuda
and is regulated as such under the Insurance Act. As so registered, Montpelier
Re may not carry on long-term business. In general, long-term business includes
effecting and carrying out contracts of insurance on human life or contracts to
pay annuities on human life, and contracts of insurance against risks of the
persons insured sustaining injury as the result of an accident, or dying as the
result of an accident or becoming incapacitated or dying in consequence of
disease. These are contracts that are expressed to be in effect for a period of
not less than five years or unlimited and to be terminable by the insurer before
the expiration of five years or are so terminable before the expiration of that
period only in special circumstances.

     Cancellation of Insurer's Registration.  An insurer's registration may be
canceled by the BMA on certain grounds specified in the Insurance Act, including
failure of the insurer to comply with its obligations under the Insurance Act or
if, in the opinion of the BMA, the insurer has not been carrying on business in
accordance with sound insurance principles.

     Principal Representative.  An insurer is required to maintain a principal
office in Bermuda and to appoint and maintain a principal representative in
Bermuda. For the purpose of the Insurance Act, the principal office of
Montpelier Re is at the Company's principal executive offices in Hamilton,
Bermuda, and Montpelier Re's principal representative is Mr. Anthony Taylor.
Without a reason acceptable to the BMA, an insurer may not terminate the
appointment of its principal representative, and the principal representative
may not cease to act as such, unless 30 days' notice in writing to the BMA is
given of the intention to do so. It is the duty of the principal representative,
within 30 days of reaching the view that there is a likelihood of the insurer
for which the principal representative acts becoming insolvent or that a
reportable "event" has, to the principal representative's knowledge, occurred or
is believed to have occurred, to make a report in writing to the BMA setting out
all the particulars of the case that are available to the principal
representative. Examples of such a reportable "event" include failure by the
insurer to comply substantially with a condition imposed upon the insurer by the
BMA relating to a solvency margin or a liquidity or other ratio.

                                        63
Independent Approved Auditor.  Every registered insurer must appoint an
independent auditor who will annually audit and report on the statutory
financial statements and the statutory financial return of the insurer, both of
which, in the case of Montpelier Re, are required to be filed annually with the
BMA. The independent auditor of Montpelier Re must be approved by the BMA and
may be the same person or firm which audits Montpelier Re's financial statements
and reports for presentation to its shareholders. Montpelier Re's independent
auditor is PricewaterhouseCoopers (Bermuda).

     Loss Reserve Specialist.  As a registered Class 4 insurer, Montpelier Re is
required to submit an opinion of its approved loss reserve specialist with its
statutory financial return in respect of its loss and loss expense reserves. The
loss reserve specialist, who will normally be a qualified casualty actuary, must
be approved by the BMA.

     Statutory Financial Statements.  Montpelier Re must prepare annual
statutory financial statements. The Insurance Act prescribes rules for the
preparation and substance of such statutory financial statements (which include,
in statutory form, a balance sheet, an income statement, a statement of capital
and surplus and notes thereto). Montpelier Re is required to give detailed
information and analyses regarding premiums, claims, reinsurance and
investments. The statutory financial statements of Montpelier Re are not
prepared in accordance with U.S. GAAP and are distinct from the Company's
combined financial statements which, under the Companies Act, are prepared in
accordance with U.S. GAAP. Montpelier Re, as a general business insurer, is
required to submit their annual statutory financial statements as part of the
annual statutory financial return. The statutory financial statements and the
statutory financial return do not form part of the public records maintained by
the BMA.

     Annual Statutory Financial Return.  Montpelier Re is required to file with
the BMA a statutory financial return no later than four months after its
financial year end (unless specifically extended). The statutory financial
return for a Class 4 insurer includes, among other matters, a report of the
approved independent auditor on the statutory financial statements of such
insurer, solvency certificates, the statutory financial statements themselves,
the opinion of the loss reserve specialist and a schedule of reinsurance ceded.
The solvency certificates must be signed by the principal representative and at
least two directors of the insurer who are required to certify, among other
matters, whether the minimum solvency margin has been met and whether the
insurer complied with the conditions attached to its certificate of
registration. The independent approved auditor is required to state whether in
its opinion it was reasonable for the directors to so certify. Where an
insurer's accounts have been audited for any purpose other than compliance with
the Insurance Act, a statement to that effect must be filed with the statutory
financial return.

     Minimum Solvency Margin and Restrictions on Dividends and
Distributions.  Under the Insurance Act, the value of the general business
assets of a Class 4 insurer, such as Montpelier Re, must exceed the amount of
its general business liabilities by an amount greater than the prescribed
minimum solvency margin. Montpelier Re:

     (1) is required, with respect to its general business, to maintain a
         minimum solvency margin (the prescribed amount by which the value of
         its general business assets must exceed its general business
         liabilities) equal to the greatest of:

         (A) $100 million;

         (B) 50% of net premiums written (being gross premiums written less any
             premiums ceded by Montpelier Re but Montpelier Re may not deduct
             more than 25% of gross premiums when computing net premiums
             written); and

         (C) 15% of loss, loss expense and other insurance reserves;

     (2) is prohibited from declaring or paying any dividends during any
         financial year if it is in breach of its minimum solvency margin or
         minimum liquidity ratio or if the declaration or payment of such
         dividends would cause it to fail to meet such margin or ratio (if it
         has failed to meet its minimum solvency margin or minimum liquidity
         ratio on the last day of any financial year, Montpelier Re will

                                        64
be prohibited, without the approval of the BMA, from declaring or
         paying any dividends during the next financial year);

     (3) is prohibited from declaring or paying in any financial year dividends
         of more than 25% of its total statutory capital and surplus (as shown
         on its previous financial year's statutory balance sheet) unless it
         files (at least 7 days before payment of such dividends) with the BMA
         an affidavit stating that it will continue to meet the required
         margins;

     (4) is prohibited, without the prior approval of the BMA, from reducing by
         15% or more its total statutory capital as set out in its previous
         year's financial statements and any application for such approval must
         include an affidavit stating that it will continue to meet the required
         margins; and

     (5) is required, at any time it fails to meet its solvency margin, within
         30 days (45 days where total statutory capital and surplus falls to $75
         million or less) after becoming aware of that failure or having reason
         to believe that such failure has occurred, to file with the BMA a
         written report containing certain information and is precluded from
         declaring and/or paying dividends until the failure is rectified.

     Minimum Liquidity Ratio.  The Insurance Act provides a minimum liquidity
ratio for general business insurers, such as Montpelier Re. An insurer engaged
in general business is required to maintain the value of its relevant assets at
not less than 75% of the amount of its relevant liabilities. Relevant assets
include cash and time deposits, quoted investments, unquoted bonds and
debentures, first liens on real estate, investment income due and accrued,
account and premiums receivable and reinsurance balances receivable. There are
certain categories of assets which, unless specifically permitted by the BMA, do
not automatically qualify as relevant assets, such as unquoted equity
securities, investments in and advances to affiliates and real estate and
collateral loans. The relevant liabilities are total general business insurance
reserves and total other liabilities less deferred income tax and sundry
liabilities (by interpretation, those not specifically defined).

     Supervision, Investigation and Intervention.  The BMA may appoint an
inspector with extensive powers to investigate the affairs of an insurer if it
believes that an investigation is required in the interest of the insurer's
policyholders or persons who may become policyholders. In order to verify or
supplement information otherwise provided to the BMA, it may direct an insurer
to produce documents or information relating to matters connected with the
insurer's business.

     If it appears to the BMA that there is a risk of Montpelier Re becoming
insolvent, or that it is in breach of the Insurance Act or any conditions
imposed upon its registration, the BMA may, among other things, direct
Montpelier Re (1) not to take on any new insurance business, (2) not to vary any
insurance contract if the effect would be to increase the insurer's liabilities,
(3) not to make certain investments, (4) to realize certain investments, (5) to
maintain in, or transfer to the custody of a specified bank, certain assets, (6)
not to declare or pay any dividends or other distributions or to restrict the
making of such payments and/or (7) to limit its premium income.

     Disclosure of Information.  In addition to powers under the Insurance Act
to investigate the affairs of an insurer, the BMA may require certain
information from an insurer (or certain other persons) to be produced to them.
Further, the BMA has been given powers to assist other regulatory authorities,
including foreign insurance regulatory authorities with their investigations
involving insurance and reinsurance companies in Bermuda but subject to
restrictions. For example, the BMA must be satisfied that the assistance being
requested is in connection with the discharge of regulatory responsibilities of
the foreign regulatory authority. Further, the BMA must consider whether to
cooperate is in the public interest. The grounds for disclosure are limited and
the Insurance Act provides sanctions for breach of the statutory duty of
confidentiality.

CERTAIN BERMUDA LAW CONSIDERATIONS

     The Company and Montpelier Re are designated as non-resident for exchange
control purposes by the BMA. The Company is required to obtain the permission of
the BMA for the issue and transfer of the notes. We obtained consent from the
BMA for the issue and transfer of the notes, to and between non-residents of
Bermuda for exchange control purposes, subject to the condition that our common
shares shall be listed on an
                                        65
appointed stock exchange, such as the New York Stock Exchange. The Company has
been granted permission by the BMA to hold all of the currently issued common
shares of Montpelier Re. Because we do not intend to transfer any of these
shares to any other person or entity and Montpelier Re does not intend to issue
any additional shares, no further permissions of the BMA are required with
respect to Montpelier Re.

     The transfer and issuance of the notes to any resident in Bermuda for
exchange control purposes may require specific prior approval under the Exchange
Control Act 1972. Montpelier Re's common shares cannot be transferred without
the consent of the BMA. Because the Company is designated as non-resident for
Bermuda exchange control purposes, it is allowed to engage in transactions, and
to pay interest subject to Bermuda law and regulations, including but not
limited to insurance regulations as discussed below, to Bermuda non-residents
who are holders of the notes, in currencies other than the Bermuda dollar. There
are no restrictions on the Company's ability to transfer funds (other than funds
denominated in Bermuda dollars) in and out of Bermuda to United States residents
who are holders of the Company's notes.

     Each of the Company and Montpelier Re has been incorporated in Bermuda as
an "exempted company." Under Bermuda law, exempted companies are companies
formed for the purpose of conducting business outside Bermuda from a principal
place in Bermuda. As a result, they are exempt from Bermuda laws restricting the
percentage of share capital that may be held by non-Bermudians, but they may not
participate in certain business transactions, including: (1) the acquisition or
holding of land in Bermuda (except that required for their business and held by
way of lease or tenancy for terms of not more than 50 years) without the express
authorization of the Bermuda legislature; (2) the taking of mortgages on land in
Bermuda to secure an amount in excess of $50,000 without the consent of the
Minister of Finance; (3) the acquisition of any bonds or debentures secured by
any land in Bermuda, other than certain types of Bermuda government securities;
or (4) the carrying on of business of any kind in Bermuda, except in furtherance
of their business carried on outside Bermuda or under license granted by the
Minister of Finance. While an insurer is permitted to reinsure risks undertaken
by any company incorporated in Bermuda and permitted to engage in the insurance
and reinsurance business, generally it is not permitted without a special
license granted by the Minister of Finance to insure Bermuda domestic risks or
risks of persons of, in or based in Bermuda. Montpelier Re does not have a
special license.

     Each of the Company and Montpelier Re must comply with the provisions of
the Companies Act regulating the payment of dividends and making distributions
from contributed surplus. Under the Companies Act, a company shall not declare
or pay a dividend, or make a distribution out of contributed surplus, if there
are reasonable grounds for believing that: (a) the company is, or would after
the payment be, unable to pay its liabilities as they become due; or (b) the
realizable value of the company's assets would thereby be less than the
aggregate of its liabilities and its issued share capital and share premium
accounts. Under the Companies Act, when a Bermuda company issues shares at a
premium (that is for a price above the par value), whether for cash or
otherwise, a sum equal to the aggregate amount or value of the premium on those
shares must be transferred to an account called "the share premium account." The
provisions of the Companies Act relating to the reduction of the share capital
of a company apply as if the share premium account were paid-up share capital of
that company, except for certain matters such as premium arising on a particular
class of shares which may be used in paying up unissued shares to be issued to
shareholders as fully paid bonus shares. The paid-up share capital may not be
reduced if on the date the reduction is to be effected there are reasonable
grounds for believing that the company is, or after the reduction would be,
unable to pay its liabilities as they become due.

     Exempted companies, such as the Company and Montpelier Re, must comply with
Bermuda resident representation provisions under the Companies Act which require
that a minimum number of offices must be filled by persons who are ordinarily
resident in Bermuda. We do not believe that such compliance will result in any
material expense to us.

     Under Bermuda law, non-Bermudians (other than spouses of Bermudians) may
not engage in any gainful occupation in Bermuda without an appropriate
governmental work permit. Our success may depend in part upon the continued
services of our principal employees in Bermuda. Most of our principal employees
are not Bermudians and are not spouses of Bermudians. Accordingly, any such
employee will require specific approval

                                        66
to work for us in Bermuda. A work permit may be granted or extended upon showing
that, after proper public advertisement, no Bermudian (or spouse of a Bermudian)
is available who meets the minimum standards reasonably required by the
employer. The Bermuda government has a policy that places a six-year term limit
on individuals with work permits, subject to certain exemptions for principal
employees. We have no reason to believe that the permits held by our senior
management would not be extended at expiration upon request.

UNITED STATES INSURANCE REGULATION

     Montpelier Re is licensed in Bermuda to write insurance and reinsurance and
is not admitted to do business in any jurisdiction in the United States or in
any country other than Bermuda. The insurance laws of each state of the United
States and of many other jurisdictions regulate the sale of insurance and
reinsurance within their jurisdictions by alien insurers and reinsurers, such as
Montpelier Re. Montpelier Re intends to conduct its business so as not to be
subject to the licensing requirements of insurance regulators in the United
States or elsewhere (other than Bermuda). Many aspects of the activities of
Montpelier Re will be similar to those employed by other non-admitted reinsurers
that provide reinsurance to United States and other ceding companies. There can
be no assurance, however, that insurance regulators in the United States or
elsewhere will not review the activities of Montpelier Re and claim that
Montpelier Re is subject to such jurisdiction's licensing requirements.

     In addition to the regulatory requirements imposed by the jurisdictions in
which they are licensed, reinsurers are subject to indirect regulatory
requirements imposed by jurisdictions in which their ceding companies are
licensed through the "credit for reinsurance" mechanism. In general, a ceding
company which obtains reinsurance from a reinsurer that is licensed, accredited
or approved by the jurisdiction or state in which the insurer files statutory
financial statements is permitted to reflect in its statutory financial
statements a credit in an aggregate amount equal to the liability for unearned
premiums and loss and LAE reserves ceded to the reinsurer.

     In the United States, many states allow credit for reinsurance ceded to a
reinsurer that is domiciled and licensed in another state of the United States
and meets certain financial requirements. A few states do not allow credit for
reinsurance ceded to non-licensed reinsurers except in certain limited
circumstances, and others impose additional requirements that make it difficult
to become accredited. The great majority of states, however, permit the
reduction in statutory surplus resulting from reinsurance obtained from a
nonlicensed or non-accredited reinsurer to be offset to the extent that the
reinsurer provides a letter of credit, trust or other acceptable security
arrangement.

UNITED KINGDOM INSURANCE REGULATION

     The Company intends that Montpelier Re will conduct its business so as not
to be subject to insurance regulation in the United Kingdom. However, if it were
determined that Montpelier Re is effecting or carrying out contracts of
insurance (including contracts of reinsurance) in the United Kingdom, it would
be required to be authorized and regulated by the Financial Services Authority
(the "FSA"). Insurers carrying on such business in the United Kingdom are
required to provide information relating to their insurance and reinsurance
arrangements to the FSA and insurers headquartered outside the European Union
are required to maintain assets in the United Kingdom in accordance with the
rules of the FSA. The FSA has wide-ranging powers of intervention in relation to
such insurers, which may be triggered if the FSA has a concern relating to such
arrangements or the solvency of such insurers as a result of the receipt of such
information or otherwise.

                                        67
MANAGEMENT

DIRECTORS

     The table below sets forth certain information concerning our directors as
of the date of this prospectus:
NAME                         AGE                          POSITIONS
----                         ---                          ---------
John J. (Jack) Byrne(1)....  70    Chairman
Anthony Taylor(1)..........  57    Deputy Chairman, Director, President and Chief Executive
                                   Officer of the Company, Chairman, Director, President
                                   and Chief Underwriting Officer of Montpelier Re
John D. Gillespie(3).......  44    Director
Raymond Barrette(3)........  52    Director
G. Thompson Hutton(2)......  48    Director
Raymond M. Salter(2).......  69    Director
Allan W. Fulkerson(1)......  69    Director
William Spiegel(3).........  40    Director
Steven J. Gilbert(3).......  56    Director
Kamil M. Salame(2).........  34    Director
K. Thomas Kemp(1)..........  62    Director and Chief Financial Officer
---------------

(1) Denotes Class A Director with term expiring in 2006.

(2) Denotes Class B Director with term expiring in 2004.

(3) Denotes Class C Director with term expiring in 2005.

     John J. (Jack) Byrne.  Mr. Byrne has been our Chairman since our inception.
He is also currently the Chairman of White Mountains Insurance Group Ltd., a
position he has held since 1985. Mr. Byrne previously held the position of CEO
of White Mountains from time to time from 1985 until 2002. Mr. Byrne previously
held the positions of Chairman and CEO of GEICO Corporation and Fireman's Fund
Corporation and Chairman of Financial Security Assurance Holdings, Ltd. Mr.
Byrne is a Managing Director of OneBeacon Insurance Group, LLC, a subsidiary of
White Mountains, and also serves as a director of Folksamerica Holding Company,
Inc. He previously served on the boards of directors of American Express, Martin
Marietta, Lehman Brothers, MidOcean Reinsurance, and Zurich Re.

     Anthony Taylor.  Mr. Taylor has served as our President and Chief Executive
Officer and President and Chief Underwriting Officer of Montpelier Re since
January 1, 2002. From 1983 until December 2001, Mr. Taylor was associated with
Lloyd's Syndicate number 51 "A Taylor & Others," which was initially managed by
Willis Faber Agencies and, after a management buy out, by Wellington
Underwriting Agencies of which he was a founding director. From 1998 until 2001,
Mr. Taylor was Chairman of Wellington Underwriting Inc., as well as Underwriting
Director of Wellington Underwriting Agencies Limited. During 2001, Mr. Taylor
was Chairman of Wellington Underwriting Agencies Limited and Deputy Chairman of
Wellington Underwriting plc. Prior to 1998, Mr. Taylor served as the Active
Underwriter of Lloyd's Syndicate Number 51. Mr. Taylor is also a director of
Aspen Insurance Holdings, Ltd., a Bermuda insurance and reinsurance company. Mr.
Taylor is a Fellow of the Chartered Insurance Institute and has held various
committee and board positions for the Lloyd's market.

     John D. Gillespie.  Mr. Gillespie has been a director of White Mountains
since 1999, and Deputy Chairman since January 2003, and is Chairman and
President of White Mountains Advisors LLC. He is also the founder and Managing
Partner of his own investment firm, Prospector Partners, LLC, in Guilford,
Connecticut. Mr. Gillespie also serves as a director of Folksamerica and served
as Managing Director of OneBeacon. Prior to forming Prospector Partners, Mr.
Gillespie was President of the T. Rowe Price Growth Stock Fund and the New Age
Media Fund, Inc. Mr. Gillespie was at T. Rowe Price from 1986-1997 and GEICO
Corporation from 1980-1984.

                                        68
Raymond Barrette.  Mr. Barrette has been President and CEO of White
Mountains since January 2003, and a director since 2000, and served as Chairman
and Chief Executive Officer of OneBeacon from 2001 until 2002. Mr. Barrette
formerly served as President of White Mountains from 2000 to June 2001 and
served as Executive Vice President and Chief Financial Officer of White
Mountains from 1997 to 2000. He was formerly a consultant to Tillinghast-Towers
Perrin from 1994 to 1996 and was with Fireman's Fund Insurance Company from 1973
to 1993. Mr. Barrette is also Chairman of Folksamerica.

     G. Thompson Hutton.  Mr. Hutton is a private equity and venture capital
investor based in Palo Alto, California. Since 2003, Mr. Hutton has been
Managing Director of Thompson Hutton LLC, providing management and investment
advisory services to private equity and venture capital firms and their
portfolio of operating companies. Immediately prior to forming Thompson Hutton
LLC, he worked as a private investor in association with Trident Capital, Sutter
Hill Ventures and Morgan Stanley Venture Partners. Mr. Hutton served as
President and Chief Executive Officer of Risk Management Solutions, Inc. from
1990 to 2000. Prior to 1990, Mr. Hutton was a management consultant at McKinsey
& Company, Inc. Mr. Hutton is currently a director of Claim IQ and Finaplex.

     Raymond Salter.  Mr. Salter was associated with Willis Faber plc from 1986
to 1993, during which time he served as a main board director and Managing
Director of the North American Reinsurance Division. During his eight years at
Willis Faber plc, Mr. Salter also held a number of other directorships in the
Willis Faber group. Mr. Salter retired from Willis Faber plc in 1993 and since
then has held a number of non-executive directorships including positions at
Kiln Capital plc (in the position of Chairman), Kiln Underwriting Limited,
Lombard Insurance Group and Groupama UK (Lombard was acquired by Groupama UK),
BF Caudle Agencies (in the position of Chairman), Advent Capital plc and Ashley
Palmer Syndicates Limited.

     Allan W. Fulkerson.  For almost ten years, Mr. Fulkerson has served as
President and Chief Executive Officer of Century Capital Management, Inc. In
addition, he serves as a director of Asset Allocation and Management, LLC, The
Galtney Group, Inc., HCC Insurance Holdings, Inc., and International Financial
Group, Inc. Previously, he has served as a director of Mutual Risk Management,
Ltd., Risk Capital Holdings, Inc., SCUUL Limited, Tempest Reinsurance Co., Terra
Nova (Bermuda) Holdings, Ltd., United Educators Risk Retention Group, Inc. and
Wellington Underwriting plc. Mr. Fulkerson is a graduate of Williams College,
where he served as a Trustee and Chairman of the Finance Committee until June
2001.

     William Spiegel.  Mr. Spiegel is a Managing Director of Cypress Advisors
Inc., which manages over $3.5 billion in private equity funds. He has been with
Cypress since its formation in 1994. Prior to joining Cypress, he was a member
of the Merchant Banking Group at Lehman Brothers. Over the course of his career,
he has worked on private equity transactions in a wide range of industries. Mr.
Spiegel currently manages Cypress' efforts in the healthcare and financial
services industries. Mr. Spiegel is a director of Catlin Westgen Group Ltd. and
Cinemark USA, Inc. He has an M.B.A. from the University of Chicago, an M.A. in
Economics from the University of Western Ontario, and a B.Sc. in Economics from
the London School of Economics.

     Steven J. Gilbert.  Mr. Gilbert has been Chairman of the Board of the
general partner of Gilbert Global Equity Partners, L.P., a private equity fund,
and Chairman of the Investment Committee of the general partner of Gilbert
Global Equity Partners (Bermuda), L.P., a private equity fund, since 1997. From
1992 to 1997, Mr. Gilbert was the Founder and Managing General Partner of Soros
Capital L.P., and a principal Advisor to Quantum Industrial Holdings Ltd. From
1988 through 1992, Mr. Gilbert was the Managing Director of Commonwealth Capital
Partners, L.P., a private equity investment firm. Mr. Gilbert is also a Limited
Partner of Chemical Venture Partners (now J.P. Morgan), which he founded in 1984
and where he was Managing General Partner until 1988. Mr. Gilbert is currently a
Director of Veritas, Inc., LCC International, Inc., Edmunds.com, Inc., Optical
Capital Group LLC, iSky, Inc., Birch Telecommunications, Inc., and the Asian
Infrastructure Fund.

     Kamil M. Salame.  Mr. Salame is a Director in the Private Equity Group of
Credit Suisse First Boston. Mr. Salame joined DLJ's Merchant Banking Group, a
predecessor to Credit Suisse First Boston Private Equity, Inc., in 1997.
Previously he was a member of DLJ's Leveraged Finance Group. Mr. Salame is also
a director of Aspen Insurance Holdings, Ltd., a Bermuda insurance and
reinsurance company. Mr. Salame
                                        69
received a J.D. from Columbia Law School, an M.B.A. from Columbia Business
School and a B.S. from Georgetown University.

     K. Thomas Kemp.  Mr. Kemp serves as our Chief Financial Officer and as a
director. Mr. Kemp has been a Director of White Mountains since 1994. He was
also President of White Mountains from June 2001 until December 2002. From
January 2000 to June 2001, Mr. Kemp was Deputy Chairman, and from 1997 to 2000,
he was President and CEO of White Mountains. He also serves as a director of
Folksamerica, Amlin plc, PECO Pallets and Main Street America.

BOARD OF DIRECTORS

     Our directors are divided into three classes of approximately equal size
and serve for terms of three years. Our Class A directors, whose terms expire in
2006, are Messrs. Byrne, Taylor, Fulkerson and Kemp. Our Class B directors,
whose terms expire in 2004, are Messrs. Hutton, Salter and Salame. Our Class C
directors, whose terms expire in 2005, are Messrs. Gillespie, Barrette, Spiegel
and Gilbert.

COMMITTEES OF THE BOARD OF DIRECTORS

     Audit Committee.  The Audit Committee, comprised of Messrs. Fulkerson,
Hutton, Salame and Spiegel, has general responsibility for the oversight and
surveillance of our accounting, reporting and financial control practices. The
Audit Committee annually reviews the qualifications of the Independent Auditors,
makes recommendations to the Board as to their selection and reviews the plan,
fees and results of their audit. Mr. Hutton is Chairman of the Audit Committee.

     Compensation and Nominating Committee.  The Compensation and Nominating
Committee, comprised of Messrs. Byrne, Gilbert, Salter and Spiegel, oversees our
compensation and benefit policies and programs, including administration of our
annual bonus awards and long-term incentive plans, the selection of new
directors, the evaluation of the board and management, and the development of
corporate governance principles. In addition, the Compensation and Nominating
Committee develops and reviews background information for candidates for the
Board, including those recommended by shareholders, and makes recommendations to
the Board regarding such candidates. Mr. Salter is Chairman of the Compensation
and Nominating Committee.

     Underwriting Policy Committee.  The Underwriting Policy Committee,
comprised of Messrs. Barrette, Hutton, Salter and Taylor, oversees Montpelier
Re's underwriting policies and approves any exceptions thereto. Mr. Taylor is
the Chairman of the Underwriting Policy Committee.

     Finance Committee.  The Finance Committee, comprised of Messrs. Fulkerson,
Gilbert, Gillespie, Salame and Taylor, formulates our investment policy and
oversees all of our significant investing activities. Mr. Gillespie is the
Chairman of the Finance Committee.

COMPENSATION AND NOMINATING COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     K. Thomas Kemp, our Chief Financial Officer and a member of our Board of
Directors is a member of the Board of Directors of White Mountains. The Chief
Executive Officer of White Mountains, John (Jack) Byrne, is a member of the
Compensation and Nominating Committee.

DIRECTOR COMPENSATION

     Those directors who are also our employees are not paid any fees or other
compensation for services as members of the Board or any committee of the Board.
In 2002, non-employee directors received an annual retainer fee of $25,000 and
$2,000 per Board or committee meeting attended, including formal telephonic
meetings, but not including informal informational meetings. In addition,
non-employee committee chairs receive an annual fee of $5,000 for each committee
chaired. All compensation received by directors was in cash.

                                        70
EXECUTIVE OFFICERS

     The table below sets forth certain information concerning our executive
officers as of the date of this prospectus:
NAME                                     AGE                     POSITIONS
----                                     ---                     ---------
Anthony Taylor(1)......................  57    Deputy Chairman, Director, President and
                                               Chief Executive Officer of the Company,
                                               Chairman, Director, President and Chief
                                               Underwriting Officer of Montpelier Re
Thomas George Story Busher.............  47    Chief Operating Officer, Executive Vice
                                               President and Secretary of the Company and
                                               Montpelier Re and Deputy Chairman of
                                               Montpelier Re
K. Thomas Kemp(1)......................  62    Director and Chief Financial Officer of the
                                               Company
C. Russell Fletcher III................  50    Chief Reinsurance Officer and Executive Vice
                                               President of the Company and Montpelier Re
Nicholas Newman-Young..................  51    Managing Director of Montpelier Marketing
                                               Services (UK) Limited
---------------

(1) Anthony Taylor and K. Thomas Kemp are also directors; detailed information
    regarding their experience is set forth in the prior section.

     Thomas George Story Busher.  Mr. Busher serves as our Chief Operating
Officer, Executive Vice President and Secretary. From 1985 to 2000, Mr. Busher
was employed by Wellington Underwriting plc, where he served as Director and
Group Secretary and as Director and Secretary of Wellington Underwriting
Agencies Limited. Prior to his employment with Wellington Underwriting plc, Mr.
Busher served as Director and Company Secretary of Richard Beckett Underwriting
Agencies Limited. Mr. Busher has also served as Chairman of Lloyd's Underwriting
Agents Association and as a member of the Business Conduct Committee of Lloyd's
Regulatory Board and of Lloyd's/FSA Liaison Committee.

     C. Russell Fletcher III.  Mr. Fletcher is our Chief Reinsurance Officer and
Executive Vice President. From 1999 to 2001, he served as Executive Vice
President of Homesite Group Incorporated. From 1996 to 1998, he was employed by
CAT Limited (acquired by ACE Ltd.) and its successor, Tempest Reinsurance
Company Limited, where he served as Chief Underwriting Officer -- North America.
From 1986 to 1996, he was employed by Vesta Insurance Group, Inc. (and its
predecessor, Liberty National Fire Insurance Company), where he served as
Executive Vice President. Mr. Fletcher has also been employed by subsidiaries of
the following reinsurance and insurance brokerages: Benfield Group plc, Aon
Corporation and Marsh & McLennan Companies, Inc.

