<PAGE>

     As filed with the Securities and Exchange Commission on May 30, 2002.

                                                     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>

                              30 WOODBOURNE AVENUE
                                 PEMBROKE HM HX
                                    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>
                 MICHAEL GROLL, ESQ.                                  RICHARD J. SANDLER, ESQ.
               JOSEPH D. FERRARO, ESQ.                               NICHOLAS A. KRONFELD, ESQ.
        LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.                         DAVIS POLK & WARDWELL
                 125 WEST 55TH STREET                                   450 LEXINGTON AVENUE
               NEW YORK, NY 10019-5389                                   NEW YORK, NY 10017
</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>
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
                                                              PROPOSED MAXIMUM
              TITLE OF EACH CLASS OF                         AGGREGATE OFFERING                         AMOUNT OF
            SECURITIES TO BE REGISTERED                          PRICE(1)(2)                        REGISTRATION FEE
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                                   <C>
Common Shares, par value $0.01 per share...........             $250,000,000                             $23,000
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
</Table>

(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457 under the Securities Act of 1933, as amended.

(2) Includes shares subject to the underwriters' over-allotment option.
                             ---------------------

    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.

PROSPECTUS (Subject to Completion)
Issued             , 2002

                                     Shares

                              [MONTPELIER RE LOGO]
                            ------------------------
                                 Common Shares
                            ------------------------

Montpelier Re Holdings Ltd. is offering           common shares in an
underwritten offering. This is our initial public offering and no public market
exists for our common shares. We anticipate that the initial public offering
price of the common shares will be between $          and $          per share.

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

We will apply to list our common shares on the Nasdaq National Market under the
symbol "MRHL."

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

INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 8.
                            ------------------------

                            PRICE $          A SHARE

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

<Table>
<Caption>
                                                               UNDERWRITING DISCOUNTS   PROCEEDS TO
                                             PRICE TO PUBLIC      AND COMMISSIONS         COMPANY
                                             ---------------   ----------------------   -----------
<S>                                          <C>               <C>                      <C>
Per Share..................................     $                     $                 $
Total......................................     $                     $                 $
</Table>

Montpelier Re Holdings Ltd. has granted the underwriters the right to purchase
up to an additional           common shares to cover over-allotments.

The Securities and Exchange Commission, state securities regulators, the
Registrar of Companies in Bermuda and the Bermuda Monetary Authority have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the common shares to purchasers on
          , 2002.
                            ------------------------
                          Joint Book-Running Managers
MORGAN STANLEY
             BANC OF AMERICA SECURITIES LLC
                          CREDIT SUISSE FIRST BOSTON
                            ------------------------
                                    JPMORGAN
          , 2002
<PAGE>

                               TABLE OF CONTENTS

<Table>
<Caption>
                                        PAGE
                                        ----
<S>                                     <C>
Prospectus Summary....................    1
Risk Factors..........................    8
Forward-Looking Statements............   21
Use of Proceeds.......................   22
Dividend Policy.......................   22
Capitalization........................   23
Dilution..............................   24
Selected Financial Data...............   25
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   27
Industry Background...................   36
Business..............................   39
Regulation............................   50
Management............................   55
Principal Shareholders................   61
Certain Relationships and Related
  Transactions........................   63
Material Tax Considerations...........   64
Description of Share Capital..........   71
Shares Eligible for Future Sale.......   77
Underwriters..........................   78
Legal Matters.........................   81
Experts...............................   81
Where You Can Find More Information...   81
Enforceability of Civil Liabilities
  Under United States Federal
  Securities Laws and Other Matters...   82
Index to Combined Financial
  Statements..........................  F-1
Glossary of Selected Reinsurance,
  Insurance and Investment Terms......  G-1
</Table>

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

     Until           , 2002, which is the 25th day after the date of this
prospectus, all dealers that buy, sell or trade our common shares, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

     You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with information that is different from that contained in this prospectus.
We are offering to sell and seeking offers to buy these securities only in
jurisdictions where offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this prospectus, regardless
of time of delivery of this prospectus or of any sale of common shares.

                                        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 reinsurance company subsidiary, Montpelier Marketing Services (UK)
Ltd., 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. Unless otherwise stated, all figures
assume no exercise of the underwriters' over-allotment option. 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 of selected reinsurance, insurance and investment terms,
which begins on page G-1.

                                  OUR COMPANY

OVERVIEW

     We are a Bermuda-based provider of reinsurance for the global insurance
market, conducting our reinsurance operations through our wholly owned
subsidiary, Montpelier Re. We were founded by White Mountains Insurance Group,
Ltd. and Benfield Group plc 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 aim to achieve superior returns on capital by writing global
specialty property and other classes of reinsurance while maintaining
disciplined underwriting practices. We seek to identify attractive reinsurance
opportunities by capitalizing on our management's significant underwriting
experience, utilizing modeling tools and technologies and developing proprietary
systems. Since Montpelier Re commenced operations, we believe we have become a
leading provider of reinsurance products to the global market. During the three
months ended March 31, 2002, we underwrote $203.7 million in gross premiums
written. 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 and Willis Group Holdings Ltd., among others.

MARKET OPPORTUNITIES AND INDUSTRY TRENDS

     As a result of September 11th terrorist attacks and the years of poor rates
and conditions in the worldwide reinsurance markets which preceded them, there
has been a contraction of global underwriting capacity combined with a
substantial increase in demand for reinsurance products. We believe this has
created favorable opportunities for new specialty reinsurance market entrants.
Some of the principal factors giving rise to these market opportunities include:

     - record loss events from the September 11th terrorist attacks, the Enron
       collapse and the Sri Lanka airport attack;

     - poor underwriting results in recent years as a result of excess capacity,
       declining premium rates, less favorable policy terms and adverse loss
       reserve developments from prior policy years (including asbestos,
       environmental and other mass tort liabilities);

     - withdrawal of capacity from important segments of the reinsurance market
       and substantial reductions in capital at some reinsurance companies due
       to excessive unanticipated claims; and

     - the decline in global equity markets and a low interest rate environment
       leading to lower investment returns.

                                        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 rather than growth in premium volume or market
     share. We write business with a view toward minimizing the loss ratio 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 Like 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 23 years of experience in the
     insurance and reinsurance industry. Our Chairman, John (Jack) Byrne, our
     Chief Reinsurance Officer, C. Russell Fletcher III, 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. A substantial
     portion of each executive's total compensation depends upon our long-term
     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 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
     provided significant business to us in the first quarter of 2002. 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 newly 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 $1.0 billion, which provides a high degree of financial strength to
     our clients. On December 19, 2001, A.M. Best Company Inc. assigned an "A-"
     (Excellent) rating to Montpelier Re. This rating reflects A.M. Best's
     opinion of our initial capitalization, management expertise and sound
     sponsorship and is not applicable to the securities offered by this
     prospectus.

          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. Mr. Byrne, our Chairman and
     the Chairman and Chief Executive Officer 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.

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. We intend to manage our capital

                                        2
<PAGE>

     prudently relative to our risk exposure in an effort to maximize
     sustainable long-term growth in shareholder value. Currently, we do not
     intend to buy retrocessional protection and will expect to do so only as
     the pricing and terms in the retrocessional market become more attractive.
     Our capital management strategy will emphasize the appropriate use of
     leverage and share repurchases to manage idle or excess capital. 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,
     will allow them to build, over time, 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,
     together with their market knowledge and judgment, to achieve the highest
     available price per unit of risk.

          Develop and Maintain Balanced Portfolio of Reinsurance Risks.  We aim
     to craft a balanced portfolio of primarily property related risks,
     diversified across products, geographic areas of coverage, cedents and
     distribution sources. 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, unlike
     the Bermuda companies that were formed in 1993 and 1994 which were more
     heavily focused on U.S. property catastrophe business. We will employ risk
     management techniques to monitor correlation risk and seek to enhance the
     portfolio returns through capital allocation. 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 Reinsurance and Insurance
     Solutions for our Clients. We intend to establish ourselves as a premier
     provider of global specialty property reinsurance products and seek to
     provide superior customer service. Our objective is to solidify long-term
     relationships with brokers and clients while establishing an industry
     reputation for innovative and timely quotes for difficult technical risks.

RECENT DEVELOPMENT

     On May 28, 2002, we signed a subscription and shareholders agreement to
invest in the Bermuda-based holding company of Wellington Re Limited
("Wellington Re"), a London-based reinsurance company to be founded by
Wellington Underwriting plc. The investor group is led by The Blackstone Group
and Candover Partners, and also includes affiliates of Credit Suisse First
Boston Private Equity, Inc., 3i Group plc, Phoenix Equity Partners, Olympus
Partners, Lexicon Partners and members of the management of Wellington Re.
Subject to various conditions, Montpelier Re has agreed to invest up to
approximately 9% of the total investor commitments of L448 million (or $653
million), or approximately $60 million, in two separate tranches. The first
tranche of L22.1 million (or $32.2 million) is expected to close prior to June
30, 2002 and the second tranche is expected to close in November, 2002.

     In addition, Montpelier Re has agreed to provide quota share reinsurance to
Wellington Re involving annual ceded premiums to us of approximately $60 million
for the underwriting years 2003, 2004 and 2005.
                                        3
<PAGE>

These arrangements would cover mainly property and casualty risks. Anthony
Taylor will join the board of directors of Wellington Re and will remain on the
board so long as we retain a specified level of shareholdings and maintain the
quota share business.

     The formation of Wellington Re, as well as our funding and reinsurance
commitments to it, are subject to a number of conditions, including the
confirmation of acceptable indicative financial strength ratings, the approvals
of Lloyd's of London, third party capital providers on Syndicate 2020 managed by
Wellington Underwriting Agencies Ltd. and the U.K.'s Financial Services
Authority and the completion of the purchase of a predecessor company which will
be renamed Wellington Re.

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

     Our principal executive offices are located at 30 Woodbourne Avenue,
Pembroke HM HX, Bermuda. Our telephone number is (441) 296-5550.

                                        4
<PAGE>

                                  THE OFFERING

Common shares offered.........        common shares

Common shares to be
outstanding after the
offering......................        common shares

Over-allotment option.........        common shares

Use of proceeds...............   We estimate the net proceeds from the initial
                                 public offering of           of our common
                                 shares, after deducting the underwriting
                                 discounts and commissions and estimated
                                 offering expenses we will pay will be
                                 approximately $          million. The net
                                 proceeds will be $          million if the
                                 underwriters exercise their over-allotment
                                 option in full. We presently intend to
                                 contribute substantially all of the net
                                 proceeds of this offering to Montpelier Re, to
                                 increase its capital and surplus so as to
                                 increase its underwriting capacity.

Dividend policy...............   We have never declared or paid any dividends on
                                 our common shares. Any determination to pay
                                 dividends will be at the discretion of our
                                 Board of Directors and will be dependent upon
                                 our results of operations and cash flows, our
                                 financial position and capital requirements,
                                 general business conditions, legal, tax,
                                 regulatory and any contractual restrictions on
                                 the payment of dividends and any other factors
                                 our Board of Directors deems relevant.

Proposed Nasdaq National
Market symbol.................   MRHL

     The number of shares outstanding after the offering is based on the number
of shares to be outstanding as of           , 2002 and reflects a stock split of
     shares for each share outstanding. The number of shares shown to be
outstanding after the offering excludes           common shares that may be
issued pursuant to the over-allotment option, shares that may be issued pursuant
to        outstanding warrants and shares that may be issued pursuant to
options. The options are not currently exercisable. All historical share
information in this prospectus does not reflect the stock split.

                                        5
<PAGE>

                     SUMMARY COMBINED 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 the
balance sheet data as of December 31, 2001 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, 2002 and the balance sheet
data as of March 31, 2002 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 combined 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>
                                                              PERIOD ENDED       THREE MONTHS ENDED
                                                          DECEMBER 31, 2001(1)     MARCH 31, 2002
                                                          --------------------   ------------------
                                                          (IN THOUSANDS, EXCEPT SHARE AMOUNTS, PER
                                                               SHARE AMOUNTS AND PERCENTAGES)
<S>                                                       <C>                    <C>
SUMMARY INCOME STATEMENT DATA:
Gross premiums written..................................       $      150            $  203,679
Net premiums written....................................              150               189,359
Net premiums earned.....................................                8                36,611
Net investment income...................................            1,139                 7,633
Loss and loss adjustment expenses.......................               --                14,367
Interest on long-term loan..............................             (236)                 (995)
Fair value of warrants issued...........................          (61,321)                   --
Net income (loss).......................................       $  (61,618)           $   18,659
Basic earnings (loss) per share.........................       $                     $
Fully diluted earnings (loss) per share.................       $                     $
Basic weighted average shares outstanding...............
Diluted weighted average shares outstanding.............
SELECTED RATIOS (BASED ON U.S. GAAP INCOME STATEMENT
  DATA):
Loss ratio (on net premiums earned)(2)..................              n/a                  39.2%
Acquisition costs ratio (on net premiums earned) (3)....              n/a                  17.7%
General and administrative expense ratio (on net
  premiums earned) (4)..................................              n/a                  11.5%
                                                               ----------            ----------
Combined ratio (5)......................................              n/a                  68.4%
                                                               ----------            ----------
</Table>

                                        6
<PAGE>

<Table>
<Caption>
                                                                  AS OF MARCH 31, 2002
                                                              ----------------------------
                                                                ACTUAL     AS ADJUSTED(6)
                                                              ----------   ---------------
                                                                 (IN THOUSANDS, EXCEPT
                                                                   PER SHARE AMOUNTS)
<S>                                                           <C>          <C>
SUMMARY BALANCE SHEET DATA:
Fixed maturities, cash and cash equivalents.................  $1,028,771      $
Total assets................................................   1,199,843
Loss and loss adjustment expense reserves...................      15,011
Unearned premium............................................     165,892
Long-term debt..............................................     150,000
Total shareholders' equity..................................     866,886

PER SHARE DATA (BASED ON U.S. GAAP BALANCE SHEET DATA)
Book value per share(7).....................................  $               $
Diluted book value per share(8).............................
</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 policy 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) The as adjusted summary balance sheet data as of March 31, 2002 reflects the
    net proceeds of the sale of common shares in this offering (assuming no
    exercise of the over-allotment option) after deducting the underwriting
    discounts and commissions and estimated offering expenses.

(7) Book value per share is based on total shareholders' equity divided by basic
    weighted average shares outstanding of           .

(8) Fully diluted book value per share is calculated based on total
    shareholders' equity divided by diluted weighted average shares outstanding
    of           . Potentially dilutive warrants and stock options were not
    dilutive at March 31, 2002 because their exercise prices were above the book
    value per share of the Company.

                                        7
<PAGE>

                                  RISK FACTORS

     An investment in our common shares 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 our
common shares. 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 decline in the
market price of our common shares. 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 no significant operating or
financial history. As a result, there is limited historical financial and
operating information available to help you evaluate our performance or an
investment in our common shares. 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 our business consists
of relatively few large reinsurance transactions, and because we have not
experienced any substantial claims to date, our historical financial results may
not accurately indicate our future performance.

WE HAVE NOT BEEN OPERATING LONG ENOUGH TO BUILD A BALANCED AND DIVERSIFIED
PORTFOLIO OF EXPOSURES.

     We began writing business in December 2001 and our current portfolio of
business is not as balanced or diverse as it might be if we had a longer
operating history. This could render our results of operations relatively more
exposed to the risks in the business that we have written.

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

     Our success will depend in substantial part upon our ability to attract and
retain our principal employees. We currently only have fourteen full-time
employees and, accordingly, 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. Our location in Bermuda may be an impediment to attracting and
retaining experienced personnel. 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, on whom we are currently in the process of obtaining
a binding policy.

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

                                        8
<PAGE>

     None of our senior management team (and possibly other officers) based in
Bermuda are Bermudian. Of our employees in Bermuda, only two are Bermudian.
Seven employees are currently working under temporary work permits that will
expire after three months. Thomas Kemp, our Chief Financial Officer, is applying
for a work permit in conjunction with his service to us. 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. 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 overages 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 operation 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, 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 per year 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. We have a limited operating
history and an insufficient loss history to allow us to extrapolate reserves
directly. Instead, our current loss reserves are based entirely on estimates
involving actuarial and statistical projections of our expectations of the
ultimate settlement and administration costs of claims incurred but not yet
reported. We utilize actuarial models as well as historical insurance industry
loss development patterns to establish appropriate loss reserves. Accordingly,
we expect actual claims and claim expenses paid to 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 will be 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

                                        9
<PAGE>

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, possibly to the extent of eliminating our shareholders' equity.

WE ARE A NEW COMPANY 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 and 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 Benfield, one of our founders, and Applied Insurance Research. We
also use programs of other modeling vendors, and are in the process of replacing
the Benfield technology with a combination of commercially available programs
and proprietary technology we are developing in-house.

     We cannot be certain that we will be able to replace the Benfield
technology without experiencing systems problems, or that our proprietary
technology, once established, 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.

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

     Upon completion of this offering, our founders, White Mountains and
Benfield, are expected to own beneficially at least   % and   %, respectively of
our outstanding common shares with warrants to purchase an additional   % and
  %, respectively, and three of our directors (and one director nominee) 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:

     - Jack Byrne, Chairman of our Board of Directors and Chairman of our
       Compensation Committee, is also Chairman and Chief Executive Officer of
       White Mountains.
                                        10
<PAGE>

     - K. Thomas Kemp, our Chief Financial Officer, is President and a member of
       the Board of Directors of White Mountains, and Mr. Kemp is also a
       director of Amlin plc, which accounts for a significant proportion of our
       QQS premiums.

     - Raymond Barrette, a member of our Board of Directors, Chairman of the
       Audit Committee and member of the Compensation and Underwriting Policy
       Committees of our Board of Directors, is Chairman, Managing Director and
       Chief Executive Officer of OneBeacon Insurance Group LLC, a subsidiary of
       White Mountains, and is a director of White Mountains.

     - John Gillespie, a member of our Board of Directors and Chairman of the
       Finance Committee of our Board, is Managing Director of OneBeacon
       Insurance Group LLC and a director of White Mountains and chairman of the
       investment committee of White Mountains' board. In addition, Mr.
       Gillespie is Principal Executive Officer of OneBeacon Asset Management, a
       wholly owned subsidiary of White Mountains, which we have engaged to
       provide investment advisory and management services.

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

     - We currently license certain risk modeling technology from Benfield.

     We do not have any agreement or understanding with any of these parties
regarding the resolution of potential conflicts of interest. In addition, 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. These parties 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 currently do not purchase reinsurance for our own account. In order to
limit the effect of large and multiple losses upon our financial condition, we
may seek to buy 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.

     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. Thus far, we have not arranged any reinsurance or
retrocession.

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

     We market our reinsurance worldwide primarily through reinsurance brokers.
Subsidiaries and affiliates of Benfield, (one of our founders and a
shareholder), Willis Group, Guy Carpenter and Aon Re Worldwide provided 36.5%,
26.4%, 17.3% and 12.2%, (for a total of 92.4%) respectively, of our premiums
written in the three months ended March 31, 2002. Two of these brokers also have
formed Bermuda reinsurance companies that may compete with us, and these brokers
may favor their own 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.

                                        11
<PAGE>

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, 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, OneBeacon Asset Management Inc., a wholly
owned subsidiary of White Mountains, subject to policy guidelines, which will be
periodically reviewed by the finance committee of our board. 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. Investment losses 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 a large portion
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.

WE ARE RATED BY A.M. BEST AND A DECLINE IN THIS RATING COULD AFFECT OUR STANDING
AMONG BROKERS AND CUSTOMERS AND CAUSE OUR SALES 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). This rating reflects A.M. Best's
opinion of our initial capitalization, management and sponsorship, and is not an
evaluation directed to investors in our common shares and is not a
recommendation to buy, sell or hold our common shares. Our rating is subject to
periodic review by, and may be revised downward or revoked at the sole
discretion of A.M. Best, and we cannot assure you that we will be able to retain
this rating.

     If our rating is reduced from its current levels by A.M. Best, 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 this offering are insufficient to fund future operating
requirements and cover claim losses, we may need to raise additional funds
through financings or curtail our growth and reduce our assets. Any equity or
debt financing, if available at all, may be on terms that are not favorable to
us. In the case of equity financings, dilution to our shareholders could result,
and in any case such securities may have rights, preferences and privileges that
are senior to those of the shares offered hereby. If we cannot obtain adequate
capital, our business, operating results and financial condition could be
adversely affected.
                                        12
<PAGE>

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. Since September 11th, 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. 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.

     Changes in the marketplace, including the tightening in supply of certain
coverages arising out of the September 11th terrorist attacks, may result in
government intervention in the insurance and reinsurance markets, both in the
United States and worldwide. Recently, the insurance and reinsurance regulatory
framework has been subject to increased scrutiny by the United States federal
government and individual state governments. There is uncertainty in the
insurance and reinsurance markets about the extent to which future coverages
will extend to terrorist acts as well as the definition of terrorist acts. The
effect of potential governmental intervention in the markets we serve, including
with respect to the extent to which coverage for terrorist acts is offered in
the future, is uncertain. Government regulators are generally concerned with the
protection of policyholders to the exclusion of other constituencies, including
shareholders. 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.

CONSOLIDATION IN THE INSURANCE INDUSTRY COULD LEAD TO LOWER MARGINS FOR US AND
REDUCED DEMAND FOR OUR REINSURANCE.

     The insurance industry is undergoing a process of consolidation as industry
participants seek to enhance their product and geographic reach, client base,
operating efficiency and general market power through merger and acquisition
activities. These larger entities may seek to use the benefits of consolidation
to, among other things, implement rate reductions for their reinsurance. These
rate reductions could make it more difficult for us to underwrite risks at
profitable levels.

     As the insurance industry consolidates, 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. In
addition, insurance companies that merge may be able to enhance their
negotiating position when buying reinsurance

                                        13
<PAGE>

and may be able to spread their risks across a consolidated, larger capital base
so that they require less reinsurance.

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. Although premium levels for many
products have increased in recent months, the supply of reinsurance may
increase, either by capital provided by new entrants or by the commitment of
additional capital by existing reinsurers. In addition, capital markets
participants have created alternative products intended to compete with
reinsurance products. 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 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 OUR COMMON SHARES AND THIS OFFERING

THERE IS NO PRIOR PUBLIC MARKET FOR OUR COMMON SHARES.

     Currently there is no public trading market for our common shares and there
can be no assurance that an active trading market will develop and continue upon
completion of this offering or that the market price of our common shares will
not decline below the initial public offering price. The initial public offering
price per common share will be determined by agreement among the Company and the
representatives of the underwriters and may not be indicative of the market
price of our common shares after our initial public offering. We will apply to
list our common shares on the Nasdaq National Market under the symbol "MRHL."

FUTURE SALES OF COMMON SHARES MAY AFFECT THEIR MARKET PRICE.

     We cannot predict what effect, if any, future sales of our common shares,
or the availability of common shares for future sale, will have on the market
price of our common shares. Sales of substantial amounts of our common shares in
the public market following our initial public offering, or the perception that
such sales could occur, could adversely affect the market price of our common
shares and may make it more difficult for you to sell your common shares at a
time and price which you deem appropriate. Upon completion of our initial public
offering there will be      common shares outstanding. If the underwriters'
over-allotment option for an additional           common shares is exercised,
     common shares will be outstanding.

                                        14
<PAGE>

PUBLIC INVESTORS WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.

     The initial public offering price per common share is significantly higher
than our net book value per share. Accordingly, if you purchase common shares in
this offering, you will suffer immediate and substantial dilution of your
investment. Based upon the issuance and sale of      common shares, you will
incur immediate dilution of approximately $     in the net book value per common
share if you purchase common shares in this offering.

WE HAVE A LIMITED ABILITY TO PAY DIVIDENDS AND DO NOT CURRENTLY INTEND TO PAY
DIVIDENDS IN THE FORESEEABLE FUTURE.

     We are a holding company and, as such, have no substantial operations of
our own. We do not expect to have any significant operations or assets other
than our ownership of the shares of Montpelier Re. 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, and to pay dividends, if any, to our shareholders. It is uncertain
when, if ever, we will declare dividends to our shareholders. During our early
years of operations, we expect that Montpelier Re will retain virtually all
profit, other than that necessary to pay our debt service and other expenses, to
provide capacity to write reinsurance and to accumulate reserves and surplus for
the payment of claims. In addition, Bermuda law and regulations, including, but
not limited to Bermuda insurance regulation, limits the declaration and payment
of dividends and the making of distributions by Montpelier Re to us. The
inability of Montpelier Re to pay dividends 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. See "Dividend Policy" and "Regulation --
Certain Bermuda Law Considerations."

     Furthermore, our ability to pay dividends is limited under our two senior
credit facilities with Bank of America, N.A. and a syndicate of commercial
banks. Under these facilities, we cannot pay dividends to our shareholders until
April 1, 2003. After this date, if we pay dividends exceeding 50% of our net
income at the end of any quarter, excluding all extraordinary gains and losses,
we would be required to simultaneously repay amounts owing under our loan
facilities.

THERE ARE PROVISIONS IN OUR CHARTER DOCUMENTS WHICH RESTRICT THE VOTING RIGHTS
OF OUR COMMON SHARES.

     Our bye-laws generally provide that any shareholder owning, directly or by
attribution, more than 9.5% of our common shares will have the voting rights
attached to such common shares reduced so that it may not exercise more than
9.5% of the total voting rights. See "Description of Share Capital -- Voting
Rights."

U.S. PERSONS WHO OWN OUR COMMON SHARES MAY HAVE MORE DIFFICULTY IN PROTECTING
THEIR INTERESTS THAN U.S. PERSONS WHO ARE SHAREHOLDERS OF A U.S. CORPORATION.

     The Companies Act 1981 of Bermuda, which applies to us, differs in certain
material respects from laws generally applicable to U.S. corporations and their
shareholders. Set forth below is a summary of certain significant provisions of
the Companies Act which includes, where relevant, information on modifications
thereto adopted pursuant to our bye-laws, applicable to us, which differ in
certain respects from provisions of Delaware corporate law. Because the
following statements are summaries, they do not discuss all aspects of Bermuda
law that may be relevant to us and our shareholders.

     Interested Directors.  Bermuda law and our bye-laws provide that we cannot
void any transaction we enter into in which a director has an interest, nor can
such director be liable to us for any profit realized pursuant to such
transaction, provided the nature of the interest is disclosed at the first
opportunity at a meeting of directors, or in writing, to the directors. Under
Delaware law such transaction would not be voidable if:

     - the material facts as to such interested director's relationship or
       interests are disclosed or are known to the board of directors and the
       board in good faith authorizes the transaction by the affirmative vote of
       a majority of the disinterested directors;

                                        15
<PAGE>

     - such material facts are disclosed or are known to the stockholders
       entitled to vote on such transaction and the transaction is specifically
       approved in good faith by vote of the majority of shares entitled to vote
       thereon; or

     - the transaction is fair as to the corporation as of the time it is
       authorized, approved or ratified.

     Under Delaware law, the interested director could be held liable for a
transaction in which the director derived an improper personal benefit.

     Business Combinations with Large Shareholders or Affiliates.  As a Bermuda
company, we may enter into business combinations with our large shareholders or
affiliates, including mergers, asset sales and other transactions in which a
large shareholder or affiliate receives, or could receive, a financial benefit
that is greater than that received, or to be received, by other shareholders,
without obtaining prior approval from our Board of Directors or from our
shareholders. If we were a Delaware company, we would need prior approval from
our Board of Directors or a supermajority of our shareholders to enter into a
business combination with an interested shareholder for a period of three years
from the time the person became an interested shareholder, unless we opted out
of the relevant Delaware statute.

     Shareholders' Suits.  The rights of shareholders under Bermuda law are not
as extensive as the rights of shareholders in many United States jurisdictions.
Class actions and derivative actions are generally not available to shareholders
under the laws of Bermuda. However, the Bermuda courts ordinarily would be
expected to follow English case law precedent, which would permit a shareholder
to commence an action in the name of the company to remedy a wrong done to the
company where an act is alleged to be beyond the corporate power of the company,
is illegal or would result in the violation of our memorandum of association or
bye-laws. Furthermore, consideration would be given by the court to acts that
are alleged to constitute a fraud against the minority shareholders or where an
act requires the approval of a greater percentage of our shareholders than
actually approved it. The winning party in such an action generally would be
able to recover a portion of attorneys' fees incurred in connection with such
action. Our bye-laws provide that shareholders waive all claims or rights of
action that they might have, individually or in the right of the company,
against any director or officer for any act or failure to act in the performance
of such director's or officer's duties, except with respect to any fraud or
dishonesty of such director or officer. Class actions and derivative actions
generally are available to stockholders under Delaware law for, among other
things, breach of fiduciary duty, corporate waste and actions not taken in
accordance with applicable law. In such actions, the court has discretion to
permit the winning party to recover attorneys' fees incurred in connection with
such action.

     Indemnification of Directors.  We may indemnify our directors or officers
or any person appointed to any committee by the Board acting in their capacity
as such in relation to any of our affairs for any loss arising or liability
attaching to them by virtue of any rule of law in respect of any negligence,
default, breach of duty or breach of trust of which such person may be guilty in
relation to the company other than in respect of his own fraud or dishonesty.
Under Delaware law, a corporation may indemnify a director or officer of the
corporation against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in defense of an
action, suit or proceeding by reason of such position if such director or
officer acted in good faith and in a manner he or she reasonably believed to be
in or not be opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, such director or officer had no reasonable
cause to believe his or her conduct was unlawful.

     For more information on the differences between Bermuda and Delaware
corporate laws, see "Description of Share Capital -- Differences in Corporate
Law."

ANTI-TAKEOVER PROVISIONS IN OUR BYE-LAWS COULD IMPEDE AN ATTEMPT TO REPLACE OR
REMOVE OUR MANAGEMENT OR DELAY OR PREVENT THE SALE OF OUR COMPANY, WHICH COULD
DIMINISH THE VALUE OF OUR COMMON SHARES.

     Our bye-laws contain provisions that could delay or prevent changes in our
management or a change of control that a shareholder might consider favorable.
For example, these provisions may prevent a shareholder from receiving the
benefit from any premium over the market price of our common shares offered by a
bidder in a potential takeover. Even in the absence of a takeover attempt, these
provisions may adversely affect the

                                        16
<PAGE>

prevailing market price of our common shares if they are viewed as discouraging
takeover attempts in the future.

     For example, our bye-laws contain the following provisions that could have
such an effect:

     - election of our directors is staggered, meaning that the members of only
       one of three classes of our directors are elected each year;

     - shareholders have limited ability to remove directors;

     - the total voting power of any shareholder owning more than 9.5% of our
       common shares will be reduced to 9.5% of the total voting power of our
       common shares; and

     - our directors may decline to record the transfer of any common shares on
       our share register if they believe that registration of the transfer is
       required under any federal or state securities law or under the laws of
       any other jurisdiction and the registration has not yet been effected.

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 and certain
of the experts named in this prospectus reside outside the United States, and
all or a substantial portion of our assets and the assets of such persons are
located in jurisdictions outside the United States. As such, it may be difficult
or impossible to effect service of process within the United States upon us or
those persons or to recover against us or them on judgments of United States
courts, including judgments predicated upon civil liability provisions of the
United States federal securities laws.

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

WE MAY REPURCHASE YOUR COMMON SHARES.

     Under our bye-laws and subject to Bermuda law, we have the option, but not
the obligation, to require a shareholder to sell some or all of its common
shares to us at fair market value (which would be based upon the average closing
price of the common shares as defined under our bye-laws) if the Board
reasonably determines, in good faith based on an opinion of counsel, that share
ownership, directly, indirectly or constructively by any shareholder is likely
to result in adverse tax, regulatory or legal consequences to us, certain of our
other shareholders or our subsidiaries.

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 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. See "Material Tax
Considerations."

                                        17
<PAGE>

     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 do not believe that we or any of our subsidiaries
will be considered a PHC, but we cannot assure you that this will not be the
case or that the amount of U.S. tax that would be imposed if it were the case
would be immaterial. See "Material Tax Considerations-Taxation of the Company
and Montpelier Re -- United States -- Personal Holding Companies."

U.S. PERSONS WHO HOLD COMMON SHARES MAY BE SUBJECT TO U.S. INCOME TAXATION AT
ORDINARY INCOME RATES ON THEIR PROPORTIONATE SHARE OF OUR "RELATED PARTY
INSURANCE INCOME" ("RPII").

     RPII is the income of Montpelier Re, if any, attributable to insurance or
reinsurance policies where the direct or indirect insureds are U.S. shareholders
or are related to U.S. shareholders. RPII may be included in a U.S.
shareholder's gross income whether or not such shareholder is a policyholder. We
do not expect our gross RPII to equal or exceed 20% of our gross insurance
income in any taxable year for the foreseeable future and do not expect our
direct or indirect insureds (and related persons) to directly or indirectly own
20% or more of either the voting power or value of our common shares, but we
cannot assure you that this will be the case. If our expectation is incorrect, a
U.S. person owning any common shares directly or indirectly on the last day of
our taxable year will be required to include in gross income for U.S. federal
income tax purposes such holder's share of the RPII for up to the entire taxable
year, determined as if all such RPII were distributed proportionately only to
such U.S. shareholders at that date, but limited by such holder's share of our
current-year earnings and profits as reduced by the holder's share, if any, of
certain prior-year deficits in earnings and profits attributable to our
insurance business. Upon the sale or other disposition of any common shares,
such person may also be required to recognize ordinary income rather than
capital gain to the extent of the shareholder's pro rata share of our
undistributed earnings and profits and to file IRS Form 5471, although this
should not be the case because we should not be treated as deriving RPII income
directly. The RPII provisions have never been interpreted by the courts or the
U.S. Treasury Department in final regulations, and regulations interpreting the
RPII provisions of the Code exist only in proposed form. It is not certain
whether these regulations will be adopted in their proposed form or what changes
or clarifications might ultimately be made thereto or whether any such changes,
as well as any interpretation or application of RPII by the IRS, the courts, or
otherwise, might have retroactive effect. The Treasury Department has authority
to impose, among other things, additional reporting requirements with respect to
RPII. Accordingly, the meaning of the RPII provisions and the application
thereof to us and our subsidiaries is uncertain. See "Material Tax
Considerations -- Taxation of Shareholders -- United States Taxation."

WE MAY BE CONSIDERED A PFIC FOR U.S. FEDERAL INCOME TAX PURPOSES.

     We may be considered a passive foreign investment company ("PFIC") for U.S.
federal income taxation purposes. While we do not believe that we will be
considered a PFIC, we can not assure you that we will not be. If we were
considered a PFIC it could have material adverse tax consequences for an
investor that is subject to U.S. federal income taxation, including subjecting
the investor to a greater tax liability than might otherwise apply and
subjecting the investor to tax on amounts in advance of when tax would otherwise
be imposed. There are currently no regulations regarding the application of the
passive foreign investment company provisions to an insurance company. New
regulations or pronouncements interpreting or clarifying these rules may be
forthcoming. We cannot predict what impact, if any, such guidance would have on
a shareholder that is subject to United States federal income taxation. See
"Material Tax Considerations -- Taxation of Shareholders -- United States
Taxation -- Passive Foreign Investment Companies."

WE MAY BE CONSIDERED A FPHC FOR U.S. FEDERAL INCOME TAX PURPOSES.

     We or a subsidiary may be considered a foreign personal holding company
("FPHC") for U.S. federal income taxation purposes. While we do not believe that
we will be considered a FPHC, we can not assure you that we will not be. If we
were considered a FPHC it could have material adverse tax consequences for an
investor that is subject to U.S. federal income taxation including subjecting
the investor to a greater tax
                                        18
<PAGE>

liability than might otherwise apply and subjecting the investor to tax on
amounts in advance of when tax would otherwise be imposed. See "Material Tax
Considerations -- Taxation of Shareholders -- United States Taxation -- Foreign
Personal Holding Companies."

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

     Legislation has recently been introduced which, if enacted, would eliminate
certain tax benefits available to companies that have changed their legal
domiciles to Bermuda. In addition, some U.S. insurance companies have been
lobbying Congress to pass legislation intended to eliminate certain perceived
tax advantages of U.S. insurance companies having Bermuda affiliates. While
these legislative proposals are aimed at inverted corporations and do not
contain provisions that would adversely affect companies such as us and
Montpelier Re that were initially formed outside the United States and that do
not have any U.S. operations, 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 shareholders, broader-based
legislative proposals could emerge that could conceivably have an adverse impact
on us, Montpelier Re or our shareholders.

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 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 of 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

                                        19
<PAGE>

     - 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 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 regulation to which
we are or may become subject.

     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 Qualifying Quota Share business, it must provide
an evergreen letter of credit in favor of The Society and Council of Lloyd's in
accordance with Lloyd's rules. We have made arrangements with Fleet Bank for the
provision of a standby letter of credit in a form acceptable to Lloyd's in an
amount of up to $200 million, which we consider sufficient to support Montpelier
Re's estimated qualifying quota share obligations during its first year of
operation. 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.

                                        20
<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. Statements which 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. We believe that these factors include but are not limited to those
described under "Risk Factors" above. We undertake no obligation to publicly
update or review any forward-looking statement, whether as a result of new
information, future developments or otherwise.

     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.

                                        21
<PAGE>

                                USE OF PROCEEDS

     We estimate the net proceeds from the initial public offering of our common
shares, after deducting the underwriting discounts and commissions and our
estimated offering expenses will be approximately $          million. The net
proceeds will be $          million if the underwriters exercise their over-
allotment option in full. We presently intend to contribute substantially all of
the net proceeds of this offering to Montpelier Re, to increase its capital and
surplus in order to increase its underwriting capacity.

                                DIVIDEND POLICY

     We have never declared or paid and do not currently intend to pay any cash
dividends on our common shares. Any determination to pay cash dividends will be
at the discretion of our Board of Directors and will be dependent upon our
results of operations and cash flows, our financial position and capital
requirements, general business conditions, legal, tax, regulatory and any
contractual restrictions on the payment of dividends and any other factors our
Board of Directors deems relevant.

     Our ability to pay dividends depends, in part, on the ability of our
subsidiaries to pay dividends to us. Montpelier Re is subject to Bermuda laws
and regulatory constraints which affect its ability to pay dividends to us.
Under the Insurance Act 1978 of Bermuda and related regulations, which we refer
to as the Insurance Act, Montpelier Re must maintain a minimum solvency margin
and minimum liquidity ratio and is prohibited from declaring or paying dividends
if it does not comply or such action would result in noncompliance with the
Insurance Act. Under the Insurance Act, Montpelier Re may not pay dividends in
any financial year which would exceed 25% of its total statutory capital and
surplus, unless an affidavit stating that it will continue to meet the required
margins is filed with the Bermuda Monetary Authority, and Montpelier Re must
obtain the approval of the Bermuda Monetary Authority before reducing its
statutory capital by 15% or more. In addition, as a Class 4 insurer, Montpelier
Re must maintain a minimum share capital of $1.0 million and a solvency margin
equal to the greatest of $100.0 million, 50% of net premiums written or 15% of
the reserve for unpaid losses and loss adjustment expenses. In addition, under
the Companies Act, the Company and Montpelier Re may only declare or pay a
dividend if, among other matters, there are reasonable grounds for believing
that each of them is, or would after the payment be, able to pay their
respective liabilities as they become due. Accordingly, we cannot assure you
that we will declare or pay dividends in the future.

     Furthermore, our ability to pay dividends is limited under our two senior
credit facilities with Bank of America, N.A. and a syndicate of commercial
banks. Under these facilities, we cannot pay dividends to our shareholders until
April 1, 2003. After this date, if we pay dividends exceeding 50% of our net
income at the end of any quarter, excluding all extraordinary gains and losses,
we would be required to simultaneously repay amounts owing under our loan
facilities.

                                        22
<PAGE>

                                 CAPITALIZATION

     The following table sets forth our combined capitalization on an actual
basis as of March 31, 2002, and as adjusted to give effect to the sale of
          common shares offered by us in this offering at an assumed initial
public offering price of $     per share, the midpoint of the range set forth on
the cover page of this prospectus, after deducting estimated underwriting
discounts 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, 2002
                                                              ---------------------------
                                                                ACTUAL     AS ADJUSTED(1)
                                                              ----------   --------------
                                                                    (IN THOUSANDS)
<S>                                                           <C>          <C>
LONG-TERM DEBT:
  Bank debt.................................................  $  150,000      $150,000
  Revolving credit facility(2)..............................          --            --
                                                              ----------      --------
     Total long-term debt...................................  $  150,000      $150,000
SHAREHOLDERS' EQUITY:
  Common shares.............................................  $       87      $
  Additional paid-in capital(3).............................     921,472
  Accumulated comprehensive income..........................     (11,714)      (11,714)
  Accumulated deficit(3)....................................     (42,959)      (42,959)
                                                              ----------      --------
     Total shareholders' equity.............................     866,886
                                                              ----------      --------
TOTAL CAPITALIZATION........................................  $1,016,886      $
                                                              ==========      ========
</Table>

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

(1) As Adjusted column reflects the deduction of estimated underwriting
    discounts and our estimated offering expenses and assumes that the
    underwriters' over-allotment option is not exercised.

(2) Consists of a 364-day revolving credit facility with a $50 million borrowing
    limit.

(3) A $61.3 million charge representing the fair value of warrants granted to
    the founders at our formation is reflected as an increase to paid-in capital
    and a decrease to retained earnings/(accumulated deficit).

                                        23
<PAGE>

                                    DILUTION

     As of March 31, 2002, our net book value was $866.9 million, or $     per
common share. As used below, our net book value per common share represents
shareholders' equity divided by the number of common shares outstanding,
excluding the effect of the anticipated bonus share issuance. After giving
effect to the issuance of           of our common shares (at an assumed initial
public offering price of $     per common share, and after deducting estimated
underwriting discounts and our estimated offering expenses and assuming that the
underwriters' over-allotment option is not exercised), the application of the
estimated net proceeds therefrom, our net book value as of March 31, 2002, would
have been $     million, or $     per common share. This amount represents an
immediate increase of $     per common share to the existing shareholders and an
immediate dilution of $     per common share issued to the new investors
purchasing shares offered hereby at the assumed public offering price. The
following table illustrates this per share dilution:

<Table>
<S>                                                            <C>
Assumed initial public offering price per common share......   $
  Net book value per common share before the offering.......
  Increase attributable to the offering.....................
Net book value per common share after the offering..........
Dilution per common share to new investors(1)...............   $
</Table>

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

(1) If the underwriters' over-allotment option is exercised in full, dilution
    per share to new investors will be $          .

     The following table sets forth the number of our common shares issued, the
total consideration paid and the average price per common share paid by all of
our existing shareholders and new investors, after giving effect to the issuance
of           common shares in the offering at an assumed initial public offering
price of $     per share (before deducting estimated underwriting discounts and
our estimated offering expenses and assuming that the underwriters'
over-allotment option is not exercised).

<Table>
<Caption>
                                               SHARES ISSUED       TOTAL CONSIDERATION      AVERAGE
                                            -------------------   ----------------------   PRICE PER
                                             NUMBER     PERCENT      AMOUNT      PERCENT     SHARE
                                            ---------   -------   ------------   -------   ---------
<S>                                         <C>         <C>       <C>            <C>       <C>
Existing shareholders.....................                        $                          $
                                            ---------     ---     ------------     ---       ----
New investors.............................
                                            ---------     ---     ------------     ---       ----
     Total................................                100%                     100%
                                            =========     ===     ============     ===       ====
</Table>

                                        24
<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 the
summary balance sheet data as of December 31, 2001 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, 2002 and the summary balance
sheet data as of March 31, 2002 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 year to date results presented below
are not necessarily indicative of our full year performance. You should read the
following summary combined 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>
                                                              PERIOD ENDED       THREE MONTHS ENDED
                                                          DECEMBER 31, 2001(1)     MARCH 31, 2002
                                                          --------------------   ------------------
                                                            (IN THOUSANDS, EXCEPT SHARE AMOUNTS,
                                                             PER SHARE AMOUNTS AND PERCENTAGES)
<S>                                                       <C>                    <C>
SUMMARY INCOME STATEMENT DATA:
  Gross premiums written................................       $      150            $  203,679
  Reinsurance premiums ceded(2).........................               --               (14,320)
                                                               ----------            ----------
  Net premiums written..................................              150               189,359
  Change in unearned premiums...........................             (142)             (152,748)
  Net premiums earned...................................       $        8            $   36,611
  Net investment income.................................            1,139                 7,633
  Net realized investment gains (losses)................               --                   484
  Loss and loss adjustment expenses.....................               --               (14,367)
  Acquisition costs.....................................               (1)               (6,467)
  General and administrative expenses...................           (1,061)               (4,198)
  Interest on long-term loan............................             (236)                 (995)
  Incorporation expenses................................             (146)                  (42)
  Fair value of warrants issued.........................          (61,321)                   --
                                                               ----------            ----------
Net income (loss).......................................       $  (61,618)           $   18,659
                                                               ==========            ==========
Basic earnings (loss) per share.........................       $                     $
Fully diluted earnings (loss) per share.................       $                     $
Basic weighted average shares outstanding...............
Diluted weighted average shares outstanding.............

SELECTED RATIOS (BASED ON U.S. GAAP INCOME STATEMENT
  DATA):
Loss ratio (on net premiums earned)(3)..................              n/a                  39.2%
Acquisition costs ratio (on net premiums earned)(4).....              n/a                  17.7%
General and administrative expense ratio (on net
  premiums earned)(5)...................................              n/a                  11.5%
                                                               ----------            ----------
Combined ratio(6).......................................              n/a                  68.4%
                                                               ----------            ----------
</Table>

                                        25
<PAGE>

<Table>
<Caption>
                                                                 AS OF                 AS OF
                                                           DECEMBER 31, 2001       MARCH 31, 2002
                                                           -----------------       --------------
SUMMARY BALANCE SHEET DATA:                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                       <C>                    <C>
ASSETS
  Fixed maturities, cash and cash equivalents...........       $  991,009            $1,028,771
  Premium receivable....................................              133               119,789
  Other assets..........................................           30,656                51,283
                                                               ----------            ----------
Total assets............................................       $1,021,798            $1,199,843
                                                               ==========            ==========
LIABILITIES
  Loss and loss adjustment reserves.....................       $       --            $   15,011
  Unearned premium......................................              142               165,892
  Long-term debt........................................          150,000               150,000
  Other liabilities.....................................           11,003                 2,054
                                                               ----------            ----------
Total liabilities.......................................       $  161,145            $  332,957
                                                               ==========            ==========
Total shareholders' equity..............................       $  860,653            $  866,886
                                                               ==========            ==========
Total liabilities and shareholders' equity..............       $1,021,978            $1,199,843
                                                               ==========            ==========

PER SHARE DATA (BASED ON U.S. GAAP BALANCE SHEET DATA)
Book value per share(7).................................       $                     $
Diluted book value per share(8).........................       $                     $
</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.

(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
    weighted average shares outstanding of        .

(8) Fully diluted book value per share is calculated based on total
    shareholders' equity divided by diluted weighted average shares outstanding
    of        . Potentially dilutive warrants and stock options were not
    dilutive at March 31, 2002 because their exercise prices were above the book
    value per share of the Company.

                                        26
<PAGE>

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

     The following discussion should be read in conjunction with the combined
financial statements and accompanying notes which appear elsewhere in this
prospectus. It contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
those discussed below and elsewhere in this prospectus, particularly under the
heading "Risk Factors."

BUSINESS ENVIRONMENT AND OUR FORMATION

     The global property and casualty insurance and reinsurance industry has
historically been highly cyclical. During the last half of the 1990s, the
industry experienced excess capacity for writers of insurance and reinsurance,
which resulted in highly competitive market conditions. After this extended
period of intense competition and eroding premium rates, the reinsurance markets
began experiencing improvements in rates, terms and conditions for reinsurers in
the first quarter of 2000. Continuing improvements through 2001 extended to the
primary insurance industry and were accelerated by the September 11th terrorist
attacks, which resulted in losses to the industry estimated to be between $30
and $70 billion, which would make it the largest catastrophe loss ever
experienced by the industry.

     We believe property and other reinsurance premiums have historically often
risen in the short term in the aftermath of significant catastrophic losses. As
claims are reserved, industry surplus is depleted and the industry's capacity to
write new business diminishes. We believe that market trends similar to those
that have occurred in past cycles are developing in the current environment. At
the same time, we believe that there is a heightened awareness that commercial
properties are exposed to a variety of risks resulting in an increase in the
demand for insurance and reinsurance products. We were formed in November 2001
to take advantage of these opportunities, and through Montpelier Re, we seek to
fulfill the need for additional underwriting capacity in the global property and
casualty reinsurance market.

     We are observing substantial increases in premium rates for renewals in
2002 compared to 2001 levels. We believe that rate increases will continue
throughout 2002, although at a more moderate pace. Capital provided by new
entrants or by the commitment of additional capital by existing reinsurers may
increase the supply of reinsurance which could impact pricing. An increase in
the supply of reinsurance could moderate rate increases.

     Since we underwrite global specialty property reinsurance and have large
aggregate exposures to natural and man-made disasters, we expect that our claim
experience will be the result of relatively few events of high magnitude. 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 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 historically have
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.

REVENUES

     We derive our revenues primarily from premiums from our reinsurance
contracts and, to a lesser extent, income from our investment portfolio.
Reinsurance premiums are a function of the amount 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, particularly the first quarter. In the markets in which
we operate, in general, approximately 40% of gross premiums written relates to
contracts that renew in the first quarter, approximately 25% relates to
contracts that renew in the

                                        27
<PAGE>

beginning of the second quarter, approximately 25% relates to contracts that
renew in the beginning of the third quarter with the remainder renewing at
various times throughout the year. Premiums are generally due in installments
and earned ratably over the contract term, which ordinarily is twelve months.

     Our fixed income investments are held as available for sale. Under U.S.
GAAP, these securities are carried at fair value, and unrealized gains and
losses on these securities are not included in investment income in our combined
statements of income, but are included in other comprehensive income as a
separate component of shareholders' equity.

EXPENSES

     Our expenses consist primarily of three types: loss and loss adjustment
expenses, policy acquisition costs and general and administrative expenses. In
our first period of operations we also incurred organizational expenses,
interest expense and expense associated with the issuance of warrants.

     Loss and loss adjustment expenses are a function of the amount and type of
reinsurance contracts we write and of the loss experience of the underlying
risks. We record loss and loss adjustment expenses based on an actuarial
analysis of the estimated losses we expect to be reported on contracts written.
As described above, we will 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 and commissions that
represent a percentage of the premiums on reinsurance contracts written, and
vary depending upon the amount and types of contracts written, and to a lesser
extent ceding commissions paid to ceding insurers and excise taxes.

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

     We have awarded, and will in the future award, performance units to some of
our employees. The ultimate value of these performance units to employees is
dependent upon our achievement of specified underwriting targets over the course
of overlapping three-year periods. We accrue the projected value of these units
and expense the value to our income statement over the course of each three-year
performance period. We have granted stock options to Mr. Taylor as part of our
formation. We do not anticipate awarding additional stock options to employees.
We have adopted FAS 123 "Accounting for Stock-Based Compensation," which
requires the recognition of compensation expense for the fair value of stock
compensation awards.

RECENT DEVELOPMENT

     On May 28, 2002, we signed a subscription and shareholders agreement to
invest in the Bermuda-based holding company of Wellington Re Limited
("Wellington Re"), a London-based reinsurance company to be founded by
Wellington Underwriting plc. The investor group is led by The Blackstone Group
and Candover Partners, and also includes affiliates of Credit Suisse First
Boston Private Equity, Inc., 3i Group plc, Phoenix Equity Partners, Olympus
Partners, Lexicon Partners and members of the management of Wellington Re.
Subject to various conditions, Montpelier Re has agreed to invest up to
approximately 9% of the total investor commitments of L448 million (or $653
million), or approximately $60 million, in two separate tranches. The first
tranche of L22.1 million (or $32.2 million) is expected to close prior to June
30, 2002 and the second tranche is expected to close in November, 2002.

     In addition, Montpelier Re has agreed to provide quota share reinsurance to
Wellington Re involving annual ceded premiums to us of approximately $60 million
for the underwriting years 2003, 2004 and 2005. These arrangements would cover
mainly property and casualty risks. Anthony Taylor will join the board of
directors of Wellington Re and will remain on the board so long as we retain a
specified level of shareholdings and maintain the quota share business.
                                        28
<PAGE>

     The formation of Wellington Re, as well as our funding and reinsurance
commitments to it, are subject to a number of conditions, including the
confirmation of acceptable indicative financial strength ratings, the approvals
of Lloyd's of London, third party capital providers on Syndicate 2020 managed by
Wellington Underwriting Agencies Ltd. and the U.K.'s Financial Services
Authority and the completion of the purchase of a predecessor company which will
be renamed Wellington Re.

RESULTS OF OPERATIONS

     Montpelier Re Holdings Ltd. and Montpelier Re were formed on November 14,
2001, and Montpelier Re commenced insurance operations on December 16, 2001.
Neither company had any prior operating history. Accordingly, we have no
comparable results from prior periods. Our fiscal year ends on December 31. Our
financial statements are prepared in accordance with U.S. GAAP.

  PERIOD ENDED DECEMBER 31, 2001

     During the period from inception to December 31, 2001, Montpelier Re wrote
one policy with gross premiums written of $0.2 million and incurred no losses.
An insignificant amount of premium was earned. Net investment income resulting
from the investment of the proceeds of our private placement contributed $1.1
million to our net income. This was offset, however, by general and
administrative expenses of $1.1 million and interest on long-term debt of $0.2
million. In addition, we incurred certain one-time expenses in connection with
our formation, consisting of incorporation expenses of $0.1 million and 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.

  THREE MONTHS ENDED MARCH 31, 2002

     Gross Premiums Written.  In the three months ended March 31, 2002,
Montpelier Re's gross premiums written were $203.7 million. Gross premiums
written were primarily driven by excess of loss contracts, which accounted for
$129.9 million of premium and three Qualifying Quota Share ("QQS") arrangements,
which accounted for $73.8 million of premium. The QQS business incepting in the
first three months of 2002 is based on projections supplied by the underlying
syndicates. Gross premiums written related to QQS arrangements have been shown
on a gross basis.

     Reinsurance Premiums Ceded.  Reinsurance premiums ceded for the three
months ended March 31, 2002 were $14.3 million, which was attributable to the
reinsurance purchased by the QQS syndicates with respect to the QQS contracts in
which we participated.

     Net Premiums Written.  Net premiums written for the three months ended
March 31, 2002 were $189.4 million, which were primarily derived from excess of
loss contracts and QQS contracts, net of reinsurance.

     Net Change in Unearned Premiums.  Net change in unearned premiums for the
three months ended March 31, 2002 was $152.7 million, which was primarily
attributable to excess of loss contracts and QQS contracts, and reflects the
fact that most of our contracts are written on a calendar year basis, with the
premiums earned over the course of the year.

     Net Premiums Earned.  Net premiums earned for the three months ended March
31, 2002 were $36.6 million, which were primarily attributable to the excess of
loss contracts and QQS contracts. The large difference between net premiums
written and net premiums earned during the three months ended March 31, 2002
reflects the fact that most of our contracts are written on a calendar year
basis, with the premiums earned over the course of the year.

     Loss and Loss Adjustment Expenses.  Loss and loss adjustment expenses for
the three months ended March 31, 2002 were $14.4 million. The amount recorded
represents our estimate of expected losses on QQS premiums earned. This was
principally due to losses that we estimate have been "incurred but not yet
                                        29
<PAGE>

reported" (IBNR) of $13.7 million and one claim that was reported to us with an
unadjusted net loss of $0.7 million. There are no amounts included for
catastrophe losses as no such events occurred during the quarter.

     Acquisition Costs.  Acquisition costs for the three months ended March 31,
2002 were $6.5 million, which were principally due to brokerage commissions for
our reinsurance contracts of $3.1 million and commissions paid to ceding
insurers and other costs of $3.4 million.

     General and Administrative Expenses.  General and administrative expenses
for the three months ended March 31, 2002 were $4.2 million, which were driven
primarily by fixed expenses of $2.4 million, $0.6 million accrual related to the
performance units granted under our performance unit plan and current incentive
compensation bonuses accrued and $1.2 million related to the accrual of the fair
value of stock options granted.

     Net Investment Income.  Net investment income for the three months ended
March 31, 2002 was $7.6 million, which was primarily comprised of interest on
coupon-paying bonds and bank interest of $9.1 million, partially offset by
amortization of premium (discount) on bonds, investment management fees and
foreign currency losses of $1.5 million.

     Net Realized Investment Gains (Losses).  Net investment gains for the three
months ended March 31, 2002 were $0.5 million, which were principally due to
gains realized from the sale of fixed income securities.

     Interest on Long-Term Loan.  Interest on long-term loan for the three
months ended March 31, 2002 was $1.0 million, which was attributable to interest
expenses on the $150 million outstanding balance on our long-term loan facility
described below.

     Incorporation Expenses.  Incorporation expenses for the three months ended
March 31, 2002 were $42,000.

     Net Income (Loss).  Net income (loss) for the three months ended March 31,
2002 was $18.7 million, which was principally due to net underwriting income of
$11.6 million, primarily reflecting the lack of reported claims, net investment
income of $7.6 million and net investment gains of $0.5 million, partially
offset by interest on the long-term loan of $1.0 million.

LIQUIDITY AND CAPITAL RESOURCES

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

     Cash Flows for the Period from Inception to December 31, 2001.  In the
period from November 14, 2001, our date of incorporation to December 31, 2001,
we received $848.2 million in cash from a private placement of our common
shares, which was partially offset by equity raising costs paid of $5.2 million.
Substantially all of these funds were contributed to Montpelier Re to provide
capital for its underwriting operations. During this period we used $3.9 million
of cash in operating activities, largely because Montpelier Re did not commence
insurance operations until late December. Montpelier Re invested $638.5 million
in investments in the period, and had a cash balance of $350.6 million at
December 31, 2001.

     Prior to December 31, 2001, we also entered into two senior credit
facilities with Bank of America, N.A. and a syndicate of commercial banks. The
credit facilities consist of a 364-day revolving credit facility with a $50
million borrowing limit and a three-year term loan facility with a $150 million
aggregate borrowing limit. As of March 31, 2002, we had borrowed $150 million
under the term loan facility and had not accessed the revolving credit facility.
Substantially all of the $150 million was contributed to Montpelier Re to
provide capital for its underwriting operations. These credit facilities contain
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 million; (y) 50% of positive quarterly net income (with no deduction for
net losses);
                                        30
<PAGE>

and (z) 50% of any net equity proceeds (including from this offering), 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 final
judgments against us which exceed an aggregate of $5 million (excluding any
portion thereof which will likely be recovered through insurance) each
constitute an event of default under our credit facilities.

     Furthermore, our ability to pay dividends is limited under these credit
facilities. Under these facilities, we cannot pay dividends to our shareholders
until April 1, 2003. After this date, we can only pay dividends in an amount
equal to 50% of our net income at the end of any quarter, excluding all
extraordinary gains and losses. If we pay dividends in excess of this amount, we
are required to refund simultaneously our debt in an amount equal to at least
43% of the excess dividend payment. This debt repayment would be used to pay any
amounts owing under our term loan facility and then amounts outstanding under
the revolving loan facility.

     In the three months ended March 31, 2002, we generated an operating net
cash inflow of $35.7 million, primarily relating to premiums received by
Montpelier Re. We did not pay any losses during the quarter. We invested $282.8
million during the quarter, and as of March 31, 2002 had a cash balance of
$119.5 million.

     Fixed maturities, cash and cash equivalents were $1,028.8 million as of
March 31, 2002, compared to $991.0 million at December 31, 2001. The primary
cause of this increase was the receipt of $26.0 million in subscriptions for
common shares on January 3, 2002, which related to the second and final closing
of our initial capitalization. We had cash and cash equivalents of $119.5
million at March 31, 2002. We expect this to be sufficient to cover our cash
needs for the next twelve months.

     For the period from inception until March 31, 2002, we have had sufficient
cash flow from operations to meet our liquidity requirements. The cash generated
from the private placement together with our credit facilities, have provided us
with sufficient liquidity to enable Montpelier Re to meet its statutory
requirements under the Insurance Act, as described below.

     We did not make any significant capital expenditures during the period from
inception to March 31, 2002.

     Liquidity.  On an ongoing basis, our sources of funds primarily consist of
premiums written, investment income and proceeds from sales and redemptions of
investments.

     Cash is used primarily to pay losses and loss adjustment expenses,
brokerage commissions, excise taxes, and general and administrative expenses and
to purchase new investments. In the future, we may also use cash to pay for any
premiums retroceded and any authorized share repurchases.

     Our cash flows from operations represent the difference between premiums
collected and investment earnings realized, and the losses 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 all cash flows not required for operating
purposes. The potential for a large claim under one of our 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 using modeling techniques to structure
our investments in an effort to anticipate the payout patterns of our
liabilities under reinsurance policies. No assurance can be given, however, that
we will successfully match the structure of Montpelier Re's investments with its
liabilities under 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.

     Montpelier Re is registered under the Insurance Act. Under the Insurance
Act, Montpelier Re is required to prepare statutory financial statements and to
file a statutory financial return. The Insurance Act also requires Montpelier Re
to meet a minimum solvency margin equal to the greatest of (i) $100 million,

                                        31
<PAGE>

(ii) 50% of net premiums written or (iii) 15% of the reserve for losses and loss
adjustment expenses. To satisfy these requirements, Montpelier Re was required
to maintain a minimum level of statutory capital and surplus of $100 million at
December 31, 2001 and a minimum share capital of $1 million. Montpelier Re's
statutory capital and surplus was $980.2 million at December 31, 2001, of which
$980.7 million is fully paid up share capital.

     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 January 1, 2002, without such
notification, was $39,540. Accordingly, there is no assurance that dividends
will be declared or paid in the future. See "Dividend Policy" and
"Regulation -- Bermuda Insurance Regulation" and "-- Certain Bermuda Law
Considerations."

     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 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. 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 $200 million,
which we consider sufficient to support Montpelier Re's estimated qualifying
quota share obligations during its first year of operation.

     We do not currently have any material commitments for any capital
expenditures over the next twelve months.

     We expect that the proceeds of this offering, together with the capital
base we established in the private placement, will permit us to continue to
implement our business strategy. On an ongoing basis, we expect our internally
generated funds, together with the revolving credit agreement and the capital
base established by this offering and the private placement, to be sufficient to
operate our business. Consequently, we do not presently anticipate that we will
incur any additional material indebtedness in the ordinary course of our
business other than obtaining letters of credit as security for Montpelier Re's
reinsurance agreements. However, there can be no assurance that we will not be
required to incur other indebtedness to implement our business strategy or pay
claims.

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 board of
directors, 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-income portfolio is exposed to interest rate risk.
Fluctuations in interest rates have a direct impact on the market valuation of
these securities. As interest rates rise, the market value of our fixed-income
portfolio falls, and the converse is also true. We expect to 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.

     Interest rate movements also affect the economic value of our long-term
debt obligation, on which the interest rate has been fixed at 2.96% until
October 21, 2002. Thereafter, we will have the option of fixing the rate again
or allowing it to vary based on LIBOR.

                                        32
<PAGE>

     As of March 31, 2002, we held $25.4 million, or 2.8% of our total invested
assets in mortgage-related 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 small 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.

     As of March 31, 2002, 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 2.4% or approximately $24.5 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
2.4% or approximately $24.5 million.

     Foreign Currency Risk.  We will attempt to manage our foreign currency risk
by seeking to match our liabilities under reinsurance policies that are payable
in foreign currencies with investments that are denominated in such currencies.
Furthermore, 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.

     Credit Risk.  We have exposure to credit risk primarily as a holder of
fixed income securities. 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.

CURRENCY

     Our functional currency is the United States dollar. However, because 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

     We do not believe that inflation has had a material effect on our combined
results of operations, except insofar as inflation may affect interest rates.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

     Our combined financial statements contain certain amounts that are
inherently subjective in nature and have required management to make assumptions
and best estimates to determine the reported values. If factors such as those
described in "Risk Factors" cause actual events or results to differ materially
from management's underlying assumptions or estimates, there could be a material
adverse effect on our results of operations and financial condition and
liquidity.

     We believe that the following critical accounting policies affect the more
significant estimates used in the preparation of our combined financial
statements. The descriptions below are summarized and have been simplified for
clarity. A more detailed description of the significant accounting policies we
use to prepare our financial statements is included in the notes to the combined
financial statements.