     Nicholas Newman-Young.  Mr. Newman-Young serves as Managing Director of
Montpelier Marketing Services (UK) Limited. From 1998 to 2001, he served as
Managing Director in the London office of HartRe Company, LLC. From 1992 to
1998, Mr. Newman-Young was employed by Willis Faber North America (U.K.), where
he served as Managing Director. Prior to joining Willis Faber, Mr. Newman-Young
served as Chairman of MCWinn Underwriting Agencies and Director of Claremount
Underwriting Agency. He also served as an underwriter for 18 years in the
following Lloyd's syndicates: Syndicate 558, Syndicate 674 and Sir Philip
d'Ambrumenil Syndicate.

                                        71
MANAGEMENT COMPENSATION AND INCENTIVE PLANS

                           SUMMARY COMPENSATION TABLE

     The following table includes certain summary information concerning the
compensation awarded to, earned by or paid for services rendered in all
capacities during 2002 by the Company's Chief Executive Officer and the four
most highly compensated executive officers who were serving as executive
officers at the end of 2002, who we refer to as the named executive officers.
LONG-TERM
                                                  ANNUAL COMPENSATION           COMPENSATION
                                          -----------------------------------   ------------
                                                                                   SHARES
                                                                 OTHER ANNUAL    UNDERLYING     ALL OTHER
                                                                 COMPENSATION   OPTIONS/SARS   COMPENSATION
NAME AND PRINCIPAL POSITION        YEAR   SALARY(1)    BONUS         (2)            (3)            (4)
---------------------------        ----   ---------   --------   ------------   ------------   ------------
Anthony Taylor
  President and Chief
  Executive Officer..............  2002   $447,520    $379,000     $216,849      2,040,000       $ 85,726
Thomas George Story Busher
  Chief Operating Officer,
  Executive Vice President and
  Secretary......................  2002   $317,032    $297,000     $108,551        225,000       $ 64,795
C. Russell Fletcher III
  Chief Reinsurance Officer and
  Executive Vice President.......  2002   $400,000    $339,000     $ 48,000        225,000       $194,397
Nicholas Newman-Young
  Managing Director of
  Montpelier Marketing Services
  (UK) Limited...................  2002   $224,850    $188,000           --         60,000       $ 22,485
K. Thomas Kemp
  Chief Financial Officer and
  Executive Vice President.......  2002         --    $113,000           --             --             --
---------------

(1) The salary for Mr. Newman-Young is the dollar equivalent of L150,000.

(2) Represents housing expense reimbursements in the amount of $110,000, $75,000
    and $48,000 for Messrs. Taylor, Busher and Fletcher, respectively, and
    personal travel in the amount of $106,849 and $33,551 for Mr. Taylor and Mr.
    Busher, respectively.

(3) Represents the aggregate number of Full Voting Common Shares subject to
    Options granted to the Named Executive Officers during 2002.

(4) Represents expenses incurred in relocating to Bermuda, contributions made to
    the Company's defined contribution pension scheme and personal taxation
    consulting fees paid on behalf of the individuals.

                                        72
OPTIONS GRANTED DURING FISCAL YEAR 2002

     The following table provides information related to options granted to the
named executive officers during fiscal year 2002.
INDIVIDUAL GRANTS
                       ----------------------------------------------------------------      POTENTIAL REALIZABLE VALUE
                       NUMBER OF                                 FAIR                          AT ASSUMED ANNUAL RATE
                         COMMON     PERCENT OF                  MARKET                         OF COMMON SHARE PRICE
                         SHARES       TOTAL                    VALUE PER                          APPRECIATION FOR
                       UNDERLYING    OPTIONS     EXERCISE      SHARE ON                             OPTION TERM
                        OPTIONS     GRANTED TO   PRICE PER      DATE OF      EXPIRATION   --------------------------------
NAME                   GRANTED(1)   EMPLOYEES      SHARE         GRANT          DATE        0%         5%          10%
----                   ----------   ----------   ---------     ---------     ----------   -------   ---------   ----------
Anthony Taylor.......   510,000(2)     20.0%      $16.67        $16.67(11)   12/31/2011        --   5,130,682   13,205,590
                        510,000(3)     20.0%      $17.50        $16.67(11)   12/31/2011        --   4,707,382   12,782,290
                        510,000(4)     20.0%      $18.33        $16.67(11)   12/31/2011        --   4,284,082   12,358,990
                        510,000(5)     20.0%      $19.17        $16.67(11)   12/31/2011        --   3,855,682   11,930,590
Thomas George Story
  Busher.............    56,250(6)      2.2%      $17.50(10)    $20.00(12)    9/30/2012   140,625     848,131    1,933,585
                         56,250(7)      2.2%      $18.33(10)    $20.00(12)    9/30/2012    93,938     801,444    1,886,898
                         56,250(8)      2.2%      $19.17(10)    $20.00(12)    9/30/2012    46,687     754,194    1,839,648
                         56,250(9)      2.2%      $20.00(10)    $20.00(12)    9/30/2012        --     707,506    1,797,960
C. Russell Fletcher
  III................    56,250(6)      2.2%      $17.50(10)    $20.00(12)    9/30/2012   140,625     848,131    1,933,585
                         56,250(7)      2.2%      $18.33(10)    $20.00(12)    9/30/2012    93,938     801,444    1,886,898
                         56,250(8)      2.2%      $19.17(10)    $20.00(12)    9/30/2012    46,687     754,194    1,839,648
                         56,250(9)      2.2%      $20.00(10)    $20.00(12)    9/30/2012        --     707,506    1,797,960
Nicholas Newman-
  Young..............    15,000(6)      0.6%      $17.50(10)    $20.00(12)    9/30/2012    37,500     226,168      515,623
                         15,000(7)      0.6%      $18.33(10)    $20.00(12)    9/30/2012    25,050     213,718      503,173
                         15,000(8)      0.6%      $19.17(10)    $20.00(12)    9/30/2012    12,450     201,118      490,573
                         15,000(9)      0.6%      $20.00(10)    $20.00(12)    9/30/2012        --     188,668      478,123
K. Thomas Kemp.......        --          --           --            --               --        --          --           --
---------------

 (1) All options are cliff vesting.

 (2) The vesting date for these options was December 31, 2002.

 (3) The vesting date for these options is December 31, 2003.

 (4) The vesting date for these options is December 31, 2004.

 (5) The vesting date for these options is December 31, 2005.

 (6) The vesting date for these options is September 30, 2003.

 (7) The vesting date for these options is September 30, 2004.

 (8) The vesting date for these options is September 30, 2005.

 (9) The vesting date for these options is September 30, 2006.

(10) The exercise price per share for these options was determined based upon
     the estimated fully converted book value of the Common Shares as of June
     30, 2002, the most recent quarter end date preceding the date of grant.

(11) These options were granted in connection with the formation of the Company;
     accordingly, the fair market value per share on the date of grant was equal
     to the price per share paid by the initial investors in the Company.

(12) These options were granted after the formation of the Company, but prior to
     the Company's initial public offering, which was completed on October 15,
     2002. As such, there was no trading market for the

                                        73
Common Shares on the date of grant from which the fair market value can be
     calculated. However, for purposes of this table only, the initial public
     offering price of the Common Shares, $20.00, has been used for the fair
     market value of the Common Shares.

OPTIONS EXERCISED DURING FISCAL YEAR 2002 AND FISCAL YEAR-END OPTION VALUES

     No options were exercised by named executive officers during 2002.

     The following table provides information on unexercised options held by
each of the named executive officers as of December 31, 2002.
NUMBER OF SHARES            VALUE OF UNEXERCISED
                                                           UNDERLYING                   IN-THE-MONEY
                                                    UNEXERCISED OPTIONS/ SARS         OPTIONS/ SARS AT
                            SHARES                      DECEMBER 31, 2002             DECEMBER 31, 2002
                           ACQUIRED      VALUE     ---------------------------   ---------------------------
NAME                      ON EXERCISE   REALIZED   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                      -----------   --------   -----------   -------------   -----------   -------------
Anthony Taylor..........       --           --       510,000       1,530,000     $6,186,300     $16,014,000
Thomas George Story
  Busher................       --           --            --         225,000             --     $ 2,261,250
C. Russell Fletcher
  III...................       --           --            --         225,000             --     $ 2,261,250
Nicholas Newman-Young...       --           --            --          60,000             --     $   603,000
K. Thomas Kemp..........       --           --            --              --             --              --
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR

     The following table summarizes the Long-Term Incentive Plan awards made to
the Named Executive Officers during the latest fiscal year exclusive of awards
of options which have been presented in the Options Granted During Fiscal Year
2002 table. The long-term incentive awards presented below consisted of
performance shares. A performance share derives its value from the market value
of a Common Share when earned.
NUMBER OF                          ESTIMATED FUTURE PAYOUTS(2)
                              PERFORMANCE    PERFORMANCE PERIOD   ----------------------------
NAME                          UNITS(#)(1)        FOR PAYOUT        THRESHOLD(#)     TARGET(#)    MAXIMUM(#)
----                          ------------   ------------------   --------------   -----------   ----------
Anthony Taylor..............     78,684           3 years                0            78,684      157,368
Thomas George Story Busher..     31,470           3 years                0            31,470       62,940
C. Russell Fletcher III.....     59,010           3 years                0            59,010      118,020
Nicholas Newman-Young.......     15,738           3 years                0            15,738       31,476
K. Thomas Kemp..............         --                --               --                --           --
---------------

(1) Each performance unit represents the fair value of a Common Share.

(2) Performance units are conditional grants which entitle the recipient to
    receive, without payment to the Company, all, double, or a part of the value
    of the units granted, depending on the achievement of specific financial or
    operating goals. Performance units vest at the end of a three-year
    performance cycle, and can be denominated in common shares at market value
    and are payable in cash, common shares or a combination of both at the
    discretion of the Compensation and Nominating Committee of the Board. The
    performance target for full payment of performance units issued in the
    2002-2004 performance cycle is the achievement of a target combined ratio as
    measured over the applicable performance periods. The payment on performance
    units can double if the average combined ratio is significantly less than
    the target. Conversely, the payment on performance units declines to zero
    with an increasing combined ratio. The Compensation and Nominating Committee
    has significant discretion regarding the payout level of the performance
    units.

                                        74
CEO EMPLOYMENT AGREEMENT

     We have entered into service agreements with Mr. Taylor, effective as of
January 1, 2002, under which he agreed to serve as our Chief Executive Officer
and the Chief Underwriting Officer of Montpelier Re for an initial term ending
on December 31, 2004. The agreements provide that Mr. Taylor be paid an initial
annual salary of L300,000 (approximately $483,000), subject to annual increase
or decrease (but not below L300,000) as determined by the Compensation and
Nominating Committee of the Board, subject to ratification by the full Board. In
addition, the agreements provide that Mr. Taylor shall receive a housing
allowance each year. Mr. Taylor received a signing bonus of $400,000 upon
entering into the service agreements for services to be rendered upon the
commencement of his employment.

     If Mr. Taylor's service agreements are terminated prior to their expiration
by the Company due to his mental or physical incapacity, Mr. Taylor will be
entitled to continue to receive his salary for a period of twelve months
following the termination. If Mr. Taylor terminates his service agreements, or
we terminate his agreements for cause, we will have no further obligations to
Mr. Taylor under the agreements. Mr. Taylor's employment agreement has no
specific provisions relating to a Change in Control of the Company.

     Mr. Taylor's agreements entitle him to participate in our annual bonus and
long-term incentive plans, which are described below, pursuant to which he had
been granted 78,684 units under the performance unit plan ("PUP") as of December
31, 2002. Mr. Taylor has also been granted options under the Share Option Plan.
The agreements also contain customary provisions relating to confidentiality,
non-competition and non-solicitation.

EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS

     The following information summarizes the employment-related agreements for
our named executive officers.

     Thomas George Story Busher.  We have entered into service agreements with
Mr. Busher, effective as of January 1, 2002, pursuant to which he has agreed to
serve as our Chief Operating Officer and Executive Vice President. In addition
to his annual salary, Mr. Busher is entitled to a housing allowance, initially
set at $90,000 per year. Mr. Busher's service agreements also entitle him to
participate in our PUP plan, pursuant to which he had been granted 31,470 units
as of December 31, 2002. Mr. Busher has also been granted options under the
Share Option Plan. The remaining material terms of Mr. Busher's service
agreements are common to the other officers' service agreements and are
described below.

     C. Russell Fletcher III.  We have entered into a service agreement with Mr.
Fletcher, effective as of January 1, 2002, pursuant to which he has agreed to
serve as our Chief Reinsurance Officer and Executive Vice President. In addition
to his annual salary, Mr. Fletcher is entitled to a housing allowance, initially
set at $144,000 per year. Mr. Fletcher's service agreement also entitles him to
participate in our PUP plan, pursuant to which he had been granted 59,010 units
as of December 31, 2002. Mr. Fletcher has also been granted options under the
Share Option Plan. The remaining material terms of Mr. Fletcher's service
agreement are common to the other officers' service agreements and are described
below.

     Nicholas Newman-Young.  We have entered into a service agreement with Mr.
Newman-Young, effective as of January 24, 2002, pursuant to which he has agreed
to serve as the Managing Director of Montpelier Marketing Services (UK) Limited.
Mr. Newman-Young's service agreement entitles him to participate in our PUP
plan, pursuant to which he had been granted 15,738 units as of December 31,
2002. Mr. Newman-Young has also been granted options under the Share Option
Plan. The remaining material terms of Mr. Newman-Young's service agreement are
common to the other officers' service agreements and are described below.

     Provisions Common to the Service Agreements.  In addition to the provisions
described above, the service agreements of Messrs. Busher, Fletcher and
Newman-Young contain the following provisions. Each service agreement is
terminable upon twelve months written notice by us or upon six months written
notice by the officer. Each agreement also contains non-compete provisions of
varying terms, and entitles the officer to

                                        75
participate in our annual bonus and long-term incentive plans described below.
The service agreements have no specific provisions relating to a Change in
Control of the Company.

     K. Thomas Kemp.  We have entered into a Letter of Employment with Mr. Kemp,
effective May 21, 2002 (other than with respect to his compensation, for which
purpose the letter is effective as of January 1, 2003) pursuant to which he has
agreed to serve as the Chief Financial Officer of the Company. Mr. Kemp's Letter
of Employment entitles him to participate in our annual bonus plan and the PUP
plan, although no units had been granted to him as of December 31, 2002. This
Letter of Employment agreement with Mr. Kemp may be terminated by us or by Mr.
Kemp upon two weeks written notice. We paid a bonus of $113,000 to Mr. Kemp in
recognition of his services to the Company as Chief Financial Officer during
2002, however, this bonus was not paid pursuant to the terms of his Letter of
Employment.

ANNUAL BONUS PLAN

     Each year, officers that participate in the annual bonus plan will be
eligible to receive a bonus based upon the officer's achievement of annual
performance targets that have been established by the Compensation and
Nominating Committee of the Board of Directors. The Compensation and Nominating
Committee will establish a bonus pool at the end of each year, with the amount
of such pool determined based upon our year end results. The pool will then be
allocated to officers based upon their individual performance with respect to
their performance targets.

LONG-TERM INCENTIVE PLANS

     Performance Unit Plan.  Performance units are conditional grants which
entitle the recipient to receive, without payment to the Company, all, double,
or a part of the value of the units granted, depending on the achievement of
specific financial or operating goals. Performance units vest at the end of a
three-year performance cycle, and can be denominated in common shares at market
value and are payable in cash, common shares or a combination of both at the
discretion of the Compensation and Nominating Committee of the Board. The
performance target for full payment of performance units issued in the 2002-2004
performance period is the achievement of an average combined ratio of 70% as
measured over the period. The performance target for full payment of performance
units issued in the 2003-2005 performance period is a combination of the
achievement of an average combined ratio of 72% as measured over the period, and
the achievement of an annual increase in fully converted book value per share of
18% as measured over the period. Linear scale collars around the targets provide
for payment on performance units to rise to 200% if performance materially
exceeds target or to reduce to nil if performance is materially below target.
The Compensation and Nominating Committee has significant discretion regarding
the payout level of the performance units.

     Share Option Plan.  Pursuant to the terms of the Share Option Plan, the
committee has discretion to grant share options to certain principal employees.
As of September 20, 2002, Messrs. Taylor, Busher, Fletcher and Newman-Young had
received options under the plan. The options expire ten years after the award
date are subject to various vesting periods, and require full payment in cash
prior to exercise. A total of 2,550,000 options, the maximum amount authorized
under current Committee approvals, were outstanding pursuant to the Share Option
Plan at December 31, 2002.

DEFERRED COMPENSATION PLAN

     The Deferred Compensation Plan gives executive officers the ability to
defer receipt of executive compensation, including performance unit payouts, at
no cost to the Company. Under the plan, various investment options are available
including a phantom share tracking option, a fixed income investment option and
an equity fund investment option. The plan is a non-funded general obligation.

                                        76
PRINCIPAL SHAREHOLDERS

     The following table sets forth information as of July 1, 2003 regarding
beneficial ownership of common shares and the applicable voting rights attached
to such share ownership in accordance with our bye-laws by:

     - each person known by us to beneficially own 5% or more of our outstanding
       common shares;

     - each of our directors;

     - each of our executive officers; and

     - all of our executive officers and directors as a group.
BENEFICIAL OWNERSHIP OF
                                                               PRINCIPAL SHAREHOLDERS(2)
                                                              ----------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1)                          NUMBER       PERCENTAGE
---------------------------------------                       ------------   -------------
White Mountains Insurance Group, Ltd.(3)....................  15,581,571.7       22.9%
  One Beacon Street
  Boston, MA 02108
Cypress Associates II (Cayman) L.P.(4)......................     6,808,334       10.7%
  65 East 55th Street, 28th Floor
  New York, New York 10022
DLJMB Overseas Partners III, C.V. and associated funds(5)...     5,760,000        9.1%
  11 Madison Avenue, 16th Floor
  New York, NY 10010
Vestar AIV Managers Ltd.(6).................................     3,404,165        5.4%
  245 Park Avenue, 41st Floor
  New York, New York 10167
FMR Corp.(7)................................................     3,283,900        5.2%
  82 Devonshire Street
  Boston, Massachusetts 02109
John J. (Jack) Byrne(8).....................................       560,000          *
Allan W. Fulkerson(9).......................................       560,000          *
Anthony Taylor(10)..........................................       570,100          *
K. Thomas Kemp(11)..........................................        60,000          *
John D. Gillespie(12).......................................     1,260,000        2.0%
C. Russell Fletcher(13).....................................         6,000          *
G. Thompson Hutton(14)......................................         6,000          *
Raymond M. Salter...........................................            --         --
William Spiegel(15).........................................            --         --
Steven J. Gilbert(16).......................................            --         --
Kamil M. Salame(17).........................................            --         --
Raymond Barrette............................................            --         --
Thomas G.S. Busher(18)......................................            --         --
Nicholas Newman-Young(19)...................................            --         --
All directors and executive officers as a group.............     3,022,100        4.7%
                                                              ------------       ----
---------------

  *  Less than 1%.

 (1) Unless otherwise stated, the address for each beneficial owner is c/o
     Montpelier Re Holdings Ltd., Mintflower Place, 8 Par-La-Ville Road,
     Hamilton HM 08, Bermuda.

 (2) Our bye-laws reduce the total voting power of any shareholder owning more
     than 9.5% of our common shares to 9.5% of the voting power of our common
     shares.

 (3) Includes 900,000 common shares held by Camden Fire Insurance Company,
     8,100,000 common shares held by OneBeacon Insurance Company and 1,800,000
     common shares held by Pennsylvania General Insurance Company and warrants,
     which are currently exercisable, to purchase 4,781,571.7 common

                                        77
shares. Jack Byrne beneficially owns 1,111,818 common shares of White
     Mountains, representing 13.3% of White Mountains' total common shares
     outstanding at March 21, 2003, and is the Chairman of White Mountains.

 (4) Includes 62,319 common shares held by 55th Street Partners II (Cayman)
     L.P., 6,457,865 common shares held by Cypress Merchant B Partners II
     (Cayman) L.P., 274,534 common shares held by Cypress Merchant Banking II-A
     C.V. and 13,616 common shares held by Cypress Side-By-Side (Cayman) L.P.
     (the "Cypress Entities"). Cypress Associates II (Cayman) L.P. is the
     general partner of the Cypress Entities. The general partner of Cypress
     Associates II (Cayman) L.P. is CMBP II (Cayman) Ltd., whose directors are
     Jeff Hughes, James Singleton, David Spalding and James Stern.

 (5) Includes 37,138 common shares held by DLJ MB Partners III GmbH & Co. KG,
     304,637 common shares held by DLJ Offshore Partners III, C.V., 78,581
     common shares held by DLJ Offshore Partners III-1, C.V., 55,978 common
     shares held by DLJ Offshore Partners III-2, C.V., 922,156 common shares
     held by MBP III Plan Investors, L.P., 7,373 common shares held by
     Millennium Partners II, L.P. and 4,354,137 common shares held by DLJMB
     Overseas Partners III, C.V. Credit Suisse First Boston, a Swiss bank, owns
     the majority of the voting stock of Credit Suisse First Boston, Inc., which
     in turn owns all of the voting stock of Credit Suisse First Boston (USA),
     Inc. ("CSFB-USA"). The DLJ related entities named above (the "DLJ Related
     Entities") are merchant banking funds advised by indirect subsidiaries of
     CSFB-USA.

 (6) Includes 3,333,954 shares held by Vestar AIV Holdings A L.P. ("Vestar
     Holdings A"), 28,361 shares held by Vestar AIV Holdings B L.P. ("Vestar
     Holdings B") and 41,850 shares held by Vestar AIV Employees Ltd. ("Vestar
     Employees"). Vestar AIV Managers Ltd. is the sole director of Vestar
     Employees and the general partner of Vestar AIV Associates L.P. ("Vestar
     Associates"). Vestar Associates, in turn, is the general partner of each of
     Vestar Holdings A and Vestar Holdings B. Vestar AIV Managers Ltd. is owned
     by Norman W. Alpert, Bryan J. Carey, Nicholas A. Dovidio, James L. Elrod,
     Jr., Jack M. Feder, James P. Kelley, Sander M. Levy, Arthur J. Nagle,
     Daniel S. O'Connell, Robert L. Rosner and Brian P. Schwartz, all of whom
     disclaim beneficial ownership of the shares of Montpelier owned by Vestar
     Holdings A, Vestar Holdings B and Vestar Employees, except to the extent of
     their pecuniary interest therein.

 (7) Based on a Schedule 13G filed jointly by FMR Corp., Edward C. Johnson, 3d
     and Abigail P. Johnson with the Securities and Exchange Commission on
     February 13, 2003. Fidelity Management & Research Company ("Fidelity"), a
     wholly owned subsidiary of FMR Corp. and an investment adviser registered
     under Section 203 of the Investment Advisers Act of 1940, is the beneficial
     owner of 3,283,900 shares as a result of acting as investment adviser to
     various investment companies registered under Section 8 of the Investment
     Company Act of 1940. Edward C. Johnson 3d, FMR Corp., through its control
     of Fidelity, and the funds each has sole power to dispose of the 3,283,900
     shares owned by the Funds. Neither FMR Corp. nor Edward C. Johnson 3d,
     Chairman of FMR Corp., has the sole power to vote or direct the voting of
     the shares owned directly by the Fidelity Funds, which power resides with
     the Funds' Boards of Trustees. Fidelity carries out the voting of the
     shares under written guidelines established by the Funds' Boards of
     Trustees. Members of the Edward C. Johnson, 3d family are the predominant
     owners of Class B shares of common stock of FMR Corp., representing
     approximately 49% of the voting power of FMR Corp. Mr. Johnson, 3d owns
     12.0% and Abigail Johnson owns 24.5% of the aggregate outstanding voting
     stock of FMR Corp. Mr. Johnson, 3d is Chairman of FMR Corp. and Abigail P.
     Johnson is a Director of FMR Corp. The Johnson family group and all other
     Class B shareholders have entered into a shareholders' voting agreement
     under which all Class B shares will be voted in accordance with the
     majority vote of Class B shares. Accordingly, through their ownership of
     voting common stock and the execution of the shareholders' voting
     agreement, members of the Johnson family may be deemed, under the
     Investment Company Act of 1940, to form a controlling group with respect to
     FMR Corp.

 (8) Includes 60,000 common shares held by his wife, Dorothy Byrne, 260,000
     common shares held by his son, John J. Byrne, III, and 240,000 common
     shares held by Jack Byrne. Mr. Byrne is also the Chairman of White
     Mountains Insurance Group, Ltd., another one of our shareholders.

                                        78
(9) Includes 560,000 common shares held by Century Capital Partners II, L.P.,
     to which Mr. Fulkerson disclaims beneficial ownership, except to the extent
     of his actual pecuniary interest therein. He is a limited partner of
     Century and is a managing member of the LLC that is the general partner of
     Century.

(10) Includes options which have vested and are currently exercisable to
     purchase 510,000 common shares. Does not include options to purchase
     1,530,000 common shares, which are not currently exercisable and which vest
     over three years.

(11) Includes 15,000 common shares held by Little Oak Hill Partnership L.P.

(12) Includes (i) 1,140,000 common shares owned by various funds of Prospector
     Partners LLC in which Mr. Gillespie is either general manager or investment
     manager, (ii) 60,000 common shares held by Gillespie Family 2000, LLC in
     which Mr. Gillespie's interest is limited to that as a co-managing member,
     (iii) 36,000 common shares held by Main Street America Assurance
     Corporation to which Mr. Gillespie serves as an investment manager and (iv)
     24,000 common shares held by National Grange Mutual Insurance Company to
     which Mr. Gillespie serves as an investment manager. Mr. Gillespie
     disclaims beneficial ownership of such common shares owned by Prospector
     Partners LLC and Gillespie Family 2000, LLC, except to the extent of his
     pecuniary interest therein. Mr. Gillespie is also Deputy Chairman of White
     Mountains Insurance Group, Ltd., another one of our shareholders.

(13) Does not include options to purchase 225,000 shares, which are not
     currently exercisable and which vest over four years.

(14) Includes 6,000 common shares held by Hutton Living Trust.

(15) Mr. Spiegel, one of our directors, is a Managing Director of Cypress
     Advisors Inc., which manages the Cypress Entities discussed in footnote 4
     above. Mr. Spiegel disclaims beneficial ownership of any of the common
     shares owned by the Cypress Entities.

(16) Does not include 1,515,562 common shares held by Gilbert Global Equity
     Partners, L.P., 276,164 shares held by Gilbert Global Equity Partners
     (Bermuda), L.P. and 23,829 shares held by GGEP-SK, LLC. Mr. Gilbert, one of
     our directors, is Chairman of the Board of the general partner of Gilbert
     Global Equity Partners, L.P. and Chairman of the Investment Committee of
     the general partner of Gilbert Global Equity Partners (Bermuda) L.P. Mr.
     Gilbert disclaims beneficial ownership of any of the common shares owned by
     the entities discussed in this footnote 16.

(17) Mr. Salame, one of our directors, is a Director in the Private Equity Group
     of Credit Suisse First Boston, of which the DLJ Related Entities are a
     part. Mr. Salame disclaims beneficial ownership of any of the common shares
     owned by the DLJ Related Entities.

(18) Does not include options to purchase 225,000 shares, which are not
     currently exercisable and which vest over four years.

(19) Does not include options to purchase 60,000 shares, which are not currently
     exercisable and which vest over four years.

                                        79
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     We describe below some of the transactions we have entered into with
parties that are related to our company. We believe that each of the
transactions described below was on terms no less favorable to us than we could
have obtained from unrelated parties.

TRANSACTIONS AND RELATIONSHIPS WITH INITIAL INVESTORS

     White Mountains and Benfield sponsored our formation and invested $180
million and $25 million respectively in our initial private placement. In
addition, White Mountains and Benfield were granted warrants that entitle them
to purchase 4,781,571.7 common shares and 2,390,785.8 common shares,
respectively.

     In connection with our formation, White Mountains and Benfield established
a trust in Bermuda to fund our start-up expenses. After our formation and
funding, we reimbursed White Mountains and Benfield $400,000 each for the
amounts they had contributed to the trust: $238,185 each as of December 31, 2001
with the remaining amount of $161,815 each, being repaid as of March 26, 2002.
In addition, in December 2001 the Company paid Benfield Advisory Limited, an
affiliate of Benfield, advisory fees of $3.3 million in connection with the
formation of the Company.

     Mr. Byrne, Chairman of our Board and a member of our Compensation and
Nominating Committee, is also Chairman of the board of directors of White
Mountains and served as Chief Executive Officer of White Mountains until
December 31, 2002. Mr. Kemp, our Chief Financial Officer and one of our
directors, is a member of the board of directors of White Mountains and served
as President of White Mountains until December 31, 2002. Mr. Barrette, one of
our directors and a member of the Underwriting Policy Committee, is a director
of White Mountains and was named President and Chief Executive Officer of White
Mountains, effective January 1, 2003. Mr. Gillespie, one of our directors, is
Principal Executive Officer of White Mountains Advisors LLC, a wholly owned
indirect subsidiary of White Mountains, and Deputy Chairman of the board of
directors of White Mountains.

     We have engaged White Mountains Advisors LLC, a wholly owned indirect
subsidiary of White Mountains Insurance Group, to provide investment advisory
and management services. The fees, which vary depending on the amount of assets
under management, are between 0.15% and 0.30% and are included in net investment
income. The Company incurred an average fee of 0.17% and 0.20% for the three
months ended March 31, 2003 and 2002, respectively. For the three months ended
March 31, 2003 and 2002, the Company expensed investment management fees of
approximately $692,000 and $523,000, respectively, and has recorded an amount
payable for these services of $705,000 and $525,000, respectively. John
Gillespie, the Company's Chairman of the Finance Committee, is Deputy Chairman
of the Board of Directors of White Mountains Insurance Group, the Principal
Executive Officer of White Mountains Advisors LLC and is either general manager
or investment manager of various funds which own less than 5% of the Company.

     We have also entered into an agreement with Remetrics, a subsidiary of
Benfield Holdings Limited, which beneficially owns 4.5% of our common shares,
for the provision of certain risk management services. This agreement was no
longer in place at December 31, 2002. As a result of this agreement, the Company
accrued approximately $nil and $650,000 for the three months ended March 31,
2003 and 2002, respectively, for risk management services.

     In addition, in the ordinary course of business, we have entered into four
reinsurance agreements with OneBeacon, a wholly owned subsidiary of White
Mountains, one of our principal shareholders, during the three months ended
March 31, 2002. The Company received $728,000 in aggregate annual premiums from
these contracts during the year ended December 31, 2002. The Company has not
entered into any reinsurance agreements with OneBeacon Insurance Group during
the three months ended March 31, 2003.

     In addition, we pay brokerage commissions to UK and U.S. brokerage
subsidiaries of Benfield Holdings Limited, on business brought in by Benfield.
These commissions are consistent with commissions paid to other brokers in the
ordinary course of business and totaled $5.8 million and $3.2 million for the
three months ended March 31, 2003 and 2002, respectively.

                                        80
RELATIONSHIPS WITH STRATEGIC INVESTORS AND UNDERWRITERS

     Mr. Kamil M. Salame, one of our directors, is a Director in the Private
Equity Group of Credit Suisse First Boston, an affiliate of which, Credit Suisse
First Boston LLC, is acting as an underwriter in this offering. In addition,
certain entities in the Private Equity Group own our common shares. Banc of
America Securities LLC, one of the underwriters in this offering, is one of our
warrantholders and is an affiliate of Bank of America Corporation, one of our
shareholders.

     Bank of America, N.A., an affiliate of Banc of America Securities LLC,
participates and acts as the administrative agent and a lender in our credit
facilities. Credit Suisse First Boston is also a lender in our credit
facilities. Under these facilities, we have a revolving credit line with a $50
million borrowing limit and have a three-year term loan of $150 million.
Following this offering, we intend to use a portion of the net proceeds of this
offering to repay all amounts outstanding under the term loan facility and to
terminate the term loan and revolving credit facilities. As a result, affiliates
of some of the underwriters will receive a portion of the proceeds of this
offering. Affiliates of both Banc of America Securities LLC and Credit Suisse
First Boston LLC are participants in the letter of credit facility which
Montpelier Re entered into on June 20, 2003.

     In addition, in the ordinary course of business, the Company entered into
four reinsurance agreements with OneBeacon Insurance Group, a subsidiary of
White Mountains Insurance Group, during the three months ended March 31, 2002.
The Company received $728,000 in aggregate annual premiums from these agreements
during the year ended December 31, 2002. The Company has not entered into any
reinsurance agreements with OneBeacon Insurance Group during the three months
ended March 31, 2003.

TRANSACTIONS WITH MANAGEMENT

     On January 29, 2002, we paid Mulherrin $95,230 for financial advisory
services. Allan Waters, who previously served as one of our directors, is the
managing member and owner of Mulherrin.

                                        81
MATERIAL TAX CONSIDERATIONS

     The following summary of our taxation, the taxation of the Company and the
taxation of holders of notes is based upon current law and is for general
information only. Legislative, judicial or administrative changes may be
forthcoming that could affect this summary.

     The following legal discussion (including and subject to the matters and
qualifications set forth in such summary) of the material tax considerations (i)
under "Taxation of the Company and Montpelier Re -- Bermuda" and "Taxation of
noteholders -- Bermuda Taxation" is based upon the advice of Conyers Dill &
Pearman, special Bermuda legal counsel, and (ii) under "Taxation of the Company
and Montpelier Re -- United States" is the opinion of Cahill Gordon & Reindel
LLP, New York, New York, special tax counsel (the advice of such firms does not
include any factual or accounting matters, determinations or conclusions,
amounts and computations and amounts of components thereof or facts relating to
the business or activities of the Company and Montpelier Re). The opinion of
Cahill Gordon & Reindel LLP relies upon and is premised on the accuracy of
factual statements and representations made by the Company concerning the
business and properties, ownership, organization, source of income and manner of
operation of the Company and Montpelier Re. The discussion is based upon current
law. Legislative, judicial or administrative changes or interpretations may be
forthcoming that could be retroactive and could affect the tax consequences to
holders of notes. The tax treatment of a holder of notes, or of a person treated
as a holder of notes for U.S. federal income, state, local or non-U.S. tax
purposes, may vary depending on the holder's particular tax situation.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S.
FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF OWNING THE NOTES.

TAXATION OF THE COMPANY AND MONTPELIER RE

     Bermuda.  Under current Bermuda law, there is no income tax or capital
gains tax payable by us or Montpelier Re. The Company and Montpelier Re have
each obtained from the Minister of Finance under The Exempted Undertaking Tax
Protection Act 1966, as amended, an assurance that, in the event that Bermuda
enacts legislation imposing tax computed on profits, income, any capital asset,
gain or appreciation, or any tax in the nature of estate duty or inheritance,
then the imposition of any such tax shall not be applicable to the Company, to
Montpelier Re or to any of their operations or their shares, debentures or other
obligations, until March 28, 2016. The Company and Montpelier Re could be
subject to taxes in Bermuda after that date. This assurance is subject to the
proviso that it is not to be construed so as to prevent the application of any
tax or duty to such persons as are ordinarily resident in Bermuda (the Company
and Montpelier Re are not so currently affected) or to prevent the application
of any tax payable in accordance with the provisions of the Land Tax Act 1967 or
otherwise payable in relation to any property leased to the Company or
Montpelier Re. The Company and Montpelier Re each pay annual Bermuda government
fees, and Montpelier Re pays annual insurance license fees. In addition, all
entities employing individuals in Bermuda are required to pay a payroll tax and
there are other sundry taxes payable, directly or indirectly, to the Bermuda
government.

     United Kingdom.  The Company presently intends to operate in such a manner
that, for tax purposes, it and Montpelier Re will not be considered to have a
taxable presence in the United Kingdom.

     The Company has a subsidiary based in the UK to provide business
introduction and other support services to Montpelier Re. Appropriate arm's
length fees are charged for such services. These fees do not include an element
of profit related commission.

     Normal UK tax will be payable on profits made by the UK subsidiary but it
not expected that, in the context of the group's profitability as a whole, any
such tax charges will be seen to be significant.

     If the nature and/or scope of the services provided from the UK subsidiary
to Montpelier Re changed (perhaps in response to growth in business or market
necessity) and was held to give rise either to the existence of a taxable
presence in the UK or to a requirement to charge higher fees for the services
provided, a greater proportion of the income generated by Montpelier Re might
become subject (directly or indirectly)

                                        82
to UK tax. This is a question of fact and degree. The amount of income deemed to
arise in the UK would depend on exactly what was done there and on the balance
between onshore UK and offshore UK activities.

     United States.  The Company and Montpelier Re currently intend to conduct
substantially all of their operations in Bermuda or elsewhere outside the United
States and to limit their U.S. contacts so that they will not be engaged in a
trade or business in the United States. However, because there is no definitive
identification of activities which constitute being engaged in a trade or
business in the United States for U.S. federal income tax purposes, there can be
no assurance that the IRS will not contend, perhaps successfully, that the
Company or Montpelier Re will be engaged in a trade or business in the United
States. A foreign corporation deemed to be so engaged would be subject to U.S.
income tax, as well as the branch profits tax, on its income which is treated as
effectively connected with the conduct of that trade or business unless the
corporation is entitled to relief under the permanent establishment provision of
a tax treaty, as discussed below.

     Under the income tax treaty between Bermuda and the United States (the
"Treaty"), Montpelier Re will not be subject to U.S. income tax on any income
found to be effectively connected with a U.S. trade or business unless that
trade or business is conducted through a permanent establishment in the United
States. No regulations interpreting the Treaty have been issued. Montpelier Re
currently intends not to have a permanent establishment in the United States,
although there can be no assurance that it will achieve this result. Under
existing law, if Montpelier Re (i) has no permanent establishment in the United
States and (ii) is entitled to the benefits of the Treaty, it will not be
subject to U.S. federal income tax.

     Montpelier Re would not be entitled to the benefits of the Treaty if (i)
50% or less of the Company's stock were beneficially owned, directly or
indirectly, by Bermuda residents or U.S. citizens or residents, or (ii)
Montpelier Re's income were used in substantial part to make distributions to,
or to meet certain liabilities to, persons who are not Bermuda residents or U.S.
citizens or residents. There can be no assurance that Montpelier Re will be
eligible for Treaty benefits as of the date of this offering or in the future
because of factual and legal uncertainties regarding the residency and
citizenship of the Company's shareholders.

     The Code requires that foreign insurance companies carrying on an insurance
business within the United States have a certain minimum amount of effectively
connected net investment income, determined in accordance with a formula that
depends, in part, on the amount of U.S. risk insured or reinsured by such
companies. If Montpelier Re is considered to be engaged in the conduct of an
insurance business in the United States and it is not entitled to the benefits
of the Treaty in general (because it fails to satisfy one of the limitations on
treaty benefits discussed above), the Code could subject a significant portion
of Montpelier Re's investment income to U.S. income tax. In addition, while the
Treaty clearly applies to premium income, it is uncertain whether the Treaty
applies to other income such as investment income. If Montpelier Re is
considered engaged in the conduct of an insurance business in the United States
and is entitled to the benefits of the Treaty in general, but the Treaty is
interpreted to not apply to investment income, a significant portion of
Montpelier Re's investment income could be subject to U.S. income tax.

     Foreign corporations not engaged in a trade or business in the United
States are nonetheless subject to U.S. income tax imposed by withholding on
certain "fixed or determinable annual or periodic gains, profits and income"
derived from sources within the United States (such as dividends and certain
interest on investments).

     The United States also imposes an excise tax on insurance and reinsurance
premiums paid to foreign insurers or reinsurers with respect to risks located in
the United States. The rates of tax applicable to premiums paid to Montpelier Re
are 4% for casualty insurance premiums and 1% for reinsurance premiums.

     Personal Holding Companies.  Based on the representations made by the
management of the Company regarding the nature of the ownership of the common
stock of the Company and Montpelier Re (including the representation that, based
on the information available to the Company, five or fewer individuals (without
regard to their citizenship or residency) do not own and are not deemed to own
(after applying the relevant constructive ownership rules) more than 50% of the
stock (by value) of the Company or Montpelier Re), Cahill Gordon & Reindel LLP
is of the opinion that neither the Company nor any subsidiary is a PHC

                                        83
for U.S. federal income tax purposes. A non-U.S. corporation generally will be
classified as a PHC for U.S. federal income tax purposes in a given taxable year
if at some time during the last half of such taxable year, five or fewer
individuals (without regard to their citizenship or residency) own or are deemed
to own (pursuant to certain constructive ownership rules) more than 50% of the
stock of the corporation by value and at least 60% of the corporation's gross
income, as determined for U.S. federal income tax purposes, for such taxable
year consists of "PHC income." For purposes of the 50% test, all of the common
shares owned by an investment partnership will be attributed to each of its
partners, if any, who are individuals. Additionally, certain entities (such as
tax-exempt organizations and pension funds) will be treated as individuals.

     If the Company or any subsidiary were a PHC in a given taxable year, such
corporation would be subject to PHC tax (at the highest marginal rate on
ordinary income applicable to individuals) on the "undistributed PHC income"
(which, in the case of a non-U.S. corporation, would exclude PHC income that is
from non-U.S. sources, except to the extent that such income is effectively
connected with a trade or business in the United States). Thus, the PHC income
of the Company and its non-U.S. subsidiaries (including Montpelier Re) would not
include underwriting income or investment income derived from non-U.S. sources
and should not include dividends received by the Company from its non-U.S.
subsidiaries (as long as such non-U.S. subsidiaries are not engaged in a trade
or business in the U.S.).

     There can be no assurance that the Company and its subsidiaries will not
become PHCs in the future because of factors including legal and factual
uncertainties regarding the application of the constructive ownership rules, the
makeup of the Company's shareholder base and other circumstances that could
change the application of the PHC rules to the Company and its subsidiaries. In
addition, if the Company or any of its subsidiaries were to become PHCs there
can be no assurance that the amount of PHC income will be immaterial.

TAXATION OF NOTEHOLDERS

  BERMUDA TAXATION

     Currently, there is no Bermuda withholding tax on interest paid by the
Company.

  UNITED STATES TAXATION

     The following summary sets forth the material United States federal income
tax considerations related to the purchase, ownership and disposition of the
notes. Unless otherwise stated, this summary deals only with holders of notes
that are U.S. holders (as defined below) who purchase their notes in this
offering and who hold their notes as capital assets. The following discussion is
only a discussion of the material United States federal income tax matters as
described herein and does not purport to address all of the U.S. federal income
tax consequences that may be relevant to a particular noteholder in light of
such noteholder's specific circumstances. In addition, the following summary
does not describe the U.S. federal income tax consequences that may be relevant
to certain holders of notes, such as financial institutions, insurance
companies, regulated investment companies, real estate investment trusts,
financial asset securitization investment trusts, dealers in securities or
traders that adopt a mark-to-market method of tax accounting, tax exempt
organizations, expatriates, or persons who hold the notes as part of a hedging
or conversion transaction or as part of a short-sale or straddle, who may be
subject to special rules or treatment under the Code. This discussion is based
upon the Code, the Treasury regulations promulgated thereunder and any relevant
administrative rulings or pronouncements or judicial decisions, all as in effect
on the date hereof and as currently interpreted, and does not take into account
possible changes in such tax laws or interpretations thereof, which may apply
retroactively. This discussion does not include any description of the tax laws
of any state or local governments within the United States, or of any foreign
government, that may be applicable to the notes or the holders of notes. Persons
considering making an investment in the notes should consult their own tax
advisors concerning the application of the U.S. federal tax laws to their
particular situations as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction prior to making such investment.

                                        84
If a partnership holds the notes, the tax treatment of a partner will
generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding the notes, you should
consult your tax advisor.

     For purposes of this discussion, the term "U.S. holder" means a beneficial
owner of the notes that is, for U.S. federal income tax purposes:

        (i) a citizen or resident of the United States,

        (ii) a corporation or entity treated as a corporation created or
     organized in or under the laws of the United States, or any political
     subdivision thereof,

        (iii) an estate the income of which is subject to U.S. federal income
     taxation regardless of its source, or

        (iv) a trust if either (x) a court within the United States is able to
     exercise primary supervision over the administration of such trust and one
     or more United States persons have the authority to control all substantial
     decisions of such trust or (y) the trust has a valid election in effect to
     be treated as a United States Person for U.S. federal income tax purposes
     or any other person or entity that is trusted for U.S. federal income tax
     purposes as if it were one of the foregoing.

     Interest Payments.  Interest paid to a U.S. holder on a note will be
includible in such holder's gross income as ordinary interest income in
accordance with the holder's regular method of tax accounting. In addition,
interest on the notes will be treated as foreign source income for U.S. federal
income tax purposes. For foreign tax credit limitation purposes, interest on the
notes generally will constitute passive income, or, in the case of certain U.S.
holders, financial services income.

     Sale, Exchange, Redemption and Other Disposition of Notes.  Upon the sale,
exchange, redemption or other disposition of a note, a U.S. holder will
recognize taxable gain or loss equal to the difference, if any, between the
amount realized on the sale, exchange, redemption or other disposition (other
than accrued but unpaid interest which will be taxable as interest) and the
holder's adjusted tax basis in such note. A U.S. holder's adjusted tax basis in
a note generally will equal the cost of such note and any such gain or loss
generally will be capital gain or loss. The deductibility of capital losses is
subject to certain limitations. Any gain or loss realized by a U.S. holder on
the sale, exchange, redemption or other disposition of a note generally will be
treated as U.S. source gain or loss, as the case may be.

     Information Reporting and Backup Withholding.  Information returns may be
filed with the IRS in connection with payments of interest on the notes and the
proceeds from a sale or other disposition of the notes unless the holder of the
notes establishes an exemption from the information reporting rules. A holder of
notes that does not establish such an exemption may be subject to U.S. backup
withholding tax on these payments if the holder fails to provide its taxpayer
identification number or otherwise comply with the backup withholding rules. The
amount of any backup withholding from a payment to a U.S. holder will be allowed
as a credit against the U.S. holder's U.S. federal income tax liability and may
entitle the U.S. holder to a refund, provided that the required information is
furnished to the IRS.

  UNITED STATES TAXATION OF NON-U.S. NOTEHOLDERS

     The following discussion is limited to the United States federal income tax
consequences relevant to a beneficial owner of a note that is a "non-U.S.
holder". For purposes of this discussion, a "non-U.S. holder" is a holder of the
notes that is a nonresident alien or a corporation, estate or trust that is not
a U.S. holder.

     Interest and Disposition.  In general (and subject to the discussion below
under "Information Reporting and Backup Withholding"), a non-U.S. holder will
not be subject to U.S. federal income or withholding tax with respect to
payments of interest on, or gain upon the disposition of, notes, unless:

     - the interest or gain is effectively connected with the conduct by the
       non-U.S. holder of a trade or business in the United States; or

                                        85
- in the case of gain upon the disposition of notes, the non-U.S. holder is
       an individual who is present in the U.S. for 183 days or more in the
       taxable year and certain other conditions are met.

     Interest or gain that is effectively connected with the conduct by the
non-U.S. holder of a trade or business in the United States will generally be
subject to regular U.S. federal income tax in the same manner as if it were
realized by a U.S. holder. In addition, if such non-U.S. holder is a non-U.S.
corporation, such interest or gain may be subject to a branch profits tax at a
rate of 30% (or such lower rate as is provided by an applicable income tax
treaty).

     Information Reporting and Backup Withholding.  If the notes are held by a
non-U.S. holder through a non-U.S. (and non-U.S. related) broker or financial
institution, information reporting and backup withholding generally would not be
required. Information reporting, and possibly backup withholding, may apply if
the notes are held by a non-U.S. holder through a U.S. (or U.S. related) broker
or financial institution and the non-U.S. holder fails to provide appropriate
information. Non-U.S. holders should consult their tax advisors concerning the
application of the information reporting and backup withholding rules.

  EUROPEAN UNION SAVINGS TAX DIRECTIVE

     On June 3, 2003 the European Union ("EU") Council of Economic and Finance
Ministers adopted a new directive regarding the taxation of savings income. The
directive is scheduled to be applied by EU member states ("Member States") from
January 1, 2005, provided that certain non-EU countries adopt similar measures
from the same date. Under the directive each Member State will be required to
provide to the tax authorities of another Member State details of payments of
interest or other similar income paid by a person within its jurisdiction to an
individual resident in that other Member State; however, Austria, Belgium and
Luxembourg may instead apply a withholding system for a transitional period in
relation to such payments. The transitional period is to commence on the date
from which the directive is to be applied by Member States and to terminate at
the end of the first fiscal year following agreement by certain non-EU countries
to the exchange of information relating to such payments.

                                        86
DESCRIPTION OF THE NOTES

GENERAL

     The notes will be issued under an indenture, to be dated as of
          ,2003, between us and The Bank of New York, as trustee, as
supplemented by the first supplemental indenture, dated as of,           , 2003.
We have summarized material provisions of the indenture below. The summary is
not complete and is subject to, and is qualified in its entirety by reference
to, all provisions of the indenture, including the definitions of certain terms
in the indenture and those terms to be made a part of the indenture by the Trust
Indenture Act of 1939, as amended. The form of indenture is filed as an exhibit
to the registration statement of which this prospectus is a part and you should
read the indenture for provisions that may be important to you. In this summary,
we have included reference to section numbers in the indenture so that you can
easily locate these provisions. Capitalized terms used in this summary have the
meanings specified in the indenture. In this summary, "we", "our" or "us" means
solely Montpelier Re Holdings Ltd. and its successors under the indenture and
not any of its subsidiaries.

     The indenture does not limit the aggregate principal amount of the debt
securities which we may issue under it and provides that we may issue debt
securities under it from time to time in one or more series. The indenture does
not limit the amount of other indebtedness or the debt securities which we or
our subsidiaries may issue.

     The notes will be our direct, unsecured obligations and will rank equally
with all of our other existing and future unsecured and unsubordinated
indebtedness.

     The notes will be issued in registered form only in denominations of $1,000
and integral multiples of $1,000. We will issue the notes initially in the
aggregate principal amount of $200,000,000. We may, at any time or from time to
time, without the consent of the existing holders of the notes, re-open the
series and issue additional notes having the same interest rate, maturity and
other terms as the notes except for the issue price, issue date, and in some
cases, first interest payment date. The notes and any additional notes
subsequently issued under the indenture will be treated as a single class for
all purposes under the indenture, including, without limitation, waivers,
amendments and redemptions.

     Each note will bear interest at an annual rate of      %, computed on the
basis of a 360-day year of twelve 30-day months, from           , 2003 or from
the most recent interest payment date to which interest has been paid or
provided for. We will pay interest semi-annually in arrears on           and
          of each year, which we refer to as the interest payment dates,
beginning on           , 2004 to the persons in whose names the notes are
registered at the close of business on the applicable record date, which is the
          or           , immediately preceding such interest payment date.
Unless previously redeemed, the notes will mature, and the principal amount of
the notes will become payable, on           .

     If any interest payment date falls on a day that is not a business day, the
interest payment shall be postponed to the next day that is a business day, and
no interest on such payment shall accrue for the period from and after such
interest payment date. If the maturity date of the notes falls on a day that is
not a business day, the payment of interest and principal may be made on the
next succeeding business day, and no interest on such payment shall accrue for
the period from and after the maturity date. Interest payments for the notes
will include accrued interest from and including the date of issue or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, the interest payment date or the date of maturity, as
the case may be. Interest on the notes which have a redemption date after a
regular record date, and on or before the following interest payment date, will
also be payable to the persons in whose names the notes are so registered.

     The indenture does not contain any provisions that would limit our ability
to incur indebtedness or that would afford holders of the notes protection in
the event of a sudden and significant decline in our credit quality or a
takeover, recapitalization or highly leveraged or similar transaction involving
us. Accordingly, we could in the future enter into transactions that could
increase the amount of indebtedness outstanding at that time or otherwise affect
our capital structure or credit rating.

                                        87
OPTIONAL REDEMPTION

     We may redeem the notes at any time, in whole or in part, at a "make-whole"
redemption price equal to the greater of (1) the principal amount being redeemed
or (2) the sum of the present values of the remaining scheduled payments of the
principal and interest (other than accrued interest) on the notes being
redeemed, discounted to the redemption date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus
basis points, plus in either case accrued and unpaid interest to the redemption
date.

     "Treasury Rate" means, for any redemption date, the rate per year equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for the redemption
date.

     "Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes being redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate notes of comparable maturity to the remaining
term of such notes.

     "Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by us after consultation with the trustee.

     "Comparable Treasury Price" means, for any redemption date, (1) the average
of the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) on the third business day
preceding the redemption date, as set forth in the daily statistical release (or
any successor release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or
(2) if that release (or any successor release) is not published or does not
contain those prices on that business day, (A) the average of the Reference
Treasury Dealer Quotations for the redemption date, after excluding the highest
and lowest Reference Treasury Dealer Quotations for that redemption date, or (B)
if we obtain fewer than four Reference Treasury Dealer Quotations, the average
of all the Reference Treasury Dealer Quotations obtained.

     "Reference Treasury Dealer Quotations" means, for each Reference Treasury
Dealer and any redemption date, the average, as determined by the trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the trustee
by the Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
business day preceding the redemption date for the notes being redeemed.

     "Reference Treasury Dealer" means (1) each of Banc of America Securities
LLC and Credit Suisse First Boston LLC and, in each case, their respective
successors; provided, however, that if either of them ceases to be a primary
U.S. Government securities dealer in New York City, we will appoint another
primary U.S. Government securities dealer as a substitute and (2) any other U.S.
Government securities dealers selected by us.

SELECTION AND NOTICE

     We will send the holders of the notes to be redeemed a notice of redemption
by first-class mail at least 30 and not more than 60 days prior to the date
fixed for redemption. If we elect to redeem fewer than all the notes, the
trustee will select in a fair and appropriate manner the notes to be redeemed.

     Unless we default in payment of the redemption price, the notes called for
redemption shall cease to accrue any interest on or after the redemption date.

RANKING

     The notes will be senior debt. They will rank equally with all our current
and future unsecured and unsubordinated indebtedness. The notes will be
effectively subordinated to all our current and future secured indebtedness to
the extent of the value of the assets securing such indebtedness and
structurally subordinated
                                        88
to all existing and future liabilities of our subsidiaries. We are a holding
company, and we conduct all of our operations through our direct and indirect
subsidiaries. As of March 31, 2003, the liabilities of our subsidiaries that are
structurally senior to the notes would have been approximately $653.5 million
(including reinsurance liabilities).

LIMITATIONS ON LIENS ON STOCK OF SUBSIDIARIES

     Under the indenture, we will covenant that, so long as any notes are
outstanding, we will not, nor will we permit any subsidiary to, create, assume,
incur, guarantee or otherwise permit to exist any Indebtedness secured by any
mortgage, pledge, lien, security interest or other encumbrance upon any shares
of capital stock of any Designated Subsidiary (whether such shares of stock are
now owned or hereafter acquired) without effectively providing concurrently that
the notes (and, if we so elect, any other Indebtedness of ours that is not
subordinate to the notes and with respect to which the governing instruments
require, or pursuant to which we are otherwise obligated, to provide such
security) will be secured equally and ratably with such Indebtedness for at
least the time period such other Indebtedness is so secured. (Section 4.7 of the
indenture)

     For purposes of the indenture, "capital stock" of any person means any and
all shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) equity of such person,
including preferred stock, but excluding any debt securities convertible into
such equity. (Section 1.1 of the indenture)

     The term "Designated Subsidiary" means any present or future consolidated
subsidiary of ours, the consolidated book value of which constitutes at least
10% of our consolidated book value. As of June 30, 2003, our only Designated
Subsidiary was Montpelier Reinsurance Ltd.

     The term "Indebtedness" means, with respect to any person:

        (1) the principal of and any premium and interest on (a) indebtedness of
     such person for money borrowed and (b) indebtedness evidenced by notes,
     debentures, bonds or other similar instruments for the payment of which
     such person is responsible or liable;

        (2) all capitalized lease obligations of such person;

        (3) all obligations of such person issued or assumed as the deferred
     purchase price of property, all conditional sale obligations and all
     obligations under any title retention agreement (but excluding trade
     accounts payable arising in the ordinary course of business);

        (4) all obligations of such person for the reimbursement of any obligor
     on any letter of credit, banker's acceptance or similar credit transaction
     (other than obligations with respect to letters of credit securing
     obligations (other than obligations described in (1) through (3) above)
     entered into in the ordinary course of business of such person to the
     extent such letters of credit are not drawn upon or, if and to the extent
     drawn upon, such drawing is reimbursed no later than the third business day
     following receipt by such person of a demand for reimbursement following
     payment on the letter of credit);

        (5) all obligations of the type referred to in clauses (1) through (4)
     of other persons and all dividends of other persons for the payment of
     which, in either case, such person is responsible or liable as obligor,
     guarantor or otherwise;

        (6) all obligations of the type referred to in clauses (1) through (5)
     of other persons secured by any mortgage, pledge, lien, security interest
     or other encumbrance on any property or asset of such person (whether or
     not such obligation is assumed by such person), the amount of such
     obligation being deemed to be the lesser of the value of such property or
     assets or the amount of the obligation so secured; and

        (7) any amendments, modifications, refundings, renewals or extensions of
     any indebtedness or obligation described as Indebtedness in clauses (1)
     through (6) above. (Section 1.1 of the indenture)

                                        89
LIMITATIONS ON DISPOSITION OF STOCK OF DESIGNATED SUBSIDIARIES

     The indenture also provides that, so long as any notes are outstanding and
except in a transaction otherwise governed by such indenture, we will not issue,
sell, assign, transfer or otherwise dispose of any shares of, securities
convertible into, or warrants, rights or options to subscribe for or purchase
shares of, capital stock (other than preferred stock having no voting rights of
any kind) of any Designated Subsidiary, and will not permit any Designated
Subsidiary to issue (other than to us or another Designated Subsidiary) any
shares (other than director's qualifying shares) of, or securities convertible
into, or warrants, rights or options to subscribe for or purchase shares of,
capital stock (other than preferred stock having no voting rights of any kind)
of any Designated Subsidiary, if, after giving effect to any such transaction
and the issuance of the maximum number of shares issuable upon the conversion or
exercise of all such convertible securities, warrants, rights or options, we
would own, directly or indirectly, less than 80% of the shares of capital stock
of such Designated Subsidiary (other than preferred stock having no voting
rights of any kind); provided, however, that (1) any issuance, sale, assignment,
transfer or other disposition permitted by us may only be made for at least a
fair market value consideration as determined by our board pursuant to a
resolution adopted in good faith and (2) the foregoing will not prohibit any
such issuance or disposition of securities if required by any law or any
regulation or order of any governmental or insurance regulatory authority.

     Notwithstanding the foregoing, (1) we may merge, amalgamate or consolidate
any Designated Subsidiary into or with another direct or indirect subsidiary of
ours, the shares of capital stock of which we own at least 70%, and (2) we may,
subject to the provisions described under "-- Consolidation, Amalgamation,
Merger and Sale of Assets" below, sell, assign, transfer or otherwise dispose of
the entire capital stock of any Designated Subsidiary at one time for at least a
fair market value consideration as determined by our Board pursuant to a
resolution adopted in good faith. (Section 4.8 of the indenture)

CONSOLIDATION, AMALGAMATION, MERGER AND SALE OF ASSETS

     The indenture provides that we may not (1) consolidate or amalgamate with
or merge into any person or convey, transfer or lease our properties and assets
as an entirety or substantially as an entirety to any person, or (2) permit any
person to consolidate or amalgamate with or merge into us, or convey, transfer
or lease its properties and assets as an entirety or substantially as an
entirety to us, unless (a) in the case of (1) above, such person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia, Bermuda or any country which is, on
the date of the indenture, a member of the Organization of Economic Cooperation
and Development and will expressly assume, by supplemental indenture
satisfactory in form to the trustee, the due and punctual payment of the
principal of, any premium and interest on and any additional amounts with
respect to the notes issued thereunder, and the performance of our obligations
under the indenture and the notes issued thereunder; (b) immediately after
giving effect to such transaction and treating any indebtedness which becomes an
obligation of ours or of a Designated Subsidiary as a result of such transaction
as having been incurred by us or such subsidiary at the time of such
transaction, no event of default, and no event which after notice or lapse of
time or both would become an event of default, will have happened and be
continuing; and (c) certain other documents are delivered.