     Premiums.  Premium income is primarily earned ratably over the term of the
insurance policy. The portion of the premium related to the unexpired portion of
the policy at the end of any reporting period is reflected in unearned premiums.

                                        33
<PAGE>

     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. 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, 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 when 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.

     Premiums receivable are recorded at amounts due less any required provision
for doubtful accounts.

     Loss and Loss Adjustment Expense Reserves.  Loss and loss adjustment
expense reserves, including losses incurred but not reported and provisions for
loss adjustment expenses, includes amounts determined from loss reports on
individual cases, independent actuarial determinations and management estimates.
We currently do not have individual case or other data specific to our
portfolio, which means that we use industry data and professional judgment in
the reserving process.

     A significant portion of our business is in the property catastrophe market
and programs with higher layers of risks. Reserving for losses in such programs
is inherently complicated in that losses in excess of the attachment level of
Montpelier Re'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. These incurred but
not reported losses are inherently difficult to predict.

     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. Since the Company has insufficient past loss experience,
management relies on industry data and professional judgment. 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.

     These complications, together with the potential for unforeseen adverse
developments, may result in losses and loss 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 catastrophe 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.

     Other Than Temporary Declines in Investments.  Investments are reviewed
periodically to determine if they have sustained an impairment of 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. If investments are determined to be impaired,
a loss is charged to the income statement in the period in which it is
discovered. The current economic environment and recent volatility of securities
markets increase the difficulty in determining impairment. We do not currently
hold any investments which are not quoted. Should such investments be purchased,
fair value will be determined using the financial information received and other
economic and market knowledge as appropriate.

     Long-Term Incentive Award Accruals.  The Long-Term Incentive Plan provides
for the granting of performance units to management. The performance units
entitle the recipient to receive a specified amount subject to the achievement
of specific financial goals. Performance units vest at the end of a three year
period,
                                        34
<PAGE>

and payout is linked to an average combined ratio. Management is required to
estimate the average combined ratio in order to accrue an appropriate expense in
the financial statements. Because of the inherent volatility in short term
underwriting results, and the resultant difficulty in estimating future
insurance ratios, management assumes a target combined ratio which results in a
100% realization by the recipients of the allocated performance units. When the
applicable three year vesting period has six months remaining, the assumed
combined ratio will be replaced by a combined ratio calculated by the
Compensation Committee based on actual results, and any adjustment required will
be recognized in the period in which the adjustment is calculated.

     New Accounting Policies.  The Financial Accounting Standards Board recently
issued FAS No. 143, "Accounting for Asset Retirement Obligations" and FAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." FAS No.
143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period such obligation is incurred. The
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. FAS No. 144 established a single accounting model
for long-lived assets to be disposed of by sale and resolves implementation
issues related to FAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of." The statement is effective
for financial statements issued for fiscal years beginning after December 15,
2001. Currently, the adoption of these statements will not have any impact on
our financial position.

                                        35
<PAGE>

                              INDUSTRY BACKGROUND

THE TRADITIONAL INSURANCE AND REINSURANCE MARKETS

     Insurance.  The property and casualty insurance market is served by a
number of primary insurers, including stock, mutual and captive insurance
companies that write insurance policies directly for the public and for other
corporations or businesses. Captive insurance companies are insurance companies
that are owned by another company or group of companies and primarily insure the
risks of that parent company or group.

     The property and casualty insurance market covers a wide range of insurance
classes, including: homeowners, automobile, property, fire, catastrophe,
accident, liability, workers' compensation, professional/medical malpractice,
bankers, fidelity, marine, cargo, aviation, automobile and credit/financial
loss. Each of these insurance classes seeks to indemnify the insured against its
own losses or its liability to a third party for loss or damage.

     Reinsurance and Retrocession.  Primary insurers spread the risks they
assume by purchasing insurance, known as reinsurance, from other insurers, known
as reinsurers. A reinsurer agrees to indemnify another insurance company,
commonly referred to as the ceding company or cedent, for all or a portion of
the insurance risks underwritten by the ceding company under one or more of its
own insurance policies. Reinsurance does not legally discharge the primary
insurer from its liability with respect to its obligations to the insured.
Reinsurance benefits a ceding company in a number of ways, including:

     - reducing net liability on individual risks;

     - providing catastrophe protection from large or multiple losses;

     - stabilizing results; and

     - assisting in maintaining acceptable operating and leverage ratios.

     Reinsurance also provides a ceding insurer with additional underwriting
capacity by permitting it to assume larger risks and underwrite a greater number
of policies without being required to increase its capital and surplus.

     Traditional reinsurance principally consists of treaty reinsurance and
facultative reinsurance. Under treaty reinsurance, the reinsurer is obliged to
reinsure a range of risks or policies, as defined in a standing arrangement,
referred to as a treaty, which is usually valid for a period of one year. Under
facultative reinsurance, a separate reinsurance contract is negotiated in
respect of each original insurance policy to be reinsured. Facultative
reinsurance is normally purchased to cover unique or large individual risks or
for amounts in excess of limits on risks already reinsured elsewhere.

     Both treaty and facultative reinsurance can be written on either a
proportional, also known as a quota share or pro rata, basis or a
non-proportional, referred to as excess of loss, basis. Under quota share
reinsurance, the reinsurer indemnifies the insurer against a predetermined
percentage or share of the losses and loss adjustment expenses incurred by the
insurer under policies it has issued and usually participates on any reinsurance
protection purchased by the ceding company. In reinsurance written on an excess
of loss basis, the reinsurer indemnifies the insurer against that portion of
losses and loss adjustment expenses incurred on the original policy in excess of
a specified dollar or percentage loss ratio amount.

     Reinsurers may also purchase reinsurance to cover their own assumed risk.
This is known as retrocessional reinsurance. Reinsurance companies enter into
retrocessional agreements for reasons similar to those for which insurers
purchase reinsurance, such as to spread risk and increase capacity. As with
reinsurance, retrocessions can be written on a treaty or facultative basis, and
on a quota share or excess of loss basis.

THE BERMUDA INSURANCE INDUSTRY

     The insurance industry in Bermuda has existed for over 50 years, and
experienced rapid expansion in the 1970s with the development of captive
insurance companies. We believe Bermuda is now the world's leading center for
reinsurance companies as well as a leading center for captive insurance
companies. There are a
                                        36
<PAGE>

number of factors that make Bermuda an attractive location from which to carry
on insurance and reinsurance business, including:

     - an established history as a highly reputable business center;

     - excellent professional and other business services;

     - a well-developed captive insurance industry with the attendant insurance
       underwriting and managerial expertise;

     - a regulatory system with minimum regulatory involvement for those
       companies that meet certain solvency, liquidity and other requirements;

     - political and economic stability; and

     - ease of access to global insurance markets.

MARKET ENVIRONMENT

     Since the late eighties, the worldwide insurance and reinsurance industry
has been characterized by highly competitive market conditions. Excess capacity,
declining premium rates, less favorable policy terms and adverse reserve
developments all contributed to poor underwriting results. The following table
sets forth the statutory loss ratios for U.S. commercial insurers and
professional reinsurers for the last five years:

<Table>
<Caption>
                                                                                FORECAST
                                                1997    1998    1999    2000      2001
                                                -----   -----   -----   -----   --------
<S>                                             <C>     <C>     <C>     <C>     <C>
Calendar Year Combined Ratios(1)
  Commercial Lines Insurers...................  103.4%  106.9%  109.1%  108.0%   116.6%
  Professional Reinsurers.....................  100.4%  104.8%  105.5%  110.5%   111.7%
</Table>

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

(1) Equal to the ratio of incurred losses and loss adjustment expenses to net
    earned premiums.

Source:  Fitch Special Report dated January 17, 2002.

     We believe that underwriting results for reinsurers outside the U.S.,
including Lloyds, have also suffered.

     Losses from the September 11th terrorist attacks are estimated to be $30-70
billion, before taxes. This represents the largest insured catastrophe in the
history of the insurance industry, surpassing the $20.2 billion in losses from
Hurricane Andrew in 1992, previously the largest insured event in history. The
following table shows the previous ten largest insured losses:

<Table>
<Caption>
EVENT                              DATE              COUNTRY               INSURED DAMAGE(1)
-----                              ----              -------               -----------------
                                                                         (DOLLARS IN BILLIONS)
<S>                              <C>        <C>                          <C>
Hurricane Andrew...............   8/23/92   United States, Bahamas               20.2
Northridge Earthquake..........   1/17/94   United States                        16.7
Typhoon Mireille...............   9/27/91   Japan                                 7.3
Winterstorm Daria..............   1/25/90   France, Great Britain                 6.2
Winterstorm Lothar.............  12/25/99   Western Europe                        6.2
Hurricane Hugo.................   9/15/89   United States, Puerto Rico            6.0
Storm and Floods...............  10/15/87   Europe                                4.7
Windstorm Vivian...............   2/25/90   Western/Central Europe                4.3
Typhoon Bart...................   9/22/99   Japan                                 4.3
Hurricane Georges..............   9/20/98   United States, Caribbean              3.8
</Table>

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

(1) Source:  Swiss Re Sigma. Amounts are shown in 2001 U.S. dollars.

     The September 11th terrorist attacks have led to a fundamental reevaluation
of risk by commercial insureds, as well as insurance and reinsurance companies,
which we believe has resulted in increased demand

                                        37
<PAGE>

for reinsurance. Following the events of September 11th, there is uncertainty in
the insurance and reinsurance markets about the extent to which future coverages
will extend to terrorist acts as well as the definition of terrorist acts. We
believe that coverage of claims that are the result of terrorist acts (as they
are ultimately defined by industry and government standards) will generally be
excluded from property catastrophe reinsurance contracts covering large
commercial risks, above specified property values, but usually will not be
excluded for smaller commercial coverages, personal lines or other coverages.
The effect of potential U.S. and other governmental intervention on the
insurance and reinsurance markets we serve, including the extent to which
coverage for terrorist acts is offered by the insurance and reinsurance markets
in the future, is uncertain. It remains to be seen whether the insurance
industry's attempts to exclude coverage for terrorist acts will be effective.

     Beyond poor underwriting results, insurers and reinsurers are negatively
impacted by the decline in global equity markets. Since many insurers and
reinsurers invest significant portions of their investment portfolios in the
equity markets, the prolonged downturn in the equity markets will likely reduce
available capacity. Additionally, the low interest rate environment is resulting
in reduced fixed maturity investment income and is having a negative impact on
economic underwriting returns.

                                        38
<PAGE>

                                    BUSINESS

OVERVIEW

     We are a Bermuda-based provider of reinsurance for the global insurance
market, conducting our reinsurance operations through our wholly owned
subsidiary, Montpelier Re. We were founded by White Mountains and Benfield 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 aim to achieve superior
returns on capital by writing global specialty property and other classes of
reinsurance while maintaining disciplined underwriting practices. We seek to
identify attractive reinsurance opportunities by capitalizing on our
management's significant underwriting experience, utilizing modeling tools and
technologies and developing proprietary systems. Since Montpelier Re commenced
operations, we believe we have become a leading provider of reinsurance products
to the global market. During the three months ended March 31, 2002, we
underwrote $203.7 million in gross premiums written. 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.)("Guy
Carpenter"), Aon Re Worldwide (a subsidiary of Aon Corporation) ("Aon Re
Worldwide"), Benfield Group plc ("Benfield") and Willis Group Holdings Ltd.
("Willis Group") among others.

MARKET OPPORTUNITIES AND INDUSTRY TRENDS

     As a result of the September 11th terrorist attacks and the years of poor
rates and conditions in the worldwide reinsurance markets which preceded them,
there has been a contraction of global underwriting capacity combined with a
substantial increase in demand for reinsurance products. We believe this has
created favorable opportunities for new specialty reinsurance market entrants.
Some of the principal factors giving rise to these market opportunities include:

     - record loss events from the September 11th terrorist attacks, the Enron
       collapse and the Sri Lanka airport attack;

     - poor underwriting results in recent years as a result of excess capacity,
       declining premium rates, less favorable policy terms and adverse loss
       reserve developments from prior policy years (including asbestos,
       environmental and other mass tort liabilities);

     - withdrawal of capacity from important segments of the reinsurance market
       and substantial reductions in capital at some reinsurance companies due
       to excessive unanticipated claims; and

     - the decline in global equity markets and a low interest rate environment
       leading to lower investment returns.

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 Like 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 23 years of experience in the
     insurance and reinsurance industry. This experience creates the opportunity
     for disciplined and

                                        39
<PAGE>

     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
     provided significant business to us in the first quarter of 2002. 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 newly 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 billion, which provides a high degree of financial strength to our
     clients. On December 19, 2001, A.M. Best Company Inc. assigned an "A-"
     (Excellent) rating to Montpelier Re. This rating reflects A.M. Best's
     opinion of our initial capitalization, management expertise and sound
     sponsorship and is not applicable to the securities offered by this
     prospectus.

          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 Mountains has substantial
     experience in managing companies and sponsoring the development of other
     insurance companies. Mr. Byrne, our Chairman and the Chairman and Chief
     Executive Officer 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.

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. We intend to manage our capital prudently relative to our
     risk exposure in an effort to maximize sustainable long-term growth in
     shareholder value. Currently, we do not intend to buy retrocessional
     protection and will expect to do so only as the pricing and terms in the
     retrocessional market become more attractive. Our capital management
     strategy will emphasize the appropriate use of leverage and share
     repurchases to manage idle or excess capital. 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

                                        40
<PAGE>

     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
     will allow them to build, over time, a substantial book of reinsurance
     business exhibiting superior performance. We believe that there has been a
     decline in the number of acknowledged program leaders both in North America
     and internationally exacerbated by the events of September 11th, which has
     increased our access to business.

          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,
     together with their market knowledge and judgment, to achieve the highest
     available price per unit of risk.

          Develop and Maintain Balanced Portfolio of Reinsurance Risks.  We aim
     to craft a balanced portfolio of primarily property related risks,
     diversified across products, geographic areas of coverage, cedents and
     distribution sources. 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, unlike
     the Bermuda companies that were formed in 1993 and 1994 which were more
     heavily focused on U.S. property catastrophe business. We will employ risk
     management techniques to monitor correlation risk and seek to enhance the
     portfolio returns through capital allocation. 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 Reinsurance and Insurance
     Solutions for Our Clients. We intend to establish ourselves as a premier
     provider of global specialty property reinsurance products and seek to
     provide superior customer service. Our objective is to solidify long-term
     relationships with brokers and clients while establishing an industry
     reputation for innovative and timely quotes for difficult technical risks.

REINSURANCE PRODUCTS

     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 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 client.

     We primarily focus on writing the following products:

     Property Catastrophe.  We believe our largest opportunity, excluding quota
share and pro-rata, is in property catastrophe coverage for insurance companies.
In addition to seeking profitable pricing, we manage our risk using contract
terms and conditions that can be varied based on the nature and scope of
coverage. Our

                                        41
<PAGE>

standard coverage excludes the peril of terrorism in respect of commercial risks
worldwide although there are modifications of this exclusion, principally in the
United States, to take account of regulatory and commercial considerations in
certain jurisdictions. However, we also underwrite specific terrorism-only
contracts when we believe we receive adequate pricing and are able to actively
control our exposures. To date we have written a limited number of contracts
covering terrorism specifically as customers find the prices of this coverage
high, and the scope limited as we typically exclude nuclear, chemical and
biological attacks.

     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 and nuclear contamination, are generally excluded
from all contracts.

     Property catastrophe reinsurance is generally written on an excess of loss
basis. Excess of loss reinsurance 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.

     Other Property.  We provide retrocessional coverage, which is reinsurance
protection to other reinsurers or retrocedents. Coverage is focused on
catastrophe protection for property portfolios. We believe, based on the
historical experience of management, the most opportune time to write
retrocessional coverage follows major catastrophes. Given the dislocation
expected in the current market, we believe that there may be an opportunity for
"private" treaties where there is the opportunity to write 100% of a layer or
layers on behalf of a program on behalf of a ceding company. The terms of these
transactions are typically kept confidential from the market, which is different
than the subscription market where all parties to the transaction are aware of
the terms under which each participates.

     Retrocessional coverage typically carries a higher degree of volatility
versus reinsurance as it covers the concentration of catastrophe exposure
written by retrocedents, which in turn may have an aggregation of losses from a
single catastrophic event. In addition, the information available in pricing
retrocessional coverage can be less precise than the information received
directly from the primary companies.

     We also provide property risk excess of loss reinsurance to protect
insurance companies on their primary insurance risks and facultative reinsurance
transactions on a "single risk" basis. Coverage is triggered by a large loss
sustained by an individual risk rather than by smaller losses which fall below
the specified attachment point 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 non-U.S. risk coverages have experienced
substantial increases over their expiring terms. We expect there to be
significant restrictions on policy terms and conditions, 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 facultative coverage for commercial property risks where the
reinsurer assumes all or part of a risk under a single insurance contract.
Facultative reinsurance is negotiated separately for each contract. 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.

                                        42
<PAGE>

     In general, we exclude terrorism risk from our retrocessional, property
risk excess of loss and facultative coverages.

     Qualifying Quota Share.  We anticipate that at least during the early years
of our operation, we will continue to provide whole account quota share
reinsurance, or QQS, to select Lloyd's syndicates and specialty insurance
companies. We will continue to target syndicates and companies which have a
proven underwriting franchise, long-term customer relationships and whose
ability to write premiums is limited by their current capital level or, in the
case of Lloyd's syndicates, 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 allowed syndicates to write up to 120% of their
stamp capacity, with the ability to cede 16% to quota share reinsurers. We do
not have exposure to underwriting in earlier years and the contracts can be
commuted after 36 months, the point at which the underwriting year is closed
into future years. We also write business from specialty insurance companies
outside of Lloyd's.

     Under a quota share reinsurance contract, a specified proportion of the
risk on a specified coverage is typically assumed in exchange for an equal
proportion of the premiums. The ceding insurer receives a commission, based on
the amount of the premiums ceded, which is intended to reimburse the insurer for
the costs of writing and administering the business. The reinsurer is dependent
on the ceding company's ability in underwriting, pricing and claims
administration.

     As a newly formed company, quota share contracts provide us with an
immediate source of 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 the quota share
reinsurance usually benefits from all reinsurance purchased by the syndicate.

     Specialty and Other.  We also write specialty risks such as aviation,
marine, personal accident, casualty and other reinsurance business. The marine
and aviation business is primarily written on a retrocessional excess of loss
basis. We also wrote a limited amount of aviation war risk business as prices
renewed at multiples of their expiring prices following significant industry
losses from Sri Lanka and the September 11th terrorist attacks. We expect to
increase our marine and aviation business based on our assessment of the market
environment.

     Our casualty portfolio of risks focuses on selected classes, with an
initial emphasis on workers' compensation, personal accident catastrophe and
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.

     Coverage for casualty and personal accident insurance is generally written
to restrict recoveries by the cedent unless a minimum of fifty insured persons
are involved in the same event. As a result of the number of fatalities arising
from the September 11th terrorist attacks, catastrophe and personal accident
reinsurers experienced significant underwriting losses. Accordingly, many
reinsurers were reluctant to provide this type of cover in December 2001. We
quoted and led what we believe to be the first treaties of this kind purchased
after September 11th. Although we cover terrorism, we exclude, in almost all
cases, losses arising from nuclear, biological and chemical attack. This
business is written to provide coverage generally worldwide.

                                        43
<PAGE>

     The following tables set forth a breakdown of our gross premiums written by
line of business and by geographic area:

                         GROSS PREMIUMS WRITTEN BY LINE

<Table>
<Caption>
                                                              THREE MONTHS ENDED
                                                                MARCH 31, 2002
                                                              ------------------
                                                               ($ IN MILLIONS)
<S>                                                           <C>         <C>
Property Catastrophe........................................  $ 79.1       38.8%
Other Property..............................................    35.6       17.5
Qualifying Quota Share......................................    73.8       36.2
Specialty and Other.........................................    15.2        7.5
                                                              ------      -----
Total.......................................................  $203.7      100.0%
                                                              ======      =====
</Table>

                   GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA

<Table>
<Caption>
                                                              THREE MONTHS ENDED
                                                                MARCH 31, 2002
                                                              ------------------
                                                               ($ IN MILLIONS)
<S>                                                           <C>         <C>
U.S.A. and Canada...........................................  $ 59.0       45.4%
Worldwide...................................................    38.2       29.4
Worldwide, excluding U.S.A..................................     9.1        7.0
United Kingdom and Ireland..................................     5.4        4.2
Western Europe excluding Scandinavia........................     5.1        3.9
Japan.......................................................     3.1        2.4
Scandinavia.................................................     2.5        1.9
Caribbean...................................................     1.8        1.4
Others (1.5% or less).......................................     5.7        4.4
                                                              ------      -----
Total, excluding pro-rata...................................  $129.9      100.0%
                                                              ======      =====
</Table>

UNDERWRITING AND RISK MANAGEMENT

     Our objective is to create a balanced portfolio of risks, diversified
across classes, products, geographic areas of coverage, cedents and source. For
example, our current policy is to limit our exposure to $100 million on any
single coverage. We attempt to limit the amount of potential loss that may arise
from a single catastrophic event. We also 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 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:

     - the attachment point of business written on an excess of loss basis is
       required to be above the level of attritional losses, thereby covering
       infrequent large losses;

     - limit the scope of coverage on regular property classes to "traditional
       perils" and exclude unquantifiable perils such as cyber risks and
       terrorism;

     - entertain difficult risks such as terrorism but only on a specific basis
       whereby exposures are carefully controlled through limits, terms and
       conditions and monitoring aggregates, and an appropriate price is
       charged;

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

                                        44
<PAGE>

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

     - use risk assessment models such as RMS, Remetrica II and Catalyst to
       assist in the underwriting process and the quantification of our
       catastrophe aggregate exposures.

     We aim to develop sophisticated modeling tools to analyze and manage the
reinsurance exposures we assume from cedents. We are currently developing CATM,
a proprietary computer-based underwriting system, the technical components of
which incorporate the fundamentals of modern portfolio theory, 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 will be comprised of risk assessment tools, exposure data bases and
intelligent systems, enabling us to price contracts according to actual
exposures and estimate the amount of loss and volatility associated with the
contracts we assume. For analysis of property risks and certain liability risks,
CATM is being designed to use output from models developed by our actuarial
staff as well as from those of commercial vendors. In addition, CATM would serve
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.

     We frequently seek to act as the lead in our reinsurance contracts.
Typically, one reinsurer acts as the "lead" in negotiating principal policy
terms and pricing of reinsurance contracts with a reinsurance broker. 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
take a lead role in underwriting many of our reinsurance contracts. We believe
that being a lead underwriter will be an important factor in achieving
longer-term success because we believe that lead underwriters generally have
greater influence in negotiation of policy terms, attachment points and premium
rates than following reinsurers. In addition, we believe that reinsurers that
lead policies 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) timely payment
of claims and (iii) innovative and customized reinsurance and insurance
solutions to clients. 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.

     Montpelier Marketing Services (UK) Ltd., our marketing subsidiary in
London, is experiencing a flow of introductions from brokers who either are
seeking new markets to channel their business or desire a personal dialogue
prior to rating and acceptance by our Bermuda underwriters. It conducts meetings
with major London brokers, smaller brokers, UK cedents and international cedents
visiting London. In addition, it has conducted specific client trips to Japan,
Australia and Scandinavia.

     The following table shows our gross premiums written by broker:

<Table>
<Caption>
                                                              THREE MONTHS ENDED
                                                                MARCH 31, 2002
                                                              ------------------
                                                               ($ IN MILLIONS)
<S>                                                           <C>         <C>
Benfield....................................................  $ 74.4       36.5%
Willis Group................................................    53.7       26.4
Guy Carpenter...............................................    35.2       17.3
Aon Re Worldwide............................................    24.9       12.2
Others......................................................    15.5        7.6
                                                              ------      -----
Total.......................................................  $203.7      100.0%
                                                              ======      =====
</Table>

     We are also focused on marketing to smaller specialist intermediaries based
in the U.S. and London markets.

                                        45
<PAGE>

CLAIMS MANAGEMENT

     As a newly formed company, we have not experienced a high volume of claims.
Pursuant to our claims management process, upon notification of a claim, a
member of our staff performs an initial review and prepares a control sheet. Our
underwriters then adjust the claim, if necessary, at which point it is submitted
to our Chief Underwriting Officer for his final review and approval for payment.
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 reserves for
the ultimate settlement costs of all loss and loss adjustment expenses incurred.

     Under U.S. GAAP, we are not permitted to establish loss and loss adjustment
reserves with respect to our property catastrophe reinsurance until an event
which gives rise to a loss occurs. Generally, reserves will be established
without regard to whether we believe we may subsequently contest a future claim.
Any reserve for losses and loss adjustment expenses may also include loss and
loss adjustment expense reserves for estimated losses that have been incurred
but not reported to us. Such reserves are estimated by our management based upon
reports received from ceding companies, as supplemented by our own estimates of
reserves for which ceding company reports have not been received, and our own
historical experience. To the extent that in the future our own historical
experience is inadequate for estimating reserves, such estimates may be
actuarially determined based upon industry experience and our management's
judgment. Our reserve estimates will be continually reviewed and as adjustments
to these reserves become necessary, such adjustments will be reflected in
current operations.

     Loss and loss adjustment reserves represent estimates, including actuarial
and statistical projections at a given point in time, of an insurer's or
reinsurer's 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 contract. However, reserve
estimates by new property catastrophe reinsurers may be inherently less reliable
than the reserve estimates of a reinsurer with a stable volume of business and
an established claim history.

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. The initial composition of the investments is a diversified
portfolio of highly rated, liquid, fixed income securities of short to medium
term duration. In determining our investment decisions, we consider the impact
of various catastrophic events, particularly those to which our reinsurance and
insurance portfolio may be exposed, on our invested assets to protect our
financial position. While investment in common equity securities does not
presently comprise a significant amount of the investment portfolio, 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.

                                        46
<PAGE>

     The types of securities in our fixed income portfolio and their fair values
and amortized costs were as follows as of March 31, 2002:

<Table>
<Caption>
                                                       AMORTIZED   UNREALIZED
                                                         COSTS       (LOSS)     FAIR VALUE
                                                       ---------   ----------   ----------
                                                                 (IN THOUSANDS)
<S>                                                    <C>         <C>          <C>
TYPE OF INVESTMENT
U.S. government and agencies.........................  $633,624     $ (5,921)    $627,703
U.S. corporate securities............................   261,626       (5,508)     256,118
Mortgage-backed securities...........................    25,727         (285)      25,442
                                                       --------     --------     --------
Total................................................  $920,977     $(11,714)    $909,263
                                                       ========     ========     ========
</Table>

     The investment ratings (provided by major rating agencies) for fixed income
securities held as of March 31, 2002 were as follows:

<Table>
<Caption>
                                                              AMORTIZED
                          RATINGS                               COST      PERCENTAGE
                          -------                             ---------   ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>         <C>
US Government and government agencies.......................  $590,900       64.2%
AAA/Aaa.....................................................    10,328        1.1
AA/Aa.......................................................   133,397       14.5
A/A.........................................................   186,352       20.2
                                                              --------      -----
                                                              $920,977      100.0%
                                                              ========      =====
</Table>

     The average duration of our fixed income portfolio is 3.0 years. The
maturity distribution for fixed income securities held as of March 31, 2002 were
as follows:

<Table>
<Caption>
                                                              AMORTIZED   ESTIMATED
                          MATURITY                              COST      FAIR VALUE
                          --------                            ---------   ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>         <C>
Within one year.............................................  $     --     $     --
From one to five years......................................   815,354      805,020
From five to ten years......................................   105,623      104,243
                                                              --------     --------
                                                              $920,977     $909,263
                                                              ========     ========
</Table>

     Our Finance Committee establishes investment guidelines and supervises our
investment activity. 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 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 OneBeacon Asset Management ("OneBeacon"), a wholly owned
indirect subsidiary of White Mountains, to provide investment advisory and
management services. We have agreed to pay investment management 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%. A
portfolio of $1.0 billion would incur an annual fee of 0.18%. In addition, we
have agreed to reimburse out-of-pocket expenses. These fees are included in net
investment income. This agreement may be terminated by either party upon 30 days
written notice. OneBeacon Asset Management earned $73,733 for the period ended
December 31, 2001 for managing these funds. In the three months ended March 31,
2002 OneBeacon earned $0.5 million in fees.

                                        47
<PAGE>

RETROCESSIONS

     We do not anticipate the need to purchase retrocessional coverage at this
time, although we do indirectly benefit from the purchase of reinsurance by the
Lloyd's syndicates in our Qualifying Quota Share arrangements. We will monitor
the opportunity to purchase reinsurance on a cost effective basis based on
market conditions, and review the need for reinsurance more generally as our
business develops.

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 Ltd., Converium, Everest Reinsurance Company, IPCRe
Limited, Lloyd's of London syndicates, Munich Re, PartnerRe Ltd., PXRE
Reinsurance Company, Renaissance Reinsurance Ltd., St. Paul Re, Inc., Swiss Re
and XL Capital. 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. and Olympus Re Holdings, Ltd.
Competition varies depending on the type of business being reinsured and whether
we are in a leading position or acting on a following basis.

     In addition, since September 11th, 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.

RATINGS

     Ratings are an important factor in establishing the competitive position of
insurance and reinsurance companies and are important to our ability to market
and sell our products. Rating organizations continually review the financial
positions of insurers, including us. A.M. Best maintains a letter scale rating
system ranging from "A++" (Superior) to "F" (in liquidation). We have been rated
"A-" (Excellent) by A.M. Best, which reflects A.M. Best's opinion of
Montpelier's initial capitalization, management expertise and sound sponsorship.
This opinion is not an evaluation directed toward the protection of investors.

ADMINISTRATION

     We have engaged International Advisory Services Ltd., an insurance
management company located in Bermuda, to provide certain management and
administrative services to us. We pay IAS a fee based upon the time and expense
incurred for the provision of such services and pursuant to our contract with
IAS, we are

                                        48
<PAGE>

required to pay them a minimum of $75,000 per quarter. For the three months
ended March 31, 2002, we paid IAS approximately $300,000 for these services. We
currently intend to hire additional staff to perform many of the services that
IAS is providing to us, and we intend to reduce our use of IAS's services in the
future.

PROPERTIES

     We currently lease office space in Pembroke, Bermuda; however, we have
entered into an agreement to lease new, replacement office space in Hamilton,
Bermuda, to accommodate our growth, for a term ending December 31, 2005. In
addition, we have entered into an agreement to lease additional space in London,
England. We believe that for the foreseeable future this office space is
sufficient for us to conduct our operations.

EMPLOYEES

     As of May 21, 2002, we had fourteen employees. The majority of our
employees is employed by Montpelier Re or by Montpelier Marketing Services (UK)
Ltd., our wholly owned marketing subsidiary. See "Risk Factors -- Risks Related
to Our Company -- Our ability to conduct our business may be adversely affected
by Bermuda employment restrictions."

LEGAL PROCEEDINGS

     We are not currently involved in any litigation or arbitration. We
anticipate that, similar to the rest of the insurance and reinsurance industry,
we will be subject to litigation and arbitration in the ordinary course of
business.

                                        49
<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, being 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 after consultation with the Insurance Advisory
Committee, 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.

                                        50
<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 provisions.
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 are not prepared in accordance
with U.S. GAAP and are distinct from the financial statements prepared for
presentation to Montpelier Re's shareholders (the Company) under the Companies
Act, which financial statements are prepared in accordance with U.S. GAAP.
Montpelier Re, as a general business insurer, is required to submit the 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

                                        51
<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;

     (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. Each of the Company and Montpelier Re is required
to obtain the permission of the BMA for the issue and transfer of all of their
shares. We intend to apply for and expect to obtain consent from the BMA for the
issue and transfer of our common shares to and between non-residents of Bermuda
for exchange control
                                        52
<PAGE>

purposes, subject to the condition that our common shares shall be listed on the
Nasdaq National Market System or any other appointed stock exchange.

     The transfer and issuance of our common shares 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 and Montpelier Re are
designated as non-resident for Bermuda exchange control purposes, they are
allowed to engage in transactions, and to pay dividends to Bermuda non-residents
who are holders of the common shares, in currencies other than the Bermuda
Dollar. In addition, share transfers must be by written instrument and comply
with our bye-laws.