     The Company's violation of the conditions relating to amalgamation,
consolidation, merger or sale of assets stated above, and the continuation of
such violation for 60 days after notice is given to the Company as provided in
the indenture, will constitute an event of default under the indenture.

CERTAIN OTHER COVENANTS

     Existence.  Except as otherwise permitted under "-- Limitations on Liens of
Stock of Subsidiaries" and "-- Consolidation, Amalgamation, Merger and Sale of
Assets" described above, we will do or cause to be done all things necessary to
maintain in full force and effect our legal existence, rights (charter and
statutory) and franchises. We are not, however, required to preserve any right
or franchise if we determine that it is no longer desirable in the conduct of
our business and the loss is not disadvantageous in any material respect to the
holders of any notes. (Section 4.5 of the indenture)

                                        90
EVENTS OF DEFAULT

     The following events will constitute an event of default under the
indenture with respect to the notes (whatever the reason for such event of
default and whether it will be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

        (1) default in the payment of any interest on the notes, or any
     additional amounts payable with respect thereto, when such interest becomes
     or such additional amounts become due and payable, and continuance of such
     default for a period of 30 days;

        (2) default in the payment of the principal of or any premium on the
     notes, or any additional amounts payable with respect thereto, when such
     principal or premium becomes or such additional amounts become due and
     payable either at maturity, upon any redemption, by declaration of
     acceleration or otherwise;

        (3) default in the performance, or breach, of any covenant or warranty
     of ours contained in the indenture, and the continuance of such default or
     breach for a period of 60 days after there has been given written notice as
     provided in the indenture;

        (4) if any event of default as defined in any mortgage, indenture or
     instrument under which there may be issued, or by which there may be
     secured or evidenced, any of our indebtedness for borrowed money (other
     than indebtedness which is non-recourse to us) happens and consists of
     default in the payment of more than $50,000,000 in principal amount of such
     indebtedness when due (after giving effect to any applicable grace period),
     and such default is not cured or such acceleration is not rescinded or
     annulled within a period of 30 days after there has been given written
     notice as provided in the indenture;

        (5) we shall fail within 60 days to pay, bond or otherwise discharge any
     uninsured judgment or court order for the payment of money in excess of
     $50,000,000, which is not stayed on appeal or is not otherwise being
     appropriately contested in good faith; and

        (6) certain events relating to our bankruptcy, insolvency or
     reorganization.

     If an event of default with respect to the notes (other than an event of
default described in clause (6) of the preceding paragraph) occurs and is
continuing, either the trustee or the holders of at least 25% in principal
amount of the outstanding notes by written notice as provided in the indenture
may declare the principal amount of all outstanding notes to be due and payable
immediately. At any time after a declaration of acceleration has been made, but
before a judgment or decree for payment of money has been obtained by the
trustee, and subject to applicable law and certain other provisions of the
indenture, the holders of a majority in aggregate principal amount of the notes
may, under certain circumstances, rescind and annul such acceleration. An event
of default described in clause (6) of the preceding paragraph will cause the
principal amount and accrued interest to become immediately due and payable
without any declaration or other act by the trustee or any holder.

     The indenture provides that, within 60 days after the occurrence of any
event which is, or after notice or lapse of time or both would become, an event
of default with respect to the notes, the trustee will transmit, in the manner
set forth in the indenture and subject to the exceptions described below, notice
of such default to the holders of the notes unless such default has been cured
or waived. However, except in the case of a default in the payment of principal
of, or premium, if any, or interest on, or additional amounts with respect to,
any notes, the trustee may withhold such notice if and so long as our board,
executive committee or a trust committee of directors and/or responsible
officers of the trustee in good faith determine that the withholding of such
notice is in the best interest of the holders of the notes. In addition, in the
case of any default of the character described in clause (5) of the second
preceding paragraph, no such notice to holders will be given until at least 30
days after the default occurs.

     If an event of default occurs and is continuing with respect to the notes,
the trustee may in its discretion proceed to protect and enforce its rights and
the rights of the holders of the notes by all appropriate judicial
                                        91
proceedings. The indenture provides that, subject to the duty of the trustee
during any default to act with the required standard of care, the trustee will
be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders of the notes, unless
such holders shall have offered to the trustee reasonable indemnity. Subject to
such provisions for the indemnification of the trustee, and subject to
applicable law and certain other provisions of the indenture, the holders of a
majority in aggregate principal amount of the outstanding notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee, or exercising any trust or power conferred on
the trustee, with respect to the notes.

     Under the Companies Act, any payment or other disposition of property made
by us within six months prior to the commencement of our winding up will be
invalid if made with the intent to fraudulently prefer one or more of our
creditors at a time that we were unable to pay our debts as they became due.

     In addition, an event of default with respect to us will occur as described
in "-- Consolidation, Amalgamation, Merger and Sale of Assets" above.

MODIFICATION AND WAIVER

     We and the trustee may modify or amend the indenture with the consent of
the holders of not less than a majority in aggregate principal amount of the
notes; provided, however, that no such modification or amendment may, without
the consent of the holder of each outstanding debt security affected thereby,

     - change the stated maturity of the principal of, or any premium or
       installment of interest on, or any additional amounts with respect to,
       the notes,

     - reduce the principal amount of, or the rate (or modify the calculation of
       such principal amount or rate) of interest on, or any additional amounts
       with respect to, or any premium payable upon the redemption of, the
       notes,

     - change our obligation to pay additional amounts with respect to the
       notes,

     - change the redemption provisions of the notes or, following the
       occurrence of any event that would entitle a holder to require us to
       redeem or repurchase the notes at the option of the holder, adversely
       affect the right of redemption or repurchase at the option of such
       holder, of the notes,

     - change the place of payment or the coin or currency in which the
       principal of, any premium or interest on or any additional amounts with
       respect to, the notes is payable,

     - impair the right to institute suit for the enforcement of any payment on
       or after the stated maturity of the notes (or, in the case of redemption,
       on or after the redemption date or, in the case of repayment at the
       option of any holder, on or after the repayment date),

     - reduce the percentage in principal amount of the notes, the consent of
       whose holders is required in order to take specific actions,

     - reduce the requirements for quorum or voting by holders of the notes in
       the applicable section of the indenture,

     - modify any of the provisions in the indenture regarding the waiver of
       past defaults and the waiver of certain covenants by the holders of the
       notes except to increase any percentage vote required or to provide that
       other provisions of the indenture cannot be modified or waived without
       the consent of the holder of each note affected thereby, or

     - modify any of the above provisions.

     We and the trustee may modify or amend the indenture and the notes without
the consent of any holder in order to, among other things:

     - provide for our successor pursuant to a consolidation, amalgamation,
       merger or sale of assets that complies with the merger covenant;

                                        92
- add to our covenants for the benefit of the holders of the notes or to
       surrender any right or power conferred upon us by the indenture;

     - provide for a successor trustee with respect to the notes;

     - cure any ambiguity or correct or supplement any provision in the
       indenture which may be defective or inconsistent with any other
       provision, or to make any other provisions with respect to matters or
       questions arising under the indenture which will not adversely affect the
       interests of the holders of the notes;

     - change the conditions, limitations and restrictions on the authorized
       amount, terms or purposes of issue, authentication and delivery of the
       notes under the indenture;

     - add any additional events of default with respect to the notes;

     - provide for conversion or exchange rights of the holders of the notes; or

     - make any other change that does not materially adversely affect the
       interests of the holders of the notes. (Section 10.1 of the indenture)

     The holders of at least a majority in aggregate principal amount of the
notes may, on behalf of the holders of the notes, waive compliance by us with
certain restrictive provisions of the indenture. (Section 4.9 of the indenture)
The holders of not less than a majority in aggregate principal amount of the
notes may, on behalf of the holders of the notes, waive any past default and its
consequences under the indenture with respect to the notes, except a default (1)
in the payment of principal of, any premium or interest on or any additional
amounts with respect to the notes or (2) in respect of a covenant or provision
of the indenture that cannot be modified or amended without the consent of the
holder of each note. (Section 6.10 of the indenture)

     Under the indenture, we are required to furnish the trustee annually a
statement as to performance by us of certain of our obligations under the
indenture and as to any default in such performance. We are also required to
deliver to the trustee, within five days after occurrence thereof, written
notice of any event of default or any event which after notice or lapse of time
or both would constitute an event of default. (Section 4.6 of the indenture)

DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE

     We may discharge certain obligations to holders of the notes that have not
already been delivered to the trustee for cancellation and that either have
become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by depositing with the trustee, in
trust, funds in U.S. dollars in an amount sufficient to pay the entire
indebtedness on the notes with respect to principal and any premium, interest
and additional amounts to the date of such deposit (if the notes have become due
and payable) or with respect to principal, any premium and interest to the
maturity or redemption date thereof, as the case may be. (Section 12.1 of the
indenture)

     The indenture provides that, unless the provisions of Section 12.6 are made
inapplicable to the notes pursuant to Section 3.1 of the indenture, we may elect
either (1) to defease and be discharged from any and all obligations with
respect to the notes (except for, among other things, the obligation to pay
additional amounts, if any, upon the occurrence of certain events of taxation,
assessment or governmental charge with respect to payments on the notes and
other obligations to register the transfer or exchange of the notes, to replace
temporary or mutilated, destroyed, lost or stolen notes, to maintain an office
or agency with respect to the notes and to hold moneys for payment in trust)
("defeasance") or (2) to be released from our obligations with respect to the
notes under certain covenants and any omission to comply with such obligations
will not constitute a default or an event of default with respect to the notes
("covenant defeasance"). Defeasance or covenant defeasance, as the case may be,
will be conditioned upon the irrevocable deposit by us with the trustee, in
trust, of an amount in U.S. dollars, or Government Obligations (as defined
below), or both, applicable to such debt securities which through the scheduled
payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of, any premium

                                        93
and interest on the notes on the scheduled due dates or any prior redemption
date. (Section 12.3 of the indenture)

     Such a trust may only be established if, among other things:

        (1) the applicable defeasance or covenant defeasance does not result in
     a breach or violation of, or constitute a default under or any material
     agreement or instrument to which we are a party or by which we are bound,

        (2) no event of default or event which with notice or lapse of time or
     both would become an event of default with respect to the notes to be
     defeased will have occurred and be continuing on the date of establishment
     of such a trust after giving effect to such establishment and, with respect
     to defeasance only, no bankruptcy proceeding will have occurred and be
     continuing at any time during the period ending on the 91st day after such
     date,

        (3) we have delivered to the trustee an opinion of counsel (as specified
     in the indenture) to the effect that the holders of the notes will not
     recognize income, gain or loss for U.S. federal income tax purposes as a
     result of such defeasance or covenant defeasance and will be subject to
     U.S. federal income tax on the same amounts, in the same manner and at the
     same times as would have been the case if such defeasance or covenant
     defeasance had not occurred, and such opinion of counsel, in the case of
     defeasance, must refer to and be based upon a letter ruling of the Internal
     Revenue Service received by us, a Revenue Ruling published by the Internal
     Revenue Service or a change in applicable U.S. federal income tax law
     occurring after the date of the indenture, and

        (4) with respect to defeasance, we have delivered to the trustee an
     officers' certificate as to solvency and the absence of intent of
     preferring holders over our other creditors. (Section 12.6 of the
     indenture)

     "Government Obligations" means debt securities which are (1) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (2) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America which, in the case
of clauses (1) and (2), are not callable or redeemable at the option of the
issuer or issuers thereof, and will also include a depository receipt issued by
a bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of or any other
amount with respect to any such Government Obligation held by such custodian for
the account of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian with respect to the Government Obligation or the specific
payment of interest on or principal of or any other amount with respect to the
Government Obligation evidenced by such depository receipt. (Section 1.1 of the
indenture)

     In the event we effect covenant defeasance with respect to the notes and
the notes are declared due and payable because of the occurrence of any event of
default other than an event of default with respect to any covenant as to which
there has been covenant defeasance, the Government Obligations on deposit with
the trustee, will be sufficient to pay amounts due on the notes at the time of
the stated maturity or redemption date but may not be sufficient to pay amounts
due on the notes at the time of the acceleration resulting from such event of
default. However, we would remain liable to make payment of such amounts due at
the time of acceleration.

PAYMENT OF ADDITIONAL AMOUNTS

     We will make all payments of principal of and premium, if any, interest and
any other amounts on, or in respect of, the notes without withholding or
deduction at source for, or on account of, any present or future taxes, fees,
duties, assessments or governmental charges of whatever nature imposed or levied
by or on behalf of Bermuda or any other jurisdiction in which we are organized
(a "taxing jurisdiction") or any political subdivision or taxing authority
thereof or therein, unless such taxes, fees, duties, assessments or governmental
charges are required to be withheld or deducted by (x) the laws (or any
regulations or rulings promulgated
                                        94
thereunder) of a taxing jurisdiction or any political subdivision or taxing
authority thereof or therein or (y) an official position regarding the
application, administration, interpretation or enforcement of any such laws,
regulations or rulings (including, without limitation, a holding by a court of
competent jurisdiction or by a taxing authority in a taxing jurisdiction or any
political subdivision thereof). If a withholding or deduction at source is
required, we will, subject to certain limitations and exceptions described
below, pay to the holder of any note such additional amounts as may be necessary
so that every net payment of principal, premium, if any, interest or any other
amount made to such holder, after the withholding or deduction, will not be less
than the amount provided for in such note to be then due and payable.

     We will not be required to pay any additional amounts for or on account of:

        (1) any tax, fee, duty, assessment or governmental charge of whatever
     nature which would not have been imposed but for the fact that such holder
     (a) was a resident, domiciliary or national of, or engaged in business or
     maintained a permanent establishment or was physically present in, the
     relevant taxing jurisdiction or any political subdivision thereof or
     otherwise had some connection with the relevant taxing jurisdiction other
     than by reason of the mere ownership of, or receipt of payment under, such
     note, (b) presented, where presentation is required, such note for payment
     in the relevant taxing jurisdiction or any political subdivision thereof,
     unless such note could not have been presented for payment elsewhere, or
     (c) presented such note for payment more than 30 days after the date on
     which the payment in respect of such note became due and payable or
     provided for, whichever is later, except to the extent that the holder
     would have been entitled to such additional amounts if it had presented
     such note for payment on any day within that 30-day period;

        (2) any estate, inheritance, gift, sale, transfer, personal property or
     similar tax, assessment or other governmental charge;

        (3) any tax, assessment or other governmental charge that is imposed or
     withheld by reason of the failure by the holder or the beneficial owner of
     such note to comply with any reasonable request by us addressed to the
     holder within 90 days of such request (a) to provide information concerning
     the nationality, residence or identity of the holder or such beneficial
     owner or (b) to make any declaration or other similar claim or satisfy any
     information or reporting requirement, which is required or imposed by
     statute, treaty, regulation or administrative practice of the relevant
     taxing jurisdiction or any political subdivision thereof as a precondition
     to exemption from all or part of such tax, assessment or other governmental
     charge;

        (4) any withholding or deduction required to be made pursuant to any EU
     Directive on the taxation of savings implementing the conclusions of the
     ECOFIN Council meetings of 26-27 November 2000, 3 June 2003 or any law
     implementing or complying with, or introduced in order to conform to, such
     EU Directive; or

        (5) any combination of items (1), (2), (3) and (4).

     In addition, we will not pay additional amounts with respect to any payment
of principal of, or premium, if any, interest or any other amounts on, any such
note to any holder who is a fiduciary or partnership or other than the sole
beneficial owner of such note if such payment would be required by the laws of
the relevant taxing jurisdiction (or any political subdivision or relevant
taxing authority thereof or therein) to be included in the income for tax
purposes of a beneficiary or partner or settlor with respect to such fiduciary
or a member of such partnership or a beneficial owner to the extent such
beneficiary, partner or settlor would not have been entitled to such additional
amounts had it been the holder of the note. (Section 4.10 of the indenture)

REDEMPTION FOR TAX PURPOSES

     We may redeem the notes at our option, in whole but not in part, at a
redemption price equal to 100% of the principal amount, together with accrued
and unpaid interest and Additional Amounts, if any, to the date fixed for
redemption, at any time we receive an opinion of counsel that as a result of (i)
any change in or amendment to the laws or treaties (or any regulations or
rulings promulgated under these laws or treaties) of Bermuda or any taxing
jurisdiction (or of any political subdivision or taxation authority affecting
taxation) or
                                        95
any change in the application or official interpretation of such laws,
regulations or rulings, or (ii) any action taken by a taxing authority of
Bermuda or any taxing jurisdiction (or any political subdivision or taxing
authority affecting taxation) which action is generally applied or is taken with
respect to the Company, or (iii) a decision rendered by a court of competent
jurisdiction in Bermuda or any taxing jurisdiction (or any political
subdivision) whether or not such decision was rendered with respect to us, there
is a substantial probability that we will be required as of the next interest
payment date to pay Additional Amounts with respect to the notes as provided in
"Payment of Additional Amounts" above and such requirements cannot be avoided by
the use of reasonable measures (consistent with practices and interpretations
generally followed or in effect at the time such measures could be taken) then
available. If we elect to redeem the notes under this provision, we will give
written notice of such election to the trustee.

BOOK-ENTRY SYSTEM

     We will issue the notes in the form of one or more fully registered global
notes. The global notes will be deposited upon issuance with, or on behalf of,
The Depository Trust Company, New York, New York, which we refer to as DTC. DTC
will act as depositary. The notes will be registered in the name of DTC or its
nominee.

     Ownership of beneficial interests in a global note will be limited to DTC
participants and to persons that may hold interests through institutions that
have accounts with DTC, which we refer to as the participants. Beneficial
interests in a global note will be shown on, and transfers of those ownership
interests will be effected only through, records maintained by DTC and its
participants for that global note. The conveyance of notices and other
communications by DTC to its participants and by its participants to owners of
beneficial interests in the notes will be governed by arrangements among them,
subject to any statutory or regulatory requirements in effect.

     DTC holds the securities of its participants and facilitates the clearance
and settlement of securities transactions among its participants through
electronic book-entry changes in accounts of its participants. The electronic
book-entry system eliminates the need for physical certificates. DTC's
participants include:

     - securities brokers and dealers (including the underwriters);

     - banks;

     - trust companies;

     - clearing corporations; and

     - other organizations (some of which, and/or their representatives, own
       DTC).

     Banks, brokers, dealers, trust companies and others that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly, also have access to DTC's book-entry system.

     We will make principal and interest payments on the notes represented by a
global note to DTC or its nominee, as the case may be, as the sole registered
owner and the sole holder of the notes represented by the global note for all
purposes under the indenture. Accordingly, we, the trustee and any paying agent
will have no responsibility or liability for:

     - any aspect of DTC's records relating to, or payments made on account of,
       beneficial ownership interests in a note represented by a global note;

     - any other aspect of the relationship between DTC and its participants or
       the relationship between those participants and the owners of beneficial
       interests in a global note held through those participants; or

     - the maintenance, supervision or review of any of DTC's records relating
       to those beneficial ownership interests.

     We provide the following description of the operations and procedures of
DTC solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to changes

                                        96
by it from time to time. We take no responsibility for these operations and
procedures and urge investors to contact DTC or its participants directly to
discuss these matters.

     DTC has advised us that upon receipt of any payment of principal of or
interest on a global note, DTC will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of that global note as shown on DTC's records. The underwriters will
initially designate the accounts to be credited. Payments by participants to
owners of beneficial interests in a global note will be governed by standing
instructions and customary practices, as is the case with securities held for
customer accounts registered in "street name," and will be the sole
responsibility of those participants.

     A global note can only be transferred:

     - as a whole by DTC to one of its nominees;

     - as a whole by a nominee of DTC to DTC or another nominee of DTC; or

     - as a whole by DTC or a nominee of DTC to a successor of DTC or a nominee
       of that successor.

     The notes represented by a global note can be exchanged for definitive
notes in registered form only if:

     - DTC notifies us that it is unwilling or unable to continue as depositary
       for that global note;

     - at any time DTC ceases to be a clearing agency registered under the
       Exchange Act;

     - we in our sole discretion determine that the global note will be
       exchangeable for definitive notes in registered form and notify the
       trustee of our decision; or

     - an event of default with respect to the notes represented by that global
       note has occurred and is continuing.

     A global note that can be exchanged under the preceding sentence will be
exchanged for definitive notes that are issued in authorized denominations in
registered form for the same aggregate amount. Those definitive notes will be
registered in the names of the owners of the beneficial interests in the global
note as directed by DTC.

     Except as provided above, (1) owners of beneficial interests in such global
note will not be entitled to receive physical delivery of notes in definitive
form and will not be considered the holders of the notes for any purpose under
the indenture and (2) no notes represented by a global note will be
exchangeable. Accordingly, each person owning a beneficial interest in a global
note must rely on the procedures of DTC (and if that person is not a
participant, on the procedures of the participant through which that person owns
its interest) to exercise any rights of a holder under the indenture or that
global note. The laws of some jurisdictions require that some purchasers of
securities take physical delivery of the securities in definitive form. Those
laws may impair the ability to transfer beneficial interests in a global note.

     Beneficial interests in a global note will trade in DTC's same day
settlement system until maturity or redemption or until issuance of definitive
notes in registered form as provided for in the indenture.

     We understand that under existing industry practices, if we request holders
to take any action, or if an owner of a beneficial interest in a global note
desires to take any action which a holder is entitled to take under the
indenture, then (1) DTC would authorize the participants holding the relevant
beneficial interests to take that action and (2) those participants would
authorize the beneficial owners owning through those participants to take that
action or would otherwise act on the instructions of beneficial owners owning
through them.

                                        97
GOVERNING LAW

     The indenture and the notes will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
or instruments entered into and, in each case, performed in that state.

INFORMATION CONCERNING THE TRUSTEE

     The Bank of New York is to be the trustee and paying agent under the
indenture and is one of a number of banks with which Montpelier Re Holdings Ltd.
and its subsidiaries maintain banking relationships in the ordinary course of
business. The Bank of New York is part of the syndicate of commercial banks
under the term loan facility. The Bank of New York will receive a portion of the
proceeds from this offering as a result of our repayment of all amounts
outstanding under the term loan facility. The Bank of New York is a party in the
letter of credit facility which Montpelier Re entered into on June 20, 2003.

                                        98
UNDERWRITING

     Under the terms and subject to the conditions contained in an underwriting
agreement dated           , 2003, we have agreed to sell to the underwriters
named below, for whom Banc of America Securities LLC and Credit Suisse First
Boston LLC are acting as representatives, the following respective principal
amounts of the notes:
PRINCIPAL
                                                                  AMOUNT
NAME                                                             OF NOTES
----                                                           ------------
Banc of America Securities LLC..............................   $
Credit Suisse First Boston LLC..............................   $
                                                               ------------

     Total..................................................   $200,000,000
                                                               ============
The underwriting agreement provides that the underwriters are obligated to
purchase all of the notes if any are purchased. The underwriting agreement also
provides that if an underwriter defaults, the purchase commitments of
non-defaulting underwriters may be increased or the offering of the notes may be
terminated.

     The underwriters propose to offer the notes initially at the public
offering price on the cover page of this prospectus and to selling group members
at that price less a selling concession of    % of the principal amount per
note. The underwriters and selling group members may allow a discount of    % of
the principal amount per note on sales to other broker-dealers. After the
initial public offering the underwriters may change the public offering price
and concession and discount to broker-dealers.

     We estimate that our out of pocket expenses for this offering will be
approximately $          .

     The notes are a new issue of securities with no established trading market.
One or more of the underwriters intend to make a secondary market for the notes.
However, they are not obligated to do so and may discontinue making a secondary
market for the notes at any time without notice. No assurance can be given as to
the liquidity or development of the trading market for the notes will be.

     We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.

     In connection with the offering, the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.

     - Stabilizing transactions permit bids to purchase the underlying security
       so long as the stabilizing bids do not exceed a specified maximum.

     - Over-allotment involves sales by the underwriters of notes in excess of
       the principal amount of the notes the underwriters are obligated to
       purchase, which creates a syndicate short position.

     - Syndicate covering transactions involve purchases of the notes in the
       open market after the distribution has been completed in order to cover
       syndicate short positions. A short position is more likely to be created
       if the underwriters are concerned that there may be downward pressure on
       the price of the notes in the open market after pricing that could
       adversely affect investors who purchase in the offering.

     - Penalty bids permit the representatives to reclaim a selling concession
       from a syndicate member when the notes originally sold by the syndicate
       member are purchased in a stabilizing transaction or a syndicate covering
       transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may have the effect of raising or maintaining the market price of the notes or
preventing or retarding a decline in the market price of the notes. As a result,
the price of the notes may be higher than the price that might otherwise exist
in the open market. These transactions, if commenced, may be discontinued at any
time.

                                        99
Banc of America Securities LLC and Credit Suisse First Boston LLC will make
securities available for distribution on the Internet through a proprietary Web
site and/or a third-party system operated by Market Axess Inc., an
Internet-based communications technology provider. Market Axess Inc. is
providing the system as a conduit for communications between Banc of America
Securities LLC and Credit Suisse First Boston LLC and their customers and is not
a party to any transactions. We do not believe that Market Axess Inc. will
function as an underwriter or agent of the issuer, nor do we believe that Market
Axess Inc. will act as a broker for any customer of Banc of America Securities
LLC and Credit Suisse First Boston LLC. Market Axess Inc., a registered
broker-dealer, will receive compensation from Banc of America Securities LLC and
Credit Suisse First Boston LLC based on transactions the underwriter conducts
through the system. Banc of America Securities LLC and Credit Suisse First
Boston LLC will make securities available to its customers through the Internet
distributions, whether made through a proprietary or third party system, on the
same terms as distributions made through other channels.

RELATIONSHIP WITH UNDERWRITERS

     From time to time certain of the underwriters have provided us, and
continued to provide us, with commercial, investment banking and other financial
services. See "Certain Relationships and Related Transactions -- Relationships
with Strategic Investors and Underwriters." Bank of America, N.A., an affiliate
of Banc of America Securities LLC, one of the underwriters in this offering,
participates and acts as the administrative agent and a lender in our credit
facilities. Credit Suisse First Boston, an affiliate of Credit Suisse First
Boston LLC, one of the underwriters in this offering, is also a lender in our
credit facilities. Under these facilities, we have a revolving credit line with
a $50 million borrowing limit and have a three-year term loan of $150 million.
We intend to use a portion of the net proceeds of this offering to repay all
amounts outstanding under the term loan facility, and as a result affiliates of
some of the underwriters will receive more than 10% of the net proceeds.
Accordingly, we are conducting this offer pursuant to NASD Conduct Rule
2710(c)(8). Affiliates of both Banc of America Securities LLC and Credit Suisse
First Boston LLC are participants in the letter of credit facility which
Montpelier Re entered into on June 20, 2003. Mr. Kamil M. Salame, one of our
directors, is a director of the Private Equity Group of Credit Suisse First
Boston, an affiliate of Credit Suisse First Boston LLC which includes entities
that own our shares. Also, Banc of America Securities LLC is one of our
warrantholders and Bank of America Corporation is one of our shareholders.

                                 LEGAL MATTERS

     Certain matters as to U.S. law in connection with this offering will be
passed upon for us by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited
liability partnership including professional corporations, New York, New York,
and Cahill Gordon & Reindel, LLP, special tax counsel to the Company. Certain
matters as to Bermuda law in connection with this offering will be passed upon
for us by Conyers Dill & Pearman, Hamilton, Bermuda. Certain legal matters as to
U.S. law in connection with this offering will be passed upon for the
underwriters by Davis Polk & Wardwell.

                                    EXPERTS

     The audited combined financial statements of the Company and its
subsidiaries as of December 31, 2002 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers (Bermuda),
independent accountants, given on the authority of that firm as experts in
auditing and accounting.

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the Securities and Exchange Commission, a registration
statement on Form S-1 under the Securities Act with respect to the notes offered
by this prospectus. This prospectus, filed as part of the registration
statement, does not contain all of the information set forth in the registration
statement and its exhibits and schedules, portions of which have been omitted as
permitted by the rules and regulations of the SEC. For further information about
us and the notes, we refer you to the registration statement and to its exhibits
and schedules. Statements in this prospectus about the contents of any contract,
agreement or other document are not necessarily complete and, in each instance,
we refer you to the copy of such contract,
                                       100
agreement or document filed as an exhibit to the registration statement, with
each such statement being qualified in all respects by reference to the document
to which it refers. Anyone may inspect the registration statement and its
exhibits and schedules without charge at the public reference facilities the SEC
maintains at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
copies of all or any part of these materials from the SEC upon the payment of
certain fees prescribed by the SEC. You may obtain further information about the
operation of the SEC's Public Reference Room by calling the SEC at
1-800-SEC-0330. You may also inspect these reports and other information without
charge at a web site maintained by the SEC. The address of this site is
http://www.sec.gov.

     We are subject to the informational requirements of the Exchange Act.
Accordingly, we file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may inspect and copy these reports, proxy
statements and other information at the public reference facilities maintained
by the SEC at the address noted above. You also may obtain copies of this
material from the Public Reference Room of the SEC as described above, or
inspect them without charge at the SEC's web site or at our web site, the
address of which is http://www.montpelierre.bm. We also furnish our shareholders
with annual reports containing combined financial statements audited by an
independent accounting firm. Our website is not incorporated into or otherwise a
part of this prospectus.

                                       101
ENFORCEABILITY OF CIVIL LIABILITIES
         UNDER UNITED STATES FEDERAL SECURITIES LAWS AND OTHER MATTERS

     We are organized under the laws of Bermuda. In addition, some of our
directors and officers reside outside the United States, and all or a
substantial portion of their assets and our assets are or may be located in
jurisdictions outside the United States. Therefore, it may be difficult for
investors to effect service of process within the United States upon our
non-U.S. directors and officers or to recover against our Company, or our
non-U.S. directors and officers on judgments of U.S. courts, including judgments
predicated upon the civil liability provisions of the U.S. federal securities
laws. However, we may be served with process in the United States with respect
to actions against us arising out of or in connection with violations of U.S.
federal securities laws relating to offers and sales of the notes made hereby by
serving CT Corporation System, 111 Eighth Avenue, New York, New York 10011, our
U.S. agent irrevocably appointed for that purpose.

     We have been advised by Conyers Dill & Pearman, our Bermuda counsel, that
there is doubt as to whether the courts of Bermuda would enforce judgments of
U.S. courts obtained in actions against us or our directors and officers, as
well as the experts named herein, who reside outside the United States
predicated upon the civil liability provisions of the U.S. federal securities
laws or original actions brought in Bermuda against us or such persons
predicated solely upon U.S. federal securities laws. We have also been advised
by Conyers Dill & Pearman that there is no treaty in effect between the United
States and Bermuda providing for such enforcement, and there are grounds upon
which Bermuda courts may not enforce judgments of U.S. courts. Some remedies
available under the laws of U.S. jurisdictions, including some remedies
available under the U.S. federal securities laws, may not be allowed in Bermuda
courts as contrary to that jurisdiction's public policy.

                             ---------------------

     We will deliver a copy of this prospectus to the Registrar of Companies in
Bermuda for filing pursuant to the Companies Act. However, the BMA and Registrar
of Companies in Bermuda accept no responsibility for the financial soundness of
any proposal or for the correctness of any of the statements made or opinions
expressed in this prospectus.

                                       102
INDEX TO FINANCIAL STATEMENTS
PAGE
                                                               ----
Report of Independent Accountants...........................    F-2
Combined Balance Sheets as at December 31, 2002 and 2001....    F-3
Combined Statements of Operations and Comprehensive Income
  for the year ended December 31, 2002 and for the period
  from November 14, 2001 to December 31, 2001...............    F-4
Combined Statements of Shareholders' Equity for the year
  ended December 31, 2002 and for the period from November
  14, 2001 to December 31, 2001.............................    F-5
Combined Statements of Cash Flows for the year ended
  December 31, 2002 and for the period from November 14,
  2001 to December 31, 2001.................................    F-6
Notes to Combined Financial Statements as at December 31,
  2002 and 2001.............................................    F-7
Unaudited Consolidated Financial Statements as at March 31,
  2003 and 2002
  Consolidated Balance Sheets as at March 31, 2003 and
     December 31, 2002......................................   F-24
  Consolidated Statements of Operations and Comprehensive
     Income for the three months ended March 31, 2003 and
     2002...................................................   F-25
  Consolidated Statements of Shareholder's Equity for the
     three months ended March 31, 2003 and 2002.............   F-26
  Consolidated Statements of Cash Flows for the three months
     ended March 31, 2003 and 2002..........................   F-27
  Notes to Consolidated Financial Statements for the three
     months ended March 31, 2003 and 2002...................   F-28
F-1
REPORT OF INDEPENDENT ACCOUNTANTS

February 26, 2003

To the Board of Directors and Shareholders of Montpelier Re Holdings Ltd.

     In our opinion, the accompanying combined balance sheets and the related
combined statements of operations and comprehensive income, shareholders' equity
and cash flows present fairly, in all material respects, the financial position
of Montpelier Re Holdings Ltd. at December 31, 2002 and 2001, and the results of
their operations and their cash flows for the year ended December 31, 2002 and
the period from November 14, 2001 (date of incorporation) to December 31, 2001,
in conformity with accounting principles generally accepted in the United States
of America. These combined financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
combined financial statements based on our audits. We conducted our audits of
these financial statements in accordance with auditing standards generally
accepted in the United States of America which require that we plan and perform
the audits to obtain reasonable assurance about whether the combined financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall combined financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

/s/ PricewaterhouseCoopers
Chartered Accountants
Hamilton, Bermuda

                                       F-2
MONTPELIER RE HOLDINGS LTD.

                            COMBINED BALANCE SHEETS
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
AS AT               AS AT
                                                              DECEMBER 31, 2002   DECEMBER 31, 2001
                                                              -----------------   -----------------
ASSETS
  Fixed maturities, at fair value (amortized cost:
     2002 -- $1,322,256; 2001 -- $638,525)..................     $1,354,845          $  640,403
  Equity investment, unquoted, at estimated fair (cost:
     $60,758)...............................................         63,691                  --
                                                                 ----------          ----------
     TOTAL INVESTMENTS......................................      1,418,536             640,403
  Cash and cash equivalents, at fair value..................        162,925             350,606
  Unearned premium ceded....................................          3,752                  --
  Reinsurance premiums receivable...........................        147,208                 133
  Funds withheld............................................         20,507                  --
  Deferred acquisition costs................................         44,881                  16
  Reinsurance recoverable...................................         16,656                  --
  Accrued investment income.................................         13,057               1,699
  Deferred financing costs..................................          1,325               2,005
  Common voting shares subscriptions receivable.............             --              26,000
  Other assets..............................................          5,071                 936
                                                                 ----------          ----------
     Total Assets...........................................     $1,833,918          $1,021,798
                                                                 ==========          ==========
LIABILITIES
  Loss and loss adjustment expense reserves.................        146,115                  --
  Unearned premium..........................................        241,000                 142
  Reinsurance balances payable..............................          2,448                  --
  Investment trades pending.................................         34,280                  --
  Long-term debt............................................        150,000             150,000
  Accounts payable, accrued expenses and other
     liabilities............................................          7,540              10,429
  Amount due to affiliates..................................             --                 574
                                                                 ----------          ----------
     Total Liabilities......................................     $  581,383          $  161,145
                                                                 ==========          ==========
SHAREHOLDERS' EQUITY
  Common voting shares: 1/6 cent par value; authorized
     1,200,000,000 shares; issued and outstanding at
     December 31, 2002; 63,392,600 shares
     (2001 -- 52,440,000)...................................            106                  87
  Additional paid-in capital................................      1,126,435             920,306
  Accumulated other comprehensive income....................         35,567               1,878
  Retained earnings (accumulated deficit)...................         90,427             (61,618)
                                                                 ----------          ----------
     Total Shareholders' Equity.............................      1,252,535             860,653
                                                                 ----------          ----------
     Total Liabilities and Shareholders' Equity.............     $1,833,918          $1,021,798
                                                                 ==========          ==========
The accompanying Notes to the Combined Financial Statements are an
               integral part of the Combined Financial Statements
                                       F-3
MONTPELIER RE HOLDINGS LTD.

           COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT EARNINGS PER SHARE AND
                                 SHARE AMOUNTS)
PERIOD FROM
                                                                YEAR ENDED       NOVEMBER 14, 2001 TO
                                                             DECEMBER 31, 2002    DECEMBER 31, 2001
                                                             -----------------   --------------------
REVENUES
  Gross premiums written..................................      $   607,688           $      150
  Reinsurance premiums ceded..............................          (41,779)                  --
                                                                -----------           ----------
  Net premiums written....................................          565,909                  150
  Change in net unearned premiums.........................         (235,983)                (142)
                                                                -----------           ----------
  Net premiums earned.....................................          329,926                    8
  Net investment income...................................           39,748                1,139
  Net realized gains on investments.......................            7,716                   --
  Net foreign exchange gains..............................            1,681                   --
                                                                -----------           ----------
  Total Revenues..........................................          379,071                1,147
                                                                -----------           ----------
EXPENSES
  Loss and loss adjustment expenses.......................          133,310                   --
  Acquisition costs.......................................           62,926                    1
  General and administrative expenses.....................           26,278                1,207
  Interest on long-term debt..............................            4,460                  236
  Fair value of warrants issued...........................               --               61,321
                                                                -----------           ----------
  Total Expenses..........................................          226,974               62,765
                                                                -----------           ----------
INCOME (LOSS) BEFORE TAXES................................          152,097              (61,618)
                                                                -----------           ----------
Income tax expense........................................               52                   --
                                                                -----------           ----------
NET INCOME (LOSS).........................................      $   152,045           $  (61,618)
                                                                ===========           ==========
COMPREHENSIVE INCOME (LOSS)
  Net income (loss).......................................      $   152,045           $  (61,618)
  Other comprehensive income..............................           33,689                1,878
                                                                -----------           ----------
  Comprehensive income (loss).............................      $   185,734           $  (59,740)
                                                                ===========           ==========
PER SHARE DATA
  Weighted average number of common and common equivalent
     shares outstanding:
     Basic................................................       55,178,150           52,440,000
     Diluted..............................................       55,457,141           52,440,000
  Basic earnings (loss) per common share..................      $      2.76           $    (1.18)
                                                                ===========           ==========
  Diluted earnings (loss) per common share................      $      2.74           $    (1.18)
                                                                ===========           ==========
The accompanying Notes to the Combined Financial Statements are an
               integral part of the Combined Financial Statements
                                       F-4
MONTPELIER RE HOLDINGS LTD.

                  COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
PERIOD FROM
                                                                 YEAR ENDED       NOVEMBER 14, 2001 TO
                                                              DECEMBER 31, 2002    DECEMBER 31, 2001
                                                              -----------------   --------------------
COMMON SHARES
  Balance -- beginning of period............................     $       87             $     --
  Issue of common shares....................................             19                   87
                                                                 ----------             --------
     Balance -- end of period...............................            106                   87
                                                                 ----------             --------
ADDITIONAL PAID-IN-CAPITAL
  Balance -- beginning of period............................        920,306                   --
  Issue of common shares....................................        219,034              873,912
  Direct equity offering expenses...........................        (18,300)             (14,927)
  Compensation recognized under stock option plan...........          5,395                   --
  Fair value of warrants qualifying as equity...............             --               61,321
                                                                 ----------             --------
     Balance -- end of period...............................      1,126,435              920,306
                                                                 ----------             --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
  Balance -- beginning of period............................          1,878                   --
  Net change in currency translation adjustments............             47                   --
  Net change in unrealized gains on investments.............         33,642                1,878
                                                                 ----------             --------
     Balance -- end of period...............................         35,567                1,878
                                                                 ----------             --------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
  Balance -- beginning of period............................        (61,618)                  --
  Net income (loss).........................................        152,045              (61,618)
                                                                 ----------             --------
     Balance -- end of period...............................         90,427              (61,618)
                                                                 ----------             --------
     TOTAL SHAREHOLDERS' EQUITY.............................     $1,252,535             $860,653
                                                                 ==========             ========
The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-5
MONTPELIER RE HOLDINGS LTD.

                       COMBINED STATEMENTS OF CASH FLOWS
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
PERIOD FROM
                                                                 YEAR ENDED       NOVEMBER 14, 2001 TO
                                                              DECEMBER 31, 2002    DECEMBER 31, 2001
                                                              -----------------   --------------------
Cash flows provided by (used in) operating activities:
  Net income (loss).........................................     $   152,045           $ (61,618)
  Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
     Accretion (amortization) of premium/(discount) on fixed
       maturities...........................................           3,803                 (27)
     Depreciation...........................................             364                  --
     Compensation recognized under stock option plan........           5,395                  --
     Net realized gains on fixed maturities.................          (7,716)                 --
     Amortization of deferred financing costs...............             680              (2,005)
     Net change in currency translation adjustments.........              47                  --
     Fair value of warrants issued..........................              --              61,321
  Change in:
     Unearned premium ceded.................................          (3,752)                 --
     Reinsurance premiums receivable........................        (147,075)               (133)
     Reinsurance recoverable................................         (16,656)                 --
     Funds withheld.........................................         (20,507)                 --
     Accrued investment income..............................         (11,358)             (1,699)
     Deferred acquisition costs.............................         (44,865)                (16)
     Other assets...........................................          (1,387)               (936)
     Loss and loss adjustment expense reserves..............         146,115                  --
     Unearned premium.......................................         240,858                 142
     Reinsurance balances payable...........................           2,448                  --
     Accounts payable, accrued expenses and other
       liabilities..........................................          (3,453)                497
     Amount due to affiliates...............................            (324)                324
     Interest accrued on long-term debt.....................             564                 236
                                                                 -----------           ---------
  Net cash provided by (used in) operating activities.......         295,226              (3,914)
                                                                 -----------           ---------
Cash flows from investing activities:
  Purchases of investments..................................      (1,922,773)           (638,498)
  Proceeds from sale of investments.........................       1,216,475                  --
  Purchases of equipment....................................          (3,112)                 --
                                                                 -----------           ---------
  Net cash used in investing activities.....................        (709,410)           (638,498)
                                                                 -----------           ---------
Cash flows provided by financing activities:
  Issue of common shares....................................         245,053             848,250
  Amount paid to affiliate for overpayment of
     subscription...........................................            (250)                 --
  Direct equity offering expenses...........................         (18,300)             (5,232)
  Issue of long-term debt...................................              --             150,000
                                                                 -----------           ---------
  Net cash provided by financing activities.................         226,503             993,018
                                                                 -----------           ---------
  Increase (decrease) in cash and cash equivalents..........        (187,681)            350,606
                                                                 -----------           ---------
  Cash and cash equivalents -- Beginning of period..........         350,606                  --
                                                                 -----------           ---------
  Cash and cash equivalents -- End of period................     $   162,925           $ 350,606
                                                                 ===========           =========
The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-6
MONTPELIER RE HOLDINGS LTD.

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS,
           EXCEPT PER SHARE AMOUNTS OR AS WHERE OTHERWISE DESCRIBED)

1.  GENERAL

     Montpelier Re Holdings Ltd. (the "Company") was incorporated under the laws
of Bermuda on November 14, 2001. The Company, through its principal operating
subsidiary Montpelier Reinsurance Ltd. ("Montpelier Re"), is a provider of
global specialty property insurance and reinsurance products. Montpelier Re is
incorporated in Bermuda and is registered as a Class 4 insurer under The
Insurance Act 1978 (Bermuda), Amendments Thereto and Related Regulations ("The
Act"). The Company's bye-laws provide that the Board of Directors of Montpelier
Re shall consist of persons who first have been elected as designated directors
by a resolution in a general meeting of the shareholders of the Company. The
Board of Directors of the Company must then vote all shares of Montpelier Re
owned by the Company to elect such designated directors as Montpelier Re
directors. The bye-law provisions with respect to the removal of directors of
Montpelier Re operate similarly.

     Montpelier Re has two subsidiaries: Montpelier Marketing Services (UK)
Limited ("MMSL") and Montpelier Holdings (Barbados) SRL ("MHB"). MMSL was
incorporated on November 19, 2001, and provides business introduction and other
support services to Montpelier Re. MHB, a Barbados registered Society with
Restricted Liability incorporated on July 25, 2002, has not yet commenced
operations. MHB will be the registered holder of certain types of securities,
including United States equity securities, purchased as part of the overall
Montpelier Re investment portfolio. On December 3, 2002, Montpelier Re
established a trust known as the Montpelier Re Foundation to promote or carry
out charitable purposes.

     In October 2002, the Company completed an initial public offering ("IPO")
of 10,952,600 common shares. The Company's common shares began trading on the
New York Stock Exchange on October 10, 2002. The offering raised approximately
$201.2 million in net proceeds, which was contributed to Montpelier Re.

2.  SIGNIFICANT ACCOUNTING POLICIES

  BASIS OF PRESENTATION

     Montpelier Re's Board of Directors, who are elected as described above,
have unilateral authority, except for certain actions that require approval by
the Company as sole shareholder, to manage the affairs of Montpelier Re.
Accordingly, the accompanying financial statements have been prepared on a
combined basis, rather than on a consolidated basis. The combined financial
statements include the financial statements of Montpelier Re Holdings Ltd. and
its wholly owned subsidiaries. All significant inter-company balances have been
eliminated on combination.

     These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP"). The
preparation of financial statements in accordance with GAAP requires management
to make estimates and assumptions that affect reported and disclosed amounts of
assets and liabilities, as well as disclosure of contingent assets and
liabilities as at the balance sheet date and the reported amounts of revenues
and expenses during the reporting period. Estimates also affect the reported
amounts of income and expenses for the reporting period. Actual results could
differ materially from those estimates.

  PREMIUMS AND RELATED COSTS

     Premiums are recognized as written for the full period of the reinsurance
contract as of the date that the contract is bound. The Company writes both
excess of loss and pro-rata contracts.

                                       F-7
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     For excess of loss contracts, written premium is based on the minimum and
deposit premium as defined in the contract. Subsequent adjustments to the
minimum and deposit premium are recognized in the period they are determined.
For pro-rata contracts, written premiums are recognized based on estimates of
ultimate premiums from the underlying insurance policies provided by the ceding
companies. Initial estimates of written premium are recognized in the period in
which the underlying risks incept. Subsequent adjustments, based on reports of
actual premium by the ceding companies, are recorded in the period they are
determined.

     Premiums are earned ratably over the term of the reinsurance contract. The
portion of the premium related to the unexpired portion of the contract is
reflected in unearned premium.

     Premiums receivable are recorded at amounts due less any required provision
for doubtful accounts.

     Where contract terms require the reinstatement of coverage after a ceding
company's loss, the mandatory reinstatement premiums are recorded as written
premiums when the loss event occurs, and are earned ratably over the remaining
contract risk period.

     Acquisition costs are comprised of ceding commissions, brokerage, premium
taxes, profit commission and other expenses that relate directly to the writing
of reinsurance contracts and are deferred and amortized over the terms of the
related contracts. Deferred acquisition costs are limited to their estimated
realizable value based on the related unearned premium, anticipated claims
expenses and investment income.

  REINSURANCE

     For certain pro-rata contracts, including quota share contracts, the
subject direct insurance contracts will carry underlying reinsurance protection
from third party reinsurers. The Company records its pro-rata share of gross
premiums from the direct insurance contracts as gross written premiums and
records amounts incurred by the ceding company for the underlying third party
reinsurance coverage as reinsurance premiums ceded.

     Reinsurance recoverable includes the Company's share of balances due from
the underlying third party reinsurance contracts for paid losses, unpaid loss
and loss adjustment expenses and reserves for losses incurred but not reported.
Initial estimates of reinsurance recoverable are recognized in the period in
which the loss event occurs. Subsequent adjustments, based on reports of actual
amounts recoverable by ceding companies, are recorded in the period they are
determined. In the event that ceding companies are unable to collect amounts due
from the underlying third party reinsurers, the Company's losses will increase.
The Company records provisions for uncollectible underlying reinsurance
recoverable when collection becomes unlikely.

  FUNDS WITHHELD

     Funds held by reinsured companies represent premiums retained by ceding
companies for a period in accordance with contractual terms. The Company
generally earns investment income on these balances during the period funds are
held.

  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

     Loss and loss adjustment expense reserves include estimates of unpaid
claims and claims expenses on reported losses as well as an estimate of losses
incurred but not reported ("IBNR"). The reserve is based on loss reports on
individual claims, case reserves and other reserve estimates reported by
insureds and ceding companies, external actuarial determinations as well as
management estimates of ultimate losses.

     A significant portion of the Company's business is property catastrophe and
other classes with higher attachment points of coverage. Reserving for losses in
such programs is inherently complicated in that losses in excess of the
attachment level of the Company's policies are characterized by high severity
and low frequency and other factors which could vary significantly as claims are
settled. This limits the volume of industry
                                       F-8
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

claims experience available from which to reliably predict ultimate losses
following a loss event. In addition, the Company has limited past loss
experience due to its short operating history, which increases the inherent
uncertainty in estimating ultimate loss levels. The reserve for losses incurred
but not reported is estimated by management using industry data, and
professional judgment to estimate the ultimate loss to the Company from
reinsurance contracts exposed to a loss event. These estimates are subject to a
corroborative review by external actuaries, based on loss development patterns
determined by reference to the Company's underwriting practices, the policy
form, type of insurance program and industry data. Delays in ceding companies
reporting losses to the Company, together with the potential for unforeseen
adverse developments, may result in loss and loss adjustment expenses
significantly greater or less than the reserve provided at the time of the loss
event. Reserving can prove especially difficult should a significant loss event
take place near the end of an accounting period, particularly if the loss is a
catastrophic event. These estimates are regularly reviewed and updated, as
experience develops and new information becomes known. Any resulting adjustments
are reflected in income in the period in which they become known.

  INVESTMENTS AND CASH

     Investments in fixed maturities are classified as available for sale and
are carried at fair value, based on quoted market prices. The net unrealized
appreciation or depreciation on fixed maturities is included in accumulated
other comprehensive income.

     Investments in unquoted equity securities are carried at estimated fair
value, based on reported net asset values and other information available to
management.

     Investments are reviewed to determine if they have sustained an impairment
in value that is considered to be other than temporary. The identification of
potentially impaired investments involves significant management judgment, which
includes the determination of their fair value and the assessment of whether any
decline in value is other than temporary. Unrealized depreciation in the value
of individual investments, considered by management to be other than temporary,
is charged to income in the period it is determined.

     Investments are recorded on a trade date basis. Gains and losses on sales
of investments are determined based on the basis of first-in, first-out and are
included in investment income when realized.

     Net investment income is stated net of investment management and custody
fees. Interest income is recognized when earned and includes the amortization of
premiums and the accretion of discounts on fixed maturities purchased at amounts
different from their par value.

     Cash and cash equivalents include amounts held in banks and time deposits
with maturities of less than three months from the date of purchase.

  EARNINGS (LOSS) PER SHARE

     The calculation of basic earnings (loss) per common share is based on the
weighted average number of common shares and excludes any dilutive effects of
warrants and options. The calculation of diluted earnings (loss) per common
share assumes the exercise of all dilutive warrants and options, using the
treasury stock method. Warrants and options are considered dilutive when the
quoted market value of the Company's common stock exceeds the strike price of
the warrants or options.

  FOREIGN CURRENCY TRANSLATION

     The Company's functional currency is the United States dollar. Assets and
liabilities of foreign operations whose functional currency is not the United
States dollar are translated at exchange rates in effect at the balance sheet
date. Revenue and expenses of such foreign operations are translated at average
exchange rates

                                       F-9
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

during the year. The effect of translation adjustments for foreign subsidiaries
is included in accumulated other comprehensive income.

     Other monetary assets and liabilities denominated in foreign currencies
have been translated to United States dollars at the rates of exchange
prevailing at the balance sheet date. Income and expense transactions
originating in foreign currencies are translated at the average rate of exchange
prevailing on the date of the transaction. Gains and losses on foreign currency
translation are recognized in income.

  EMPLOYEE INCENTIVE PLANS

     Performance Unit Plan (the "PUP").  Performance units are granted to
executive officers and certain other key employees. The ultimate value of these
performance units, which vest at the end of three-year performance periods, is
dependent upon the Company's achievement of specific performance targets over
the course of the overlapping three-year periods and the market value of the
Company's shares at the date of redemption. Performance units are payable in
cash, common stock or a combination of both. The liability is expensed over the
vesting period of the performance units granted. The liability is recalculated
as the relevant financial results and share price of the Company evolve. Any
adjustments are included in income in the period in which they are determined.

     Option Plan.  The Company has adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-based Compensation." Accordingly, the
Company recognizes the compensation expense for stock option grants based on the
fair value of the award on the date of grant. The compensation expense is
recognized over the vesting period of each grant, with a corresponding
recognition of the equity expected to be issued in Additional paid-in capital.

     Deferred Compensation Plan.  The Company provides a deferred compensation
plan ("DCP") to executive officers and certain other key employees, whereby the
individual can elect to defer receipt of compensation by choosing to
theoretically transfer compensation to certain investment options, including a
phantom share investment option and investment fund options. The DCP would be an
unfunded obligation of the Company and would be included within accounts
payable, accrued expenses and other liabilities.

  RECENT ACCOUNTING PRONOUNCEMENT

     The Financial Accounting Standards Board issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46") an interpretation of
ARB No. 51 "Consolidated Financial Statements," in January 2003. FIN 46
clarifies the accounting and reporting for certain entities in which equity
investors do not have the characteristics of a controlling financial interest.
As disclosed in Notes 1 and 2, the financial statements at December 31, 2002 are
prepared on a combined basis as a result of the fact that Montpelier Re's and
the Company's bye-laws include certain restrictions relating to the election of
directors of Montpelier Re. FIN 46 becomes effective in the first quarter of
2003. The impact of adoption of FIN 46 will be that the Company's financial
statements for the quarter ending March 31, 2003 and for future periods will be
presented on a consolidated basis instead of on a combined basis. There is no
impact on the Company's net income or shareholders' equity as presented in these
combined financial statements as a result of the adoption of FIN 46.

                                       F-10
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3.  INVESTMENTS

     The amortized cost, fair value and related gross unrealized gains and
losses on investments are as follows:
COST OR       GROSS        GROSS
                                          AMORTIZED    UNREALIZED   UNREALIZED
AT DECEMBER 31, 2002                         COST        GAINS        LOSSES     FAIR VALUE
--------------------                      ----------   ----------   ----------   ----------
Fixed Maturities:
  U.S. government and agency............  $  785,312    $18,827        $ --      $  804,139
  Corporate debt securities.............     312,323     13,177          --         325,500
  Mortgage-backed and asset-backed
     securities.........................     224,621        710         125         225,206
                                          ----------    -------        ----      ----------
                                           1,322,256     32,714         125       1,354,845
                                          ----------    -------        ----      ----------
Equity Investment.......................      60,758      2,933          --          63,691
                                          ----------    -------        ----      ----------
                                          $1,383,014    $35,647        $125      $1,418,536
                                          ==========    =======        ====      ==========
COST OR      GROSS        GROSS
                                             AMORTIZED   UNREALIZED   UNREALIZED
AT DECEMBER 31, 2001                           COST        GAINS        LOSSES     FAIR VALUE
--------------------                         ---------   ----------   ----------   ----------
Fixed Maturities:
  U.S. government and agency...............  $638,525      $1,878       $  --       $640,403
  Corporate debt securities................        --          --          --             --
  Mortgage-backed and asset-backed
     securities............................        --          --          --             --
                                             --------      ------       -----       --------
                                             $638,525      $1,878       $  --       $640,403
                                             ========      ======       =====       ========
The following table sets forth the composition of the cost or amortized
cost of fixed maturities by ratings assigned by rating agencies (e.g. Standard &
Poor's Corporation).
AMORTIZED
AT DECEMBER 31, 2002                                             COST        %
--------------------                                          ----------   -----
RATINGS
  U.S. government and agency................................  $  785,312    59.4%
  AAA.......................................................     272,552    20.6
  AA........................................................      54,092     4.1
  A.........................................................     201,965    15.3
  BBB+......................................................       8,335     0.6
                                                              ----------   -----
                                                              $1,322,256   100.0%
                                                              ==========   =====
AMORTIZED
AT DECEMBER 31, 2001                                            COST        %
--------------------                                          ---------   -----
RATINGS
  U.S. government and agency................................  $638,525    100.0%
  AAA.......................................................        --       --
  AA........................................................        --       --
  A.........................................................        --       --
                                                              --------    -----
                                                              $638,525    100.0%
                                                              ========    =====
F-11
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

  LIQUIDITY AND INTEREST RATE RISK

     The amortized cost and estimated fair value amounts for fixed maturity
investments held at December 31, 2002 are shown by contractual maturity:
AMORTIZED
                                                                 COST      FAIR VALUE
                                                              ----------   ----------
Due within one year.........................................  $   94,894   $   96,514
Due after one year through five years.......................     886,675      915,231
Due after five years through ten years......................     116,066      117,894
Mortgage-backed and asset-backed securities.................     224,621      225,206
                                                              ----------   ----------
                                                              $1,322,256   $1,354,845
                                                              ==========   ==========
Actual maturity may differ from contractual maturity because certain
borrowers have the right to call or prepay certain obligations with or without
call or prepayment penalties.

     Proceeds from sales of available for sale securities for the year ended
December 31, 2002 were $1,216 million. There were no sales of fixed maturity
investments during the period ended December 31, 2001. Gross realized losses did
not include any provisions for declines considered to be other than temporary.

     The analysis of net realized gains and the change in net unrealized gains
on investments is as follows:
PERIOD FROM
                                                        YEAR ENDED       NOVEMBER 14, 2001 TO
                                                     DECEMBER 31, 2002    DECEMBER 31, 2001
                                                     -----------------   --------------------
Gross realized gains...............................       $ 8,828               $   --
Gross realized losses..............................        (1,112)                  --
                                                          -------
Net realized gains on investments..................         7,716                   --
Net unrealized gains...............................        33,642                1,878
                                                          -------               ------
Total realized and unrealized gains on
  investments......................................       $41,358               $1,878
                                                          =======               ======
The components of net investment income are as follows:
PERIOD FROM
                                                        YEAR ENDED       NOVEMBER 14, 2001 TO
                                                     DECEMBER 31, 2002    DECEMBER 31, 2001
                                                     -----------------   --------------------
Interest on fixed maturities.......................       $44,137               $  697
Net amortization of premium/discount on fixed
  maturities.......................................        (3,803)                  27
Interest on cash and cash equivalents..............         1,677                  491
                                                          -------               ------
                                                           42,011                1,215
Net investment expenses(1).........................        (2,263)                 (76)
                                                          -------               ------
                                                          $39,748               $1,139
                                                          =======               ======
---------------

(1) $2.2 million relates to White Mountains Advisors LLC

     In the normal course of business, the Company provides security to
reinsureds as required under contract provisions. Such security takes the form
of a letter of credit. Letters of credit are issued by a bank at the request of
the Company. The Company has made arrangements with Fleet National Bank and
Barclay's Bank PLC for the provision of evergreen standby letters of credit in
favor of ceding companies in an amount up to $200.0 million and $100.0 million,
respectively, at December 31, 2002. Total letters of credit outstanding at

                                       F-12
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 2002 were approximately $119.8 million, and are secured by cash and
investments of approximately $127.8 million. The Company did not have any
letters of credit outstanding at December 31, 2001.