     In accordance with Bermuda law, share certificates are issued only in the
names of corporations or individuals. In the case of an applicant acting in a
special capacity (for example, as an executor or trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity, we are not
bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust. We will take no notice of any trust
applicable to any of our common shares whether or not we have notice of such
trust.

     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.

     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 may be used in paying up unissued shares of the same
class 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.

                                        53
<PAGE>

     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 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 recently
announced a new 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 non-
licensed 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.

                                        54
<PAGE>

                                   MANAGEMENT

DIRECTORS

     The table below sets forth certain information concerning our directors as
of May 21, 2002:

<Table>
<Caption>
NAME                                     AGE                     POSITIONS
----                                     ---                     ---------
<S>                                      <C>   <C>
John J. (Jack) Byrne(1)................  69    Chairman
Anthony Taylor(1)......................  56    Deputy Chairman, Director, President and
                                               Chief Executive Officer of the Company,
                                               President and Chief Underwriting Officer of
                                               Montpelier Re
John D. Gillespie(3)...................  43    Director
Allan L. Waters(2).....................  44    Director
Raymond Barrette(3)....................  51    Director
Tom Hutton(2)..........................  46    Director
Raymond M. Salter(2)...................  67    Director
Allan W. Fulkerson(1)..................  68    Director
William Spiegel(3).....................  39    Director
Steven J. Gilbert(3)...................  55    Director
Kamil M. Salame(2).....................  33    Director
K. Thomas Kemp(4)......................  61    Director Nominee
</Table>

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

(1) Denotes Class A Director with a 2 year term.

(2) Denotes Class B Director with a 3 year term.

(3) Denotes Class C Director with a 4 year term.

(4) The Board of Directors intends to recommend that the shareholders approve an
    increase to the size of the Board and has nominated Mr. Kemp to serve as a
    Director.

     John J. (Jack) Byrne.  Mr. Byrne has been our Chairman since our inception.
He is also currently the Chairman of White Mountains, a position he has held
since 1985, and the CEO of White Mountains, a position he has held since
February 2002, and from time to time since 1985. 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., FSA Holdings, and Overstock.com. 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. 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 has served as Managing Director of OneBeacon since June 2001. He
is also the founder and Managing Partner of his own investment firm, Prospector
Partners, LLC, in Guilford, Connecticut. Mr. Gillespie is a Managing Director of
OneBeacon and also serves as a director of Folksamerica. 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.

     Allan Waters.  Mr. Waters is the founder and Chief Executive Officer of
Mulherrin Capital Advisors, LLC, a financial advisory firm in Hanover, New
Hampshire. Previously Mr. Waters served as Senior Vice

                                        55
<PAGE>

President and Chief Financial Officer of White Mountains from 1993 to 1997. He
was formerly Vice President and Controller of Fund American Enterprises from
1991 to 1993; was Vice President, Controller and Assistant Secretary of White
Mountains from 1990 to 1991, and was Vice President, Finance of the Company from
1988 to 1990.

     Raymond Barrette.  Mr. Barrette has been a director of White Mountains
since 2000 and has served as Managing Director and Chief Executive Officer of
OneBeacon since June 2001. 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 Holding Company Inc.

     Tom Hutton.  Mr. Hutton is a private equity and venture capitalist investor
based in Palo Alto, California. Mr. Hutton is a consultant/venture partner at
Trident Capital and was formerly associated with Morgan Stanley Venture Partners
in a similar capacity. 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.  Mr. Fulkerson currently serves as a director of The
Galtney Group, Inc., HCC Insurance Holdings, Inc., International Financial
Group, Inc., Asset Allocation & Management Company, LLC and one of the directors
of Wellington Underwriting plc. 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., LUA Seguros La
Portena, S.A. and United Educators Risk Retention Group, Inc. He is a member of
the Boston Society of Security Analysts and the Association of Insurance and
Financial Analysts. 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 with The Cypress Group
L.L.C., 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 Cinemark USA, Inc.
and Medpointe 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 is Chairman of the Board of Gilbert Global
Equity Partners, L.P., a private equity fund. 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 was Managing
General Partner until 1988. Mr. Gilbert is currently a Director of Veritas,
Inc., LCC International, Inc., Edmunds.com, Optical Capital Group, iSky, Ionex,
and the Asian Infrastructure Fund.

     Kamil M. Salame.  Mr. Salame is a Director of the Private Equity Group of
Credit Suisse First Boston, which has the DLJ Merchant Banking PartnersIII, L.P.
$5.3 billion private equity fund. Mr. Salame joined DLJ's Merchant Banking
Group, a predecessor to Credit Suisse First Boston Private Equity, Inc., in
1997.

                                        56
<PAGE>

Previously he was a member of DLJ's Leveraged Finance Group. Mr. Salame is a
director of Hardin Capital, ProChannel Distribution Partners and PM Realty
Group. Mr. Salame 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 has
been nominated to serve as a director. He is also President of White Mountains,
a position he has held since June 2001. From January 2000 to June 2001, Mr. Kemp
was Deputy Chairman, and from 1997 to 2000, he was President and CEO of White
Mountains. Mr. Kemp has been a Director of White Mountains since 1994. He also
serves as a director of Folksamerica, Amlin, PECO Pallets, Main Street America
and Fund American Re.

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
2003, are Messrs. Byrne, Taylor and Fulkerson. Our Class B directors, whose
terms expire in 2004, are Messrs. Waters, Hutton, Salter and Salame. Our Class C
directors, whose terms expire in 2005, are Messrs. Gillespie, Barrette, Spiegel
and Gilbert. The Board of Directors intends to recommend that the shareholders
approve an increase to the size of the Board by one director, and has nominated
K. Thomas Kemp to serve in the newly created directorship.

COMMITTEES OF THE BOARD OF DIRECTORS

     Audit Committee.  The Audit Committee, comprised of Messrs. Barrette,
Fulkerson, Hutton, Salame, Spiegel and Waters, 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. Barrette is
Chairman of the Audit Committee.

     Compensation Committee.  The Compensation Committee, comprised of Messrs.
Barrette, Byrne, Gilbert, Salter and Waters, oversees our compensation and
benefit policies and programs, including administration of our annual bonus
awards and long-term incentive plans. Mr. Byrne is Chairman of the Compensation
Committee.

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

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

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     K. Thomas Kemp, our Chief Financial Officer, is President and a Director of
White Mountains. The Chief Executive Officer of White Mountains, Mr. Byrne, is
Chairman of the Compensation Committee. Mr. Barrette, a member of the
Compensation Committee, is also a Director of White Mountains.

DIRECTOR COMPENSATION

     Directors, who are also our employees, are not paid any fees or other
compensation for services as members of the board of directors or any committee
of the board. Each other director receives cash in the amount of $25,000 per
year and $2,000 per board or committee meeting attended, including formal
telephonic meetings, but not including informal informational meetings. In
addition, committee chairs receive an annual fee of $5,000 for each committee
chaired.

                                        57
<PAGE>

EXECUTIVE OFFICERS

     The table below sets forth certain information concerning some of our
executive officers as of May 21, 2002:

<Table>
<Caption>
NAME                                     AGE                     POSITIONS
----                                     ---                     ---------
<S>                                      <C>   <C>
Anthony Taylor(1)......................  56    Deputy Chairman, Director, President and
                                               Chief Executive Officer of the Company,
                                               President and Chairman and Chief Underwriting
                                               Officer of Montpelier Re
Thomas George Story Busher.............  46    Chief Operating Officer, Executive Vice
                                               President and Secretary of the Company and
                                               Montpelier and Deputy Chairman of Montpelier
                                               Re
K. Thomas Kemp(2)......................  61    Director Nominee and Chief Financial Officer
C. Russell Fletcher III................  49    Chief Reinsurance Officer and Executive Vice
                                               President
Nicholas Newman-Young..................  50    Marketing Director and Executive Vice
                                               President of Montpelier Re
Neil McConachie........................  30    Financial Controller and Senior Vice
                                               President
</Table>

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

(1) Anthony Taylor is also a director; detailed information regarding his
    experience is set forth in the prior section.

(2) K. Thomas Kemp is also a director nominee; detailed information regarding
    his 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, Aon Corporation
and Marsh & McLennan Companies, Inc.

     Nicholas Newman-Young.  Mr. Newman-Young serves as Marketing Director and
Executive Vice President for Montpelier Re. 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.

     Neil McConachie.  Mr. McConachie serves as our Financial Controller and
Senior Vice President. From 2000 to 2002, he was an Assistant Controller at
Stockton Holdings Limited in Bermuda. From 1996 to 2000, Mr. McConachie was
employed as an Audit Manager in the Insurance Focus Group at
PricewaterhouseCoopers in London and Bermuda.

MANAGEMENT COMPENSATION AND INCENTIVE PLANS

     Because we commenced operations on December 16, 2001, we did not pay any
executive officer compensation in excess of $100,000 during the fiscal period
ended December 31, 2001. Our Chief Executive

                                        58
<PAGE>

Officer, Anthony Taylor, was employed by us as of January 1, 2002. Our current
executive officers, Messrs. Taylor, Fletcher, Busher, Sinnott and Chattock are
compensated according to the terms of their respective employment agreements,
which are described below.

     Our compensation committee designs and approves all compensation policies.
Our policies are designed with the single goal of maximizing shareholder value
over long periods of time.

     The committee believes that this goal is best pursued by utilizing a
pay-for-performance program which serves to attract and retain superior
executive talent and provide management with performance-based incentives to
maximize shareholder value. Through the compensation program, the committee
seeks to maximize shareholder value by aligning closely the financial interests
of management with those of our shareholders. Compensation of our management
team consists primarily of three components: base salary, annual bonus and
long-term incentive awards. The level of compensation is based on numerous
factors, including achievement of underwriting results and financial objectives
established by our compensation committee and our board of directors.

     Long-term incentive awards provide for the granting to our executive
officers, and certain other principal employees, of various types of incentive
awards, some of which may be stock based. For example, we employ a performance
unit plan in which employees are granted units, each representing the fair value
of a common share. The payment to a participant of this fair value is dependent
on the achievement of specific goals relating to our underwriting performance,
generally over a three-year period or as otherwise determined by the
Compensation Committee. At the discretion of the compensation committee, payment
may take the form of common shares.

EMPLOYMENT-RELATED AGREEMENTS AND EXECUTIVE COMPENSATION

     The following information summarizes the employment-related agreements for
our Deputy Chairman, President and Chief Executive Officer and our four other
most highly compensated executive officers.

     Anthony Taylor.  We have entered into an employment agreement with Mr.
Taylor under which he has 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 agreement provides that Mr. Taylor shall be paid an
annual salary of L300,000 (approximately $432,000) which is subject to annual
increase or decrease (but not below L300,000) as determined by the Compensation
Committee of the board of directors, subject to ratification by the full board.
The agreement further provides that Mr. Taylor receive a housing allowance of
$132,000 per year. Mr. Taylor received a signing bonus of $400,000 upon entering
into the employment agreement.

     If Mr. Taylor's employment agreement is terminated prior to its 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 employment agreement, or
we terminate his agreement for cause, we will have no further obligations to Mr.
Taylor under the agreement.

     Mr. Taylor's agreement entitles him to participate in our annual bonus and
long-term incentive plans, which are described below, pursuant to which he has
been granted 13,114 units under the performance unit plan ("PUP") and options to
purchase 340,000 common shares. The options will vest over four years and have
an annually escalating exercise price, as follows: 85,000 options will vest on
December 31, 2002 with an exercise price of $100; 85,000 options will vest on
December 31, 2003 with an exercise price of $105; 85,000 options will vest on
December 31, 2004 with an exercise price of $110; and 85,000 options will vest
on December 31, 2005 with an exercise price of $115. The agreement also contains
provisions relating to confidentiality, non-competition and non-solicitation.

     C. Russell Fletcher III.  We have entered into an employment agreement with
Mr. Fletcher pursuant to which he has agreed to serve as our Chief Reinsurance
Officer and Executive Vice President and will be paid an annual salary of
$400,000 as well as a housing allowance of $144,000 per year. Mr. Fletcher's
employment agreement also entitles him to participate in our PUP plan, pursuant
to which he has been granted 9,835 units. The remaining material terms of Mr.
Fletcher's employment agreement are common to the other officers' employment
agreements and are described below.

     Thomas George Story Busher.  We have entered into an employment agreement
with Mr. Busher pursuant to which he has agreed to serve as our Chief Operating
Officer and Executive Vice President and will
                                        59
<PAGE>

be paid an annual salary of $300,000 as well as a housing allowance of $90,000
per year. Mr. Busher's employment agreement also entitles him to participate in
our PUP plan, pursuant to which he has been granted 5,245 units. The remaining
material terms of Mr. Busher's employment agreement are common to the other
officers' employment agreements and are described below.

     David Sinnott.  We have signed an offer letter, and expect to enter into a
similar employment agreement, with Mr. Sinnott pursuant to which he has agreed
to serve as our Chief International Underwriter and will be paid an annual
salary of $250,000 as well as a housing allowance of $90,000 per year. Mr.
Sinnott has also been awarded 3,934 units under our PUP plan. The remaining
material terms of Mr. Sinnott's employment agreement are common to the other
officers' employment agreements and are described below.

     Richard Chattock.  We have entered into an employment agreement with Mr.
Chattock pursuant to which he has agreed to serve as our Facultative Property
Underwriter and will be paid an annual salary of $243,000 as well as a housing
allowance of $90,000 per year. Mr. Chattock's employment agreement entitles him
to participate in our PUP plan, pursuant to which he has been granted 2,623
units. The remaining material terms of Mr. Chattock's employment agreement are
common to the other officers' employment agreements and are described below.

     Provisions Common to the Employment Agreements.  In addition to the
provisions described above, the employment agreements of Messrs. Fletcher,
Busher and Chattock each contain the following provisions. Each employment
agreement is continuous from January 1, 2002, except for Mr. Chattock's which is
from March 6, 2002, and 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 participate
in our annual bonus and long-term incentive plans described below.

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 Committee of
the board of directors. The Compensation 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 of a
specified number of common shares or an equivalent amount of cash. Grants are
generally earned, subject to the attainment of pre-specified performance goals,
at the end of a three-year period or as otherwise determined by the Compensation
Committee of the Board. The performance goal 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 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 other principal
employees. As of March 31, 2002, only Mr. Taylor had received options under the
plan. The options expire ten years after date of grant and require full payment
in cash prior to exercise. A maximum of 425,000 options may be granted under the
Share Option Plan. On January 8, 2002, the committee granted 340,000 options.
The numbers representing maximum options available for grant and options granted
exclude the effects of the anticipated share split.

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 May 21, 2002 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 named executive officers; and

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

<Table>
<Caption>
                                                            BENEFICIAL OWNERSHIP OF    BENEFICIAL OWNERSHIP OF
                                                             PRINCIPAL SHAREHOLDERS     PRINCIPAL SHAREHOLDERS
                                                            PRIOR TO THE OFFERING(1)    AFTER THE OFFERING(1)
                                                            ------------------------   ------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(2)                       NUMBER     PERCENTAGE      NUMBER     PERCENTAGE
---------------------------------------                     ----------   -----------   ----------   -----------
<S>                                                         <C>          <C>           <C>          <C>
White Mountains Insurance Group, Ltd.(3)..................  2,574,929        27.0%     1,800,000
  One Beacon Street
  Boston, MA 02108
Cypress Associates II (Cayman)(4).........................  1,500,000        17.2%     1,500,000
  65 East 55th Street, 28th Floor
  New York, New York 10022
Credit Suisse First Boston Private Equity, Inc. (5).......  1,200,000        13.7%     1,200,000
  11 Madison Avenue, 16th Floor
  New York, NY 10010
Vestar-Montpelier Associates L.P.(6)......................    750,000         8.6%       750,000
  c/o Walkers SPV Limited,
  Walker House, Mary Street
  P.O. Box 908 G.T.
  George Town, Grand Cayman
  Cayman Islands
Benfield Group plc(7).....................................    637,464         7.0%       637,464
  55 Bishopsgate
  London
  EC2N 3BD
  United Kingdom
Jack Byrne(8).............................................    100,000         1.1%       100,000
Allan W. Fulkerson(9).....................................    100,000         1.1%       100,000
Anthony Taylor(10)........................................     10,000           *         10,000
K. Thomas Kemp(11)........................................     10,000           *         10,000
John D. Gillespie(12).....................................     10,000           *         10,000
Allan L. Waters...........................................      5,000           *          5,000
C. Russell Fletcher.......................................      1,000           *          1,000
Tom Hutton................................................      1,000           *          1,000
Raymond M. Salter.........................................         --           *             --
William Spiegel...........................................         --           *             --
Steven J. Gilbert(13).....................................         --           *             --
Kamil M. Salame...........................................         --           *             --
Raymond Barrette..........................................         --           *             --
Thomas G.S. Busher........................................         --           *             --
David Sinnott.............................................         --           *             --
Richard Chattock..........................................         --           *             --
All directors and named executive officers as a group (16
  persons)................................................    237,000         2.7%       237,000
                                                            ---------       -----      ---------       -----
</Table>

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

  *  Less than 1%

 (1) 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. See "Description of Share Capital -- Voting Rights."

                                        61
<PAGE>

 (2) Unless otherwise stated, the address for each beneficial owner is c/o
     Montpelier Re Holdings Ltd., 30 Woodbourne Avenue, Pembroke HM HX, Bermuda.

 (3) Includes 150,000 common shares held by Camden Fire Insurance Company,
     1,350,000 common shares held by OneBeacon Insurance Company and 300,000
     common shares held by Pennsylvania General Insurance Company and warrants
     to purchase up to 774,929 common shares which are currently exercisable.

 (4) Includes 13,730 common shares held by 55th Street Partners II (Cayman)
     L.P., 1,422,785 common shares held by Cypress Merchant B Partners II
     (Cayman) L.P., 60,485 common shares held by Cypress Merchant Banking II-A.
     C.V. and 3,000 common shares held by Cypress Side-By-Side (Cayman) L.P.

 (5) Includes 7,852 common shares held by DLJ MB PartnersIII GmbH & Co. KG,
     63,951 common shares held by DLJ Offshore Partners III, C.V., 16,614 common
     shares held by DLJ Offshore Partners III-1, C.V., 11,834 common shares held
     by DLJ Offshore Partners III-2, C.V., 193,694 common shares held by
     Donaldson, Lufkin & Jenrette Securities Corporation, as nominee for Credit
     Suisse First Boston Private Equity, Inc., DLJ First ESC, L.P., EMA 2001
     Plan, L.P., Docklands 2001 Plan, L.P., Paradeplatz 2001 Plan, L.P. and CSFB
     2001 Investors, L.P. and 906,055 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.
     (formerly Donaldson Lufkin & Jenrette, Inc.) ("CSFB-USA"). The DLJ related
     entities named above (the "DLJ Related Entities") are direct and indirect
     subsidiaries of CSFB-USA and merchant banking funds advised by subsidiaries
     of CSFB-USA. Credit Suisse First Boston Corporation, one of the
     underwriters in this offering, is a direct subsidiary of CSFB-USA and
     itself does not hold any ownership interest in either Credit Suisse First
     Boston Private Equity, Inc. or any of the DLJ Related Entities.

 (6) Includes 9,402 common shares held by Vestar-Montpelier Employees Ltd.,
     734,350 common shares held by Vestar-Montpelier Holdings A L.P. and 6,247
     common shares held by Vestar-Montpelier Holdings B L.P.

 (7) Includes 387,464 warrants, which are currently exercisable.

 (8) Includes 10,000 common shares held by Dorothy Byrne, 50,000 common shares
     held by John J. Byrne, III, and 40,000 common shares held by Jack Byrne.
     Mr. Byrne is also the Chairman and Chief Executive Officer of White
     Mountains Insurance Group, Ltd., another one of our shareholders.

 (9) Includes 100,000 common shares held by Century Capital Partners II, L.P.
     ("Century"), to which Mr. Fulkerson disclaims beneficial ownership. Mr.
     Fulkerson is a general partner of the partnership that is the general
     partner of Century.

(10) Does not include options to purchase 340,000 common shares, which are not
     currently exercisable and which vest over four years.

(11) Includes 2,500 common shares held by Little Oak Hill Partnership.

(12) Includes 10,000 common shares held by Gillespie Family 2000, LLC.

(13) Includes 5,250 common shares held by GGEP-SK, LLC, 60,844 common shares
     held by Gilbert Global Equity Partners (Bermuda), L.P. and 333,906 common
     shares held by Gilbert Global Equity Partners, L.P.

                                        62
<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

     Investments by Our Founders.  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 entitling them to purchase 774,929 common shares and 387,464 common
shares, respectively. See "Description of Share Capital -- Warrants."

     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, $161,815 each, being repaid as of March 26, 2002.

     We have engaged OneBeacon Asset Management, a wholly owned indirect
subsidiary of White Mountains, to provide investment advisory and management
services. We have agreed to pay investment management 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%. A portfolio
of $1.0 billion would incur an annual fee of 0.18%. In addition, we have agreed
to reimburse fees and out-of-pocket expenses. These fees are included in net
investment income. This agreement may be terminated by either party upon 30 days
written notice. An amount of $73,733 was payable as of December 31, 2001 to
OneBeacon Asset Management for these services.

     We have also entered into an agreement with Remetrics, a subsidiary of
Benfield, for the provision of catastrophe modeling services. Under this
agreement, we accrued approximately $650,000 in expenses during the three months
ended March 31, 2002.

     In addition, we pay brokerage commissions to Benfield Greig Limited, a
subsidiary of Benfield, on business generated by Benfield Greig Limited. These
commissions were consistent with commissions that we pay to other brokers in the
ordinary course of business.

RELATIONSHIPS WITH STRATEGIC INVESTORS AND UNDERWRITERS

     Mr. Kamil M. Salame is a Director of the Private Equity Group of Credit
Suisse First Boston, which has the DLJ Merchant Banking PartnersIII, L.P.
private equity fund, an affiliate of which, Credit Suisse First Boston
Corporation, is acting as an underwriter in this offering.

     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. Under these
facilities, we have a revolving credit line with a $50 million borrowing limit
and have a three-year term loan of a $150 million. Credit Suisse First Boston,
an affiliate of Credit Suisse First Boston Corporation, one of the underwriters
in this offering, is also a lender in our credit facilities.

     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. We receive $0.7 million in aggregate annual premiums
from these contracts.

                                        63
<PAGE>

                          MATERIAL TAX CONSIDERATIONS

     The following summary of our taxation, the taxation of Montpelier Re and
the taxation of our shareholders 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
Shareholders -- 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" and "Taxation of Shareholders -- United
States Taxation" and "-- United States Taxation of Non-U.S. Shareholders" is the
opinion of Cahill Gordon & Reindel, New York, New York, special tax counsel (the
advice of such firms does not include any factual or accounting matters,
determinations or conclusions such as RPII (as defined below), amounts and
computations and amounts of components thereof (for example, amounts or
computations of income or expense items or reserves entering into RPII
computations) or facts relating to the business or activities 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 common shares.
The tax treatment of a holder of common shares, or of a person treated as a
holder of common shares 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 COMMON SHARES.

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 Undertakings Tax
Protection Act 1966, 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) 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.

                                        64
<PAGE>

     United States.  The Company and Montpelier Re currently intend to conduct
their operations such that they will not be engaged in a trade or business in
the United States in the future. 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 Internal Revenue Service ("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 be subject to U.S. income tax on any income found
to be effectively connected with a U.S. trade or business only if that trade or
business is conducted through a permanent establishment in the United States. No
regulations interpreting the Treaty have been issued. While there can be no
assurance, Montpelier Re currently intends to conduct its operations such that
it will not have a permanent establishment in the United States.

     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 immediately following the 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 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.  The Company does not believe that it or any
subsidiary will be considered a PHC 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. The PHC rules contain an
exception for non-U.S. corporations that are classified as Foreign Personal
Holding Companies (as discussed below).

                                        65
<PAGE>

     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 U.S.). Thus, the PHC income of the
Company and its non-US 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 immediately following the offering or 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 SHAREHOLDERS

  BERMUDA TAXATION

     Currently, there is no Bermuda withholding tax on dividends 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 common
shares. Unless otherwise stated, this summary deals only with shareholders that
are United States Persons (as defined below) who purchase their common shares in
this offering and who hold their common shares 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 shareholder
in light of such shareholder's specific circumstances. In addition, the
following summary does not describe the U.S. federal income tax consequences
that may be relevant to special classes of shareholders, 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, persons who are considered with respect to us
or Montpelier Re "United States shareholders" for purposes of the controlled
foreign corporation ("CFC") rules of the Code (generally, a United States
Person, as defined below, who owns or is deemed to own 10% or more of the total
combined voting power of all classes of our stock or the stock of Montpelier Re
entitled to vote), or persons who hold the common shares 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 common shares or the shareholders.
Persons considering making an investment in the common shares 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.

     If a partnership holds the common shares, 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 common shares, you
should consult your tax advisor.

                                        66
<PAGE>

     For purposes of this discussion, the term "United States Person" means a
person 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.

     Taxation of Dividends.  Subject to the discussions below relating to the
potential application of the RPII and PFIC rules, cash distributions, if any,
made with respect to the common shares will constitute dividends for U.S.
federal income tax purposes to the extent paid out of current or accumulated
earnings and profits of the Company (as computed using U.S. tax principles). To
the extent such distributions exceed the Company's earnings and profits, they
will be treated first as a return of the shareholder's basis in the common
shares to the extent thereof, and then as gain from the sale of a capital asset.

     Sale, Exchange or Other Disposition.  Subject to the discussions below
relating to the potential application of the RPII, PFIC and foreign personal
holding company ("FPHC") rules, holders of common shares generally will
recognize capital gain or loss for U.S. federal income tax purposes on the sale,
exchange or other disposition of common shares in the same manner as on the
sale, exchange or other disposition of any other shares held as capital assets.

     The RPII Provisions.  The following discussion generally is applicable only
if the Related Person Insurance Income ("RPII") of Montpelier Re, determined on
a gross basis, is 20% or more of Montpelier Re's gross insurance income for the
taxable year. The following discussion generally would not apply for any fiscal
year in which Montpelier Re's RPII falls below the 20% threshold. While there
can be no assurance, the Company believes that Montpelier Re's gross RPII as a
percentage of gross insurance income will be below the 20% threshold for the
foreseeable future.

     RPII Companies.  RPII is any "insurance income" (as defined in the Code)
attributable to policies of insurance or reinsurance with respect to which the
person (directly or indirectly) insured is a "United States shareholder" or a
"related person" to such a shareholder. Generally, the term "related person" for
this purpose means someone who controls or is controlled by the United States
shareholder or someone who is controlled by the same person or persons which
control the U.S. shareholder. Control is measured by either more than 50% in
value or more than 50% in voting power of stock applying certain constructive
ownership principles. A corporation's pension plan is ordinarily not a "related
person" with respect to the corporation unless the pension plan owns, directly
or indirectly through the application of certain constructive ownership rules,
more than 50% measured by vote or value, of the stock of the corporation. For
purposes of inclusion of Montpelier Re's RPII in the income of United States
shareholders, unless an exception applies, the term "United States shareholder"
includes any United States Persons who beneficially own any amount (rather than
stock possessing 10% or more of the total combined voting power) of Montpelier
Re's stock, and Montpelier Re will be treated as a CFC if such persons are
treated as owning 25% or more of the stock of Montpelier Re by vote or value.

     RPII Exceptions.  The special RPII rules do not apply if (A) direct and
indirect insureds and persons related to such insureds, whether or not United
States Persons, are treated as owning less than 20% of the voting power and less
than 20% of the value of the stock of Montpelier Re, (B) RPII, determined on a
gross basis, is less than 20% of Montpelier Re's gross insurance income for the
taxable year, (C) Montpelier Re elects to be taxed on its RPII as if the RPII
were effectively connected with the conduct of a U.S. trade or

                                        67
<PAGE>

business, or (D) Montpelier Re elects to be treated as a U.S. corporation. Where
none of these exceptions applies, each United States Persons owning or treated
as owning any stock in the Company (and therefore, indirectly, in Montpelier Re)
on the last day of the Company's fiscal year will be required to include in its
gross income for U.S. federal income tax purposes its share of the RPII for the
portion of the taxable year during which Montpelier Re was a CFC under the RPII
provisions, determined as if all such RPII were distributed proportionately only
to such United States Persons at that date, but limited by each such United
States Person's share of Montpelier Re's current-year earnings as reduced
profits by the United States Person's share, if any, of certain prior-year
deficits in earnings and profits.

     Computation of RPII.  In order to determine how much RPII the Company has
earned in each fiscal year, the Company may obtain and rely upon information
from its insureds to determine whether any of the insureds or persons related to
such insureds own shares of the Company and are U.S. Persons. For any year in
which Montpelier Re's gross RPII is 20% or more of Montpelier Re's gross
insurance income for the year, the Company may also seek information from its
shareholders as to whether beneficial owners of common shares at the end of the
year are United States Persons so that the RPII may be determined and
apportioned among such persons; to the extent the Company is unable to determine
whether a beneficial owner of shares is a United States Person, the Company may
assume that such owner is not a United States Person, thereby increasing the per
share RPII amount for all known United States shareholders.

     If, as believed, RPII is less than 20% of gross insurance income, United
States shareholders will not be required to include RPII in their taxable
income. The amount of RPII includable in the income of a United States
shareholder is based upon the net RPII income for the year after deducting
related expenses such as losses, loss reserves and operating expenses.

     Apportionment of RPII to U.S. Shareholders.  Every United States Person who
owns common shares on the last day of any fiscal year of the Company in which
Montpelier Re's gross insurance income constituting RPII for that year equals or
exceeds 20% of Montpelier Re's gross insurance income should expect that for
such year it will be required to include in gross income its share of Montpelier
Re's RPII for the portion of the taxable year during which Montpelier Re was a
CFC under the RPII provisions, whether or not distributed, even though it may
not have owned the shares throughout such period. A United States Person who
owns common shares during such fiscal year but not on the last day of the fiscal
year is not required to include in gross income any part of Montpelier Re's
RPII.

     Basis Adjustments.  A United States shareholder's tax basis in its common
shares will be increased by the amount of any RPII that the shareholder includes
in income. The shareholder may exclude from income the amount of any
distributions by the Company to the extent of the RPII included in income for
the year in which the distribution was paid or for any prior year. The United
States shareholder's tax basis in its common shares will be reduced by the
amount of such distributions that are excluded from income.

     Dispositions of common shares.  The Code provides that any gain from the
sale or exchange of shares of a foreign corporation that earns any RPII and that
would be treated as an insurance company if it were a U.S. corporation may be
treated as ordinary income to the extent of a United States shareholder's share
of the corporation's earnings and profits during the period that the shareholder
held the shares (with certain adjustments) and while such entity was a CFC. A
United States shareholder may in certain circumstances be required to report a
disposition of shares of such a CFC by attaching IRS Form 5471 to the U.S.
income tax or information return that it would normally file for the taxable
year in which the disposition occurs. Existing Treasury Department regulations
do not address whether these rules would apply when the foreign corporation
(such as the Company) is not a CFC but the foreign corporation has a subsidiary
(such as Montpelier Re) that is a CFC or that would be taxed as an insurance
company if it were a domestic corporation.

     The Company believes that these rules will not apply to dispositions of
common shares because the Company will not have any 10% voting shareholders as a
result of the offering of common shares and the Company will not be directly
engaged in the insurance business, and that the proposed regulations issued by
the U.S. Treasury Department should be interpreted in this manner. There can be
no assurance, however, that the IRS will interpret the proposed regulations in
this manner or that the Treasury Department will not amend the proposed
regulations to provide that these rules will apply to dispositions of common
shares.
                                        68
<PAGE>

     The Company will notify shareholders if the IRS or Treasury Department take
such action. Thereafter, the Company will send a notice after the end of each
calendar year to all persons who were shareholders during the year notifying
them that these rules will apply to dispositions of common shares. The Company
will attach to this notice a copy of Form 5471 completed with all Company
information and instructions for completing the shareholder information.