  EQUITY INVESTMENT

     Pursuant to a subscription and shareholders agreement (the "agreement"),
the Company invested a total of L40.0 million (or $60.8 million) in the common
shares of Aspen Insurance Holdings Limited ("Aspen") (formerly Exali Reinsurance
Holdings Limited), the Bermuda-based holding company of Aspen Insurance UK
Limited ("Aspen Re") (formerly Wellington Re Limited). At December 31, 2002,
Montpelier Re held approximately 7% of Aspen on an undiluted basis and
approximately 6% on a fully diluted basis.

     As part of the agreement, the Company has agreed to provide quota share
reinsurance to Aspen Re comprising annual assumed premiums to the Company of
approximately $60.0 million per year for the underwriting years 2003, 2004 and
2005. These arrangements cover mainly property and casualty risks.

     Aspen is an unquoted investment. The investment is carried at estimated
fair value based on reported net asset values and other information available to
management, with any unrealized gain or loss included in other comprehensive
income as a separate component of shareholders' equity.

4.  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

     Loss and loss adjustment expense reserves are estimates subject to
variability, and the variability could be material in the near term. The
variability arises because all events affecting the ultimate settlement of
claims have not taken place and may not take place for some time. Variability
can be caused by receipt of additional claim information, changes in judicial
interpretation of contracts or significant changes in the severity or frequency
of claims from historical trends.

     Loss and loss adjustment expense reserve estimates are based on all
relevant information available to the Company. Methods of estimation are used
which the Company believes produce reasonable results given current information.
Management believes that the reserves for loss and loss adjustment expenses are
sufficient to cover losses that fall within coverages assumed by the Company;
however, there can be no assurance that losses will not exceed the Company's
total reserves.

     The Company was incorporated on November 14, 2001 and wrote only one
contract during the period ended December 31, 2001. Given the absence of
reported loss events during the period, the Company did not establish a loss and
loss adjustment expense reserve at December 31, 2001. In the period to December
31, 2001, the Company did not purchase reinsurance.

                                       F-13
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     Activity in the reserve for loss and loss adjustment expenses is summarized
as follows:
PERIOD FROM
                                                                YEAR ENDED       NOVEMBER 14, 2001 TO
                                                             DECEMBER 31, 2002    DECEMBER 31, 2001
                                                             -----------------   --------------------
Net reserves at January 1..................................      $     --               $  --
Net losses incurred related to:
  Current year.............................................       133,310                  --
  Prior period.............................................            --                  --
                                                                 --------               -----
Total net incurred losses..................................       133,310                  --
Net paid losses related to:
  Current year.............................................         4,193                  --
  Prior period.............................................            --                  --
                                                                 --------               -----
Total net paid losses......................................         4,193                  --
Effect of foreign exchange movements.......................           342                  --
                                                                 --------               -----
Total net reserves as of December 31.......................       129,459                  --
Losses recoverable as of December 31.......................        16,656                  --
                                                                 --------               -----
Total gross reserves as of December 31.....................      $146,115               $  --
                                                                 ========               =====
The December 31, 2002 balance comprises reserves for reported claims of
$37,979 and reserves for claims incurred but not reported of $108,136.

5.  LONG-TERM DEBT

     On incorporation, the Company entered into a three-year term loan agreement
with Bank of America, N.A. and a syndicate of commercial banks, with an
aggregate borrowing limit of $150 million. As of December 31, 2002 and 2001, the
Company had borrowed all $150 million under this facility. The term loan
agreement requires that the Company and/or certain of its subsidiaries maintain
specific covenants, including maintaining: (i) a ratio of debt to total capital
of no greater than 30%; (ii) a tangible net worth equal to at least the sum of:
(x) $525 million; (y) 50% of positive net income (with no reduction for net
losses); and (z) 50% of any net proceeds, minus certain dividends; and (iii) the
ratio of aggregate statutory net premiums to the net worth of all of the
Company's insurance subsidiaries at a level of no greater than 1:5 to 1 at the
end of any fiscal quarter.

     These covenants also restrict the Company's other borrowings, the ability
to merge, consolidate, make acquisitions, sell any assets or assign any
receivables, create liens on any assets, make certain capital expenditures and
to hold margin stock. In addition, a change of control of the Company or final
judgments against the Company which exceeds $5 million (excluding any portion
thereof which will likely be recovered through insurance) each constitute an
event of default. The Company has been in compliance with all covenants
throughout the year and is in compliance at December 31, 2002.

     Under this facility, the Company may not pay dividends to shareholders
until April 1, 2003. After this date, the Company may only pay dividends up to
an amount equal to 50% of net income in any quarter, excluding all extraordinary
gains and losses. If dividends in excess of this amount are paid, the Company is
required to reduce the term loan facility by an amount equal to at least 43% of
the excess payment.

     No principal payments are required on the loan prior to its final maturity
date of December 12, 2004. The loan bears interest on the outstanding principal
at a rate equal to various base rates plus a margin of between 50 and 125 basis
points, depending on certain conditions. The interest rate was variable from
inception of the

                                       F-14
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

loan until April 20, 2002. Thereafter, the interest rate was fixed at 2.96% from
April 21, 2002 until October 21, 2002 and has been fixed at 2.59% for the period
from October 21, 2002 until April 21, 2003. After April 21, 2003, the rate
reverts back to a floating rate, unless another fixed rate is agreed upon. At
December 31, 2002 and 2001, the Company accrued interest expense of $800 and
$236 respectively, at an average interest rate of 2.80% and 2.99%, respectively.
The Company paid interest of $3,457 for the year ended December 31, 2002 and did
not pay any interest during the period ended December 31, 2001.

6.  RELATED PARTY TRANSACTIONS

     White Mountains Insurance Group and Benfield Holdings Limited sponsored the
formation of the Company in 2001, and invested $180.0 million and $25.0 million,
respectively, in the initial private placement. Certain officers and directors
of White Mountains also invested in the Company and some of these individuals
also serve as officers and directors of the Company. In addition, White
Mountains and Benfield Holdings Limited were granted warrants entitling them to
purchase 4,781,571.7 common shares and 2,390,785.8 common shares, respectively.
In connection with the Company's formation in 2001, White Mountains and Benfield
established a trust in Bermuda to fund start-up expenses. After the Company's
formation and funding, White Mountains and Benfield were reimbursed $400 each
for the amounts they had contributed to the trust. Included in Amount due to
affiliates at December 31, 2001 is $324 due to White Mountains and Benfield for
reimbursement of these funds. In addition, the Company paid Benfield Advisory
Services, an affiliate of Benfield, advisory fees of $3,300 during the period
ended December 31, 2001 in connection with the formation of the Company. These
expenses are included as Direct equity offering expenses within Additional
paid-in-capital at December 31, 2001. Described below are some of the
transactions the Company has entered into with related parties. The Company
believes that each of the transactions described below was on terms no less
favorable than could have been obtained from unrelated parties.

     The Company's Chairman is also the Chairman of the Board of Directors of
White Mountains Insurance Group, who beneficially owns 22.9% and 29.7% of the
Company at December 31, 2002 and 2001, respectively. The Chief Financial Officer
is also a Director of White Mountains Insurance Group and a director of Amlin,
one of the Company's qualifying quota share cedents.

     Four directors, including the Company's Chairman, are employed by White
Mountains Insurance Group.

     The Company has engaged White Mountains Advisors LLC, a wholly owned
indirect subsidiary of White Mountains Insurance Group, to provide investment
advisory and management services. This agreement may be terminated by either
party upon 30 days written notice. The Company's Chairman of the Finance
Committee of the Board is also a Managing Director of OneBeacon Insurance Group
LLC, Deputy Chairman of the Board of White Mountains Insurance Group, the
Principal Executive Officer of White Mountains Advisors LLC and is either
general manager or investment manager of various funds which own less than 5% of
the Company. The Company pays investment fees based on the month-end market
values held under custody. The fees, which vary depending on the amount of
assets under management, are between 0.15% and 0.30% and are included in net
investment income. The Company incurred an average fee of 0.19% and 0.20% for
the periods ended December 31, 2002 and 2001, respectively. For the periods
ended December 31, 2002 and 2001, the Company expensed investment management
fees of approximately $2.1 million and $76, respectively, and has recorded an
amount payable for these services of $630 and $74, respectively.

     For the periods ended December 31, 2002 and 2001, consulting fees of $95
and $75, respectively, were paid to two officers of the Company for services
related to the incorporation of the Company.

     In January 2002, the Company entered into an agreement with Remetrics, a
subsidiary of Benfield, for the provision of certain risk management services.
As a result of this agreement, the Company paid

                                       F-15
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

approximately L589 (or $879) for risk management services during the year ended
December 31, 2002. This agreement is no longer in place at December 31, 2002.

     In addition, in the ordinary course of business, the Company has entered
into four reinsurance agreements with OneBeacon Insurance Group during the year
ended December 31, 2002. The Company will receive $728 in aggregate annual
premiums from these contracts.

     In addition, the Company pays brokerage commissions to Benfield Greig
Limited, a subsidiary of Benfield Holdings Limited, on business brought in by
Benfield Greig Limited. These commissions are consistent with commissions paid
to other brokers in the ordinary course of business and totaled $6.8 million for
the year ended December 31, 2002.

     Included in Amount due to affiliates at December 31, 2001 is $250 due to a
shareholder for an overpaid subscription payment.

7.  COMMON VOTING SHARES SUBSCRIPTIONS RECEIVABLE

     At December 31, 2001, $26,000 of subscriptions for common shares was due
from shareholders. On January 3, 2002, payment of the outstanding amount was
received in full.

8.  SHAREHOLDERS' EQUITY

  AUTHORIZED AND ISSUED

     At December 31, 2002 and 2001, the total authorized common voting shares of
the Company were 1,200,000,000, with a par value of 1/6 cent each.

     At December 31, 2002 and 2001, the total issued and outstanding shares of
the Company were 63,392,600 and 52,440,000, respectively, with a par value of
1/6 cent each. The holders of common voting shares are entitled to receive
dividends and are allocated one vote per share, provided that, if the controlled
shares of any shareholder or group of related shareholders constitute more than
9.5 percent of the outstanding common shares of the Company, their voting power
will be reduced to 9.5 percent. There are various restrictions on the ability of
certain shareholders to dispose of their shares.

     In the period to December 31, 2001, the Company received cash of $848,000
in respect of subscriptions of common shares. On January 3, 2002, payment of the
remaining outstanding subscriptions totaling $26,000 was received from
shareholders. All issued and outstanding common voting shares were fully paid at
December 31, 2002.

     On September 20, 2002, the Board of Directors of the Company authorized a
six-for-one share split of the Company's common shares. The share split has been
reflected in the December 31, 2001 comparative financial information, and all
applicable references as to the number of common shares, common share
equivalents, including exercise prices where applicable, and per share
information have been represented.

     On October 15, 2002, the Company completed an initial public offering
("IPO") and issued 10,952,600 common shares for proceeds, net of fees, discounts
and commissions of approximately $201.2 million. The Company's common shares
began trading on the New York Stock Exchange on October 10, 2002. Costs
associated with the sale of the shares, totaling approximately $18.3 million,
were deducted from the related proceeds. The net amount received in excess of
common share par value was recorded in Additional paid-in capital.

  WARRANTS

     The Company's founders provided their insurance industry expertise,
resources and relationships during the fourth quarter of 2001 to ensure that the
Company would be fully operational with key management in
                                       F-16
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

place in time for the January 2002 renewal season. In consideration for the
founders' position and commitment, the Company issued warrants to the founding
shareholders to purchase, in the aggregate, up to 7,319,160.1 common shares.
Warrants will expire either five or ten years from the date of issue depending
on the grant terms, and will be exercisable at a price per share of $16.67,
equal to the price per share paid by investors in the initial private offering.

     The warrant contracts may be settled using either the physical settlement
or net-share settlement methods. The warrants have been classified as equity
instruments, in accordance with EITF 00-19: "Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company's Own Stock." The
warrants were initially measured at an aggregate fair value of $61,321 and
reported as an expense and an addition to Additional paid-in-capital for the
period ended December 31, 2001.

     The fair value of each warrant grant was estimated on the date of grant
using the Black-Scholes option-pricing model. The volatility assumption used, of
approximately 30.0%, was derived from the historical volatility of the share
price of a range of publicly-traded Bermuda reinsurance companies of a similar
business nature to the Company. No allowance was made for any potential
liquidity associated with the private trading of the Company's shares. The other
assumptions used for grants in 2001 were as follows: risk free interest rate of
4.5%, expected life of five or ten years as appropriate, and a dividend yield of
nil%.

  DIVIDENDS

     The Company did not declare any dividends for the periods ended December
31, 2002 and 2001.

9.  SEGMENT REPORTING

     Management has determined that the Company operates in one segment only.
The Company focuses on writing global specialty property and other classes of
insurance and reinsurance business. During the period ended December 31, 2001,
the Company wrote one specialty reinsurance policy with a premium of $150. This
policy was for worldwide risks.

     The following table sets forth a breakdown of the Company's gross premiums
written by line of business and by geographic area of risks insured for the year
ended December 31, 2002:

                         GROSS PREMIUMS WRITTEN BY LINE
YEAR ENDED
                                                              DECEMBER 31, 2002
                                                              -----------------
                                                               ($ IN MILLIONS)
Property Specialty..........................................  $230.3      37.9%
Property Catastrophe........................................   141.4      23.3
Qualifying Quota Share......................................   171.7      28.2
Other Specialty.............................................    64.3      10.6
                                                              ------     -----
Total.......................................................  $607.7     100.0%
                                                              ======     =====
F-17
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

           GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA OF RISK INSURED
YEAR ENDED
                                                              DECEMBER 31, 2002
                                                              -----------------
                                                               ($ IN MILLIONS)
Worldwide(1)................................................  $306.4      50.4%
USA and Canada..............................................   207.4      34.1
Japan.......................................................    23.3       3.8
Western Europe, excluding the United Kingdom and Ireland....    17.8       2.9
United Kingdom and Ireland..................................    11.8       1.9
Worldwide, excluding USA and Canada(2)......................    11.4       1.9
Other (1.5% or less)........................................    29.6       5.0
                                                              ------     -----
Total.......................................................  $607.7     100.0%
                                                              ======     =====
---------------

(1) "Worldwide" comprises insurance and reinsurance contracts that insure or
    reinsure risks on a worldwide basis.

(2) "Worldwide, excluding USA and Canada" comprises insurance and reinsurance
    contracts that insure or reinsure risks on a worldwide basis but
    specifically exclude the USA and Canada.

     The Qualifying Quota Share contracts and substantial amounts of other lines
of business are world-wide in nature, with the majority of business related to
North America and Europe.

     In the year ended December 31, 2002, 85% of gross written premium was
produced by four brokers as follows: Benfield Greig Limited $180.5 million;
Willis Group $140.2 million; Guy Carpenter $107.3 million; and Aon Re $90.4
million.

10.  EARNINGS (LOSS) PER SHARE

     The reconciliation of basic and diluted earnings (loss) per share is as
follows:
PERIOD FROM
                                                                YEAR ENDED       NOVEMBER 14, 2001 TO
                                                             DECEMBER 31, 2002    DECEMBER 31, 2001
                                                             -----------------   --------------------
BASIC EARNINGS PER COMMON SHARE:
Net income (loss) available to common shareholders.........     $   152,045          $   (61,618)
Weighted average common shares outstanding -- Basic........      55,178,150           52,440,000
                                                                -----------          -----------
BASIC EARNINGS (LOSS) PER COMMON SHARE.....................     $      2.76          $     (1.18)
                                                                -----------          -----------
DILUTED EARNINGS PER COMMON SHARE:
Net income (loss) available to common shareholders.........     $   152,045          $   (61,618)
Weighted average common shares outstanding -- Basic........      55,178,150           52,440,000
Dilutive effect of Warrants................................         263,070                   --
Dilutive effect of Share Options...........................          15,921                   --
                                                                -----------          -----------
Weighted average common and common equivalent shares
  outstanding -- Diluted...................................      55,457,141           52,440,000
                                                                -----------          -----------
DILUTED EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT
  SHARE....................................................     $      2.74          $     (1.18)
                                                                -----------          -----------
There were no dilutive securities at December 31, 2001.

                                       F-18
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

11.  COMMITMENTS AND CONTINGENCIES

  LETTERS OF CREDIT

     In order for the Company to write Lloyd's Qualifying Quota Share business,
it must provide an evergreen letter of credit in favor of The Society and
Council of Lloyd's ("Lloyd's") in accordance with Lloyd's rules. The Company has
made arrangements with Fleet National Bank for the provision of a standby letter
of credit in a form acceptable to Lloyd's in an amount of up to $200.0 million.
Letters of credit outstanding under this facility at December 31, 2002 were
approximately $99.9 million (L62.1 million) and have been secured by investments
of approximately $107.5 million.

     In addition, as of December 31, 2002, the Company made arrangements with
Barclay's Bank PLC for the provision of an additional evergreen letter of credit
facility in favor of certain U.S. ceding companies in an amount of up to $100
million. Letters of credit outstanding under this facility at December 31, 2002
were approximately $19.9 million and are secured by cash of approximately $20.3
million.

     There were no letters of credit outstanding at December 31, 2001.

  LEASE COMMITMENTS

     The Company and its subsidiaries lease office space in the countries in
which they operate under operating leases, which expire at various dates. The
Company has also entered into operating leases for office equipment and
furniture. Future minimum annual commitments under existing leases are expected
to be as follows: 2003 -- $427; 2004 -- $412; 2005 -- $396; 2006 -- $107; and
2007 -- $107.

  CONCENTRATION OF CREDIT RISK

     The investment portfolio is managed following prudent standards of
diversification. Specific provisions limit the allowable holdings of a single
issue or issuer. The Company believes that there are no significant
concentrations of credit risk associated with its investments. Concentrations of
credit risk with respect to reinsurance balances are limited due to their
dispersion across various companies and geographies.

  CREDIT FACILITIES

     On December 12, 2001, the Company obtained a $50,000 revolving loan
facility from a syndicate of lenders, with the Company and its subsidiaries as
borrowers and guarantors. The facility is for general corporate purposes, and
requires that the Company and/or certain of its subsidiaries maintain specific
covenants, including a tangible net worth covenant and a maximum leverage
covenant. At December 31, 2002 and 2001, no amounts had been drawn down under
this facility.

12.  EMPLOYEE INCENTIVE PLANS

  LONG-TERM INCENTIVE PLAN ("LTIP")

     On January 8, 2002, the Company adopted a Long-Term Incentive Plan (the
"LTIP"). Pursuant to the terms of the LTIP, at the discretion of the
Compensation Committee of the Board of Directors (the "Committee"), various
types of share-based incentive awards, including phantom performance shares,
performance units and options to acquire common shares, may be granted to
executive officers, and certain other principal employees.

  PERFORMANCE UNIT PLAN (THE "PUP")

     The PUP is the Company's primary executive long-term incentive scheme.
Pursuant to the terms of the PUP, at the discretion of the Compensation
Committee of the Board of the Directors (the "Committee"),

                                       F-19
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

performance units may be granted to executive officers and certain other key
employees. Performance units entitle the recipient to receive, without payment
to the Company, all, double, or a part of the value of the units granted,
depending on the achievement of specific financial or operating goals.
Performance units vest at the end of a three-year performance cycle, and can be
denominated in common shares at market value and are payable in cash, common
shares or a combination thereof at the discretion of the Committee.

     For the 2002-2004 cycle, the current performance target for a 100% harvest
of value of the units granted is an average combined ratio of 70% for the
financial years 2002, 2003, and 2004. The target for a maximum harvest of 200%
of the value of the units granted is a combined ratio of 50% or less. A combined
ratio of 95% or more will result in a harvest of nil. Straight line
interpolation is used between these points. Determination of actual performance
and amount of payment is at the sole discretion of the Committee.

     A total of 936,000 performance units are authorized under the PUP at
December 31, 2002 (or up to 1,872,000 common shares should the maximum harvest
of 200% of units apply). On January 8, 2002, the Committee approved the grant of
up to 312,000 performance units for the three year performance period covering
financial years 2002, 2003 and 2004. The Company granted 264,390 and nil
performance units for the periods ended December 31, 2002 and 2001,
respectively. The Company accrues the projected value of these units and
expenses the value in the income statement over the course of each three-year
performance period. The accrual is based on the number of units granted, the
share price at December 31, 2002, and an assumption of a 100% harvest ratio. The
Company recalculates their liability under the PUP as the Company's financial
results evolve, and the share price changes, and reflects such adjustments in
the income statement in the period in which they are determined. The associated
accrual for the performance unit expense was $2,538 and $nil for the periods
ended December 31, 2002 and 2001, respectively. 47,610 performance units in the
2002-2004 performance cycles have not been granted, and may be granted in future
periods.

  OPTION PLAN

     Under the option plan, options expire ten years after the award date, and
are subject to various vesting periods. Options granted under the option plan
may be exercised for common shares upon vesting. A total of 2,550,000 were
issued under the plan for the year ended December 31, 2002, which represents the
maximum number of common shares that may be issued under the option plan under
current Committee approvals. There were no options issued or outstanding for the
period ended December 31, 2001.

     A summary of options issued and outstanding for the year ended December 31,
2002 is as follows:
OPTIONS FOR   AVERAGE
                                                                COMMON      EXERCISE
                                                                SHARES       PRICE
                                                              -----------   --------
Balance at January 1, 2002..................................          --         --
Options granted.............................................   2,550,000     $18.08
Options exercised...........................................          --         --
Options forfeited...........................................          --         --
Options expired.............................................          --         --
Balance at December 31, 2002................................   2,550,000     $18.08
F-20
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table summarizes the range of exercise prices for outstanding
options at December 31, 2002:
WEIGHTED
                                                          AVERAGE     WEIGHTED                 WEIGHTED
                                                         REMAINING    AVERAGE                  AVERAGE
                                            OPTIONS     CONTRACTUAL   EXERCISE     OPTIONS     EXERCISE
            EXERCISE PRICES               OUTSTANDING      LIFE        PRICE     EXERCISABLE    PRICE
            ---------------               -----------   -----------   --------   -----------   --------
$16.67..................................     510,000    9.00 years     $16.67      510,000      $16.67
$17.50..................................     637,500    9.15 years     $17.50           --          --
$18.33..................................     637,500    9.15 years     $18.33           --          --
$19.17..................................     637,500    9.15 years     $19.17           --          --
$20.00..................................     127,500    9.75 years     $20.00
                                           ---------                               -------      ------
                                           2,550,000                               510,000      $16.67
                                           =========                               =======      ======
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 2002: risk free interest rate of 3.8% to 4.8%
based on the applicable zero-coupon bond interest rates, expected life of two
years after vesting date as detailed below, expected volatility of 30.0% to
31.2% and a dividend yield of 0.0%.

     The weighted average fair value of options granted during 2002 is detailed
below:
ASSUMPTION OF
                              OPTIONS                          EXPECTED LIFE AT   FAIR VALUE ON
     EXERCISE PRICES        OUTSTANDING      VESTING DATE       DATE OF GRANT     DATE OF GRANT
     ---------------        -----------   ------------------   ----------------   -------------
$16.67....................     510,000    December 31, 2002        3 years           $ 2,116
$17.50....................     510,000    December 31, 2003        4 years             2,384
$17.50....................     127,500    September 30, 2003       3 years               636
$18.33....................     510,000    December 31, 2004        5 years             2,639
$18.33....................     127,500    September 30, 2004       4 years               707
$19.17....................     510,000    December 31, 2005        6 years             2,885
$19.17....................     127,500    September 30, 2005       5 years               776
$20.00....................     127,500    September 30, 2006       6 years               842
                             ---------                                               -------
                             2,550,000                                               $12,985
                             =========                                               =======
A compensation expense of $5,395 was recorded in general and administrative
expenses for the year ended December 31, 2002, with a corresponding increase to
Additional paid-in capital. The expense represents the proportionate accrual of
the fair value of each grant based on the remaining vesting period.

  DEFERRED COMPENSATION PLAN ("DCP")

     The DCP gives executive officers the ability to defer receipt of executive
compensation, including performance unit payouts, at no cost to the Company.
Under the DCP, various investment options are available including a phantom
Company share tracking option, a fixed income investment option and an equity
fund investment option. The DCP would be a non-funded general obligation of the
Company.

13.  TAXATION

  BERMUDA

     The Company has received an undertaking from the Bermuda government
exempting it from all local income, withholding and capital gains taxes until
March 28, 2016. At the present time, no such taxes are levied in Bermuda.

                                       F-21
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

  UNITED STATES

     The Company does not consider itself to be engaged in trade or business in
the United States and, accordingly, does not expect to be subject to United
States taxation.

  OTHER

     MMSL is subject to the taxation laws of the United Kingdom and has accrued
the estimated tax expense for the year ended December 31, 2002.

14.  STATUTORY REQUIREMENTS

     Montpelier Re is registered under The Act. Under the Act, Montpelier Re is
required to prepare Statutory Financial Statements and to file a Statutory
Financial Return annually. The Act also requires Montpelier Re to maintain a
minimum share capital of $1.0 million and to meet a minimum solvency margin
equal to the greater of $100.0 million, 50% of net premiums written or 15% of
the loss and loss adjustment expense reserves. To satisfy these requirements,
Montpelier Re was required to maintain a minimum level of statutory capital and
surplus of $282.9 million and $100.0 million at December 31, 2002 and 2001,
respectively. Montpelier Re's statutory capital and surplus was $1.3 billion and
$980.1 million at December 31, 2002 and 2001, respectively, of which $1.2
billion and $980.7 million respectively, is fully paid up share capital.

     The Act limits the maximum amount of annual dividends or distributions paid
by Montpelier Re to the Company without the prior notification to, and in
certain cases the approval of, the Bermuda Monetary Authority of such payment.
The maximum amount of dividends that could be paid by Montpelier Re to the
Company, without such notification, was $151.4 million and $39 at December 31,
2002 and 2001, respectively.

     Montpelier Re is also required to maintain a minimum liquidity ratio, which
was met for both periods ended December 31, 2002 and 2001.

15.  SUBSEQUENT EVENT

     In May 2003, the Board of Directors of the Company authorized a public
issue of unsecured debt securities of up to $300 million.

     The terms of the transaction will be finalized prior to the closing of the
offering. Net proceeds of the offering will be used to repay amounts outstanding
under our existing term loan facility and for other general corporate purposes.

                                       F-22
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

15.  UNAUDITED QUARTERLY FINANCIAL DATA(1)
QUARTER ENDED   QUARTER ENDED   QUARTER ENDED   QUARTER ENDED   PERIOD ENDED
                                   MARCH 31,       JUNE 30,      SEPTEMBER 30,   DECEMBER 31,    DECEMBER 31,
                                     2002            2002            2002           2002(3)        2001(2)
                                 -------------   -------------   -------------   -------------   ------------
Gross premiums written.........   $   203,679     $   136,339     $   193,736     $    73,934    $       150
Net premiums written...........   $   189,359     $   131,811     $   172,875     $    71,864    $       150
Net premiums earned............   $    36,611     $    81,434     $   106,496     $   105,385    $         8
Net investment income..........         7,633          11,322          10,040          10,753          1,139
Net realized gains on
  investments..................           484           1,013           4,005           2,214             --
Net foreign exchange gains
  (losses).....................            --              --           2,505            (824)            --
Total revenues.................        44,728          93,769         123,046         117,528          1,147
Loss and loss adjustment
  expenses.....................        14,367          38,975          69,031          10,937             --
Acquisition costs..............         6,467          14,707          20,404          21,348              1
General & administrative
  expenses.....................         4,240           5,873           5,843          10,322          1,207
Interest on long-term debt.....           995           1,118           1,155           1,192            236
Fair value of warrants
  issued.......................            --              --              --              --         61,321
Total expenses.................        26,069          60,673          96,433          43,799         62,765
Income (loss) before taxes.....        18,659          33,096          26,613          73,729        (61,618)
Income tax expense.............            --              --              50               2             --
Net income (loss)..............   $    18,659     $    33,096     $    26,563     $    73,727        (61,618)
Basic earnings (loss) per
  common share.................   $      0.36     $      0.63     $      0.51     $      1.16    $     (1.18)
Diluted earnings (loss) per
  common share.................   $      0.36     $      0.63     $      0.50     $      1.11    $     (1.18)
Weighted average
  shares -- basic..............    52,440,000      52,440,000      52,440,000      63,392,600     52,440,000
Weighted average
  shares -- diluted............    52,440,000      52,603,995      53,129,393      66,629,482     52,440,000
Loss ratio.....................          39.2%           47.9%           64.8%           10.4%           n/a
Expense ratio..................          29.3%           25.3%           24.7%           30.0%           n/a
Combined ratio.................          68.5%           73.2%           89.5%           40.4%           n/a
---------------

(1) As the Company was incorporated November 14, 2001, only one period of
    information is available for the period ended December 31, 2001.

(2) The financial information for this period reflects the Company's results
    from November 14, 2001, the date of incorporation, to December 31, 2001.

(3) The Company completed their IPO during the fourth quarter of 2002.

                                       F-23
MONTPELIER RE HOLDINGS LTD.

                          CONSOLIDATED BALANCE SHEETS
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
AS AT              AS AT
                                                              MARCH 31, 2003   DECEMBER 31, 2002
                                                              --------------   -----------------
                                                               (UNAUDITED)         (AUDITED)
ASSETS
Fixed maturities, at fair value (amortized cost:
  2003 -- $1,535,755; 2002 -- $1,322,256)...................    $1,567,483        $1,354,845
Equity investment, unquoted, at estimated fair value (cost:
  $60,758)..................................................        63,691            63,691
                                                                ----------        ----------
TOTAL INVESTMENTS...........................................     1,631,174         1,418,536
Cash and cash equivalents, at fair value....................       106,982           162,925
Unearned premium ceded......................................        31,123             3,752
Reinsurance premiums receivable.............................       277,407           147,208
Funds withheld..............................................         1,555            20,507
Deferred acquisition costs..................................        69,931            44,881
Reinsurance recoverable.....................................        16,316            16,656
Accrued investment income...................................        14,298            13,057
Deferred financing costs....................................         1,155             1,325
Other assets................................................         4,547             5,071
                                                                ----------        ----------
     Total Assets...........................................    $2,154,488        $1,833,918
                                                                ==========        ==========
LIABILITIES
Loss and loss adjustment expense reserves...................       183,621           146,115
Unearned premium............................................       415,730           241,000
Reinsurance balances payable................................        11,419             2,448
Investment trades pending...................................        30,000            34,280
Long-term debt..............................................       150,000           150,000
Accounts payable, accrued expenses and other liabilities....         7,145             7,540
                                                                ----------        ----------
     Total Liabilities......................................    $  797,915        $  581,383
                                                                ==========        ==========
SHAREHOLDERS' EQUITY
Common voting shares: 1/6 cent par value; authorized
  1,200,000,000 shares; issued and outstanding 63,392,600
  shares....................................................           106               106
Additional paid-in capital..................................     1,127,498         1,126,435
Accumulated other comprehensive income......................        34,701            35,567
Retained earnings...........................................       194,268            90,427
                                                                ----------        ----------
     Total Shareholders' Equity.............................     1,356,573         1,252,535
                                                                ----------        ----------
     Total Liabilities and Shareholders' Equity.............    $2,154,488        $1,833,918
                                                                ==========        ==========
The accompanying Notes to the Consolidated Financial Statements are an
            integral part of the Consolidated Financial Statements.
                                       F-24
MONTPELIER RE HOLDINGS LTD.

         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
2003          2002
                                                              -----------   -----------
                                                                     (UNAUDITED)
REVENUES
  Gross premiums written....................................  $   366,563   $   203,679
  Reinsurance premiums ceded................................      (34,267)      (14,320)
                                                              -----------   -----------
  Net premiums written......................................      332,296       189,359
  Change in net unearned premiums...........................     (147,641)     (152,748)
                                                              -----------   -----------
  Net premiums earned.......................................      184,655        36,611
  Net investment income.....................................       11,684         7,633
  Net realized gains on investments.........................        4,681           484
  Net foreign exchange gains................................        1,359            --
                                                              -----------   -----------
  Total Revenues............................................      202,379        44,728
EXPENSES
  Loss and loss adjustment expenses.........................       47,690        14,367
  Acquisition costs.........................................       40,998         6,467
  General and administrative expenses.......................        8,884         4,240
  Interest on long-term debt................................          965           995
                                                              -----------   -----------
  Total Expenses............................................       98,537        26,069
                                                              -----------   -----------
INCOME BEFORE TAXES.........................................      103,842        18,659
Income tax expense..........................................            1            --
                                                              -----------   -----------
NET INCOME..................................................  $   103,841   $    18,659
                                                              ===========   ===========
COMPREHENSIVE INCOME
  Net income................................................  $   103,841   $    18,659
  Other comprehensive loss..................................         (866)      (13,592)
                                                              -----------   -----------
  Comprehensive income......................................  $   102,975   $     5,067
                                                              ===========   ===========
PER SHARE DATA
  Weighted average number of common and common equivalent
     shares outstanding:
     Basic..................................................   63,392,600    52,440,000
     Diluted................................................   66,479,220    52,440,000
  Basic earnings per common share...........................  $      1.64   $      0.36
                                                              ===========   ===========
  Diluted earnings per common share.........................  $      1.56   $      0.36
                                                              ===========   ===========
The accompanying Notes to the Consolidated Financial Statements are an
            integral part of the Consolidated Financial Statements.
                                       F-25
MONTPELIER RE HOLDINGS LTD.

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
2003        2002
                                                              ----------   --------
                                                                   (UNAUDITED)
COMMON VOTING SHARES
     Balance -- beginning and end of period.................  $      106   $     87
                                                              ----------   --------
ADDITIONAL PAID-IN-CAPITAL
  Balance -- beginning of period............................   1,126,435    920,306
  Direct equity offering expenses...........................          --        (61)
  Compensation recognized under stock option plan...........       1,063      1,227
                                                              ----------   --------
     Balance -- end of period...............................   1,127,498    921,472
                                                              ----------   --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
  Balance -- beginning of period............................      35,567      1,878
  Net change in currency translation adjustments............          (6)        --
  Net change in unrealized losses on investments............        (860)   (13,592)
                                                              ----------   --------
     Balance -- end of period...............................      34,701    (11,714)
                                                              ----------   --------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
  Balance -- beginning of period............................      90,427    (61,618)
  Net income................................................     103,841     18,659
                                                              ----------   --------
     Balance -- end of period...............................     194,268    (42,959)
                                                              ----------   --------
TOTAL SHAREHOLDERS' EQUITY..................................  $1,356,573   $866,886
                                                              ==========   ========
The accompanying Notes to the Consolidated Financial Statements are an
            integral part of the Consolidated Financial Statements.
                                       F-26
MONTPELIER RE HOLDINGS LTD.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
2003        2002
                                                              ---------   ---------
                                                                   (UNAUDITED)
Cash flows provided by operating activities:
  Net income................................................  $ 103,841   $  18,659
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Accretion (amortization) of premium/(discount) on fixed
      maturities............................................      2,678         874
     Depreciation...........................................        206          30
     Compensation recognized under stock option plan........      1,063       1,227
     Net realized gains on fixed maturities.................     (4,681)       (484)
     Amortization of deferred financing costs...............        170         171
     Net change in currency translation adjustments.........         (6)         --
  Change in:
     Unearned premium ceded.................................    (27,371)    (13,002)
     Reinsurance premiums receivable........................   (130,199)   (119,656)
     Funds withheld.........................................     18,952          --
     Deferred acquisition costs.............................    (25,050)    (26,074)
     Reinsurance recoverable................................        340        (644)
     Accrued investment income..............................     (1,241)     (7,068)
     Other assets...........................................        445         (40)
     Loss and loss adjustment expense reserves..............     37,506      15,011
     Unearned premium.......................................    174,730     165,750
     Reinsurance balances payable...........................      8,971          --
     Accounts payable, accrued expenses and other
      liabilities...........................................       (340)      1,317
     Amount due to affiliates...............................         --        (324)
     Interest accrued on long-term debt.....................        (55)        (93)
                                                              ---------   ---------
  Net cash provided by operating activities.................    159,959      35,654
                                                              ---------   ---------
Cash flows from investing activities:
  Purchases of investments..................................   (603,651)   (282,842)
  Proceeds from sale and maturity of investments............    387,875          --
  Purchases of equipment....................................       (126)         --
                                                              ---------   ---------
  Net cash used in investing activities.....................   (215,902)   (282,842)
                                                              ---------   ---------
Cash flows provided by financing activities:
  Issue of common shares....................................         --      26,000
  Amount paid to affiliate for overpayment of
     subscription...........................................         --        (250)
  Direct equity offering expenses...........................         --      (9,660)
                                                              ---------   ---------
  Net cash provided by financing activities.................         --      16,090
                                                              ---------   ---------
  Decrease in cash and cash equivalents.....................    (55,943)   (231,098)
  Cash and cash equivalents -- Beginning of period..........    162,925     350,606
                                                              ---------   ---------
  Cash and cash equivalents -- End of period................  $ 106,982   $ 119,508
                                                              =========   =========
The accompanying Notes to the Consolidated Financial Statements are an
            integral part of the Consolidated Financial Statements.
                                       F-27
MONTPELIER RE HOLDINGS LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS,
             EXCEPT SHARE AMOUNTS OR AS WHERE OTHERWISE DESCRIBED)
                                  (UNAUDITED)

1.  BASIS OF PRESENTATION AND CONSOLIDATION

     These interim unaudited consolidated financial statements include the
accounts of Montpelier Re Holdings Ltd. (the "Company") and its wholly owned
operating subsidiary Montpelier Reinsurance Ltd. ("Montpelier Re"). Montpelier
Re has two subsidiaries: Montpelier Marketing Services (UK) Limited ("MMSL") and
Montpelier Holdings (Barbados) SRL ("MHB"). MMSL provides business introduction
and other support services to Montpelier Re. MHB, a Barbados registered Society
with Restricted Liability, has not yet commenced operations. MHB will be the
registered holder of certain types of securities, including United States equity
securities, purchased as part of the overall Montpelier Re investment portfolio.
On December 3, 2002, Montpelier Re established a trust known as the Montpelier
Re Foundation to promote or carry out charitable purposes.

     The Company, through Montpelier Re, is a provider of global specialty
property insurance and reinsurance products.

     The unaudited consolidated financial statements have been prepared on the
basis of accounting principles generally accepted in the United States ("GAAP")
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete consolidated financial
statements. This report on Form 10-Q should be read in conjunction with
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission. In the opinion of management, these unaudited consolidated financial
statements reflect all the normal recurring adjustments considered necessary for
a fair presentation of the Company's financial position at the end of and for
the periods presented. The results of operations and cash flows for any interim
period will not necessarily be indicative of the results of the operations and
cash flows for the full fiscal year or subsequent quarters. All significant
intercompany accounts and transactions have been eliminated on consolidation.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

2.  SECURITIES LENDING

     During the first quarter of 2003, the Company entered into a Securities
Lending Agreement to participate in a program whereby certain of its fixed
maturity investments are loaned to other institutions for short periods of time
through a lending agent. The Company maintains control over the securities it
lends, retains the earnings and cash flows associated with the loaned securities
and receives a fee from the borrower for the temporary use of the asset.
Collateral is required at a rate of 102-105% of the market value of the loaned
securities, depending on the type of collateral used. The Company does not have
any securities on loan at March 31, 2003.

3.  REINSURANCE

     For certain pro-rata contracts, including quota share contracts, the
subject direct insurance contracts will carry underlying reinsurance protection
from third party reinsurers. The Company records its pro-rata share of gross
premiums from the direct insurance contracts as gross written premiums and
records amounts incurred by the ceding company for the underlying third party
reinsurance coverage as reinsurance premiums ceded. In addition, during the
three months ended March 31, 2003, the Company purchased retrocessional

                                       F-28
MONTPELIER RE HOLDINGS LTD.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

protection on its own account for the direct insurance and facultative
reinsurance programs on an "any one risk" basis to limit the Company's exposure
from losses at one location.

     Reinsurance recoverable includes the Company's share of balances due from
the underlying third party reinsurance contracts for paid losses, unpaid loss
and loss adjustment expenses and reserves for losses incurred but not reported.
Initial estimates of reinsurance recoverable are recognized in the period in
which the loss event occurs. Subsequent adjustments, are recorded in the period
they are determined. The earned reinsurance premiums ceded were $6.9 million and
$1.3 million for the three months ended March 31, 2003 and 2002, respectively.
Total recoveries netted against loss and loss adjustment expenses was $(0.3)
million and $0.6 million for the three months ended March 31, 2003 and 2002,
respectively.

     The Company remains liable in the event that ceding companies, and the
Company, are unable to collect amounts due from the underlying third party
reinsurers. The Company records provisions for uncollectible underlying
reinsurance recoverable when collection becomes unlikely. There are no such
provisions recorded at March 31, 2003 or 2002.

4.  RECENT ACCOUNTING PRONOUNCEMENT

     The Financial Accounting Standards Board issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46") an interpretation of
ARB No. 51 "Consolidated Financial Statements" in January 2003. FIN 46 clarifies
the accounting and reporting for certain entities in which equity investors do
not have the characteristics of a controlling financial interest. The financial
statements included with the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2002 were prepared on a combined basis as a result of
the fact that Montpelier Re's and the Company's bye-laws include certain
restrictions relating to the election of directors of Montpelier Re. The Company
adopted FIN 46 in the first quarter of 2003. The impact of adoption of FIN 46 is
that the Company's financial statements are now prepared on a consolidated basis
instead of on a combined basis. There is no impact on the Company's net income
or shareholders' equity as presented in these consolidated financial statements
as a result of the adoption of FIN 46.

5.  EARNINGS PER SHARE

     The reconciliation of basic and diluted earnings per share is as follows:
THREE MONTHS     THREE MONTHS
                                                               ENDED            ENDED
                                                           MARCH 31, 2003   MARCH 31, 2002
                                                           --------------   --------------
BASIC EARNINGS PER COMMON SHARE:
Net income available to common shareholders..............   $   103,841      $    18,659
Weighted average common shares outstanding -- Basic......    63,392,600       52,440,000
                                                            -----------      -----------
BASIC EARNINGS PER COMMON SHARE..........................   $      1.64      $      0.36
                                                            -----------      -----------
DILUTED EARNINGS PER COMMON SHARE:
Net income available to common shareholders..............   $   103,841      $    18,659
Weighted average common shares outstanding -- Basic......    63,392,600       52,440,000
Dilutive effect of warrants..............................     2,672,006               --
Dilutive effect of share options.........................       414,614               --
                                                            -----------      -----------
Weighted average common and common equivalent shares
  outstanding -- Diluted.................................    66,479,220       52,440,000
                                                            -----------      -----------
DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT
  SHARE..................................................   $      1.56      $      0.36
                                                            -----------      -----------
F-29
MONTPELIER RE HOLDINGS LTD.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  SEGMENT REPORTING

     Management has determined that the Company operates in one segment only.
The Company focuses on writing global specialty property and other classes of
insurance and reinsurance business.

     The following table sets forth a breakdown of the Company's gross premiums
written by line of business and by geographic area of risks insured for the
periods indicated ($ in millions):

                         GROSS PREMIUMS WRITTEN BY LINE
THREE MONTHS     THREE MONTHS
                                                           ENDED            ENDED
                                                       MARCH 31, 2003   MARCH 31, 2002
                                                       --------------   --------------
Property Specialty...................................  $ 90.6    24.7%  $ 35.6    17.5%
Property Catastrophe.................................   150.8    41.1     79.1    38.8
Qualifying Quota Share...............................    76.4    20.9     73.8    36.2
Other Specialty......................................    48.8    13.3     15.2     7.5
                                                       ------   -----   ------   -----
Total................................................  $366.6   100.0%  $203.7   100.0%
                                                       ======   =====   ======   =====
GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA OF RISKS INSURED
THREE MONTHS     THREE MONTHS
                                                           ENDED            ENDED
                                                       MARCH 31, 2003   MARCH 31, 2002
                                                       --------------   --------------
Worldwide(1).........................................  $174.0    47.5%  $112.0    55.0%
USA and Canada.......................................   133.0    36.3     59.0    29.0
United Kingdom and Ireland...........................    21.3     5.8      5.4     2.6
Worldwide, excluding USA and Canada(2)...............    12.2     3.3      9.1     4.5
Western Europe, excluding the United Kingdom and
  Ireland............................................     9.8     2.7      5.1     2.5
Japan................................................     1.6     0.4      3.1     1.5
Others (1.5% or less)................................    14.7     4.0     10.0     4.9
                                                       ------   -----   ------   -----
Total................................................  $366.6   100.0%  $203.7   100.0%
                                                       ======   =====   ======   =====
---------------

(1) "Worldwide" comprises insurance and reinsurance contracts that insure or
    reinsure risks on a worldwide basis.

(2) "Worldwide, excluding USA and Canada" comprises insurance and reinsurance
    contracts that insure or reinsure risks on a worldwide basis but
    specifically exclude the USA and Canada.

     The Qualifying Quota Share contracts and substantial amounts of other lines
of business are world-wide in nature, with the majority of business related to
North America and Europe.

                                       F-30
MONTPELIER RE HOLDINGS LTD.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table sets forth a breakdown of the Company's gross premiums
written by broker for the periods indicated ($ in millions):
THREE MONTHS     THREE MONTHS
                                                           ENDED            ENDED
                                                       MARCH 31, 2003   MARCH 31, 2002
                                                       --------------   --------------
Benfield(1)..........................................  $101.6    29.3%  $ 74.4    36.5%
Willis Group(1)......................................    82.8    23.9     53.7    26.4
Guy Carpenter........................................    75.8    21.9     35.2    17.3
Aon Re Worldwide.....................................    42.1    12.1     24.9    12.2
Others brokers.......................................    44.7    12.8     15.5     7.6
                                                       ------   -----   ------   -----
Total brokers........................................   347.0   100.0%   203.7   100.0%
                                                       ------   -----   ------   -----
Direct (no broker)...................................    19.6               --
                                                       ------   -----   ------   -----
Total................................................  $366.6           $203.7
                                                       ======   =====   ======   =====
---------------

(1) Includes QQS gross premiums written. Benfield represents gross premiums
    written through Benfield Greig Limited and Benfield Blanch, subsidiaries of
    Benfield Holdings Limited.

7.  LONG-TERM DEBT

     On incorporation, the Company entered into a three-year term loan agreement
with Bank of America, N.A. and a syndicate of commercial banks, with an
aggregate borrowing limit of $150.0 million. As of March 31, 2003 and 2002, the
Company had borrowed all $150.0 million under this facility. The term loan
agreement requires that the Company and/or certain of its subsidiaries maintain
specific covenants, including a tangible net worth covenant and a maximum
leverage covenant, and has a final maturity date of December 12, 2004. The
facility also restricts the payment of dividends. The Company has been in
compliance with all covenants throughout the three months ended and as at March
31, 2003 and 2002.

     The interest rate was fixed at 2.59% for the period from October 21, 2002
until April 21, 2003. From April 21, 2003, the rate is fixed at 2.07% until July
21, 2003. The Company incurred interest expense for the three months ended March
31, 2003 and 2002 of $965 and $995, respectively, at an average annual interest
rate of 2.59% and 2.65%, respectively, and paid interest of $959 and $1,069,
respectively. In order to hedge the interest rate risk of the loan, the Company
has entered into an interest rate swap contract with Bank of America, which
becomes effective April 22, 2003 and expires on December 11, 2004, the last day
of the term-loan facility. Under the terms of the interest rate swap contract,
the Company pays interest at a fixed rate of 1.88% plus a margin dependent on
leverage, and receives interest at a variable rate equal to the offshore LIBOR
rate.

8.  RELATED PARTIES

     The Company's Chairman is also the Chairman of the Board of Directors of
White Mountains Insurance Group, which beneficially owns 22.9% and 27.2% of the
Company as at March 31, 2003 and 2002, respectively. The Chief Financial Officer
is also a Director of White Mountains Insurance Group and a director of Amlin,
one of the Company's qualifying quota share cedents.

     Four directors, including the Company's Chairman, are employed by White
Mountains Insurance Group.

     The Company has engaged White Mountains Advisors LLC, a wholly owned
indirect subsidiary of White Mountains Insurance Group, to provide investment
advisory and management services. The fees, which vary depending on the amount
of assets under management, are between 0.15% and 0.30% and are included in net

                                       F-31
MONTPELIER RE HOLDINGS LTD.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

investment income. The Company incurred an average fee of 0.17% and 0.20% for
the three months ended March 31, 2003 and 2002, respectively. For the three
months ended March 31, 2003 and 2002, the Company expensed investment management
fees of approximately $692 and $523, respectively, and has recorded an amount
payable for these services of $705 and $525, respectively. The Company's
Chairman of the Finance Committee is Deputy Chairman of the Board of Directors
of White Mountains Insurance Group, the Principal Executive Officer of White
Mountains Advisors LLC and is either general manager or investment manager of
various funds which own less than 5% of the Company.

     In January 2002, the Company entered into an agreement with Remetrics, a
subsidiary of Benfield Holdings Limited, which beneficially owns 5.9% of the
Company, for the provision of certain risk management services. This agreement
was no longer in place at December 31, 2002. As a result of this agreement, the
Company accrued approximately $nil and $650 for the three months ended March 31,
2003 and 2002, respectively, for risk management services.

     In addition, in the ordinary course of business, the Company entered into
four reinsurance agreements with OneBeacon Insurance Group, a subsidiary of
White Mountains Insurance Group, during the three months ended March 31, 2002.
The Company received $728 in aggregate annual premiums from these contracts
during the year ended December 31, 2002. The Company has not entered into any
reinsurance agreements with OneBeacon Insurance Group during the three months
ended March 31, 2003.

     In addition, the Company pays brokerage commissions to Benfield Greig
Limited and Benfield Blanch ("Benfield"), subsidiaries of Benfield Holdings
Limited, on business brought in by Benfield. These commissions are consistent
with commissions paid to other brokers in the ordinary course of business and
totaled $5.8 million and $3.2 million for the three months ended March 31, 2003
and 2002, respectively.

9.  COMMITMENTS AND CONTINGENCIES

  LETTERS OF CREDIT

     In order for the Company to write Lloyd's Qualifying Quota Share business,
it must provide an evergreen letter of credit in favor of The Society and
Council of Lloyd's ("Lloyd's") in accordance with Lloyd's rules. The Company has
made arrangements with Fleet National Bank for the provision of a standby letter
of credit in a form acceptable to Lloyd's in an amount of up to $200.0 million.
Letters of credit outstanding under this facility at March 31, 2003 were
approximately $125.8 million (L79.6 million) and have been secured by
investments of approximately $138.3 million. There were no letters of credit
outstanding at March 31, 2002.

     In addition, as of December 31, 2002, Company has made arrangements with
Barclay's Bank PLC for the provision of an additional evergreen letter of credit
facility in favor of certain U.S. ceding companies in an amount of up to $100.0
million. Letters of credit outstanding under this facility at March 31, 2003
were approximately $20.8 million and are secured by investments of approximately
$22.9 million.

  CREDIT FACILITIES

     On December 12, 2001, the Company obtained a $50.0 million revolving loan
facility from a syndicate of lenders, with the Company and its subsidiaries as
borrowers and guarantors. The facility is for general corporate purposes, and
requires that the Company and/or certain of its subsidiaries maintain specific
covenants, including a tangible net worth covenant and a maximum leverage
covenant. At March 31, 2003 and 2002, no amounts had been drawn down under this
facility.

                                       F-32
MONTPELIER RE HOLDINGS LTD.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10.  STATUTORY REQUIREMENTS

     Montpelier Re is registered under The Insurance Act 1978 (Bermuda),
Amendments Thereto and Related Regulations ("The Act"). Under The Act,
Montpelier Re is required to annually prepare and file Statutory Financial
Statements and a Statutory Financial Return. The Act also requires Montpelier Re
to maintain a minimum share capital of $1.0 million and to meet a minimum
solvency margin equal to the greater of $100.0 million, 50% of net premiums
written or 15% of the loss and loss adjustment expense reserves. For the three
months ended March 31, 2003 and 2002, Montpelier Re satisfied these
requirements.

     The Act limits the maximum amount of annual dividends or distributions paid
by Montpelier Re to the Company without the prior notification to, and in
certain cases the approval of, the Bermuda Monetary Authority of such payment.
The maximum amount of dividends that could be paid by Montpelier Re to the
Company, without such notification, was $255.7 million and $14.3 at March 31,
2003 and 2002, respectively.

     Montpelier Re is also required to maintain a minimum liquidity ratio, which
was met for both periods ended March 31, 2003 and 2002.

11.  SUBSEQUENT EVENT

     In May 2003, the Board of Directors of the Company authorized a public
issue of unsecured debt securities of up to $300 million.

     The terms of the transaction will be finalized prior to the closing of the
offering. Net proceeds of the offering will be used to repay amounts outstanding
under our existing term loan facility and for other general corporate purposes.

                                       F-33
GLOSSARY OF SELECTED REINSURANCE, INSURANCE AND INVESTMENT TERMS

ATTACHMENT POINT:.............   The amount of loss (per occurrence or in the
                                 aggregate, as the case may be) above which
                                 excess of loss reinsurance becomes operative.

BROKER:.......................   One who negotiates contracts of insurance or
                                 reinsurance, receiving a commission for
                                 placement and other service rendered, between
                                 (1) a policyholder and a primary insurer, on
                                 behalf of the insured party, (2) a primary
                                 insurer and reinsurer, on behalf of the primary
                                 insurer, or (3) a reinsurer and a
                                 RETROCESSIONAIRE, on behalf of the reinsurer.

CASUALTY INSURANCE:...........   Insurance that is primarily concerned with the
                                 losses caused by injuries to third persons (in
                                 other words, persons other than the
                                 policyholder) and the legal liability imposed
                                 on the insured resulting therefrom.

CATASTROPHE EXCESS OF LOSS
REINSURANCE:..................   A form of excess of loss reinsurance that,
                                 subject to a specified limit, indemnifies the
                                 ceding company for the amount of loss in excess
                                 of a specified RETENTION with respect to an
                                 accumulation of losses incurred in a
                                 catastrophic event or series of events.

CEDE; CEDENT; CEDING
COMPANY:......................   When a party reinsures its liability with
                                 another, it "cedes" business and is referred to
                                 as the "cedent" or "ceding company."

COMBINED RATIO:...............   A combination of the underwriting expense ratio
                                 and the loss and loss adjustment expense ratio,
                                 determined in accordance with either STATUTORY
                                 ACCOUNTING PRINCIPLES ("SAP") or GAAP. The
                                 underwriting expense ratio measures the ratio
                                 of UNDERWRITING EXPENSES to net premiums
                                 written, if determined in accordance with SAP,
                                 or the ratio of underwriting expenses (adjusted
                                 by deferred policy acquisition costs) to earned
                                 premiums if deter-mined in accordance with
                                 GAAP. The loss and loss adjustment expense
                                 ratio measures the ratio of losses and loss
                                 adjustment expenses to earned premiums
                                 determined in accordance with either SAP or
                                 GAAP. A combined ratio below 100% generally
                                 indicates profitable underwriting prior to the
                                 consideration of investment income. A combined
                                 ratio over 100% generally indicates
                                 unprofitable underwriting prior to the
                                 consideration of investment income.

COMMERCIAL LINES:.............   The various kinds of insurance that are written
                                 for businesses.

EXCESS OF LOSS REINSURANCE:...   A generic term describing reinsurance that
                                 indemnifies the reinsured against all or a
                                 specified portion of losses on underlying
                                 insurance policies in excess of a specified
                                 amount, which is called a "level" or
                                 "retention." Also known as non-proportional
                                 reinsurance. Excess of loss reinsurance is
                                 written in LAYERS. A reinsurer or group of
                                 reinsurers accepts a band of coverage up to a
                                 specified amount. The total coverage purchased
                                 by the cedent is referred to as a "program" and
                                 will typically be placed with predetermined
                                 reinsurers in pre-negotiated layers. Any
                                 liability exceeding the outer limit of the
                                 program reverts to the ceding company, which
                                 also bears the credit risk of a reinsurer's
                                 insolvency.

                                       G-1
GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES ("U.S. GAAP"):.....   United States generally accepted accounting
                                 principles as defined by the American Institute
                                 of Certified Public Accountants or statements
                                 of the Financial Accounting Standards Board.
                                 U.S. GAAP is the method of accounting to be
                                 used by the Company for reporting to
                                 shareholders.

GROSS PREMIUMS WRITTEN:.......   Total premiums for insurance written and
                                 assumed reinsurance during a given period.

INCURRED BUT NOT REPORTED
(IBNR):.......................   Reserves for estimated losses that have been
                                 incurred by insureds and reinsureds but not yet
                                 reported to the insurer or reinsurer including
                                 unknown future developments on losses which are
                                 known to the insurer or reinsurer.

LAYER:........................   The interval between the retention or
                                 attachment point and the maximum limit of
                                 indemnity for which a reinsurer is responsible.

LOSS ADJUSTMENT EXPENSES
(LAE):........................   The expenses of settling claims, including
                                 legal and other fees and the portion of general
                                 expenses allocated to claim settlement costs.
                                 Also known as claim adjustment expenses.

LOSS RATIO:...................   The ratio of incurred losses and LAE to net
                                 premiums earned, determined in accordance with
                                 either SAP or U.S. GAAP. Incurred losses
                                 include a provision for IBNR.

LOSS RESERVES:................   Liabilities established by insurers and
                                 reinsurers to reflect the estimated cost of
                                 claims payments and the related expenses that
                                 the insurer or reinsurer will ultimately be
                                 required to pay in respect of insurance or
                                 reinsurance it has written. Reserves are
                                 established for losses and for loss adjustment
                                 expenses.

NET PREMIUMS EARNED:..........   The portion of net premiums written during or
                                 prior to a given period that was actually
                                 recognized as income during such period.

NET PREMIUMS WRITTEN:.........   Gross premiums written for a given period less
                                 premiums ceded to reinsurers and
                                 retrocessionaires during such period.

PERSONAL LINES:...............   Types of insurance written for individuals or
                                 families, rather than for businesses.

PROPERTY INSURANCE:...........   Insurance that is primarily concerned with
                                 financial loss arising out of the loss of
                                 property or its use caused by an insured
                                 danger.

QUALIFYING QUOTA SHARE OR
QQS:..........................   A reinsurance arrangement under which premiums
                                 paid by a Lloyd's syndicate to a reinsurer
                                 qualify under the Lloyd's Bye-laws to be
                                 set-off against the syndicate's aggregate
                                 premiums received, thereby increasing the
                                 syndicate's underwriting capacity.

REINSURANCE:..................   An arrangement in which an insurance company,
                                 the reinsurer, agrees to indemnify another
                                 insurance or reinsurance company, the ceding
                                 company, against all or a portion of the
                                 insurance or reinsurance risks underwritten by
                                 the ceding company under one or more policies.
                                 Reinsurance can provide a ceding company with
                                 several benefits, including a reduction in net
                                 liability on individual risks and catastrophe
                                 protection from large or multiple losses.
                                       G-2
Reinsurance also provides a ceding company with
                                 additional underwriting capacity by permitting
                                 it to accept larger risks and write more
                                 business than would be possible without a
                                 concomitant increase in capital and surplus,
                                 and facilitates the maintenance of acceptable
                                 financial ratios by the ceding company.
                                 Reinsurance does not legally discharge the
                                 primary insurer from its liability with respect
                                 to its obligations to the insured.