     Uncertainty as to Application of RPII.  The RPII provisions of the Code
have never been interpreted by the courts or the U.S. Treasury Department.
Regulations interpreting the RPII provisions of the Code exist only in proposed
form. It is not certain whether these regulations will be adopted in their
proposed form or what changes or clarifications might ultimately be made thereto
or whether any such changes, as well as any interpretation or application of
RPII by the IRS, the courts or otherwise, might have retroactive effect. The
description of RPII herein is therefore qualified. Accordingly, the meaning of
the RPII provisions and the application thereof to the Company and Montpelier Re
is uncertain. These provisions include the grant of authority to the U.S.
Treasury Department to prescribe "such regulations as may be necessary to carry
out the purpose of this subsection including . . . regulations preventing the
avoidance of this subsection through cross insurance arrangements or otherwise."
In addition, there can be no assurance that the amounts of the RPII inclusions
will not be subject to adjustment based upon subsequent IRS examination. Each
United States Person who is considering an investment in common shares should
consult his tax advisor as to the effects of these uncertainties.

     Passive Foreign Investment Companies.  The Company believes that it will
not be considered a "passive foreign investment company" or, PFIC, for U.S.
federal income tax purposes. The PFIC statutory provisions contain special rules
for corporations engaged in the "active conduct of an insurance business";
however, there are no regulations interpreting the application of the PFIC rules
to an insurance company and there is no explicit guidance on the application of
these provisions to the Company's situation. Regulations interpreting these
rules may be forthcoming and could have a negative impact on a United States
Person who holds common shares. Because of the uncertainty in the proper
application of these rules and because PFIC status depends upon the composition
of a company's income and assets and the market value of its assets (including,
among others, less than 25 percent owned equity investments) from time to time,
there can be no assurance that the Company will not be considered a PFIC for any
taxable year. If the Company were treated as a PFIC for any taxable year during
which a United States Person held common shares, certain adverse consequences
could apply, including a material increase in the amount of tax that the United
States Person would owe, an imposition of tax earlier than it would otherwise be
imposed and additional tax form filing requirements. Each United States Person
who is considering an investment in common shares should consult his tax advisor
as to the effects of these rules.

     Foreign Personal Holding Companies.  The Company believes that neither it
nor any of its subsidiaries will be classified as a FPHC. A non-U.S. corporation
will not be classified as a FPHC for U.S. federal income tax purposes unless, at
some time during the taxable year at issue, five or fewer individuals who are
U.S. citizens or residents own or are deemed to own (pursuant to certain
constructive ownership rules) more than 50% of all classes of the corporation's
stock measured by voting power or value. For purposes of this test, all of the
common shares owned by an investment partnership will be attributed to each of
its partners, if any, who are individuals. Depending on the Company's
shareholder base, the Company and its subsidiaries could satisfy the FPHC
ownership test immediately following the offering or in the future. If the
Company or any of its subsidiaries were to become FPHCs, a portion of the
"undistributed foreign personal holding company income" (as defined for U.S.
federal income tax purposes) of each such FPHC would be imputed to all of the
Company's shareholders who are United States Persons. Such income would be
taxable as a dividend, even if no cash dividend were actually paid. In such
event, subsequent cash distributions will first be treated as a tax-free return
of any previously taxed and undistributed amounts. In addition, in such case,
upon the death of any U.S. individual owning common shares, such individual's
heirs or estate would not be entitled to a "step-up" in the basis of the common
shares which might otherwise be available under U.S. federal income tax laws.
There can be no assurance that the Company and each of its subsidiaries will not
become FPHCs because of factors including legal and factual uncertainties
regarding the application of the constructive ownership rules,

                                        69
<PAGE>

the makeup of the Company's shareholder base and other circumstances that could
change the application of the FPHC rules to the Company and its subsidiaries.

     Information Reporting and Backup Withholding.  Information returns may be
filed with the IRS in connection with distributions on the common shares and the
proceeds from a sale or other disposition of the common shares unless the holder
of the common shares establishes an exemption from the information reporting
rules. A holder of common shares 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 United States Person will be allowed as a credit against the United States
Person's U.S. federal income tax liability and may entitle the United States
Person to a refund, provided that the required information is furnished to the
IRS.

  OTHER TAX LAWS

     Shareholders should consult their own tax advisors with respect to the
applicability to them of the tax laws of other jurisdictions.

                                        70
<PAGE>

                          DESCRIPTION OF SHARE CAPITAL

GENERAL

     Upon the completion of this offering, our authorized share capital will
consist of 200,000,000 common shares, at a $0.01 par value per share, of which
          common shares will be issued and outstanding (          common shares
if the underwriters exercise their over-allotment option in full). Under certain
circumstances, we have the right to purchase all or a portion of our common
shares held by shareholders. See "-- Acquisition of Common Shares by the
Company" below. When issued and paid for, all of the common shares sold pursuant
to this offering will be fully paid and nonassessable. As of May 1, 2002, there
were approximately 90 holders of record of our common shares. The following
summary of our share capital is qualified in its entirety by reference to our
memorandum of association and bye-laws, the shareholders agreement and the
warrants.

     Holders of our common shares have no preemptive, redemption, conversion or
sinking fund rights. In the event of our liquidation, dissolution or winding-up,
the holders of our common shares are entitled to share equally and ratably in
our assets, if any remain after the payment of all our debts and liabilities and
the liquidation preference of any outstanding preferred shares.

VOTING RIGHTS

     In general, and except as provided below, shareholders have one vote for
each common share held by them and are entitled to vote, on a non-cumulative
basis, at all meetings of shareholders. If, and so long as, the "controlled
shares" (as defined below) of any person would otherwise represent more than
9.5% of the voting power of all of the shares entitled to vote generally at an
election of directors, then the votes conferred by the controlled shares owned
by such person shall be reduced by whatever amount is necessary so that after
any such reduction the votes conferred by the controlled shares of such person
shall constitute 9.5% of the total voting power of all the shares entitled to
vote generally at any election of directors as set forth in our bye-laws. In
addition, our board may adjust a shareholder's voting rights to the extent that
the board reasonably determines in good faith that it is necessary to do so to
avoid adverse tax consequences or materially adverse legal or regulatory
treatment to us or any subsidiary. "Controlled shares" shall include, among
other things, all common shares that a person is deemed to beneficially own
directly, indirectly or constructively (within the meaning of Section 958 of the
Internal Revenue Code).

     Pursuant to our bye-laws, our shareholders have certain rights with respect
to the election and removal of directors of Montpelier Re. See
"-- Bye-laws -- Shareholder Action."

     We are authorized to require any shareholder to provide information as to
that shareholder's beneficial share ownership, the names of persons having
beneficial ownership of the shareholder's shares, relationships with other
shareholders or any other facts the directors may deem relevant to a
determination of the number of common shares attributable to any person. We may,
in our reasonable discretion, disregard the votes attached to shares of any
holder failing to respond to such a request or submitting incomplete or
inaccurate information.

RESTRICTIONS ON TRANSFER OF COMMON SHARES OR WARRANTS

     Although our board of directors may decline to register certain transfers
of shares, pursuant to our bye-laws, our board is required to register any
transfer settled on a stock exchange or automated quotation system on which
shares are listed or traded from time to time. Except in connection with the
settlement of trades or transactions entered into through the facilities of a
stock exchange or automated quotation system on which the shares are listed or
traded from time to time, our board may generally require any shareholder or any
person proposing to acquire our shares or warrants to provide the information
required under our bye-laws. If any such shareholder or proposed acquiror does
not provide such information, or if the board has reason to believe that any
certification or other information provided pursuant to any such request is
inaccurate or incomplete, the board may decline to register any transfer or to
effect any issuance or purchase of shares or warrants to which such request is
related. Although these restrictions on transfer will not interfere with the

                                        71
<PAGE>

settlement of trades on NASDAQ, we may decline to register transfers in
accordance with our bye-laws and board resolutions after a settlement has taken
place.

     The restrictions on transfer and voting restrictions described above may
have the effect of delaying, deferring or preventing a change in control of our
company.

ACQUISITION OF COMMON SHARES BY THE COMPANY

     Under our bye-laws and subject to Bermuda law, we have the option, but not
the obligation, to require a shareholder to sell to us at fair market value the
minimum number of common shares which is necessary to avoid or cure any adverse
tax consequences or materially adverse regulatory or legal treatment to us, our
subsidiaries or our shareholders if we reasonably determine, in good faith, that
failure to exercise our option would result in such adverse consequences or
treatment.

ISSUANCE OF SHARES

     Subject to our bye-laws and Bermuda law, our board has the power to issue
any of our shares as it determines, including the issuance of any shares or
class of shares with preferred, deferred or other special rights. Subject to
certain exceptions in the shareholders agreement, we will not issue additional
equity securities or securities exercisable for or convertible or exchangeable
into equity securities without the approval of a majority of the votes conferred
by the issued and outstanding common shares entitled to vote (after taking into
account any voting reduction as set forth in our bye-laws). We may issue
additional securities without such approval in certain circumstances, including
any issuance by us pursuant to an underwritten public offering having a proposed
aggregate offering price of at least $75 million.

SHAREHOLDERS AGREEMENT

     We entered into a shareholders agreement with all of our existing
shareholders at the time of their original investment. Except for specific
provisions described below which survive termination, the shareholders agreement
will generally terminate upon the earliest of (i) this initial public offering,
(ii) consent among us and the shareholders, (iii) an exchange of a third party's
securities for all of our common shares, (iv) our liquidation or dissolution or
(v) December 12, 2011.

     The shareholders agreement, together with the bye-laws, define the rights
and obligations of existing shareholders party to the shareholders agreement
with respect to the transfer of common shares, our corporate governance and
related matters. The shareholders agreement may be amended only with our consent
and the consent of the holders of at least a majority (or higher in certain
circumstances) of the common shares held by shareholders party to the
shareholders agreement. Amendments which adversely affect the rights,
obligations or tax treatment of any shareholder shall in general not be
effective unless: (i) signed by shareholders holding at least 75% of the common
shares then held by shareholders party to the shareholders agreement; (ii) all
similarly situated shareholders are proportionately adversely affected; and
(iii) the amendment is approved by at least 75% of the adversely affected
shareholders.

     Pursuant to the terms of our shareholders agreement, if any existing
shareholder (or group of existing shareholders) proposes to sell 20% or more of
our outstanding shares within the first 18 months following the date of this
prospectus, then the other shareholders will have the right to participate
proportionately in such sale.

     At any time after the date of this prospectus, existing shareholders who
are party to the shareholders agreement who hold 15% of the issued and
outstanding shares entitled to vote (or 20% after the first such request), will
have the right to request registration for a public offering of common shares.
We will use our best efforts to cause the prompt registration of common shares,
but will not be required to file a registration statement if the proposed
offering is not an appropriate size, if the managing underwriter determines that
a registration would be adverse to another proposed offering for a period of
time, if we hold material non-public information that our board determines we
should not disclose (for a period of time) or if we have filed a registration
statement within a period of time before the proposed registration. If the
number of common

                                        72
<PAGE>

shares to be sold in the offering is limited by the managing underwriter, then
the number of shares requested to be registered will be allocated, pro rata,
among the requesting shareholders.

     The shareholders agreement provides that neither we, nor the existing
shareholders party to the shareholders agreement, will offer, sell, or otherwise
dispose of any common shares or other securities convertible or exchangeable for
common shares for a specified period of time, not to exceed 180 days after the
date of this prospectus or, in the case of all other offerings, 90 days
following the effective date of the corresponding registration statement.

BYE-LAWS

     The following provisions are a summary of some of the other important
provisions of our bye-laws.

     Our Board and Corporate Action.  Our bye-laws provide that the board shall
consist of 5 directors, or such larger number agreed by the shareholders,
divided into three approximately equal classes. Currently, the board has three
Class A directors with an initial 2 year term, four Class B directors with an
initial 3 year term and four Class C directors with an initial 4 year term.
After the initial respective terms of these directors, the term of each class of
directors shall be 3 years. Shareholders may only remove a director for
specified reasons under our bye-laws, including willful misconduct, fraud or
other criminal conduct, prior to the expiration of such director's term. The
reappointment of a director requires the affirmative vote of shareholders
holding at least a majority of the total combined voting power of all of our
issued and outstanding shares at a meeting of shareholders. A special meeting of
shareholders may be convened by the President, the Chairman, any two directors,
any director and the Secretary, or the board. Our bye-laws also provide that the
board shall convene a special general meeting at the requisition of shareholders
holding at the date of the deposit of the requisition not less than 10% of the
total combined voting power of all of our issued and outstanding shares carrying
the right to vote at our general meetings.

     Generally, the affirmative vote of a majority of the directors present at
any meeting at which a quorum is present shall be required to authorize
corporate action provided that no director participates in the meeting from
within the United States or the United Kingdom. Corporate action may also be
taken by a unanimous written resolution of the board without a meeting, provided
that the last director to sign the written resolution does so outside of the
U.S. and U.K. A quorum shall be a majority of the directors in office from time
to time, provided that in no event shall it be less than 3 directors.

     Shareholder Action.  At any general meeting, two or more persons present in
person and representing more than 50% of the total combined voting power of all
of our issued and outstanding shares throughout the meeting shall constitute a
quorum for the transaction of business. In general, any action that we may take
by resolution in a general meeting may, without a meeting, be taken by a
resolution in writing signed by all of the shareholders entitled to attend such
meeting and vote on the resolution. In general, any question proposed for the
consideration of the shareholders at any general meeting shall be decided by the
affirmative votes of a majority of the votes cast in accordance with the
bye-laws.

     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 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. The bye-laws of Montpelier Re provide that the only persons
eligible to be elected as Montpelier Re's directors are those persons who first
have been elected by the shareholders of the Company as designated directors in
accordance with the Company's bye-laws (including any limitation on voting
rights).

     Amendment.  The bye-laws may only be amended by a resolution adopted by the
board and by resolution of the shareholders.

                                        73
<PAGE>

WARRANTS

     The following table shows the number of warrants to purchase common shares
currently outstanding:

<Table>
<Caption>
                                    WARRANTS TO    PERCENTAGE OF
                                      ACQUIRE         COMMON       EXERCISE
HOLDER                             COMMON SHARES     SHARES(1)      PRICE       EXPIRATION
------                             -------------   -------------   --------   ---------------
<S>                                <C>             <C>             <C>        <C>
White Mountains Insurance Group
  Limited........................      774,929          7.8%         $100     January 3, 2012
Benfield Group plc...............      387,464          3.9          $100     January 3, 2012
Banc of America Securities LLC...       24,217          0.2          $100     January 3, 2007
                                     ---------         ----
  Total..........................    1,186,610         11.9%
</Table>

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

(1) Percentages are based upon current outstanding shares of 8,740,000 plus the
    1,186,610 common shares issuable upon exercise of outstanding warrants. If
    the warrants were immediately exercised for cash, White Mountains and its
    subsidiaries, Benfield and Banc of America would own 28.6%, 6.6% and 2.8%,
    respectively, of our common shares.

     The warrants included in the table above will expire either five or ten
years from the date of issue depending on the grant terms, will be exercisable
at a price per share of $100, equal to the price per share paid by investors in
our initial private offering, and may be settled using either the physical
settlement or net-share settlement methods.

     White Mountains and Benfield may exercise their warrants in whole or in
part. Subject to Bermuda law, White Mountains and Benfield have the option to
exercise their warrants on a cashless basis, in which case the warrant holder
will receive a reduced number of common shares. The exercise price and number of
such shares for each warrant will be subject to adjustment in respect of certain
events. In certain of these events, the warrant holders will receive the right
to receive the full intrinsic time value of the warrants instead of the assets
acquirable and receivable upon exercise. In the event we pay cash or stock
dividends or other distributions to our shareholders, the warrant holders will
also be entitled to such dividends or distributions. The shareholders agreement
contains registration rights for warrant holders similar to those applicable to
holders of our common shares, as set forth in the shareholders agreement. Each
warrant holder will have a right of first refusal to any transfer of any other
warrants, after which we, and then the signatories to the shareholders
agreement, will have such right of first refusal on any remaining portion
proposed to be sold.

DIFFERENCES IN CORPORATE LAW

     The Companies Act, which applies to us, differs in certain material
respects from laws generally applicable to United States corporations and their
shareholders. Set forth below is a summary of certain significant provisions of
the Act (including modifications adopted pursuant to our bye-laws) applicable to
us which differ in certain respects from provisions of the State of Delaware
corporate law. Because the following statements are summaries, they do not
address all aspects of Bermuda law that may be relevant to us and our
shareholders.

     Interested Directors.  Bermuda law and our bye-laws provide that any
transaction entered into by us in which a director has an interest is not
voidable by us nor can such director be liable to us for any profit realized
pursuant to such transaction provided the nature of the interest is disclosed at
the first opportunity at a meeting of directors, or in writing to the directors.
Under Delaware law, such transaction would not be voidable if (1) the material
facts as to such interested director's relationship or interests are disclosed
or are known to the board of directors and the board in good faith authorizes
the transaction by the affirmative vote of a majority of the disinterested
directors, (2) such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the transaction is
specifically approved in good faith by vote of the majority of shares entitled
to vote thereon or (3) the transaction is fair as to the corporation as of the
time it is authorized, approved or ratified. Under Delaware law, such interested
director could be held liable for a transaction in which such director derived
an improper personal benefit.

                                        74
<PAGE>

     Mergers and Similar Arrangements.  We may acquire the business of another
Bermuda exempted company or a company incorporated outside Bermuda when such
business purpose is within our objects as set forth in our Memorandum of
Association. We may, with the approval of a majority of votes cast at a general
meeting of our shareholders at which a quorum is present, amalgamate with
another Bermuda company or with a body incorporated outside Bermuda. In the case
of an amalgamation, a shareholder may apply to a Bermuda court for a proper
valuation of such shareholder's shares if such shareholder is not satisfied that
fair value has been paid for such shares. The court ordinarily would not
disapprove the transaction on that ground absent evidence of fraud or bad faith.
Under Delaware law, with certain exceptions, a merger, consolidation or sale of
all or substantially all the assets of a corporation must be approved by the
board of directors and a majority of the outstanding shares entitled to vote
thereon. Under Delaware law, a stockholder of a corporation participating in
certain major corporate transactions may, under certain circumstances, be
entitled to appraisal rights pursuant to which such stockholder may receive cash
in the amount of the fair value of the shares held by such stockholder (as
determined by a court) in lieu of the consideration such stockholder would
otherwise receive in the transaction.

     Takeovers.  Bermuda law provides that where an offer is made for shares of
a company and, within four months of the offer, the holders of not less than 90%
of the shares which are the subject of the offer accept, the offeror may by
notice require the nontendering shareholders to transfer their shares on the
terms of the offer. Dissenting shareholders may apply to the court within one
month of the notice objecting to the transfer. The burden is on the dissenting
shareholders to show that the court should exercise its direction to enjoin the
required transfer, which the court will be unlikely to do unless there is
evidence of fraud or bad faith or collusion between the offeror and the holders
of the shares who have accepted the offer as a means of unfairly forcing out
minority shareholders. Delaware law provides that a parent corporation, by
resolution of its board of directors and without any stockholder vote, may merge
with any subsidiary of which it owns at least 90% of each class of capital
stock. Upon any such merger, dissenting stockholders of the subsidiary would
have appraisal rights.

     Shareholders' Suits.  The rights of shareholders under Bermuda law are not
as extensive as the rights of shareholders under legislation or judicial
precedent in many United States jurisdictions. Class actions and derivative
actions are generally not available to shareholders under the laws of Bermuda.
However, the Bermuda courts ordinarily would be expected to follow English case
law precedent, which would permit a shareholder to commence an action in our
name to remedy a wrong done to us where the act complained of is alleged to be
beyond our corporate power or is illegal or would result in the violation of our
Memorandum of Association or bye-laws. Furthermore, consideration would be given
by the court to acts that are alleged to constitute a fraud against the minority
shareholders or where an act requires the approval of a greater percentage of
our shareholders than actually approved it. The winning party in such an action
generally would be able to recover a portion of attorneys' fees incurred in
connection with such action. Our bye-laws provide that shareholders waive all
claims or rights of action that they might have, individually or in our right,
against any of our directors or officers for any act or failure to act in the
performance of such director's or officer's duties, except with respect to any
fraud or dishonesty of such director or officer. Class actions and derivative
actions generally are available to stockholders under Delaware law for, among
other things, breach of fiduciary duty, corporate waste and actions not taken in
accordance with applicable law. In such actions, the court generally has
discretion to permit the winning party to recover attorneys' fees incurred in
connection with such action.

     Indemnification of Directors.  We may indemnify our directors, officers or
any other person appointed to a board committee in their capacity as such in
respect of any loss arising or liability attaching to them by virtue of any rule
of law in respect of any action, damages or expenses brought against or incurred
by such person in or about the execution of such person's duty or supposed duty,
or in such person's respective office, other than in respect of such person's
own fraud or dishonesty. Under Delaware law, a corporation may indemnify a
director or officer of the corporation against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in defense of an action, suit or proceeding by reason of such position
if (i) such director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and (ii) with respect to any criminal action or proceeding, such
director or officer had no reasonable cause to believe his conduct was unlawful.

                                        75
<PAGE>

     Inspection of Corporate Records.  Members of the general public have the
right to inspect our public documents available at the office of the Registrar
of Companies in Bermuda and our registered office in Bermuda, which will include
our Memorandum of Association (including its objects and powers) and any
alteration to our Memorandum of Association and documents relating to any
increase or reduction of authorized capital. Our shareholders have the
additional right to inspect our bye-laws, minutes of general meetings and
financial statements, which must be presented to the annual general meeting of
shareholders. The register of our shareholders is also open to inspection by
shareholders without charge, and to members of the public for a fee. We are
required to maintain our share register in Bermuda but may establish a branch
register outside of Bermuda. We are required to keep at our registered office a
register of its directors and officers which is open for inspection by members
of the public without charge. Bermuda law does not, however, provide a general
right for shareholders to inspect or obtain copies of any other corporate
records. Delaware law permits any shareholder to inspect or obtain copies of a
corporation's shareholder list and its other books and records for any purpose
reasonably related to such person's interest as a shareholder.

                                        76
<PAGE>

                        SHARES ELIGIBLE FOR FUTURE SALE

     Upon completion of the offering we will have a total of      common shares
outstanding. All of the
shares (     shares if the underwriters exercise the over-allotment option in
full) sold in the offering will be freely tradeable without restriction or
further registration under the Securities Act by persons other than our
"affiliates." Under the Securities Act, an "affiliate" of a company is a person
that directly or indirectly controls, is controlled by, or is in common control
with that company.

     The remaining      common shares outstanding will be "restricted
securities" within the meaning of Rule 144 under the Securities Act and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the exemptions contained in
Rule 144.

     In general, under Rule 144, a person (or persons whose shares are
aggregated), including any person who may be deemed our affiliate, is entitled
to sell within any three-month period, a number of restricted securities that
does not exceed the greater of 1% of the then outstanding shares of common stock
and the average weekly trading volume in the over-the-counter market during the
four calendar weeks preceding each such sale, provided that at least one year
has elapsed since such shares were acquired from us or any affiliate of ours and
certain manner of sale, notice requirements and requirements as to availability
of current public information about us are satisfied. Any person who is deemed
to be our affiliate must comply with the provisions of Rule 144 (other than the
one-year holding period requirement) in order to sell shares of common stock
which are not restricted securities (such as shares acquired by affiliates
either in the offering or through purchases in the open market following the
offering). In addition, under Rule 144(k), a person who is not our affiliate,
and who has not been our affiliate at any time during the 90 days preceding any
sale, is entitled to sell such shares without regard to the foregoing
limitations, provided that at least two years have elapsed since the shares were
acquired from us or any affiliate of ours.

     Pursuant to the shareholders agreement, our initial investors have certain
demand registration rights which will continue to apply to all of such shares
after the offering. At any time after this offering subject to exceptions, such
shareholders may request that we file a registration statement under the
Securities Act covering their shares, subject to certain minimum offering size
requirements. Upon receipt of any such request, we generally will be required to
use our best efforts to effect such registration. We are not required to effect
any registration requested by any such shareholders if we have effected two or
more registration statements for such shareholders or if we have effected any
registration (other than on Form S-3 or any successor form relating to secondary
offerings) within six months prior to such request. We are generally obligated
to bear the expenses, other than underwriting discounts and sales commissions,
of all such registrations.

     Pursuant to the shareholders agreement, our initial investors also have
certain "piggyback" registration rights with respect to our common shares.
Accordingly, if we propose to register any of our securities, either for our own
account or for the account of other shareholders, with certain exceptions, we
are required to notify such shareholders and to include in such registration all
the common shares requested to be included by them, subject to rejection of such
shares under certain circumstances by an underwriter.

     No prediction can be made as to the effect, if any, future sales of shares,
or the availability of shares for future sales, will have on the market price of
our common shares prevailing from time to time. The sale of substantial amounts
of our common shares in the public market, or the perception that such sales
could occur, could harm the prevailing market price of our common shares.

                                        77
<PAGE>

                                  UNDERWRITERS

     Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, Credit
Suisse First Boston Corporation and J.P. Morgan Securities Inc. are acting as
representatives, have severally agreed to purchase, and Montpelier Re Holdings
Ltd. has agreed to sell to them, the number of common shares indicated below:

<Table>
<Caption>
NAME                                                           NUMBER OF SHARES
----                                                           ----------------
<S>                                                            <C>
Morgan Stanley & Co. Incorporated...........................
Banc of America Securities LLC..............................
Credit Suisse First Boston Corporation......................
J.P. Morgan Securities Inc..................................

                                                                   --------
     Total..................................................
                                                                   ========
</Table>

     The underwriters are offering the common shares subject to their acceptance
of the common shares from Montpelier Re Holdings Ltd. [and subject to prior
sale]. The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the common shares offered by this
prospectus are subject to the approval of certain legal matters by their counsel
and to certain other conditions. The underwriters are obligated to take and pay
for all of the common shares offered by this prospectus if any such common
shares are taken. However, the underwriters are not required to take or pay for
the common shares covered by the underwriters' over-allotment option described
below.

     The underwriters initially propose to offer part of the common shares
directly to the public at the public offering price listed on the cover page of
this prospectus and part to certain dealers at a price that represents a
concession not in excess of $          a common share under the public offering
price. Any underwriter may allow, and such dealers may reallow, a concession not
in excess of $          a common share to other underwriters or to certain
dealers. After the initial offering of the common shares, the offering price and
other selling terms may from time to time be varied by the representatives of
the underwriters.

     We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional common
shares at the public offering price set forth on the cover page of this
prospectus, less underwriting discounts and commissions. The underwriters may
exercise this option solely for the purpose of covering over-allotments, if any,
made in connection with the offering of the common shares offered by this
prospectus. To the extent the option is exercised, each underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of the additional common shares as the number listed next to the
underwriter's name in the preceding table bears to the total number of common
shares listed next to the names of all underwriters in the preceding table. If
the underwriters' option is exercised in full, the total price to the public
would be $          assuming an initial public offering price of $     per
share, the total underwriters' discounts and commissions would be $          and
total proceeds to us would be $          .

     Our estimated offering expenses, in addition to the underwriting discounts
and commissions, are approximately $          , which includes legal, accounting
and printing costs and various other fees associated with registration and
quotation of the common shares.

     The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.

     We have made an application to have the common shares approved, subject to
official notice of issuance, for quotation on the Nasdaq National Market under
the symbol "MRHL."

                                        78
<PAGE>

     Each of the Company, the directors and executive officers of our Company,
and certain other shareholders of the Company has agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, it will not, during the period ending 180 days after the date of
this prospectus:

     - offer, pledge, sell, contract to sell, sell any option or contract to
       purchase, purchase any option or contract to sell, grant any option,
       right or warrant to purchase, lend, or otherwise transfer or dispose of,
       directly or indirectly, any common shares or any securities convertible
       into or exercisable or exchangeable for common shares; or

     - enter in any swap or other arrangement that transfers to another, in
       whole or in part, any of the economic consequences of ownership of the
       common shares;

whether any such transaction is to be settled by delivery of common shares or
such other securities, in cash or otherwise. The restrictions described in this
paragraph do not apply to:

     - the sale of common shares to the underwriters;

     - the issuance by the Company of common shares upon the exercise of an
       option or a warrant or the conversion of a security outstanding on the
       date of this prospectus of which the underwriters have been advised in
       writing;

     - transactions by any person other than the Company relating to common
       shares or other securities acquired in open market transactions after the
       completion of the offering of the common shares; and

     - transfers by any person other than the Company to an affiliate of such
       person, a family member of such person or a trust created for the benefit
       of such person or family member, provided that any transferee agrees to
       be bound by the transfer restrictions described here and subject to
       certain other conditions.

     In order to facilitate the offering of the common shares, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common shares. Specifically, the underwriters may sell more common
shares than they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short position is no
greater than the number of common shares available for purchase by the
underwriters under the over allotment option. The underwriters can close out a
covered short sale by exercising the over allotment option or purchasing common
shares in the open market. In determining the source of common shares to close
out a covered short sale, the underwriters will consider, among other things,
the open market price of common shares compared to the price available under the
over allotment option. The underwriters may also sell common shares in excess of
the over allotment option, creating a naked short position. The underwriters
must close out any naked short position by purchasing common shares in the open
market. A naked short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the price of the common
shares in the open market after pricing that could adversely affect investors
who purchase in the offering. As an additional means of facilitating the
offering or to cover any over allotments, the underwriters may bid for, and
purchase, common shares in the open market to stabilize the price of the common
shares. The underwriting syndicate may also reclaim selling concessions allowed
to an underwriter or a dealer for distributing the common shares in the
offering, if the syndicate repurchases previously distributed common shares to
cover syndicate short positions or to stabilize the price of the common shares.
These activities may raise or maintain the market price of the common shares.
The underwriters are not required to engage in these activities, and may end any
of these activities at any time.

     It is anticipated that Morgan Stanley DW Inc., an affiliate of Morgan
Stanley & Co. Incorporated, through Morgan Stanley Online, its online service,
may be a member of the syndicate and engage in electronic offers, sales and
distribution of the shares being offered. A prospectus in electronic format may
be made available on the web sites maintained by one or more underwriters. The
underwriters may agree to allocate a number of shares to underwriters for sale
to their online brokerage account holders.

     We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.
                                        79
<PAGE>

RELATIONSHIPS WITH UNDERWRITERS

     From time to time certain of the underwriters have provided us, and
continue to provide us, with commercial, investment banking and other financial
services. In addition, affiliates of Banc of America Securities LLC and
subsidiaries of Credit Suisse First Boston Private Equity, Inc., an affiliate of
Credit Suisse First Boston Corporation, currently own 2.9% and 13.7%
respectively, of the outstanding common shares of the Company. In addition,
Kamil M. Salame, one of our directors, is a Director of the Private Equity Group
of Credit Suisse First Boston, which has the DLJ Merchant Banking PartnersIII,
L.P. private equity fund, an affiliate of Credit Suisse First Boston
Corporation.

PRICE OF THE OFFERING

     Prior to this offering, there has been no public market for the common
shares. The initial public offering price will be determined by negotiations
between the Company and the representative of the underwriters. Among the
factors to be considered in determining the initial public offering price will
be the future prospects of the Company and its industry in general, premiums,
earnings and certain other financial and operating information of the Company in
recent periods, and the price-earnings ratios, price-book value ratios, market
prices of securities and certain financial and operating information of
companies engaged in activities similar to those of the Company. The estimated
initial public offering price range set forth on the cover page of this
preliminary prospectus is subject to change as a result of market conditions and
other factors.

                                        80
<PAGE>

                                 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, special tax counsel to the Company. The validity of
the issuance of common shares under Bermuda law will be passed upon for us by
Conyers Dill & Pearman, Hamilton, Bermuda. Certain legal matters 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, 2001 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 common shares
offered in 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 our common shares, 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, 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.

     Upon completion of this offering, we will become subject to the
informational requirements of the Exchange Act and will be required to file
reports, proxy statements and other information with the SEC. You will be able
to 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 will be able to 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. We intend to furnish our shareholders with annual reports
containing combined financial statements audited by an independent accounting
firm.

                                        81
<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 common shares 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 intend to apply for and expect to obtain consent for the issue and
transfer of the common shares to and between non-residents of Bermuda for
exchange control purposes from the BMA as required by the Exchange Control Act
1972 of Bermuda and related regulations, subject to the condition that the
common shares shall be listed on the Nasdaq National Market System or any other
appointed stock exchange. In addition, we have delivered 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.