RESERVES:.....................   Liabilities established by insurers and
                                 reinsurers to reflect the estimated costs of
                                 claim payments and the related expenses that
                                 the insurer or reinsurer will ultimately be
                                 required to pay in respect of insurance or
                                 reinsurance it has written. Reserves are
                                 established for losses, for LAE and for
                                 unearned premiums. Loss reserves consist of
                                 "case reserves," or reserves established with
                                 respect to individual reported claims, and
                                 "IBNR reserves." For reinsurers, LAE reserves
                                 are generally not significant because
                                 substantially all of the LAE associated with
                                 particular claims are incurred by the primary
                                 insurer and reported to reinsurers as losses.
                                 Unearned premium reserves constitute the
                                 portion of premium paid in advance for
                                 insurance or reinsurance that has not yet been
                                 provided. See also "Loss Reserves."

RETENTION:....................   The amount or portion of risk that an insurer
                                 retains for its own account. Losses in excess
                                 of the retention level up to the outer limit of
                                 the program, if any, are paid by the reinsurer.
                                 In proportional treaties, the retention may be
                                 a percentage of the original policy's limit. In
                                 excess of loss business, the retention is a
                                 dollar amount of loss, a loss ratio or a
                                 percentage.

RETROCESSIONAL REINSURANCE;
RETROCESSIONAIRE:.............   A transaction whereby a reinsurer cedes to
                                 another reinsurer, the retrocessionaire, all or
                                 part of the reinsurance that the first rein-
                                 surer has assumed. Retrocessional reinsurance
                                 does not legally discharge the ceding reinsurer
                                 from its liability with respect to its
                                 obligations to the reinsured. Reinsurance
                                 companies cede risks to retrocessionaires for
                                 reasons similar to those that cause primary
                                 insurers to purchase reinsurance: to reduce net
                                 liability on individual risks, to protect
                                 against catastrophic losses, to stabilize
                                 financial ratios and to obtain additional
                                 underwriting capacity.

RISK EXCESS OF LOSS
REINSURANCE:..................   A form of excess of loss reinsurance that
                                 covers a loss of the reinsured on a single
                                 "risk" in excess of its retention level of the
                                 type reinsured, rather than to aggregate losses
                                 for all covered risks, as does CATASTROPHE
                                 EXCESS OF LOSS REINSURANCE. A "risk" in this
                                 context might mean the insurance coverage on
                                 one building or a group of buildings or the
                                 insurance coverage under a single policy that
                                 the reinsured treats as a single risk.

STATUTORY ACCOUNTING
PRINCIPLES ("SAP"):...........   Recording transactions and preparing financial
                                 statements in accordance with the rules and
                                 procedures prescribed or permitted by United
                                 States state insurance regulatory authorities
                                 including the NAIC, which in general reflect a
                                 liquidating, rather than going concern, concept
                                 of accounting.

                                       G-3
UNDERWRITING:.................   The insurer's or reinsurer's process of
                                 reviewing applications submitted for insurance
                                 coverage, deciding whether to accept all or
                                 part of the coverage requested and determining
                                 the applicable premiums.

UNDERWRITING CAPACITY:........   The maximum amount that an insurance company
                                 can underwrite. The limit is generally
                                 determined by the company's retained earnings
                                 and investment capital. Reinsurance serves to
                                 increase a company's underwriting capacity by
                                 reducing its exposure from particular risks.

UNDERWRITING EXPENSES:........   The aggregate of policy acquisition costs,
                                 including commissions and the portion of
                                 administrative, general and other expenses
                                 attributable to underwriting operations.

                                       G-4
[MONTPELIER RE LOGO]
PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the expenses payable by the Registrant in
connection with the issuance and distribution of the notes being registered
hereby. All of such expenses are estimates, other than the filing and quotation
fees payable to the Securities and Exchange Commission.
Filing Fee -- Securities and Exchange Commission............  $ 16,180
Fees and Expenses of Counsel................................  $      *
Printing Expenses...........................................  $      *
Fees and Expenses of Accountants............................  $      *
Blue Sky Fees and Expenses..................................  $      *
Miscellaneous Expenses......................................  $      *
                                                              --------
Total.......................................................  $      *
                                                              ========
---------------

* To be provided by amendment.

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Bye-law 31 of the Registrant's bye-laws provides, among other things, that
the Registrant shall indemnify its directors and officers to the fullest extent
possible, except as prohibited under the Act and, without limitation, that: (a)
the directors and officers of the Registrant, any person appointed to any
committee of the Board of Directors of the Registrant or any person who is or
was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise (including any employee benefit plan) and employers of the Company
acting in relation to any of the affairs of the Registrant and the liquidator or
trustee (if any) and their heirs, executors and administrators, shall be
indemnified and secured harmless out of the assets of the Registrant from and
against all actions, costs, charges, losses, damages and expenses (including,
without limitation, attorney's fees) which they or any of them, their heirs,
executors or administrators, shall or may incur or sustain by or by reason of
any act done, concurred in or omitted in or about the execution of their duty,
or supposed duty, or in their respective offices or trusts, including, without
limitation, acts taken or omitted with regard to subsidiary companies of the
Registrant, and none of them shall be answerable for the acts, receipts,
neglects or defaults of the others of them or for joining in any receipts for
the sake of conformity, or for any bankers or other persons with whom any moneys
or effects belonging to the Registrant shall or may be lodged or deposited for
safe custody, or for insufficiency or deficiency of any security upon which any
moneys of or belonging to the Registrant shall be placed out on or invested, or
for any other loss, misfortune or damage which may happen in the execution of
their respective offices or trusts, or in relation thereto; provided, that this
indemnity shall not extend to any matter prohibited by the Companies Act 1981 of
Bermuda which may attach to any of said persons.

     Bye-law 32 of the Registrant's bye-laws provides that each shareholder
agrees to waive any claim or right of action it might have, whether individually
or by or in the right of the Registrant, against any director or officer on
account of any action taken by such director or officer, or the failure of such
director or officer to take any action in the performance of his duties with or
for the Registrant, provided that such waiver shall not extend to any matter in
respect of any fraud or dishonesty which may attach to such director or officer.

     Reference is made to the form of Underwriting Agreement to be filed as
Exhibit 1.1 hereto for provisions providing that the Underwriters are obligated,
under certain circumstances, to indemnify the directors, certain officers and
the controlling persons of the Registrant against certain liabilities under the
Securities Act of 1933, as amended (the "Securities Act").

                                       II-1
Reference is made to the Shareholders Agreement to be filed as Exhibit 10.1
hereto for provisions providing that the Registrant and certain holders of
common shares and warrants are each obligated to indemnify the other for certain
actions.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     As part of its formation, the Registrant issued unregistered securities as
described below. None of these transactions involved any underwriters,
underwriting discounts or commissions, or any public offering and the Registrant
believes that each transaction, if deemed to be a sale of a security, was exempt
from the registration requirements of the Securities Act by virtue of Section
4(2) thereof, Regulation D promulgated thereunder, Rule 701 pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701 or Regulation S for offerings of securities outside of the United
States. The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, such securities were
restricted as to transfers and appropriate legends were affixed to the share
certificates and instruments issued in such transactions.

     (1) On December 12, 2001, the Registrant sold 8,480,000 common shares to
certain accredited investors for an aggregate price of $848 million. The sales
of shares were made in reliance on Regulation D.

     (2) On January 3, 2002, the Registrant sold 260,000 common shares to
certain accredited investors for an aggregate price of $26 million and issued
1,186,610 warrants to purchase common shares. The sales of shares and warrants
were made in reliance on Regulation D.

     (3) Since its inception in November 2001, the Registrant has granted
options to certain principal employees and officers under its Share Option Plan
covering an aggregate of 2,550,000 of the Registrant's common shares. All
options granted under the Share Option Plan have subsequently been registered
under, and in accordance with, the Securities Act of 1933, as amended.

     (4) Since its inception in November 2001, the Registrant has issued 600,000
performance units to principal employees and officers. Each performance unit
represents the fair value of a common share. Performance units are conditional
grants that entitle the recipient to receive, all, double, or part of the value
of performance units payable in cash, common shares or a combination of both at
the Registrant's discretion. Performance units are granted pursuant to the
Registrant's Performance Unit Plan.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) Exhibits
EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT
-------                     -----------------------
1.1      Form of Underwriting Agreement.*
 3.1      Memorandum of Association (incorporated herein by reference
          to Exhibit 3.1 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-89408)).
 3.2      Amended and Restated Bye-Laws (incorporated herein by
          reference to Exhibit 3.1 to the Company's Current Report on
          Form 8-K dated May 20, 2003).
 4.1      Form of Indenture.*
 4.2      Form of Supplemental Indenture.*
 4.3      Form of global note (included as Exhibit A to Exhibit 4.1
          herein).*
 5.1      Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.*
 8.1      Opinion of Cahill Gordon & Reindel LLP*
10.1      Shareholders Agreement, dated as of December 12, 2001, among
          the Registrant and each of the persons listed on Schedule 1
          thereto, as amended by Amendment No. 1, dated December 24,
          2001 (incorporated herein by reference to Exhibit 10.1 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.2      Service Agreement, dated as of December 12, 2001, between
          Anthony Taylor, the Registrant and Montpelier Reinsurance
          Ltd. (incorporated herein by reference to Exhibit 10.2 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
II-2
EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT
-------                     -----------------------
10.3      Service Agreement, dated as of January 24, 2002, between
          Anthony Taylor and Montpelier Marketing Services (UK)
          Limited (incorporated herein by reference to Exhibit 10.3 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.4      Service Agreement, dated as of January 1, 2002, between C.
          Russell Fletcher, III and Montpelier Reinsurance Ltd.
          (incorporated herein by reference to Exhibit 10.4 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)).
10.5      Service Agreement, dated as of January 1, 2002, between
          Thomas George Story Busher and Montpelier Reinsurance Ltd.
          (incorporated herein by reference to Exhibit 10.5 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)).
10.6      Service Agreement, dated as of January 24, 2002, between
          Thomas George Story Busher and Montpelier Marketing Services
          (UK) Limited (incorporated herein by reference to Exhibit
          10.6 to the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.7      Service Agreement, dated as of January 24, 2002, between
          Nicholas Newman-Young and Montpelier Marketing Services (UK)
          Limited (incorporated herein by reference to Exhibit 10.6 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.8      Credit Agreement, dated as of December 12, 2001, among the
          Registrant and Various Financial Institutions, as amended by
          Amendment Agreement, dated as of December 26, 2001, by
          Second Amendment Agreement, dated as of June 17, 2002 and by
          Third Amendment Agreement, dated as of August 1, 2002
          (incorporated herein by reference to Exhibit 10.8 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)) and by Fourth Amendment Agreement, dated as
          of December 11, 2002 (incorporated herein by reference to
          Exhibit 10.1 to the Company's Current Report on Form 8-K
          filed on April 8, 2003).
10.9      Share Option Plan (incorporated herein by reference to
          Exhibit 10.9 to the Company's Registration Statement on Form
          S-1 (Registration No. 333-89408)).
10.10     Performance Unit Plan (incorporated herein by reference to
          Exhibit 10.10 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-89408)).
10.11     Standby Letter of Credit Agreement, among Montpelier Re and
          Fleet National Bank, dated as of February 26, 2002,
          (incorporated herein by reference to Exhibit 10.11 to the
          Company's Annual Report on Form 10-K for the year ended
          December 31, 2002).
10.12     Standby Letter of Credit Agreement, among Montpelier Re and
          Barclays Bank PLC, dated as of November 21, 2002,
          (incorporated herein by reference to Exhibit 10.12 to the
          Company's Annual Report on Form 10-K for the year ended
          December 31, 2002).
10.13     Service Agreement, dated as of March 18, 2003, between K.
          Thomas Kemp and Montpelier Re Holdings Ltd., (incorporated
          herein by reference to Exhibit 10.13 to the Company's Annual
          Report on Form 10-K for the year ended December 31, 2002).
10.14     Letter of Credit Reimbursement and Pledge Agreement, among
          Montpelier Re and Fleet National Bank, dated June 20, 2003
          (incorporated herein by reference to Exhibit 10.14 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-105896)).*
12.1      Statement Regarding Calculation of Ratio of Earnings to
          Fixed Charges.
12.2      Statement Regarding Calculation of Pro Forma Ratio of
          Earnings to Fixed Charges.*
21.1      Subsidiaries of the Registrant (incorporated herein by
          reference to Exhibit 21.1 to the Company's Registration
          Statement on Form S-1 (Registration No. 333-89408)).
23.1      Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.(included
          in Exhibit 5.1).*
23.2      Consent of PricewaterhouseCoopers (Bermuda).
23.3      Consent of Cahill Gordon & Reindel LLP (included in Exhibit
          8.1).*
23.4      Consent of Conyers Dill & Pearman.*
24.1      Power of Attorney by John J. (Jack) Byrne.
24.2      Power of Attorney by Anthony Taylor.
24.3      Power of Attorney by K. Thomas Kemp.
24.4      Power of Attorney by John D. Gillespie.
24.5      Power of Attorney by Raymond Barrette.
24.6      Power of Attorney by G. Thompson Hutton.
24.7      Power of Attorney by Raymond M. Salter.
II-3
EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT
-------                     -----------------------
24.8      Power of Attorney by Allen W. Fulkerson.
24.9      Power of Attorney by William Spiegel.
24.10     Power of Attorney by Steven J. Gilbert.
24.11     Power of Attorney by Kamil M. Salame.
25.1      Statement of Eligibility of The Bank of New York on Form
          T-1, as trustee for the senior notes under the indenture.*
99.1      Form F-N.*
---------------

 * To be filed by amendment.

ITEM 17.  UNDERTAKINGS

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

     The undersigned Registrant hereby undertakes that:

     (1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

     (2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

                                       II-4
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Pembroke, Bermuda, on
the 9th day of July, 2003.

                                          MONTPELIER RE HOLDINGS LTD.

                                          By:/s/ THOMAS GEORGE STORY BUSHER

                                            ------------------------------------
                                            Name: Thomas George Story Busher
                                            Title:  Chief Operating Officer
SIGNATURE                                                  TITLE
                       ---------                                                  -----
*                                                    Chairman
 ------------------------------------------------------
                  John J. (Jack) Byrne

                           *                                    President and Chief Executive Officer and
 ------------------------------------------------------          Director (Principal Executive Officer)
                     Anthony Taylor

                           *                                      Chief Financial Officer and Director
 ------------------------------------------------------               (Principal Financial Officer)
                     K. Thomas Kemp

                     /s/ NEIL MCCONACHIE                             (Principal Accounting Officer)
 ------------------------------------------------------
                    Neil McConachie

                           *                                                    Director
 ------------------------------------------------------
                   John D. Gillespie

                           *                                                    Director
 ------------------------------------------------------
                    Raymond Barrette

                           *                                                    Director
 ------------------------------------------------------
                   G. Thompson Hutton

                           *                                                    Director
 ------------------------------------------------------
                   Raymond M. Salter

                           *                                                    Director
 ------------------------------------------------------
                   Allan W. Fulkerson

                           *                                                    Director
 ------------------------------------------------------
                    William Spiegel

                           *                                                    Director
 ------------------------------------------------------
                   Steven J. Gilbert
II-5
SIGNATURE                                                  TITLE
                       ---------                                                  -----
*                                                    Director
 ------------------------------------------------------
                    Kamil M. Salame

                           *
 ------------------------------------------------------
                   John D. Gillespie
    (authorized representative in the United States)

          *By:  /s/ THOMAS GEORGE STORY BUSHER
 ------------------------------------------------------
               Thomas George Story Busher
                    Attorney-in-fact
II-6
INDEX TO FINANCIAL STATEMENT SCHEDULES
SCHEDULE
                                                              PAGE    NUMBER
                                                              ----   --------
Report of Independent Accountants on Financial Statement
  Schedules.................................................  S-2
Summary of Investments -- Other than Investments in Related
  Parties at December 31, 2002..............................  S-3    I
Condensed Financial Information of Registrant...............  S-4    II
Supplementary Insurance Information.........................  S-7    III
Reinsurance.................................................  S-8    IV
Note: Other Schedules have been omitted as they are not applicable to the
Company.

                                       S-1
MONTPELIER RE HOLDINGS LTD.

                      REPORT OF INDEPENDENT ACCOUNTANTS ON

                         FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Shareholders of
Montpelier Re Holdings Ltd.

Our audits of the combined financial statements referred to in our report dated
February 26, 2003, appearing on page F-2 in this Form S-1 also included an audit
of the financial statement schedules I, II, III and IV. In our opinion, these
financial statement schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the related combined
financial statements.

PricewaterhouseCoopers
Chartered Accountants

Hamilton, Bermuda
February 26, 2003

                                       S-2
MONTPELIER RE HOLDINGS LTD.

                                   SCHEDULE I

  COMBINED SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES
                            AS AT DECEMBER 31, 2002
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
COST OR       ESTIMATED     AMOUNT SHOWN IN
TYPE OF INVESTMENT                                   AMORTIZED COST   FAIR VALUE   THE BALANCE SHEET
------------------                                   --------------   ----------   -----------------
Fixed Maturities:
  Bonds and notes:
     U.S. Government and agency....................    $  785,312     $  804,139      $  804,139
     Corporate debt securities.....................       312,323        325,500         325,500
     Mortgage-backed securities....................       224,621        225,206         225,206
                                                       ----------     ----------      ----------
          Total Fixed Maturities...................     1,322,256      1,354,845       1,354,845
Equity Investment:.................................        60,758         63,691          63,691
                                                       ----------     ----------      ----------
          Total Investments........................    $1,383,014     $1,418,536      $1,418,536
                                                       ----------     ----------      ----------
S-3
MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE II

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                CONDENSED BALANCE SHEETS -- PARENT COMPANY ONLY
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
AS AT          AS AT
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  2002           2001
                                                              ------------   ------------
ASSETS
Cash and cash equivalents, at fair value....................   $    5,418     $   10,183
Investment in combined subsidiaries, on an equity basis.....    1,353,973        982,645
Common voting shares subscriptions receivable...............           --         26,000
Other assets................................................        8,449          2,330
                                                               ----------     ----------
     Total Assets...........................................   $1,367,840     $1,021,158
                                                               ==========     ==========
LIABILITIES
Accounts payable and accrued liabilities....................   $      872     $   10,505
Long-term debt..............................................      150,000        150,000
                                                               ----------     ----------
     Total Liabilities......................................   $  150,872     $  160,505
                                                               ==========     ==========
SHAREHOLDERS' EQUITY
Common voting shares: 1/6 cent par value; authorized
  1,200,000,000 shares; issued and outstanding at December
  31, 2002; 63,392,600 shares (2001 -- 52,440,000)..........   $      106     $       87
Additional paid-in capital..................................    1,126,435        920,306
Accumulated other comprehensive income......................           --          1,878
Retained earnings (accumulated deficit).....................       90,427        (61,618)
                                                               ----------     ----------
     Total Shareholders' Equity.............................    1,216,968        860,653
                                                               ----------     ----------
     Total Liabilities and Shareholders' Equity.............   $1,367,840     $1,021,158
                                                               ==========     ==========
S-4
MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE II

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                 STATEMENT OF OPERATIONS -- PARENT COMPANY ONLY
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
PERIOD FROM
                                                                YEAR ENDED       NOVEMBER 14, 2001 TO
                                                             DECEMBER 31, 2002    DECEMBER 31, 2001
                                                             -----------------   --------------------
REVENUES
  Equity in net earnings of subsidiaries...................      $151,487              $     39
  Management fee from subsidiary...........................         8,000                    --
  Net investment income....................................           165                    43
                                                                 --------              --------
     Total Revenue.........................................       159,652                    82

EXPENSES
  Interest on long-term debt...............................         4,460                    --
  Fair value of warrants issued............................            --                61,321
  Other expenses...........................................         3,147                   379
                                                                 --------              --------
     Total Expenses........................................         7,607                61,700
                                                                 --------              --------

NET INCOME (LOSS)..........................................      $152,045              $(61,618)
                                                                 ========              ========
ACCUMULATED DEFICIT -- BEGINNING OF PERIOD.................       (61,618)                   --
                                                                 --------              --------
RETAINED EARNINGS (ACCUMULATED DEFICIT) -- END OF PERIOD...      $ 90,427              $(61,618)
                                                                 --------              --------
S-5
MONTPELIER RE HOLDINGS LTD.
                                  SCHEDULE II

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                STATEMENTS OF CASH FLOWS -- PARENT COMPANY ONLY
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
PERIOD FROM
                                                                YEAR ENDED       NOVEMBER 14, 2001 TO
                                                             DECEMBER 31, 2002    DECEMBER 31, 2001
                                                             -----------------   --------------------
Cash flows used in operating activities:
  Net income (loss)........................................      $ 152,045            $ (61,618)
  Adjustments to reconcile net income (loss) to net cash
     used in operating activities:
     Equity in net earnings (loss) of subsidiaries.........       (151,487)                 (39)
     Compensation recognized under stock option plan.......          5,395                   --
     Fair value of warrants issued.........................             --               61,321
     Other assets and liabilities..........................        (14,938)              (1,771)
     Interest accrued on long-term debt....................           (564)                  --
                                                                 ---------            ---------
  Net cash used in operating activities....................         (9,549)              (2,107)
                                                                 ---------            ---------
Cash flows from investing activity:
  Net Capital contribution to subsidiary...................       (221,719)            (980,728)
                                                                 ---------            ---------
  Net cash used in investing activity......................       (221,719)            (980,728)
                                                                 ---------            ---------
Cash flows provided by financing activities:
  Issue of common shares...................................        245,053              843,018
  Amount paid to affiliate for overpayment of
     subscription..........................................           (250)                  --
  Direct equity offering expenses..........................        (18,300)                  --
  Issue of long-term debt..................................             --              150,000
                                                                 ---------            ---------
  Net cash provided by financing activities................        226,503              993,018
                                                                 ---------            ---------
  Increase (decrease) in cash and cash equivalents.........         (4,765)              10,183
                                                                 ---------            ---------
  Cash and cash equivalents -- Beginning of period.........         10,183                   --
                                                                 ---------            ---------
  Cash and cash equivalents -- End of period...............      $   5,418            $  10,183
                                                                 =========            =========
S-6
MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE III

                      SUPPLEMENTARY INSURANCE INFORMATION
           AS AT AND FOR THE PERIODS ENDED DECEMBER 31, 2002 AND 2001
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
NET BENEFITS,   AMORTIZATION
                        DEFERRED       FUTURE POLICY                                           CLAIMS,      OF DEFERRED
                         POLICY      BENEFITS, LOSSES,                NET         NET        LOSSES AND        POLICY
                       ACQUISITION      CLAIMS AND       UNEARNED   PREMIUMS   INVESTMENT    SETTLEMENT     ACQUISITION
                          COSTS        LOSS EXPENSES     PREMIUMS    EARNED      INCOME       EXPENSES         COSTS
                       -----------   -----------------   --------   --------   ----------   -------------   ------------
2002 -- Property and
  Casualty...........    $44,881         $146,115        $241,000   $329,926    $39,748       $133,310        $62,926
2001 -- Property and
  Casualty...........    $    16         $      0        $    142   $      8    $ 1,139       $      0        $     1
OTHER      GROSS
                       OPERATING   PREMIUMS
                       EXPENSES    WRITTEN
                       ---------   --------
2002 -- Property and
  Casualty...........   $26,278    $607,688
2001 -- Property and
  Casualty...........   $ 1,207    $    150
Notes:

1.  There are no material comparative figures as the Company did not commence
operations until December 16, 2001.

                                       S-7
MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE IV

                                  REINSURANCE
           AS AT AND FOR THE PERIODS ENDED DECEMBER 31, 2002 AND 2001
               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
CEDED TO     ASSUMED                  PERCENTAGE OF
                                     DIRECT      OTHER     FROM OTHER                AMOUNT ASSUMED
                                     AMOUNT    COMPANIES   COMPANIES    NET AMOUNT       TO NET
                                     -------   ---------   ----------   ----------   --------------
2002 -- Property and Casualty......  $76,100    $41,779     $531,588     $565,909          94%
2001 -- Property and Casualty......  $    --    $    --     $    150     $    150         100%
Notes:

1.  There are no material comparative figures as the Company did not commence
operations until December 16, 2001.

                                       S-8
EXHIBIT INDEX
EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT
-------                     -----------------------
1.1      Form of Underwriting Agreement.*
 3.1      Memorandum of Association (incorporated herein by reference
          to Exhibit 3.1 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-89408)).
 3.2      Amended and Restated Bye-Laws (incorporated herein by
          reference to Exhibit 3.1 to the Company's Current Report on
          Form 8-K dated May 20, 2003).
 4.1      Form of Indenture.*
 4.2      Form of Supplemental Indenture.*
 4.3      Form of global note (included as Exhibit A to Exhibit 4.1
          herein).*
 5.1      Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.*
 8.1      Opinion of Cahill Gordon & Reindel LLP.*
10.1      Shareholders Agreement, dated as of December 12, 2001, among
          the Registrant and each of the persons listed on Schedule 1
          thereto, as amended by Amendment No. 1, dated December 24,
          2001 (incorporated herein by reference to Exhibit 10.1 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.2      Service Agreement, dated as of December 12, 2001, between
          Anthony Taylor, the Registrant and Montpelier Reinsurance
          Ltd. (incorporated herein by reference to Exhibit 10.2 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.3      Service Agreement, dated as of January 24, 2002, between
          Anthony Taylor and Montpelier Marketing Services (UK)
          Limited (incorporated herein by reference to Exhibit 10.3 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.4      Service Agreement, dated as of January 1, 2002, between C.
          Russell Fletcher, III and Montpelier Reinsurance Ltd.
          (incorporated herein by reference to Exhibit 10.4 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)).
10.5      Service Agreement, dated as of January 1, 2002, between
          Thomas George Story Busher and Montpelier Reinsurance Ltd.
          (incorporated herein by reference to Exhibit 10.5 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)).
10.6      Service Agreement, dated as of January 24, 2002, between
          Thomas George Story Busher and Montpelier Marketing Services
          (UK) Limited (incorporated herein by reference to Exhibit
          10.6 to the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.7      Service Agreement, dated as of January 24, 2002, between
          Nicholas Newman-Young and Montpelier Marketing Services (UK)
          Limited (incorporated herein by reference to Exhibit 10.6 to
          the Company's Registration Statement on Form S-1
          (Registration No. 333-89408)).
10.8      Credit Agreement, dated as of December 12, 2001, among the
          Registrant and Various Financial Institutions, as amended by
          Amendment Agreement, dated as of December 26, 2001, by
          Second Amendment Agreement, dated as of June 17, 2002 and by
          Third Amendment Agreement, dated as of August 1, 2002
          (incorporated herein by reference to Exhibit 10.8 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-89408)) and by Fourth Amendment Agreement, dated as
          of December 11, 2002 (incorporated herein by reference to
          Exhibit 10.1 to the Company's Current Report on Form 8-K
          filed on April 8, 2003).
10.9      Share Option Plan (incorporated herein by reference to
          Exhibit 10.9 to the Company's Registration Statement on Form
          S-1 (Registration No. 333-89408)).
10.10     Performance Unit Plan (incorporated herein by reference to
          Exhibit 10.10 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-89408)).
10.11     Standby Letter of Credit Agreement, among Montpelier Re and
          Fleet National Bank, dated as of February 26, 2002,
          (incorporated herein by reference to Exhibit 10.11 to the
          Company's Annual Report on Form 10-K for the year ended
          December 31, 2002).
10.12     Standby Letter of Credit Agreement, among Montpelier Re and
          Barclays Bank PLC, dated as of November 21, 2002,
          (incorporated herein by reference to Exhibit 10.12 to the
          Company's Annual Report on Form 10-K for the year ended
          December 31, 2002).
EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT
-------                     -----------------------
10.13     Service Agreement, dated as of March 18, 2003, between K.
          Thomas Kemp and Montpelier Re Holdings Ltd., (incorporated
          herein by reference to Exhibit 10.13 to the Company's Annual
          Report on Form 10-K for the year ended December 31, 2002).
10.14     Letter of Credit Reimbursement and Pledge Agreement, among
          Montpelier Re and Fleet National Bank, dated June 20, 2003
          (incorporated herein by reference to Exhibit 10.14 to the
          Company's Registration Statement on Form S-1 (Registration
          No. 333-105896)).*
12.1      Statement Regarding Calculation of Ratio of Earnings to
          Fixed Charges.
12.2      Statement Regarding Calculation of Pro Forma Ratio of
          Earnings to Fixed Charges.*
21.1      Subsidiaries of the Registrant (incorporated herein by
          reference to Exhibit 21.1 to the Company's Registration
          Statement on Form S-1 (Registration No. 333-89408)).
23.1      Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included
          in Exhibit 5.1).*
23.2      Consent of PricewaterhouseCoopers (Bermuda).
23.3      Consent of Cahill Gordon & Reindel LLP (included in Exhibit
          8.1).*
23.4      Consent of Conyers Dill & Pearman.*
24.1      Power of Attorney by John J. (Jack) Byrne.
24.2      Power of Attorney by Anthony Taylor.
24.3      Power of Attorney by K. Thomas Kemp.
24.4      Power of Attorney by John D. Gillespie.
24.5      Power of Attorney by Raymond Barrette.
24.6      Power of Attorney by G. Thompson Hutton.
24.7      Power of Attorney by Raymond M. Salter.
24.8      Power of Attorney by Allen W. Fulkerson.
24.9      Power of Attorney by William Spiegel.
24.10     Power of Attorney by Steven J. Gilbert.
24.11     Power of Attorney by Kamil M. Salame.
25.1      Statement of Eligibility of The Bank of New York on Form
          T-1, as trustee for the senior notes under the indenture.*
99.1      Form F-N.*
---------------

 * To be filed by amendment.