                                        82
<PAGE>

                     INDEX TO COMBINED FINANCIAL STATEMENTS

<Table>
<Caption>
                                                               PAGE
                                                               ----
<S>                                                            <C>
Report of Independent Accountants...........................    F-2
Combined Balance Sheet as at December 31, 2001..............    F-3
Combined Statement of Operations and Comprehensive Income
  for the period from
  November 14, 2001 to December 31, 2001....................    F-4
Combined Statement of Shareholders' Equity for the period
  from November 14, 2001
  to December 31, 2001......................................    F-5
Combined Statement of Cash Flows for the period from
  November 14, 2001 to
  December 31, 2001.........................................    F-6
Notes to Combined Financial Statements as at December 31,
  2001......................................................    F-7
Unaudited Financial Statements as at March 31, 2002 and for
  the three months then ended
  Combined Balance Sheets as of December 31, 2001 and March
     31, 2002...............................................   F-16
  Combined Statement of Operations and Comprehensive
     Income.................................................   F-17
  Combined Statement of Cash Flows..........................   F-18
  Notes to Combined Financial Statements....................   F-19
</Table>

                                       F-1
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS OF
MONTPELIER RE HOLDINGS LTD.

To the Board of Directors and Shareholders of Montpelier Re Holdings Ltd.

     In our opinion, the combined balance sheet and the related combined
statements of operations and comprehensive income, shareholders' equity and cash
flows included on pages F-3 to F-15 of the Montpelier Re Holdings Ltd.
Registration Statement Form S-1, present fairly, in all material respects, the
financial position of Montpelier Re Holdings Ltd. and its subsidiary at December
31, 2001, and the results of their operations and their cash flows for 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 audit. We conducted our audit of
these combined financial statements in accordance with auditing standards
generally accepted in the United States of America which require that we plan
and perform the audit 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 combined 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 audit provides a
reasonable basis for our opinion.

/s/ PricewaterhouseCoopers
Chartered Accountants

February 12, 2002, except for Note 15, which is as of May 29, 2002

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

MAILING ADDRESS:  PO BOX HM 1171, Hamilton, Bermuda HM EX

A list of partners can be obtained from the above address.

                                       F-2
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                             COMBINED BALANCE SHEET

<Table>
<Caption>
                                                                   DECEMBER 31, 2001
                                                               -------------------------
                                                                (EXPRESSED IN THOUSANDS
                                                               OF UNITED STATES DOLLARS)
<S>                                                            <C>
ASSETS
  Fixed maturities, at fair value (amortized cost:
     $638,525)..............................................          $  640,403
  Cash and cash equivalents, at fair value..................             350,606
  Accrued investment income.................................               1,699
  Premium receivable........................................                 133
  Deferred acquisition costs................................                  16
  Deferred financing costs..................................               2,005
  Common voting shares subscriptions receivable.............              26,000
  Other assets..............................................                 936
                                                                      ----------
     Total assets...........................................          $1,021,798
                                                                      ==========
LIABILITIES
  Loss and loss adjustment expense reserves.................                  --
  Unearned premium..........................................                 142
  Amount due to affiliates..................................                 574
  Accounts payable, accrued expenses and other
     liabilities............................................              10,429
  Long-term debt............................................             150,000
                                                                      ----------
     Total liabilities......................................          $  161,145
                                                                      ==========
SHAREHOLDERS' EQUITY
  Common voting shares ($0.01 par value; 200,000,000 shares
     authorized; 8,740,000 shares issued and outstanding)...                  87
  Additional paid-in capital................................             920,306
  Accumulated other comprehensive income....................               1,878
  Accumulated deficit.......................................             (61,618)
                                                                      ----------
     Total shareholders' equity.............................             860,653
                                                                      ----------
     Total liabilities and shareholders' equity.............          $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 STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

<Table>
<Caption>
                                                                      PERIOD FROM
                                                                 NOVEMBER 14, 2001 TO
                                                                   DECEMBER 31, 2001
                                                               -------------------------
                                                                (EXPRESSED IN THOUSANDS
                                                               OF UNITED STATES DOLLARS,
                                                                 EXCEPT SHARE AMOUNTS)
<S>                                                            <C>
REVENUES
  Gross premiums written....................................          $      150
  Reinsurance premiums ceded................................                  --
                                                                      ----------
  Net premiums written......................................                 150
  Change in unearned premiums...............................                (142)
                                                                      ----------
  Net premiums earned.......................................                   8
  Net investment income.....................................               1,139
                                                                      ----------
  Total revenues............................................               1,147
                                                                      ----------
EXPENSES
  Loss and loss adjustment expenses.........................                  --
  Acquisition costs.........................................                   1
  General and administrative expenses.......................               1,061
  Interest on long-term loan................................                 236
  Incorporation expenses....................................                 146
  Fair value of warrants issued.............................              61,321
                                                                      ----------
  Total expenses............................................              62,765
                                                                      ----------
NET INCOME (LOSS)...........................................          $  (61,618)
                                                                      ==========
COMPREHENSIVE INCOME (LOSS)
  Net income (loss).........................................          $  (61,618)
  Net unrealized gains (losses) on investments..............               1,878
                                                                      ----------
  Comprehensive income (loss)...............................          $  (59,740)
                                                                      ==========
PER SHARE DATA
  Weighted average number of common and common equivalent
     shares outstanding:
     Basic..................................................           8,740,000
     Diluted................................................           8,740,000
  Basic earnings (loss) per share...........................          $    (7.05)
                                                                      ==========
  Diluted earnings (loss) per share.........................          $    (7.05)
                                                                      ==========
</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 STATEMENT OF SHAREHOLDERS' EQUITY

<Table>
<Caption>
                                                                     PERIOD FROM
                                                                NOVEMBER 14, 2001 TO
                                                                  DECEMBER 31, 2001
                                                              -------------------------
                                                               (EXPRESSED IN THOUSANDS
                                                              OF UNITED STATES DOLLARS)
<S>                                                           <C>
Common shares
  Balance -- beginning of period............................          $     --
  Issue of common shares....................................                87
                                                                      --------
     Balance -- end of period...............................                87
                                                                      --------
Additional paid-in-capital
  Balance -- beginning of period............................                --
  Issue of common shares....................................           873,912
  Direct equity offering expenses...........................           (14,927)
  Fair value of warrants qualifying as equity...............            61,321
                                                                      --------
     Balance -- end of period...............................           920,306
                                                                      --------
Accumulated other comprehensive income
  Balance -- beginning of period............................                --
  Net unrealized gains (losses) on investments..............             1,878
                                                                      --------
     Balance -- end of period...............................             1,878
                                                                      --------
Accumulated deficit
  Balance -- beginning of period............................                --
  Net income (loss).........................................           (61,618)
                                                                      --------
     Balance -- end of period...............................           (61,618)
                                                                      --------
     Total shareholders' equity.............................          $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 STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                                     PERIOD FROM
                                                                NOVEMBER 14, 2001 TO
                                                                  DECEMBER 31, 2001
                                                              -------------------------
                                                               (EXPRESSED IN THOUSANDS
                                                              OF UNITED STATES DOLLARS)
<S>                                                           <C>
Cash flows from operating activities
  Net income (loss).........................................          $(61,618)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Amortization of premium/discount on fixed maturities...               (27)
     Fair value of warrants issued..........................            61,321
  Change in:
     Investment income due and accrued......................            (1,699)
     Premium receivable.....................................              (133)
     Deferred financing expenses............................            (2,005)
     Deferred acquisition costs.............................               (16)
     Other assets...........................................              (936)
     Interest accrued on long-term debt.....................               236
     Amount due to affiliated companies.....................               324
     Unearned premium.......................................               142
     Accounts payable, accrued expenses and other
      liabilities...........................................               497
                                                                      --------
  Net cash used in operating activities.....................            (3,914)
                                                                      --------
Cash flows from investing activities
  Purchases of fixed maturities.............................          (638,498)
                                                                      --------
  Cash used in investing activities.........................          (638,498)
                                                                      --------
Cash flows from financing activities
  Issue of common shares....................................           848,250
  Direct equity offering expenses...........................            (5,232)
  Long-term debt............................................           150,000
                                                                      --------
Cash provided by financing activities.......................           993,018
                                                                      --------
  Increase in cash and cash equivalents.....................           350,606
  Cash and cash equivalents -- Beginning of period..........                --
                                                                      --------
  Cash and cash equivalents -- End of period................          $350,606
                                                                      ========
Supplemental cash flow information
  Interest paid on long-term debt...........................                --
</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, 2001
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

1.  GENERAL

     Montpelier Re Holdings Ltd. (the "Company") was incorporated under the laws
of Bermuda on November 14, 2001. The Company's principal operating subsidiary is
Montpelier Reinsurance Ltd. ("Montpelier Re"). Montpelier Re is incorporated in
Bermuda and is registered as a Class 4 insurer under the Insurance 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 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.

     The Company, through Montpelier Re, intends to write a diversified range of
insurance and reinsurance business on a global basis with an initial emphasis on
property exposed business.

     Subsequent to December 31, 2001, Montpelier Re's wholly-owned subsidiary,
Montpelier Marketing Services (UK) Limited ("MMSL") commenced operations. MMSL
provides business introduction and other support services to Montpelier Re.

2.  SIGNIFICANT ACCOUNTING POLICIES

     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 subsidiary Montpelier Re. 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. The preparation
of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect
reported amounts of assets and liabilities, as well as disclosure of contingent
assets and liabilities as at the balance sheet date. Estimates also affect the
reported amounts of income and expenses for the reporting period. Actual results
could differ from those estimates.

  PREMIUMS

     Written premiums are recognized 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.

     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 in which 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
when 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 at the
end of the fiscal year is reflected in unearned premiums.

     Premiums receivable are recorded at amounts due less any required provision
for doubtful accounts.

                                       F-7
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

  DEFERRED ACQUISITION COSTS

     Acquisition costs are comprised of ceding commissions, brokerage, premium
taxes and other expenses that relate directly to the writing of reinsurance
contracts. These costs are deferred and amortized over the terms of the related
contracts. Deferred acquisition costs are reviewed to determine if they are
recoverable from future underwriting profits, including investment income. If
such costs are estimated to be unrecoverable, they are expensed.

  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

     Loss and loss adjustment expense reserves, including losses incurred but
not reported and provisions for settlement expenses, includes amounts determined
from loss reports on individual cases, independent actuarial determinations and
management estimates. Our limited historical experience and resultant lack of
reported losses means that industry data must be relied upon in the reserving
process.

     A significant portion of our business is in the property catastrophe market
and programs with higher layers of risks. Reserving for losses in such programs
is inherently complicated in that losses in excess of the attachment level of
Montpelier Re'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 losses following a loss event.

     Management uses industry data and professional judgment to estimate the
ultimate loss to the Company from reinsurance contracts exposed to a loss event.
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 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 it
involves a catastrophe 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.

  INVESTMENTS

     The Company's investments in fixed maturities and equity securities are
classified as "available-for-sale" and are carried at fair value, based on
quoted market prices. Unrealized gains and losses are included within
accumulated other comprehensive income in shareholders' equity.

     Net investment income is stated net of investment management and custody
fees. Interest income is recognized on the accrual basis and includes the
amortization of premium or discount on fixed interest securities purchased at
amounts different from their par value.

     Gains and losses on investments are included in investment income when
realized. Investments are recorded on a trade date basis and the cost of
securities sold is determined on the basis of first-in, first-out.

     Investments are reviewed periodically to determine if they have sustained
an impairment of 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. If
investments are determined to be impaired, a loss is charged to the income
statement in the period in which it is discovered.

                                       F-8
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

  CASH AND CASH EQUIVALENTS

     Cash and cash equivalents include debt securities and time deposits with a
maturity of three months or less from the date of purchase.

  EARNINGS (LOSS) PER SHARE

     Diluted earnings per common share are based upon the weighted average
number of common shares and common share equivalents outstanding, using the
treasury stock method. Common share equivalents comprise warrants, which are
dilutive when the book value of the Company exceeds the strike price of the
warrants. Basic earnings per ordinary share give no effect for dilutive
securities.

  TRANSLATION OF FOREIGN CURRENCY

     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
included in income. The Company has no operations that have a functional
currency other than the United States dollar.

  INCORPORATION AND CAPITALIZATION COSTS

     Expenses related to the issue of common shares are recorded as a reduction
of the proceeds from shares issued. Expenses related to the acquisition of
long-term debt are capitalized and amortized over the expected term of the
agreement. Incorporation costs not related to the raising of capital have been
expensed as incurred.

3.  INVESTMENTS

     The amortized cost, gross unrealized gains, gross unrealized losses and
fair value of investments available for sale at December 31, 2001 were as
follows:

<Table>
<Caption>
                                             AMORTIZED   UNREALIZED   UNREALIZED
                                               COST         GAIN         LOSS      FAIR VALUE
                                             ---------   ----------   ----------   ----------
<S>                                          <C>         <C>          <C>          <C>
Fixed Maturities:
  U.S. government and agency...............  $638,525      $1,878           --      $640,403
  Corporate................................        --          --           --            --
  Mortgage-backed securities...............        --          --           --            --
  Foreign government and agencies..........        --          --           --            --
                                             --------      ------       ------      --------
                                              638,525       1,878           --       640,403
                                             --------      ------       ------      --------
Equities...................................        --          --           --            --
                                             --------      ------       ------      --------
                                             $638,525      $1,878           --      $640,403
                                             ========      ======       ======      ========
</Table>

                                       F-9
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

     The following table sets forth certain information regarding the investment
ratings of the Company's fixed maturity securities portfolio:

<Table>
<Caption>
                                                              AMORTIZED
RATINGS                                                         COST        %
-------                                                       ---------   -----
<S>                                                           <C>         <C>
US Government & government agencies.........................  $638,525    100.0
AAA.........................................................        --       --
AA..........................................................        --       --
A...........................................................        --       --
Not rated...................................................        --       --
                                                              --------    -----
                                                              $638,525    100.0
                                                              ========    =====
</Table>

  LIQUIDITY AND INTEREST RATE RISK

     The amortized cost and estimated fair value amounts for fixed maturity
securities held at December 31, 2001 are shown by contractual maturity.

<Table>
<Caption>
                                                              AMORTIZED   ESTIMATED
                                                                COST      FAIR VALUE
                                                              ---------   ----------
<S>                                                           <C>         <C>
Due within one year.........................................  $     --           --
Due after one year through five years.......................   638,525      640,403
Due after five years through ten years......................        --           --
                                                              --------     --------
Mortgage-backed securities..................................        --           --
                                                              --------     --------
                                                              $638,525     $640,403
                                                              ========     ========
</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.

  NET REALIZED GAINS (LOSSES) ON INVESTMENTS

     During the period ended December 31, 2001, no sales of available-for-sale
securities were made.

  NET INVESTMENT INCOME

<Table>
<Caption>
                                                               PERIOD ENDED
                                                               DECEMBER 31,
                                                                   2001
                                                               ------------
<S>                                                            <C>
Interest on fixed maturities................................      $  697
Net amortization of premium/discount on fixed maturities....          27
Interest on cash and cash equivalents.......................         491
                                                                  ------
                                                                   1,215
Net investment expenses.....................................         (76)
                                                                  ------
                                                                  $1,139
                                                                  ======
</Table>

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
                                       F-10
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

frequency of claims from historical trends. Loss and loss adjustment expense
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.

     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.

5.  LONG-TERM DEBT

     On incorporation, the Company obtained a term loan from a syndicate of
lenders, totaling $150,000 in aggregate. 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. No
principal repayments 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. At December 31, 2001, the Company
accrued interest expense of $236 in 2001, at an average interest rate of 2.99%.

6.  RELATED PARTY TRANSACTIONS

     White Mountains and Benfield sponsored the formation of the Company and
invested $180,000 and $25,000 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 were granted warrants
entitling them to purchase 774,929 common shares and 387,464 common shares,
respectively. In connection with the Company's formation, 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 is $324 due to White Mountains and Benfield for reimbursement
of these funds.

     The Company has engaged OneBeacon Asset Management, a wholly-owned indirect
subsidiary of White Mountains, to provide investment advisory and management
services. The Company has agreed to pay fees of between 0.15% and 0.30% per
annum based on the month-end market values held under custody plus reimbursement
of fees and out-of-pocket expenses. These fees are charged against net
investment income. 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 and is the Principal
Executive Officer of OneBeacon Asset Management. An amount of $74 was payable as
of December 31, 2001 to OneBeacon Asset Management for services provided during
the period November 16, 2001 to December 31, 2001.

     Subsequent to December 31, 2001, the Company entered into an agreement with
Remetrics, a subsidiary of Benfield, for the provision of catastrophe modeling
services.

     In addition, the Company pays brokerage commissions to Benfield Greig
Limited, a subsidiary of Benfield, on business brought in by Benfield Greig
Limited. These commissions are consistent with commissions paid to other brokers
in the ordinary course of business. The Company may, in the ordinary course of
business, reinsure portions of White Mountains' insurance risks that come to
market through reinsurance brokers.

     Also included in Amount due to affiliates is $250 due to a shareholder for
an overpaid subscription payment.
                                       F-11
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

     Three directors, including the Company's Chairman, are employed by White
Mountains.

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 SHARES

     At December 31, 2001, the total authorized shares of the Company were
200,000,000, with a par value of $0.01 each.

  COMMON SHARES

     At December 31, 2001, the total issued and outstanding shares of the
Company were 8,740,000, with a par value of $0.01 each. The holders of ordinary
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. Following receipt of the outstanding subscriptions payments, all
issued and outstanding common voting shares were fully paid.

  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 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 1,186,610 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 $100, 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.

     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
illiquidity 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%.

                                       F-12
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

  DIVIDENDS

     The Company did not declare any dividends for the period to December 31,
2001.

9.  SEGMENT REPORTING

     Management views the operations and management of the Company as one
operating segment. As such, no segmental analyses of lines of business or
premium by geographic zone are prepared.

     The Company has established relationships with the major global reinsurance
brokers. Four of these brokers are significant customers for the Company.

10.  EARNINGS (LOSS) PER SHARE

     The net income (loss) used in the Company's basic and diluted loss per
share calculation is identical. There were no dilutive securities at December
31, 2001. The Company's 8,740,000 shares are considered to be issued and
outstanding throughout the period from November 14, 2001 to December 31, 2001.

11.  COMMITMENTS AND CONTINGENCIES

  CONCENTRATIONS 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.

  CREDIT FACILITIES

     On incorporation, 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, 2001, no amounts had been drawn down under this facility.

  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: 2002 -- $248; 2003 -- $267; 2004 -- $245.

12.  EMPLOYEE INCENTIVE PLANS

     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"), performance units may
be granted to executive officers and certain other key employees. Performance
units

                                       F-13
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

entitles the recipient to receive, without payment to the Company, all or part
of a specified amount determined by the Committee, subject to the achievement of
specific financial goals. Performance units are generally payable at the end of
a three-year performance cycle, and can be denominated in common stock at market
value and are payable in cash, common stock or a combination thereof at the
discretion of the Committee.

     On January 8, 2002, the Committee approved the grant of up to 52,000
performance units for the 2002-2004 performance cycle.

  OPTION PLAN

     Pursuant to the terms of the Option Plan, at the discretion of the
Committee, share options may be granted to certain key employees of the Company.
The options expire ten years after date of grant and require full payment in
cash prior to exercise.

     A maximum of 425,000 options may be granted under the Option Plan. On
January 8, 2002, 340,000 options were granted, with vesting dates of between
December 31, 2002 to December 31, 2005, and strike prices of between $100 and
$115.

  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 is 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.

  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

     Subsequent to December 31, 2001, Montpelier Re's wholly-owned subsidiary,
Montpelier Marketing Services (UK) Limited ("MMSL") commenced operations. MMSL
is to provide business introduction and other support services to Montpelier Re.
Appropriate arms' length fees will be charged for such services. Normal UK tax
will be payable on profits made by MMSL.

     Montpelier Re intends to capitalize a wholly-owned subsidiary, Montpelier
Enterprises (Barbados) Limited ("MEBL"), to act as a holding company for a
proportion of the Company's investment portfolio. Normal Barbados tax will be
payable on profits made by MEBL.

     It is not anticipated that any such tax charges of MMSL or MEBL will have a
material effect on the combined financial results of the Company.

                                       F-14
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

14.  STATUTORY REQUIREMENTS

     Montpelier Re is registered under The Insurance Act 1978 (Bermuda),
Amendments Thereto and Related Regulations ("The Act"). Under the Insurance Act,
Montpelier Re is required to prepare Statutory Financial Statements and to file
a Statutory Financial Return. The Act also requires Montpelier Re to maintain a
minimum share capital of $1,000 and to meet a minimum solvency margin equal to
the greater of $100,000, 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
$100,000 at December 31, 2001. Montpelier Re's statutory capital and surplus was
$980,170 at December 31, 2001, of which $980,727 is fully paid up share capital.

     The Insurance 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 BMA of such payment.
The maximum amount of dividends that could be paid by Montpelier Re to the
Company at January 1, 2002, without such notification, was $39.

     Montpelier Re is also required to maintain a minimum liquidity ratio, which
was met as at December 31, 2001.

15.  SUBSEQUENT EVENTS

     In May 2002, the Board of Directors of the Company authorized an Initial
Public Offering of common shares of the Company. The terms of the transaction
will be finalized prior to the closing of the offering. Net proceeds of the
offering will be used in the ordinary operations of the business.

     In May 2002, the Company entered into a new lease agreement for its office
space. Future minimum annual commitments under this lease are as follows:
2002 -- $313; 2003 -- $347; 2004 -- $347. The lease on its former premises in
Bermuda, was cancelled without penalty.

     Subsequent to December 31, 2001, the Company has written a significant
volume of reinsurance contracts.

     On May 28, 2002, the Company signed a subscription and shareholders
agreement to invest in the Bermuda-based holding company of Wellington Re
Limited ("Wellington Re"), a London-based reinsurance company to be founded by
Wellington Underwriting plc. Subject to various conditions, Montpelier Re has
agreed to invest up to approximately 9% of the total investor commitments of
L448 million or approximately $60 million, in two separate tranches. The first
tranche of L22.1 million is expected to be paid in June 2002 and the second and
final tranche is expected to be paid in November 2002. Anthony Taylor, the Chief
Executive Officer and President of Montpelier Re, will join the board of
directors of Wellington Re.

                                       F-15
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                            COMBINED BALANCE SHEETS

<Table>
<Caption>
                                                              DECEMBER 31,   MARCH 31,
                                                                  2001          2002
                                                              ------------   ----------
                                                               (EXPRESSED IN THOUSANDS
                                                              OF UNITED STATES DOLLARS)
                                                                             UNAUDITED
<S>                                                           <C>            <C>
ASSETS
  Fixed maturities, at fair value (amortized cost:             $  640,403    $  909,263
     2001 -- $638,525; 2002 -- $920,977)....................
  Cash and cash equivalents, at fair value..................      350,606       119,508
  Unearned premium ceded....................................           --        13,002
  Accrued investment income.................................        1,699         8,767
  Premium receivable........................................          133       119,789
  Reinsurance recoverable...................................           --           644
  Deferred acquisition costs................................           16        26,090
  Deferred financing costs..................................        2,005         1,834
  Common voting shares subscriptions receivable.............       26,000            --
  Other assets..............................................          936           946
                                                               ----------    ----------
     Total assets...........................................   $1,021,798    $1,199,843
                                                               ==========    ==========
LIABILITIES
  Loss and loss adjustment expense reserves.................   $       --    $   15,011
  Unearned premium..........................................          142       165,892
  Amount due to affiliates..................................          574            --
  Accounts payable, accrued expenses and other                     10,429         2,054
     liabilities............................................
  Long-term debt............................................      150,000       150,000
                                                               ----------    ----------
     Total liabilities......................................   $  161,145    $  332,957
                                                               ==========    ==========
SHAREHOLDERS' EQUITY
  Common voting shares ($0.01 par value, 200,000,000 shares    $       87    $       87
     authorized; 8,740,000 shares issued and outstanding)...
  Additional paid-in capital................................      920,306       921,472
  Accumulated other comprehensive income....................        1,878       (11,714)
  Accumulated deficit.......................................      (61,618)      (42,959)
                                                               ----------    ----------
     Total shareholders' equity.............................      860,653       866,886
                                                               ----------    ----------
     Total liabilities and shareholders' equity.............   $1,021,798    $1,199,843
                                                               ==========    ==========
</Table>

       The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-16
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

           COMBINED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

<Table>
<Caption>
                                                                 THREE MONTHS ENDED
                                                                   MARCH 31, 2002
                                                              -------------------------
                                                               (EXPRESSED IN THOUSANDS
                                                              OF UNITED STATES DOLLARS,
                                                                EXCEPT SHARE AMOUNTS)
                                                                      UNAUDITED
<S>                                                           <C>
REVENUES
  Gross premiums written....................................          $ 203,679
  Reinsurance premiums ceded................................            (14,320)
                                                                      ---------
  Net premiums written......................................            189,359
  Change in unearned premiums...............................           (152,748)
                                                                      ---------
  Net premiums earned.......................................             36,611
                                                                      ---------
  Net investment income.....................................              7,633
  Net realized investment gains (losses)....................                484
                                                                      ---------
  Total revenues............................................             44,728
EXPENSES
  Loss and loss adjustment expenses.........................             14,367
  Acquisition costs.........................................              6,467
  General and administrative expenses.......................              4,198
  Interest on long-term loan................................                995
  Incorporation expenses....................................                 42
                                                                      ---------
  Total expenses............................................             26,069
                                                                      ---------
NET INCOME (LOSS)...........................................          $  18,659
                                                                      =========
COMPREHENSIVE INCOME (LOSS)
  Net income (loss).........................................          $  18,659
  Net unrealized gains (losses) on investments..............            (13,592)
                                                                      ---------
  Comprehensive income (loss)...............................          $   5,067
                                                                      =========
PER SHARE DATA
  Weighted average number of common and common equivalent
     shares outstanding:
     Basic..................................................
     Diluted................................................
  Basic earnings (loss) per share...........................
                                                                      =========
  Diluted earnings (loss) per share.........................
                                                                      =========
</Table>

       The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-17
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                        COMBINED STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                                     THREE MONTHS
                                                                        ENDED
                                                                    MARCH 31, 2002
                                                              --------------------------
                                                               (EXPRESSED IN THOUSANDS
                                                              OF UNITED STATES DOLLARS)
                                                                      UNAUDITED
<S>                                                           <C>
Cash flows from operating activities
  Net income................................................          $  18,659
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Amortization of premium/discount on fixed maturities...                874
     Depreciation...........................................                 30
     Fair value of options issued as compensation...........              1,227
     Realized (gains) losses on marketable securities.......               (484)
  Change in:
     Unearned premium ceded.................................            (13,002)
     Investment income due and accrued......................             (7,068)
     Premium receivable.....................................           (119,656)
     Reinsurance recoverable................................               (644)
     Deferred acquisition costs.............................            (26,074)
     Deferred financing costs...............................                171
     Other assets...........................................                (40)
     Interest accrued on long-term debt.....................                (93)
     Loss and loss adjustment expense reserves..............             15,011
     Amount due to affiliates...............................               (324)
     Unearned premium.......................................            165,750
     Accounts payable, accrued expenses and other
      liabilities...........................................              1,317
                                                                      ---------
  Net cash provided by operating activities.................             35,654
                                                                      ---------
Cash flows from investing activities
  Purchases of fixed maturities.............................           (282,842)
                                                                      ---------
  Sales of fixed maturities.................................                 --
                                                                      ---------
  Cash used in investing activities.........................           (282,842)
                                                                      ---------
Cash flows from financing activities
  Issue of common shares....................................             25,750
  Direct equity offering expenses...........................             (9,660)
  Long-term debt............................................                 --
                                                                      ---------
     Cash provided by financing activities..................             16,090
                                                                      ---------
  Increase (Decrease) in cash and cash equivalents..........           (231,098)
  Cash and cash equivalents -- Beginning of period..........            350,606
                                                                      ---------
  Cash and cash equivalents -- End of period................          $ 119,508
                                                                      =========
Supplemental cash flow information
  Interest paid on long-term debt...........................          $   1,069
</Table>

       The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-18
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                 MARCH 31, 2002
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)

1.  GENERAL

     The combined financial statements have been prepared on the basis of
accounting principles generally accepted in the United States ("GAAP") and
include the accounts of Montpelier Re Holdings Ltd. and its wholly owned
subsidiary Montpelier Reinsurance Ltd. In the opinion of management, these
financial statements reflect all the normal recurring adjustments necessary for
a fair presentation of the Company's financial position as of December 31, 2001
and March 31, 2002 and its results and cash flows for the period from November
14, 2001 (date of incorporation) to December 31, 2001 and for the three months
ended March 31, 2002. These combined financial statements should be read in
conjunction with the 2001 audited combined financial statements and related
notes thereto.

     The results for the three months to March 31, 2002 are not necessarily
indicative of the expected results for the remainder of 2002.

2.  SIGNIFICANT ACCOUNTING POLICIES

  PREMIUMS

     Written premiums are recognized 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.

     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 in which 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
when 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 at the
end of the fiscal year is reflected in unearned premiums.

     Premiums receivable are recorded at amounts due less any required provision
for doubtful accounts.

  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

     Loss and loss adjustment expense reserves, including losses incurred but
not reported and provisions for settlement expenses, includes amounts determined
from loss reports on individual cases, independent actuarial determinations and
management estimates. Our limited historical experience and resultant lack of
reported losses means that industry data must be relied upon in the reserving
process.

     A significant portion of our business is in the property catastrophe market
and programs with higher layers of risks. Reserving for losses in such programs
is inherently complicated in that losses in excess of the attachment level of
Montpelier Re'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 losses following a loss event.

     Management uses industry data and professional judgment to estimate the
ultimate loss to the Company from reinsurance contracts exposed to a loss event.
Delays in ceding companies reporting losses to the Company together with the
potential for unforeseen adverse developments, may result in losses and loss
adjustment expenses significantly greater or less than the reserve provided at
the time of the loss event.
                                       F-19
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)

Reserving can prove especially difficult should a significant loss event take
place near the end of an accounting period, particularly if it involves a
catastrophe event.

     Loss and loss adjustment expense 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.

3.  EARNINGS (LOSS) PER SHARE

     Diluted earnings per common share are based upon the weighted average
number of common shares and common share equivalents outstanding, using the
treasury stock method. Common share equivalents comprise warrants, which are
dilutive when the book value of the Company exceeds the strike price of the
warrants. Basic earnings per ordinary share give no effect for dilutive
securities.

4.  EMPLOYEE INCENTIVE PLAN

  PERFORMANCE UNIT PLAN (THE "PUP")

     The PUP is the Company's primary executive long-term incentive scheme.
Performance units are conditional grants of a specified number of common shares
or an equivalent amount of cash. Grants are generally earned, subject to the
attainment of pre-specified performance goals, at the end of a three-year period
or as otherwise determined by the Compensation Committee of the Board.

     For the three-year performance period beginning 2002, the Company has
granted 30,817 performance units through March 31, 2002. The associated accrual
for the performance unit expense was $0.4 million for the three month period
ended March 31, 2002.

  OPTION PLAN

     Under the option plan, options expire 10 years after the award date, and
are subject to various vesting periods. Stock options granted under the option
plan may be exercised for common shares upon vesting. A total of 425,000 common
shares may be issued under the option plan.

     A summary of options issued and outstanding for the period ended March 31,
2002 is as follows:

<Table>
<Caption>
                                                                     AVERAGE    OPTIONS FOR
                                                         YEAR OF     EXERCISE    ORDINARY
                                                        EXPIRATION    PRICE       SHARES
                                                        ----------   --------   -----------
<S>                                                     <C>          <C>        <C>
Balance at January 1, 2002............................        --          --           --
Options granted.......................................   340,000     $107.50      340,000
Options exercised.....................................        --          --           --
Options forfeited.....................................        --          --           --
Balance at March 31, 2002.............................   340,000     $107.50      340,000
</Table>

                                       F-20
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)

     The following table summarizes the range of exercise prices for outstanding
options at March 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>
$100.00.................................     85,000     9.75 years    $100.00           --          --
$105.00.................................     85,000     9.75 years    $105.00           --          --
$110.00.................................     85,000     9.75 years    $110.00           --          --
$115.00.................................     85,000     9.75 years    $115.00           --          --
                                            -------                                -------     -------
                                            340,000                                     --          --
                                            =======                                =======     =======
</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 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     FAIR VALUE ON
EXERCISE PRICES             OUTSTANDING     VESTING DATE      AT DATE OF GRANT   DATE OF GRANT
---------------             -----------   -----------------   ----------------   -------------
<S>                         <C>           <C>                 <C>                <C>
$100.00...................     85,000     December 31, 2002       3 years           $ 2,116
$105.00...................     85,000     December 31, 2003       4 years           $ 2,384
$110.00...................     85,000     December 31, 2004       5 years           $ 2,639
$115.00...................     85,000     December 31, 2005       6 years           $ 2,885
                              -------                                               -------
                              340,000                                               $10,024
                              =======                                               =======
</Table>

     A compensation expense of $1,227 was recorded in general and administrative
expenses in the income statement in the period to March 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.

5.  EARNINGS (LOSS) PER SHARE

     The net income (loss) used in the Company's basic and diluted earnings per
share calculations is identical. There were no dilutive securities at March 31,
2002.

                                       F-21
<PAGE>
                          MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)

<Table>
<Caption>
                                                              THREE MONTHS
                                                                 ENDED
                                                               MARCH 31,
                                                                  2002
                                                              ------------
<S>                                                           <C>
Basic
  Net income (loss).........................................     18.659
  Weighted average common shares outstanding................
Basic earnings (loss) per share.............................
Diluted
  Net income (loss).........................................     18.659
  Weighted average common equivalent shares outstanding.....
Diluted net earnings (loss) per share.......................
</Table>

6.  SEGMENT REPORTING

     We have primarily focused on writing global specialty property and other
classes of reinsurance business. The following tables set forth a breakdown of
our gross premiums written by line of business:

                         GROSS PREMIUMS WRITTEN BY LINE

<Table>
<Caption>
                                                              THREE MONTHS ENDED
                                                                MARCH 31, 2002
                                                              -------------------
                                                                ($ IN MILLIONS)
<S>                                                           <C>          <C>
Property Catastrophe........................................  $ 79.1       38.8%
Other Property..............................................    35.6        17.5
Qualifying Quota Share......................................    73.8        36.2
Specialty and Other.........................................    15.2         7.5
                                                              ------       -----
Total.......................................................  $203.7       100.0%
                                                              ======       =====
</Table>

     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 three months to March 31, 2002, premium produced by each of the four
large brokers was as follows: Benfield $74.4 million; Willis Group $53.7
million; Guy Carpenter $35.2 million; Aon Re $24.9 million.

7.  RELATED PARTIES

     The Company's Chairman, Chief Financial Officer and another director are
shareholders in both the Company and in Olympus Re Holdings, Ltd., the parent
company of a Bermuda domiciled reinsurer writing certain lines of business which
are similar to some of those written by Montpelier Re. The Company does not have
an investment in Olympus Re Holdings, Ltd.

     The Company's Chief Financial Officer is also a director of a significant
customer of the Company.

                                       F-22
<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."

CLASH COVERAGE:...............   Exposure to a larger single loss than intended
                                 due to losses incurred under two or more
                                 coverages or policies for the same event.

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 determined 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.

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 (OR CLAIM
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.

PROPORTIONAL REINSURANCE:.....   A generic term describing all forms of
                                 reinsurance in which the reinsurer shares a
                                 proportional part of the original premiums and
                                 losses of the reinsured. Proportional
                                 reinsurance is also known as pro rata
                                 reinsurance, quota share reinsurance or
                                 participating reinsurance. In proportional
                                 reinsurance the reinsurer generally pays the
                                 ceding company a ceding commission. The ceding
                                 commission generally is based on the ceding
                                 company's cost of acquiring the business being
                                 reinsured (including commissions, premium
                                 taxes, assessments and miscellaneous
                                 administrative expense) and also may include a
                                 profit factor.

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.

REINSTATEMENT PREMIUMS:.......   The premiums charged for the restoration of the
                                 reinsurance limit of a contract to its full
                                 amount after payment by the reinsurer of losses
                                 as a result of an occurrence.

                                       G-2
<PAGE>

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.
                                 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
                                 reinsurer 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.

                                       G-3
<PAGE>

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.

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 common shares being
registered hereby. All of such expenses are estimates, other than the filing and
quotation fees payable to the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc. and the Nasdaq National Market.

<Table>
<S>                                                           <C>
Filing Fee -- Securities and Exchange Commission............  $23,000
Filing Fee -- National Association of Securities Dealers,
  Inc.......................................................  $25,500
Quotation Fees -- The Nasdaq National Market................        *
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:
(a) the directors and officers of the Registrant, 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 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, 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 in respect of any
fraud or dishonesty 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").

     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.

                                       II-1
<PAGE>

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     Since its formation, the Registrant has issued unregistered securities as
described below. None of the 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 was 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.

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.
 3.2*    Bye-Laws.
 4.1*    Specimen Common Share Certificate.
 4.2*    Form of Warrant.
 5.1*    Opinion of Conyers Dill & Pearman.
10.1*    Shareholders Agreement, dated as of December 12, 2001, among
         the Registrant and certain other signatories.
10.2*    Service Agreement, dated as of December 12, 2001, between
         Anthony Taylor and the Registrant.
10.3*    Form of Officer Service Agreement.
21.1*    Subsidiaries of the Registrant.
23.1*    Consent of Conyers Dill & Pearman (included in Exhibit 5.1).
23.2     Consent of PricewaterhouseCoopers (Bermuda).
24.1     Power of Attorney (included as part of the signature pages).
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
                                       II-2
<PAGE>

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.

     The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

                                       II-3
<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 30th day of May, 2002.

                                          MONTPELIER RE HOLDINGS LTD.

                                          By:      /s/ ANTHONY TAYLOR
                                            ------------------------------------
                                            Name: Anthony Taylor
                                            Title:  President and Chief
                                              Executive Officer

                               POWER OF ATTORNEY

     Know all men by these presents, that the undersigned directors and officers
of the Company, a Bermuda limited liability company, which is filing a
Registration Statement on Form S-1 with the Securities and Exchange Commission,
Washington, D.C. 20549 under the provisions of the Securities Act of 1933 hereby
constitute and appoint Anthony Taylor and Thomas Busher, and each of them, the
individual's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the person and in his or her name, place
and stead, in any and all capacities, to sign such registration statement and
any or all amendments, including post-effective amendments to the registration
statement, including a prospectus or an amended prospectus therein and any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act, and all other documents in
connection therewith to be filed with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact as agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 30th day of May, 2002.

<Table>
<Caption>
                       SIGNATURE                                                  TITLE
                       ---------                                                  -----
<S>     <C>                                                    <C>

                   /s/ JOHN J. BYRNE                                            Chairman
 ------------------------------------------------------
                  John J. (Jack) Byrne


                   /s/ ANTHONY TAYLOR                           President and Chief Executive Officer and
 ------------------------------------------------------          Director (Principal Executive Officer)
                     Anthony Taylor


                   /s/ K. THOMAS KEMP                              Chief Financial Officer (Principal
 ------------------------------------------------------                    Financial Officer)
                     K. Thomas Kemp


                  /s/ NEIL MCCONACHIE                                (Principal Accounting Officer)
 ------------------------------------------------------
                    Neil McConachie


                 /s/ JOHN D. GILLESPIE                                          Director
 ------------------------------------------------------
                   John D. Gillespie


                                                                                Director
 ------------------------------------------------------
                    Allan L. Waters
</Table>

                                       II-4
<PAGE>

<Table>
<Caption>
                       SIGNATURE                                                  TITLE
                       ---------                                                  -----
<S>     <C>                                                    <C>

                  /s/ RAYMOND BARRETTE                                          Director
 ------------------------------------------------------
                    Raymond Barrette


                     /s/ TOM HUTTON                                             Director
 ------------------------------------------------------
                       Tom Hutton


                 /s/ RAYMOND M. SALTER                                          Director
 ------------------------------------------------------
                   Raymond M. Salter


                  /s/ ALLEN FULKERSON                                           Director
 ------------------------------------------------------
                    Allen Fulkerson


                  /s/ WILLIAM SPIEGEL                                           Director
 ------------------------------------------------------
                    William Spiegel


                 /s/ STEVEN J. GILBERT                                          Director
 ------------------------------------------------------
                   Steven J. Gilbert


                  /s/ KAMIL M. SALAME                                           Director
 ------------------------------------------------------
                    Kamil M. Salame


                 /s/ JOHN D. GILLESPIE
 ------------------------------------------------------
                   John D. Gillespie
    (authorized representative in the United States)


 ------------------------------------------------------
                    Attorney-in-fact
</Table>

                                       II-5
<PAGE>

                            REPORT ON SCHEDULES I-IV

                      REPORT OF INDEPENDENT ACCOUNTANTS ON

                         FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Stockholders of
Montpelier Re Holdings Ltd. and Subsidiaries:

Our audit of the combined financial statements referred to in our report dated
February 12, 2002, except for Note 15, which is as of May 29, 2002, appearing on
page F-2 in this Registration Statement 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 LLP

Hamilton, Bermuda
May 29, 2002

                                       S-1
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                                   SCHEDULE I

      SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES

<Table>
<Caption>
                                                                                       AMOUNT AT
                                                                                      WHICH SHOWN
                                                                        ESTIMATED       IN THE
TYPE OF INVESTMENT                                             COST     FAIR VALUE   BALANCE SHEET
------------------                                            -------   ----------   -------------
<S>                                                           <C>       <C>          <C>
Fixed maturities:
  Bonds:
     United States Government and government agencies and
       authorities..........................................  638,525    640,403        640,403
     States, municipalities and political subdivisions......
     Foreign governments....................................
     Public utilities.......................................
     Convertibles and bonds with warrants attached..........
     All other corporate bonds..............................
  Certificates of deposit...................................
  Redeemable preferred stocks...............................
                                                              -------    -------        -------
          Total fixed maturities............................  638,525    640,403        640,403
                                                              -------    -------        -------
Equity securities:
  Common stocks:
     Public utilities.......................................
     Banks, trust and insurance companies...................
     Industrial, miscellaneous and all other................
  Nonredeemable preferred stocks............................
                                                              -------    -------        -------
          Total equity securities...........................       --         --             --
                                                              -------    -------        -------
Mortgage loans on real estate...............................
Real estate.................................................
Policy loans................................................
Other long-term investments.................................
Short-term investments......................................
                                                              -------    -------        -------
          Total investments.................................  638,525                   640,403
                                                              -------    -------        -------
</Table>

                                       S-2
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE II

         CONDENSED FINANCIAL INFORMATION OF MONTPELIER RE HOLDINGS LTD.
                                 BALANCE SHEET
                               DECEMBER 31, 2001
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<Table>
<Caption>
                                                                 2001
                                                              ----------
<S>                                                           <C>
ASSETS
Cash and cash equivalents...................................      10,183
Investment in combined subsidiaries.........................     982,645
                                                              ----------
     Total investments......................................     992,828
Subscriptions receivable....................................      26,000
Other assets................................................       2,330
                                                              ----------
     Total assets...........................................  $1,021,158
                                                              ==========
LIABILITIES
Accounts payable and accrued liabilities....................      10,505
Long-term debt..............................................     150,000
                                                              ----------
     Total liabilities......................................  $  160,505
                                                              ----------
SHAREHOLDERS' EQUITY
Common voting shares ($0.01 par value; 200,000,000 shares
  authorized; 8,740,000 shares issued and outstanding)......          87
Additional paid in capital..................................     920,306
Accumulated other comprehensive income......................       1,878
Accumulated deficit.........................................     (61,618)
                                                              ----------
     Total shareholders' equity.............................  $  860,653
                                                              ----------
     Total liabilities and shareholders' equity.............  $1,021,158
                                                              ==========
</Table>

The Condensed Financial Statements of Montpelier Re Holdings Ltd. should be read
in conjunction with the Combined Financial Statements and accompanying notes of
             Montpelier Re Holdings Ltd. included elsewhere herein.

                                       S-3
<PAGE>

                                  SCHEDULE II

                          MONTPELIER RE HOLDINGS LTD.

         CONDENSED FINANCIAL INFORMATION OF MONTPELIER RE HOLDINGS LTD.
                            STATEMENT OF OPERATIONS
               PERIOD FROM NOVEMBER 14, 2001 TO DECEMBER 31, 2001
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                                 2001
                                                               --------
<S>                                                            <C>
REVENUE
  Equity in net earnings of subsidiaries....................   $     39
  Net investment income.....................................         43
                                                               --------
     Total revenue..........................................         82

EXPENSES
  Fair value of warrants issued as consideration for capital
     raising services.......................................     61,321
  Other expenses............................................        379
                                                               --------
     Total expenses.........................................     61,700
                                                               --------
NET LOSS....................................................   $ 61,618
                                                               --------
</Table>

The Condensed Financial Statements of Montpelier Re Holdings Ltd. should be read
in conjunction with the Combined Financial Statements and accompanying notes of
             Montpelier Re Holdings Ltd. included elsewhere herein.

                                       S-4
<PAGE>

                                  SCHEDULE II

                          MONTPELIER RE HOLDINGS LTD.

         CONDENSED FINANCIAL INFORMATION OF MONTPELIER RE HOLDINGS LTD.
                            STATEMENT OF CASH FLOWS
               PERIOD FROM NOVEMBER 14, 2001 TO DECEMBER 31, 2001

<Table>
<Caption>
                                                                2001
                                                              ---------
<S>                                                           <C>
OPERATING ACTIVITIES:
  Net loss..................................................  $ (61,618)
Adjustments to reconcile loss to net cash used in operating
  activities:
  Equity in net earnings of subsidiaries....................        (39)
  Fair value of warrants issued as consideration for capital     61,321
     raising services.......................................
  Other.....................................................     (1,771)
                                                              ---------
     Net cash used in operating activities..................     (2,107)

INVESTING ACTIVITIES:
  Capital contribution to subsidiary........................   (980,728)
                                                              ---------
  Net cash used in investing activities.....................   (980,728)
                                                              ---------

FINANCING ACTIVITIES:
  Issue of common shares....................................    843,018
  Long-term debt............................................    150,000
                                                              ---------
  Net cash provided by financing activities.................    993,018
                                                              ---------
Cash and cash equivalents, beginning of period..............         --
Cash and cash equivalents, end of period....................  $  10,183
                                                              =========
</Table>

The Condensed Financial Statements of Montpelier Re Holdings Ltd. should be read
in conjunction with the Combined Financial Statements and accompanying notes of
             Montpelier Re Holdings Ltd. included elsewhere herein.

                                       S-5
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE III

                      SUPPLEMENTARY INSURANCE INFORMATION
                AS AT AND FOR THE PERIOD ENDED DECEMBER 31, 2001
                    (EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
<Table>
<Caption>
                               FUTURE POLICY
                             BENEFITS, LOSSES,                                         NET          BENEFITS
                                CLAIMS AND                                 NET      INVESTMENT   CLAIMS, LOSSES     OTHER
                                   LOSS          UNEARNED   EXPERIENCE   PREMIUMS     INCOME     AND SETTLEMENT   OPERATING
SEGMENT                          EXPENSES        PREMIUMS    REFUNDS      EARNED     (NOTE 2)       EXPENSES      EXPENSES
-------                      -----------------   --------   ----------   --------   ----------   --------------   ---------
<S>                          <C>                 <C>        <C>          <C>        <C>          <C>              <C>
Property and Casualty......         $0              142          0           8         1,139            0           1,061

<Caption>

                               NET
                             PREMIUMS
SEGMENT                      WRITTEN
-------                      --------
<S>                          <C>
Property and Casualty......     150
</Table>

Notes:

1.  There are no comparatives as the company did not commence writing business
until December 16, 2001.

2.  Net investment income has been allocated in the same ratio as net premiums
earned.

                                       S-6
<PAGE>

                          MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE IV

                                  REINSURANCE
                     FOR THE PERIOD ENDED DECEMBER 31, 2001
                    (EXPRESSED IN THOUSANDS OF U.S. DOLLARS)

<Table>
<Caption>
                                                                                         PERCENTAGE
                                                       CEDED TO     ASSUMED              OF AMOUNT
                                              GROSS      OTHER     FROM OTHER    NET      ASSUMED
                                              AMOUNT   COMPANIES   COMPANIES    AMOUNT     TO NET
                                              ------   ---------   ----------   ------   ----------
<S>                                           <C>      <C>         <C>          <C>      <C>
Property and casualty.......................   $150        0           150        150       100%
</Table>

Notes:

1.  There are no comparatives as the company did not commence writing business
until December 16, 2001.

                                       S-7
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As filed with the Securities and Exchange Commission on May 30, 2002.

                                                     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.)
30 WOODBOURNE AVENUE
                                 PEMBROKE HM HX
                                    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.                                  RICHARD J. SANDLER, ESQ.
               JOSEPH D. FERRARO, ESQ.                               NICHOLAS A. KRONFELD, ESQ.
        LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.                         DAVIS POLK & WARDWELL
                 125 WEST 55TH STREET                                   450 LEXINGTON AVENUE
               NEW YORK, NY 10019-5389                                   NEW YORK, NY 10017
---------------------
    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
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
                                                              PROPOSED MAXIMUM
              TITLE OF EACH CLASS OF                         AGGREGATE OFFERING                         AMOUNT OF
            SECURITIES TO BE REGISTERED                          PRICE(1)(2)                        REGISTRATION FEE
-------------------------------------------------------------------------------------------------------------------------------
Common Shares, par value $0.01 per share...........             $250,000,000                             $23,000
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457 under the Securities Act of 1933, as amended.

(2) Includes shares subject to the underwriters' over-allotment option.
                             ---------------------

    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.

PROSPECTUS (Subject to Completion)
Issued             , 2002

                                     Shares

                              [MONTPELIER RE LOGO]
                            ------------------------
                                 Common Shares
                            ------------------------

Montpelier Re Holdings Ltd. is offering           common shares in an
underwritten offering. This is our initial public offering and no public market
exists for our common shares. We anticipate that the initial public offering
price of the common shares will be between $          and $          per share.

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

We will apply to list our common shares on the Nasdaq National Market under the
symbol "MRHL."

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

INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 8.
                            ------------------------

                            PRICE $          A SHARE

                            ------------------------
UNDERWRITING DISCOUNTS   PROCEEDS TO
                                             PRICE TO PUBLIC      AND COMMISSIONS         COMPANY
                                             ---------------   ----------------------   -----------
Per Share..................................     $                     $                 $
Total......................................     $                     $                 $
Montpelier Re Holdings Ltd. has granted the underwriters the right to purchase
up to an additional           common shares to cover over-allotments.

The Securities and Exchange Commission, state securities regulators, the
Registrar of Companies in Bermuda and the Bermuda Monetary Authority have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the common shares to purchasers on
          , 2002.
                            ------------------------
                          Joint Book-Running Managers
MORGAN STANLEY
             BANC OF AMERICA SECURITIES LLC
                          CREDIT SUISSE FIRST BOSTON
                            ------------------------
                                    JPMORGAN
          , 2002
TABLE OF CONTENTS
PAGE
                                        ----
Prospectus Summary....................    1
Risk Factors..........................    8
Forward-Looking Statements............   21
Use of Proceeds.......................   22
Dividend Policy.......................   22
Capitalization........................   23
Dilution..............................   24
Selected Financial Data...............   25
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   27
Industry Background...................   36
Business..............................   39
Regulation............................   50
Management............................   55
Principal Shareholders................   61
Certain Relationships and Related
  Transactions........................   63
Material Tax Considerations...........   64
Description of Share Capital..........   71
Shares Eligible for Future Sale.......   77
Underwriters..........................   78
Legal Matters.........................   81
Experts...............................   81
Where You Can Find More Information...   81
Enforceability of Civil Liabilities
  Under United States Federal
  Securities Laws and Other Matters...   82
Index to Combined Financial
  Statements..........................  F-1
Glossary of Selected Reinsurance,
  Insurance and Investment Terms......  G-1
---------------------

     Until           , 2002, which is the 25th day after the date of this
prospectus, all dealers that buy, sell or trade our common shares, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

     You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with information that is different from that contained in this prospectus.
We are offering to sell and seeking offers to buy these securities only in
jurisdictions where offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this prospectus, regardless
of time of delivery of this prospectus or of any sale of common shares.

                                        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 reinsurance company subsidiary, Montpelier Marketing Services (UK)
Ltd., 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. Unless otherwise stated, all figures
assume no exercise of the underwriters' over-allotment option. 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 of selected reinsurance, insurance and investment terms,
which begins on page G-1.

                                  OUR COMPANY

OVERVIEW

     We are a Bermuda-based provider of reinsurance for the global insurance
market, conducting our reinsurance operations through our wholly owned
subsidiary, Montpelier Re. We were founded by White Mountains Insurance Group,
Ltd. and Benfield Group plc 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 aim to achieve superior returns on capital by writing global
specialty property and other classes of reinsurance while maintaining
disciplined underwriting practices. We seek to identify attractive reinsurance
opportunities by capitalizing on our management's significant underwriting
experience, utilizing modeling tools and technologies and developing proprietary
systems. Since Montpelier Re commenced operations, we believe we have become a
leading provider of reinsurance products to the global market. During the three
months ended March 31, 2002, we underwrote $203.7 million in gross premiums
written. 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 and Willis Group Holdings Ltd., among others.

MARKET OPPORTUNITIES AND INDUSTRY TRENDS

     As a result of September 11th terrorist attacks and the years of poor rates
and conditions in the worldwide reinsurance markets which preceded them, there
has been a contraction of global underwriting capacity combined with a
substantial increase in demand for reinsurance products. We believe this has
created favorable opportunities for new specialty reinsurance market entrants.
Some of the principal factors giving rise to these market opportunities include:

     - record loss events from the September 11th terrorist attacks, the Enron
       collapse and the Sri Lanka airport attack;

     - poor underwriting results in recent years as a result of excess capacity,
       declining premium rates, less favorable policy terms and adverse loss
       reserve developments from prior policy years (including asbestos,
       environmental and other mass tort liabilities);

     - withdrawal of capacity from important segments of the reinsurance market
       and substantial reductions in capital at some reinsurance companies due
       to excessive unanticipated claims; and

     - the decline in global equity markets and a low interest rate environment
       leading to lower investment returns.

                                        1
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 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 Like 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 23 years of experience in the
     insurance and reinsurance industry. Our Chairman, John (Jack) Byrne, our
     Chief Reinsurance Officer, C. Russell Fletcher III, 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. A substantial
     portion of each executive's total compensation depends upon our long-term
     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 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
     provided significant business to us in the first quarter of 2002. 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 newly 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 $1.0 billion, which provides a high degree of financial strength to
     our clients. On December 19, 2001, A.M. Best Company Inc. assigned an "A-"
     (Excellent) rating to Montpelier Re. This rating reflects A.M. Best's
     opinion of our initial capitalization, management expertise and sound
     sponsorship and is not applicable to the securities offered by this
     prospectus.

          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. Mr. Byrne, our Chairman and
     the Chairman and Chief Executive Officer 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.

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. We intend to manage our capital

                                        2
prudently relative to our risk exposure in an effort to maximize
     sustainable long-term growth in shareholder value. Currently, we do not
     intend to buy retrocessional protection and will expect to do so only as
     the pricing and terms in the retrocessional market become more attractive.
     Our capital management strategy will emphasize the appropriate use of
     leverage and share repurchases to manage idle or excess capital. 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,
     will allow them to build, over time, 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,
     together with their market knowledge and judgment, to achieve the highest
     available price per unit of risk.

          Develop and Maintain Balanced Portfolio of Reinsurance Risks.  We aim
     to craft a balanced portfolio of primarily property related risks,
     diversified across products, geographic areas of coverage, cedents and
     distribution sources. 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, unlike
     the Bermuda companies that were formed in 1993 and 1994 which were more
     heavily focused on U.S. property catastrophe business. We will employ risk
     management techniques to monitor correlation risk and seek to enhance the
     portfolio returns through capital allocation. 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 Reinsurance and Insurance
     Solutions for our Clients. We intend to establish ourselves as a premier
     provider of global specialty property reinsurance products and seek to
     provide superior customer service. Our objective is to solidify long-term
     relationships with brokers and clients while establishing an industry
     reputation for innovative and timely quotes for difficult technical risks.

RECENT DEVELOPMENT

     On May 28, 2002, we signed a subscription and shareholders agreement to
invest in the Bermuda-based holding company of Wellington Re Limited
("Wellington Re"), a London-based reinsurance company to be founded by
Wellington Underwriting plc. The investor group is led by The Blackstone Group
and Candover Partners, and also includes affiliates of Credit Suisse First
Boston Private Equity, Inc., 3i Group plc, Phoenix Equity Partners, Olympus
Partners, Lexicon Partners and members of the management of Wellington Re.
Subject to various conditions, Montpelier Re has agreed to invest up to
approximately 9% of the total investor commitments of L448 million (or $653
million), or approximately $60 million, in two separate tranches. The first
tranche of L22.1 million (or $32.2 million) is expected to close prior to June
30, 2002 and the second tranche is expected to close in November, 2002.

     In addition, Montpelier Re has agreed to provide quota share reinsurance to
Wellington Re involving annual ceded premiums to us of approximately $60 million
for the underwriting years 2003, 2004 and 2005.
                                        3
These arrangements would cover mainly property and casualty risks. Anthony
Taylor will join the board of directors of Wellington Re and will remain on the
board so long as we retain a specified level of shareholdings and maintain the
quota share business.

     The formation of Wellington Re, as well as our funding and reinsurance
commitments to it, are subject to a number of conditions, including the
confirmation of acceptable indicative financial strength ratings, the approvals
of Lloyd's of London, third party capital providers on Syndicate 2020 managed by
Wellington Underwriting Agencies Ltd. and the U.K.'s Financial Services
Authority and the completion of the purchase of a predecessor company which will
be renamed Wellington Re.

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

     Our principal executive offices are located at 30 Woodbourne Avenue,
Pembroke HM HX, Bermuda. Our telephone number is (441) 296-5550.

                                        4
THE OFFERING

Common shares offered.........        common shares

Common shares to be
outstanding after the
offering......................        common shares

Over-allotment option.........        common shares

Use of proceeds...............   We estimate the net proceeds from the initial
                                 public offering of           of our common
                                 shares, after deducting the underwriting
                                 discounts and commissions and estimated
                                 offering expenses we will pay will be
                                 approximately $          million. The net
                                 proceeds will be $          million if the
                                 underwriters exercise their over-allotment
                                 option in full. We presently intend to
                                 contribute substantially all of the net
                                 proceeds of this offering to Montpelier Re, to
                                 increase its capital and surplus so as to
                                 increase its underwriting capacity.

Dividend policy...............   We have never declared or paid any dividends on
                                 our common shares. Any determination to pay
                                 dividends will be at the discretion of our
                                 Board of Directors and will be dependent upon
                                 our results of operations and cash flows, our
                                 financial position and capital requirements,
                                 general business conditions, legal, tax,
                                 regulatory and any contractual restrictions on
                                 the payment of dividends and any other factors
                                 our Board of Directors deems relevant.

Proposed Nasdaq National
Market symbol.................   MRHL

     The number of shares outstanding after the offering is based on the number
of shares to be outstanding as of           , 2002 and reflects a stock split of
     shares for each share outstanding. The number of shares shown to be
outstanding after the offering excludes           common shares that may be
issued pursuant to the over-allotment option, shares that may be issued pursuant
to        outstanding warrants and shares that may be issued pursuant to
options. The options are not currently exercisable. All historical share
information in this prospectus does not reflect the stock split.

                                        5
SUMMARY COMBINED 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 the
balance sheet data as of December 31, 2001 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, 2002 and the balance sheet
data as of March 31, 2002 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 combined 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.
PERIOD ENDED       THREE MONTHS ENDED
                                                          DECEMBER 31, 2001(1)     MARCH 31, 2002
                                                          --------------------   ------------------
                                                          (IN THOUSANDS, EXCEPT SHARE AMOUNTS, PER
                                                               SHARE AMOUNTS AND PERCENTAGES)
SUMMARY INCOME STATEMENT DATA:
Gross premiums written..................................       $      150            $  203,679
Net premiums written....................................              150               189,359
Net premiums earned.....................................                8                36,611
Net investment income...................................            1,139                 7,633
Loss and loss adjustment expenses.......................               --                14,367
Interest on long-term loan..............................             (236)                 (995)
Fair value of warrants issued...........................          (61,321)                   --
Net income (loss).......................................       $  (61,618)           $   18,659
Basic earnings (loss) per share.........................       $                     $
Fully diluted earnings (loss) per share.................       $                     $
Basic weighted average shares outstanding...............
Diluted weighted average shares outstanding.............
SELECTED RATIOS (BASED ON U.S. GAAP INCOME STATEMENT
  DATA):
Loss ratio (on net premiums earned)(2)..................              n/a                  39.2%
Acquisition costs ratio (on net premiums earned) (3)....              n/a                  17.7%
General and administrative expense ratio (on net
  premiums earned) (4)..................................              n/a                  11.5%
                                                               ----------            ----------
Combined ratio (5)......................................              n/a                  68.4%
                                                               ----------            ----------
6
AS OF MARCH 31, 2002
                                                              ----------------------------
                                                                ACTUAL     AS ADJUSTED(6)
                                                              ----------   ---------------
                                                                 (IN THOUSANDS, EXCEPT
                                                                   PER SHARE AMOUNTS)
SUMMARY BALANCE SHEET DATA:
Fixed maturities, cash and cash equivalents.................  $1,028,771      $
Total assets................................................   1,199,843
Loss and loss adjustment expense reserves...................      15,011
Unearned premium............................................     165,892
Long-term debt..............................................     150,000
Total shareholders' equity..................................     866,886

PER SHARE DATA (BASED ON U.S. GAAP BALANCE SHEET DATA)
Book value per share(7).....................................  $               $
Diluted book value per share(8).............................
---------------

(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 policy 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) The as adjusted summary balance sheet data as of March 31, 2002 reflects the
    net proceeds of the sale of common shares in this offering (assuming no
    exercise of the over-allotment option) after deducting the underwriting
    discounts and commissions and estimated offering expenses.

(7) Book value per share is based on total shareholders' equity divided by basic
    weighted average shares outstanding of           .

(8) Fully diluted book value per share is calculated based on total
    shareholders' equity divided by diluted weighted average shares outstanding
    of           . Potentially dilutive warrants and stock options were not
    dilutive at March 31, 2002 because their exercise prices were above the book
    value per share of the Company.

                                        7
RISK FACTORS

     An investment in our common shares 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 our
common shares. 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 decline in the
market price of our common shares. 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 no significant operating or
financial history. As a result, there is limited historical financial and
operating information available to help you evaluate our performance or an
investment in our common shares. 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 our business consists
of relatively few large reinsurance transactions, and because we have not
experienced any substantial claims to date, our historical financial results may
not accurately indicate our future performance.

WE HAVE NOT BEEN OPERATING LONG ENOUGH TO BUILD A BALANCED AND DIVERSIFIED
PORTFOLIO OF EXPOSURES.

     We began writing business in December 2001 and our current portfolio of
business is not as balanced or diverse as it might be if we had a longer
operating history. This could render our results of operations relatively more
exposed to the risks in the business that we have written.

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

     Our success will depend in substantial part upon our ability to attract and
retain our principal employees. We currently only have fourteen full-time
employees and, accordingly, 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. Our location in Bermuda may be an impediment to attracting and
retaining experienced personnel. 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, on whom we are currently in the process of obtaining
a binding policy.

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

                                        8
None of our senior management team (and possibly other officers) based in
Bermuda are Bermudian. Of our employees in Bermuda, only two are Bermudian.
Seven employees are currently working under temporary work permits that will
expire after three months. Thomas Kemp, our Chief Financial Officer, is applying
for a work permit in conjunction with his service to us. 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. 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 overages 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 operation 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, 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 per year 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. We have a limited operating
history and an insufficient loss history to allow us to extrapolate reserves
directly. Instead, our current loss reserves are based entirely on estimates
involving actuarial and statistical projections of our expectations of the
ultimate settlement and administration costs of claims incurred but not yet
reported. We utilize actuarial models as well as historical insurance industry
loss development patterns to establish appropriate loss reserves. Accordingly,
we expect actual claims and claim expenses paid to 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 will be 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

                                        9
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, possibly to the extent of eliminating our shareholders' equity.

WE ARE A NEW COMPANY 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 and 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 Benfield, one of our founders, and Applied Insurance Research. We
also use programs of other modeling vendors, and are in the process of replacing
the Benfield technology with a combination of commercially available programs
and proprietary technology we are developing in-house.

     We cannot be certain that we will be able to replace the Benfield
technology without experiencing systems problems, or that our proprietary
technology, once established, 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.

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

     Upon completion of this offering, our founders, White Mountains and
Benfield, are expected to own beneficially at least   % and   %, respectively of
our outstanding common shares with warrants to purchase an additional   % and
  %, respectively, and three of our directors (and one director nominee) 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:

     - Jack Byrne, Chairman of our Board of Directors and Chairman of our
       Compensation Committee, is also Chairman and Chief Executive Officer of
       White Mountains.
                                        10
- K. Thomas Kemp, our Chief Financial Officer, is President and a member of
       the Board of Directors of White Mountains, and Mr. Kemp is also a
       director of Amlin plc, which accounts for a significant proportion of our
       QQS premiums.

     - Raymond Barrette, a member of our Board of Directors, Chairman of the
       Audit Committee and member of the Compensation and Underwriting Policy
       Committees of our Board of Directors, is Chairman, Managing Director and
       Chief Executive Officer of OneBeacon Insurance Group LLC, a subsidiary of
       White Mountains, and is a director of White Mountains.

     - John Gillespie, a member of our Board of Directors and Chairman of the
       Finance Committee of our Board, is Managing Director of OneBeacon
       Insurance Group LLC and a director of White Mountains and chairman of the
       investment committee of White Mountains' board. In addition, Mr.
       Gillespie is Principal Executive Officer of OneBeacon Asset Management, a
       wholly owned subsidiary of White Mountains, which we have engaged to
       provide investment advisory and management services.

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

     - We currently license certain risk modeling technology from Benfield.

     We do not have any agreement or understanding with any of these parties
regarding the resolution of potential conflicts of interest. In addition, 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. These parties 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 currently do not purchase reinsurance for our own account. In order to
limit the effect of large and multiple losses upon our financial condition, we
may seek to buy 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.

     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. Thus far, we have not arranged any reinsurance or
retrocession.

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

     We market our reinsurance worldwide primarily through reinsurance brokers.
Subsidiaries and affiliates of Benfield, (one of our founders and a
shareholder), Willis Group, Guy Carpenter and Aon Re Worldwide provided 36.5%,
26.4%, 17.3% and 12.2%, (for a total of 92.4%) respectively, of our premiums
written in the three months ended March 31, 2002. Two of these brokers also have
formed Bermuda reinsurance companies that may compete with us, and these brokers
may favor their own 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.

                                        11
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, 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, OneBeacon Asset Management Inc., a wholly
owned subsidiary of White Mountains, subject to policy guidelines, which will be
periodically reviewed by the finance committee of our board. 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. Investment losses 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 a large portion
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.

WE ARE RATED BY A.M. BEST AND A DECLINE IN THIS RATING COULD AFFECT OUR STANDING
AMONG BROKERS AND CUSTOMERS AND CAUSE OUR SALES 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). This rating reflects A.M. Best's
opinion of our initial capitalization, management and sponsorship, and is not an
evaluation directed to investors in our common shares and is not a
recommendation to buy, sell or hold our common shares. Our rating is subject to
periodic review by, and may be revised downward or revoked at the sole
discretion of A.M. Best, and we cannot assure you that we will be able to retain
this rating.

     If our rating is reduced from its current levels by A.M. Best, 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 this offering are insufficient to fund future operating
requirements and cover claim losses, we may need to raise additional funds
through financings or curtail our growth and reduce our assets. Any equity or
debt financing, if available at all, may be on terms that are not favorable to
us. In the case of equity financings, dilution to our shareholders could result,
and in any case such securities may have rights, preferences and privileges that
are senior to those of the shares offered hereby. If we cannot obtain adequate
capital, our business, operating results and financial condition could be
adversely affected.
                                        12
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. Since September 11th, 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. 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.

     Changes in the marketplace, including the tightening in supply of certain
coverages arising out of the September 11th terrorist attacks, may result in
government intervention in the insurance and reinsurance markets, both in the
United States and worldwide. Recently, the insurance and reinsurance regulatory
framework has been subject to increased scrutiny by the United States federal
government and individual state governments. There is uncertainty in the
insurance and reinsurance markets about the extent to which future coverages
will extend to terrorist acts as well as the definition of terrorist acts. The
effect of potential governmental intervention in the markets we serve, including
with respect to the extent to which coverage for terrorist acts is offered in
the future, is uncertain. Government regulators are generally concerned with the
protection of policyholders to the exclusion of other constituencies, including
shareholders. 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.

CONSOLIDATION IN THE INSURANCE INDUSTRY COULD LEAD TO LOWER MARGINS FOR US AND
REDUCED DEMAND FOR OUR REINSURANCE.

     The insurance industry is undergoing a process of consolidation as industry
participants seek to enhance their product and geographic reach, client base,
operating efficiency and general market power through merger and acquisition
activities. These larger entities may seek to use the benefits of consolidation
to, among other things, implement rate reductions for their reinsurance. These
rate reductions could make it more difficult for us to underwrite risks at
profitable levels.

     As the insurance industry consolidates, 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. In
addition, insurance companies that merge may be able to enhance their
negotiating position when buying reinsurance

                                        13
and may be able to spread their risks across a consolidated, larger capital base
so that they require less reinsurance.

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. Although premium levels for many
products have increased in recent months, the supply of reinsurance may
increase, either by capital provided by new entrants or by the commitment of
additional capital by existing reinsurers. In addition, capital markets
participants have created alternative products intended to compete with
reinsurance products. 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 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 OUR COMMON SHARES AND THIS OFFERING

THERE IS NO PRIOR PUBLIC MARKET FOR OUR COMMON SHARES.

     Currently there is no public trading market for our common shares and there
can be no assurance that an active trading market will develop and continue upon
completion of this offering or that the market price of our common shares will
not decline below the initial public offering price. The initial public offering
price per common share will be determined by agreement among the Company and the
representatives of the underwriters and may not be indicative of the market
price of our common shares after our initial public offering. We will apply to
list our common shares on the Nasdaq National Market under the symbol "MRHL."

FUTURE SALES OF COMMON SHARES MAY AFFECT THEIR MARKET PRICE.

     We cannot predict what effect, if any, future sales of our common shares,
or the availability of common shares for future sale, will have on the market
price of our common shares. Sales of substantial amounts of our common shares in
the public market following our initial public offering, or the perception that
such sales could occur, could adversely affect the market price of our common
shares and may make it more difficult for you to sell your common shares at a
time and price which you deem appropriate. Upon completion of our initial public
offering there will be      common shares outstanding. If the underwriters'
over-allotment option for an additional           common shares is exercised,
     common shares will be outstanding.

                                        14
PUBLIC INVESTORS WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.

     The initial public offering price per common share is significantly higher
than our net book value per share. Accordingly, if you purchase common shares in
this offering, you will suffer immediate and substantial dilution of your
investment. Based upon the issuance and sale of      common shares, you will
incur immediate dilution of approximately $     in the net book value per common
share if you purchase common shares in this offering.

WE HAVE A LIMITED ABILITY TO PAY DIVIDENDS AND DO NOT CURRENTLY INTEND TO PAY
DIVIDENDS IN THE FORESEEABLE FUTURE.

     We are a holding company and, as such, have no substantial operations of
our own. We do not expect to have any significant operations or assets other
than our ownership of the shares of Montpelier Re. 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, and to pay dividends, if any, to our shareholders. It is uncertain
when, if ever, we will declare dividends to our shareholders. During our early
years of operations, we expect that Montpelier Re will retain virtually all
profit, other than that necessary to pay our debt service and other expenses, to
provide capacity to write reinsurance and to accumulate reserves and surplus for
the payment of claims. In addition, Bermuda law and regulations, including, but
not limited to Bermuda insurance regulation, limits the declaration and payment
of dividends and the making of distributions by Montpelier Re to us. The
inability of Montpelier Re to pay dividends 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. See "Dividend Policy" and "Regulation --
Certain Bermuda Law Considerations."

     Furthermore, our ability to pay dividends is limited under our two senior
credit facilities with Bank of America, N.A. and a syndicate of commercial
banks. Under these facilities, we cannot pay dividends to our shareholders until
April 1, 2003. After this date, if we pay dividends exceeding 50% of our net
income at the end of any quarter, excluding all extraordinary gains and losses,
we would be required to simultaneously repay amounts owing under our loan
facilities.

THERE ARE PROVISIONS IN OUR CHARTER DOCUMENTS WHICH RESTRICT THE VOTING RIGHTS
OF OUR COMMON SHARES.

     Our bye-laws generally provide that any shareholder owning, directly or by
attribution, more than 9.5% of our common shares will have the voting rights
attached to such common shares reduced so that it may not exercise more than
9.5% of the total voting rights. See "Description of Share Capital -- Voting
Rights."

U.S. PERSONS WHO OWN OUR COMMON SHARES MAY HAVE MORE DIFFICULTY IN PROTECTING
THEIR INTERESTS THAN U.S. PERSONS WHO ARE SHAREHOLDERS OF A U.S. CORPORATION.

     The Companies Act 1981 of Bermuda, which applies to us, differs in certain
material respects from laws generally applicable to U.S. corporations and their
shareholders. Set forth below is a summary of certain significant provisions of
the Companies Act which includes, where relevant, information on modifications
thereto adopted pursuant to our bye-laws, applicable to us, which differ in
certain respects from provisions of Delaware corporate law. Because the
following statements are summaries, they do not discuss all aspects of Bermuda
law that may be relevant to us and our shareholders.

     Interested Directors.  Bermuda law and our bye-laws provide that we cannot
void any transaction we enter into in which a director has an interest, nor can
such director be liable to us for any profit realized pursuant to such
transaction, provided the nature of the interest is disclosed at the first
opportunity at a meeting of directors, or in writing, to the directors. Under
Delaware law such transaction would not be voidable if:

     - the material facts as to such interested director's relationship or
       interests are disclosed or are known to the board of directors and the
       board in good faith authorizes the transaction by the affirmative vote of
       a majority of the disinterested directors;

                                        15
- such material facts are disclosed or are known to the stockholders
       entitled to vote on such transaction and the transaction is specifically
       approved in good faith by vote of the majority of shares entitled to vote
       thereon; or

     - the transaction is fair as to the corporation as of the time it is
       authorized, approved or ratified.

     Under Delaware law, the interested director could be held liable for a
transaction in which the director derived an improper personal benefit.

     Business Combinations with Large Shareholders or Affiliates.  As a Bermuda
company, we may enter into business combinations with our large shareholders or
affiliates, including mergers, asset sales and other transactions in which a
large shareholder or affiliate receives, or could receive, a financial benefit
that is greater than that received, or to be received, by other shareholders,
without obtaining prior approval from our Board of Directors or from our
shareholders. If we were a Delaware company, we would need prior approval from
our Board of Directors or a supermajority of our shareholders to enter into a
business combination with an interested shareholder for a period of three years
from the time the person became an interested shareholder, unless we opted out
of the relevant Delaware statute.

     Shareholders' Suits.  The rights of shareholders under Bermuda law are not
as extensive as the rights of shareholders in many United States jurisdictions.
Class actions and derivative actions are generally not available to shareholders
under the laws of Bermuda. However, the Bermuda courts ordinarily would be
expected to follow English case law precedent, which would permit a shareholder
to commence an action in the name of the company to remedy a wrong done to the
company where an act is alleged to be beyond the corporate power of the company,
is illegal or would result in the violation of our memorandum of association or
bye-laws. Furthermore, consideration would be given by the court to acts that
are alleged to constitute a fraud against the minority shareholders or where an
act requires the approval of a greater percentage of our shareholders than
actually approved it. The winning party in such an action generally would be
able to recover a portion of attorneys' fees incurred in connection with such
action. Our bye-laws provide that shareholders waive all claims or rights of
action that they might have, individually or in the right of the company,
against any director or officer for any act or failure to act in the performance
of such director's or officer's duties, except with respect to any fraud or
dishonesty of such director or officer. Class actions and derivative actions
generally are available to stockholders under Delaware law for, among other
things, breach of fiduciary duty, corporate waste and actions not taken in
accordance with applicable law. In such actions, the court has discretion to
permit the winning party to recover attorneys' fees incurred in connection with
such action.

     Indemnification of Directors.  We may indemnify our directors or officers
or any person appointed to any committee by the Board acting in their capacity
as such in relation to any of our affairs for any loss arising or liability
attaching to them by virtue of any rule of law in respect of any negligence,
default, breach of duty or breach of trust of which such person may be guilty in
relation to the company other than in respect of his own fraud or dishonesty.
Under Delaware law, a corporation may indemnify a director or officer of the
corporation against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in defense of an
action, suit or proceeding by reason of such position if such director or
officer acted in good faith and in a manner he or she reasonably believed to be
in or not be opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, such director or officer had no reasonable
cause to believe his or her conduct was unlawful.

     For more information on the differences between Bermuda and Delaware
corporate laws, see "Description of Share Capital -- Differences in Corporate
Law."

ANTI-TAKEOVER PROVISIONS IN OUR BYE-LAWS COULD IMPEDE AN ATTEMPT TO REPLACE OR
REMOVE OUR MANAGEMENT OR DELAY OR PREVENT THE SALE OF OUR COMPANY, WHICH COULD
DIMINISH THE VALUE OF OUR COMMON SHARES.

     Our bye-laws contain provisions that could delay or prevent changes in our
management or a change of control that a shareholder might consider favorable.
For example, these provisions may prevent a shareholder from receiving the
benefit from any premium over the market price of our common shares offered by a
bidder in a potential takeover. Even in the absence of a takeover attempt, these
provisions may adversely affect the

                                        16
prevailing market price of our common shares if they are viewed as discouraging
takeover attempts in the future.

     For example, our bye-laws contain the following provisions that could have
such an effect:

     - election of our directors is staggered, meaning that the members of only
       one of three classes of our directors are elected each year;

     - shareholders have limited ability to remove directors;

     - the total voting power of any shareholder owning more than 9.5% of our
       common shares will be reduced to 9.5% of the total voting power of our
       common shares; and

     - our directors may decline to record the transfer of any common shares on
       our share register if they believe that registration of the transfer is
       required under any federal or state securities law or under the laws of
       any other jurisdiction and the registration has not yet been effected.

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 and certain
of the experts named in this prospectus reside outside the United States, and
all or a substantial portion of our assets and the assets of such persons are
located in jurisdictions outside the United States. As such, it may be difficult
or impossible to effect service of process within the United States upon us or
those persons or to recover against us or them on judgments of United States
courts, including judgments predicated upon civil liability provisions of the
United States federal securities laws.

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

WE MAY REPURCHASE YOUR COMMON SHARES.

     Under our bye-laws and subject to Bermuda law, we have the option, but not
the obligation, to require a shareholder to sell some or all of its common
shares to us at fair market value (which would be based upon the average closing
price of the common shares as defined under our bye-laws) if the Board
reasonably determines, in good faith based on an opinion of counsel, that share
ownership, directly, indirectly or constructively by any shareholder is likely
to result in adverse tax, regulatory or legal consequences to us, certain of our
other shareholders or our subsidiaries.

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 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. See "Material Tax
Considerations."

                                        17
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 do not believe that we or any of our subsidiaries
will be considered a PHC, but we cannot assure you that this will not be the
case or that the amount of U.S. tax that would be imposed if it were the case
would be immaterial. See "Material Tax Considerations-Taxation of the Company
and Montpelier Re -- United States -- Personal Holding Companies."

U.S. PERSONS WHO HOLD COMMON SHARES MAY BE SUBJECT TO U.S. INCOME TAXATION AT
ORDINARY INCOME RATES ON THEIR PROPORTIONATE SHARE OF OUR "RELATED PARTY
INSURANCE INCOME" ("RPII").

     RPII is the income of Montpelier Re, if any, attributable to insurance or
reinsurance policies where the direct or indirect insureds are U.S. shareholders
or are related to U.S. shareholders. RPII may be included in a U.S.
shareholder's gross income whether or not such shareholder is a policyholder. We
do not expect our gross RPII to equal or exceed 20% of our gross insurance
income in any taxable year for the foreseeable future and do not expect our
direct or indirect insureds (and related persons) to directly or indirectly own
20% or more of either the voting power or value of our common shares, but we
cannot assure you that this will be the case. If our expectation is incorrect, a
U.S. person owning any common shares directly or indirectly on the last day of
our taxable year will be required to include in gross income for U.S. federal
income tax purposes such holder's share of the RPII for up to the entire taxable
year, determined as if all such RPII were distributed proportionately only to
such U.S. shareholders at that date, but limited by such holder's share of our
current-year earnings and profits as reduced by the holder's share, if any, of
certain prior-year deficits in earnings and profits attributable to our
insurance business. Upon the sale or other disposition of any common shares,
such person may also be required to recognize ordinary income rather than
capital gain to the extent of the shareholder's pro rata share of our
undistributed earnings and profits and to file IRS Form 5471, although this
should not be the case because we should not be treated as deriving RPII income
directly. The RPII provisions have never been interpreted by the courts or the
U.S. Treasury Department in final regulations, and regulations interpreting the
RPII provisions of the Code exist only in proposed form. It is not certain
whether these regulations will be adopted in their proposed form or what changes
or clarifications might ultimately be made thereto or whether any such changes,
as well as any interpretation or application of RPII by the IRS, the courts, or
otherwise, might have retroactive effect. The Treasury Department has authority
to impose, among other things, additional reporting requirements with respect to
RPII. Accordingly, the meaning of the RPII provisions and the application
thereof to us and our subsidiaries is uncertain. See "Material Tax
Considerations -- Taxation of Shareholders -- United States Taxation."

WE MAY BE CONSIDERED A PFIC FOR U.S. FEDERAL INCOME TAX PURPOSES.

     We may be considered a passive foreign investment company ("PFIC") for U.S.
federal income taxation purposes. While we do not believe that we will be
considered a PFIC, we can not assure you that we will not be. If we were
considered a PFIC it could have material adverse tax consequences for an
investor that is subject to U.S. federal income taxation, including subjecting
the investor to a greater tax liability than might otherwise apply and
subjecting the investor to tax on amounts in advance of when tax would otherwise
be imposed. There are currently no regulations regarding the application of the
passive foreign investment company provisions to an insurance company. New
regulations or pronouncements interpreting or clarifying these rules may be
forthcoming. We cannot predict what impact, if any, such guidance would have on
a shareholder that is subject to United States federal income taxation. See
"Material Tax Considerations -- Taxation of Shareholders -- United States
Taxation -- Passive Foreign Investment Companies."

WE MAY BE CONSIDERED A FPHC FOR U.S. FEDERAL INCOME TAX PURPOSES.

     We or a subsidiary may be considered a foreign personal holding company
("FPHC") for U.S. federal income taxation purposes. While we do not believe that
we will be considered a FPHC, we can not assure you that we will not be. If we
were considered a FPHC it could have material adverse tax consequences for an
investor that is subject to U.S. federal income taxation including subjecting
the investor to a greater tax
                                        18
liability than might otherwise apply and subjecting the investor to tax on
amounts in advance of when tax would otherwise be imposed. See "Material Tax
Considerations -- Taxation of Shareholders -- United States Taxation -- Foreign
Personal Holding Companies."

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

     Legislation has recently been introduced which, if enacted, would eliminate
certain tax benefits available to companies that have changed their legal
domiciles to Bermuda. In addition, some U.S. insurance companies have been
lobbying Congress to pass legislation intended to eliminate certain perceived
tax advantages of U.S. insurance companies having Bermuda affiliates. While
these legislative proposals are aimed at inverted corporations and do not
contain provisions that would adversely affect companies such as us and
Montpelier Re that were initially formed outside the United States and that do
not have any U.S. operations, 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 shareholders, broader-based
legislative proposals could emerge that could conceivably have an adverse impact
on us, Montpelier Re or our shareholders.

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 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 of 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

                                        19
- 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 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 regulation to which
we are or may become subject.

     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 Qualifying Quota Share business, it must provide
an evergreen letter of credit in favor of The Society and Council of Lloyd's in
accordance with Lloyd's rules. We have made arrangements with Fleet Bank for the
provision of a standby letter of credit in a form acceptable to Lloyd's in an
amount of up to $200 million, which we consider sufficient to support Montpelier
Re's estimated qualifying quota share obligations during its first year of
operation. 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.

                                        20
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. Statements which 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. We believe that these factors include but are not limited to those
described under "Risk Factors" above. We undertake no obligation to publicly
update or review any forward-looking statement, whether as a result of new
information, future developments or otherwise.

     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.

                                        21
USE OF PROCEEDS

     We estimate the net proceeds from the initial public offering of our common
shares, after deducting the underwriting discounts and commissions and our
estimated offering expenses will be approximately $          million. The net
proceeds will be $          million if the underwriters exercise their over-
allotment option in full. We presently intend to contribute substantially all of
the net proceeds of this offering to Montpelier Re, to increase its capital and
surplus in order to increase its underwriting capacity.

                                DIVIDEND POLICY

     We have never declared or paid and do not currently intend to pay any cash
dividends on our common shares. Any determination to pay cash dividends will be
at the discretion of our Board of Directors and will be dependent upon our
results of operations and cash flows, our financial position and capital
requirements, general business conditions, legal, tax, regulatory and any
contractual restrictions on the payment of dividends and any other factors our
Board of Directors deems relevant.

     Our ability to pay dividends depends, in part, on the ability of our
subsidiaries to pay dividends to us. Montpelier Re is subject to Bermuda laws
and regulatory constraints which affect its ability to pay dividends to us.
Under the Insurance Act 1978 of Bermuda and related regulations, which we refer
to as the Insurance Act, Montpelier Re must maintain a minimum solvency margin
and minimum liquidity ratio and is prohibited from declaring or paying dividends
if it does not comply or such action would result in noncompliance with the
Insurance Act. Under the Insurance Act, Montpelier Re may not pay dividends in
any financial year which would exceed 25% of its total statutory capital and
surplus, unless an affidavit stating that it will continue to meet the required
margins is filed with the Bermuda Monetary Authority, and Montpelier Re must
obtain the approval of the Bermuda Monetary Authority before reducing its
statutory capital by 15% or more. In addition, as a Class 4 insurer, Montpelier
Re must maintain a minimum share capital of $1.0 million and a solvency margin
equal to the greatest of $100.0 million, 50% of net premiums written or 15% of
the reserve for unpaid losses and loss adjustment expenses. In addition, under
the Companies Act, the Company and Montpelier Re may only declare or pay a
dividend if, among other matters, there are reasonable grounds for believing
that each of them is, or would after the payment be, able to pay their
respective liabilities as they become due. Accordingly, we cannot assure you
that we will declare or pay dividends in the future.

     Furthermore, our ability to pay dividends is limited under our two senior
credit facilities with Bank of America, N.A. and a syndicate of commercial
banks. Under these facilities, we cannot pay dividends to our shareholders until
April 1, 2003. After this date, if we pay dividends exceeding 50% of our net
income at the end of any quarter, excluding all extraordinary gains and losses,
we would be required to simultaneously repay amounts owing under our loan
facilities.

                                        22
CAPITALIZATION

     The following table sets forth our combined capitalization on an actual
basis as of March 31, 2002, and as adjusted to give effect to the sale of
          common shares offered by us in this offering at an assumed initial
public offering price of $     per share, the midpoint of the range set forth on
the cover page of this prospectus, after deducting estimated underwriting
discounts 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, 2002
                                                              ---------------------------
                                                                ACTUAL     AS ADJUSTED(1)
                                                              ----------   --------------
                                                                    (IN THOUSANDS)
LONG-TERM DEBT:
  Bank debt.................................................  $  150,000      $150,000
  Revolving credit facility(2)..............................          --            --
                                                              ----------      --------
     Total long-term debt...................................  $  150,000      $150,000
SHAREHOLDERS' EQUITY:
  Common shares.............................................  $       87      $
  Additional paid-in capital(3).............................     921,472
  Accumulated comprehensive income..........................     (11,714)      (11,714)
  Accumulated deficit(3)....................................     (42,959)      (42,959)
                                                              ----------      --------
     Total shareholders' equity.............................     866,886
                                                              ----------      --------
TOTAL CAPITALIZATION........................................  $1,016,886      $
                                                              ==========      ========
---------------

(1) As Adjusted column reflects the deduction of estimated underwriting
    discounts and our estimated offering expenses and assumes that the
    underwriters' over-allotment option is not exercised.

(2) Consists of a 364-day revolving credit facility with a $50 million borrowing
    limit.

(3) A $61.3 million charge representing the fair value of warrants granted to
    the founders at our formation is reflected as an increase to paid-in capital
    and a decrease to retained earnings/(accumulated deficit).

                                        23
DILUTION

     As of March 31, 2002, our net book value was $866.9 million, or $     per
common share. As used below, our net book value per common share represents
shareholders' equity divided by the number of common shares outstanding,
excluding the effect of the anticipated bonus share issuance. After giving
effect to the issuance of           of our common shares (at an assumed initial
public offering price of $     per common share, and after deducting estimated
underwriting discounts and our estimated offering expenses and assuming that the
underwriters' over-allotment option is not exercised), the application of the
estimated net proceeds therefrom, our net book value as of March 31, 2002, would
have been $     million, or $     per common share. This amount represents an
immediate increase of $     per common share to the existing shareholders and an
immediate dilution of $     per common share issued to the new investors
purchasing shares offered hereby at the assumed public offering price. The
following table illustrates this per share dilution:
Assumed initial public offering price per common share......   $
  Net book value per common share before the offering.......
  Increase attributable to the offering.....................
Net book value per common share after the offering..........
Dilution per common share to new investors(1)...............   $
---------------

(1) If the underwriters' over-allotment option is exercised in full, dilution
    per share to new investors will be $          .

     The following table sets forth the number of our common shares issued, the
total consideration paid and the average price per common share paid by all of
our existing shareholders and new investors, after giving effect to the issuance
of           common shares in the offering at an assumed initial public offering
price of $     per share (before deducting estimated underwriting discounts and
our estimated offering expenses and assuming that the underwriters'
over-allotment option is not exercised).
SHARES ISSUED       TOTAL CONSIDERATION      AVERAGE
                                            -------------------   ----------------------   PRICE PER
                                             NUMBER     PERCENT      AMOUNT      PERCENT     SHARE
                                            ---------   -------   ------------   -------   ---------
Existing shareholders.....................                        $                          $
                                            ---------     ---     ------------     ---       ----
New investors.............................
                                            ---------     ---     ------------     ---       ----
     Total................................                100%                     100%
                                            =========     ===     ============     ===       ====
24
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 the
summary balance sheet data as of December 31, 2001 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, 2002 and the summary balance
sheet data as of March 31, 2002 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 year to date results presented below
are not necessarily indicative of our full year performance. You should read the
following summary combined 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.
PERIOD ENDED       THREE MONTHS ENDED
                                                          DECEMBER 31, 2001(1)     MARCH 31, 2002
                                                          --------------------   ------------------
                                                            (IN THOUSANDS, EXCEPT SHARE AMOUNTS,
                                                             PER SHARE AMOUNTS AND PERCENTAGES)
SUMMARY INCOME STATEMENT DATA:
  Gross premiums written................................       $      150            $  203,679
  Reinsurance premiums ceded(2).........................               --               (14,320)
                                                               ----------            ----------
  Net premiums written..................................              150               189,359
  Change in unearned premiums...........................             (142)             (152,748)
  Net premiums earned...................................       $        8            $   36,611
  Net investment income.................................            1,139                 7,633
  Net realized investment gains (losses)................               --                   484
  Loss and loss adjustment expenses.....................               --               (14,367)
  Acquisition costs.....................................               (1)               (6,467)
  General and administrative expenses...................           (1,061)               (4,198)
  Interest on long-term loan............................             (236)                 (995)
  Incorporation expenses................................             (146)                  (42)
  Fair value of warrants issued.........................          (61,321)                   --
                                                               ----------            ----------
Net income (loss).......................................       $  (61,618)           $   18,659
                                                               ==========            ==========
Basic earnings (loss) per share.........................       $                     $
Fully diluted earnings (loss) per share.................       $                     $
Basic weighted average shares outstanding...............
Diluted weighted average shares outstanding.............

SELECTED RATIOS (BASED ON U.S. GAAP INCOME STATEMENT
  DATA):
Loss ratio (on net premiums earned)(3)..................              n/a                  39.2%
Acquisition costs ratio (on net premiums earned)(4).....              n/a                  17.7%
General and administrative expense ratio (on net
  premiums earned)(5)...................................              n/a                  11.5%
                                                               ----------            ----------
Combined ratio(6).......................................              n/a                  68.4%
                                                               ----------            ----------
25
AS OF                 AS OF
                                                           DECEMBER 31, 2001       MARCH 31, 2002
                                                           -----------------       --------------
SUMMARY BALANCE SHEET DATA:                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
  Fixed maturities, cash and cash equivalents...........       $  991,009            $1,028,771
  Premium receivable....................................              133               119,789
  Other assets..........................................           30,656                51,283
                                                               ----------            ----------
Total assets............................................       $1,021,798            $1,199,843
                                                               ==========            ==========
LIABILITIES
  Loss and loss adjustment reserves.....................       $       --            $   15,011
  Unearned premium......................................              142               165,892
  Long-term debt........................................          150,000               150,000
  Other liabilities.....................................           11,003                 2,054
                                                               ----------            ----------
Total liabilities.......................................       $  161,145            $  332,957
                                                               ==========            ==========
Total shareholders' equity..............................       $  860,653            $  866,886
                                                               ==========            ==========
Total liabilities and shareholders' equity..............       $1,021,978            $1,199,843
                                                               ==========            ==========

PER SHARE DATA (BASED ON U.S. GAAP BALANCE SHEET DATA)
Book value per share(7).................................       $                     $
Diluted book value per share(8).........................       $                     $
---------------

(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.

(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
    weighted average shares outstanding of        .

(8) Fully diluted book value per share is calculated based on total
    shareholders' equity divided by diluted weighted average shares outstanding
    of        . Potentially dilutive warrants and stock options were not
    dilutive at March 31, 2002 because their exercise prices were above the book
    value per share of the Company.

                                        26
MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the combined
financial statements and accompanying notes which appear elsewhere in this
prospectus. It contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
those discussed below and elsewhere in this prospectus, particularly under the
heading "Risk Factors."

BUSINESS ENVIRONMENT AND OUR FORMATION

     The global property and casualty insurance and reinsurance industry has
historically been highly cyclical. During the last half of the 1990s, the
industry experienced excess capacity for writers of insurance and reinsurance,
which resulted in highly competitive market conditions. After this extended
period of intense competition and eroding premium rates, the reinsurance markets
began experiencing improvements in rates, terms and conditions for reinsurers in
the first quarter of 2000. Continuing improvements through 2001 extended to the
primary insurance industry and were accelerated by the September 11th terrorist
attacks, which resulted in losses to the industry estimated to be between $30
and $70 billion, which would make it the largest catastrophe loss ever
experienced by the industry.

     We believe property and other reinsurance premiums have historically often
risen in the short term in the aftermath of significant catastrophic losses. As
claims are reserved, industry surplus is depleted and the industry's capacity to
write new business diminishes. We believe that market trends similar to those
that have occurred in past cycles are developing in the current environment. At
the same time, we believe that there is a heightened awareness that commercial
properties are exposed to a variety of risks resulting in an increase in the
demand for insurance and reinsurance products. We were formed in November 2001
to take advantage of these opportunities, and through Montpelier Re, we seek to
fulfill the need for additional underwriting capacity in the global property and
casualty reinsurance market.

     We are observing substantial increases in premium rates for renewals in
2002 compared to 2001 levels. We believe that rate increases will continue
throughout 2002, although at a more moderate pace. Capital provided by new
entrants or by the commitment of additional capital by existing reinsurers may
increase the supply of reinsurance which could impact pricing. An increase in
the supply of reinsurance could moderate rate increases.

     Since we underwrite global specialty property reinsurance and have large
aggregate exposures to natural and man-made disasters, we expect that our claim
experience will be the result of relatively few events of high magnitude. 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 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 historically have
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.

REVENUES

     We derive our revenues primarily from premiums from our reinsurance
contracts and, to a lesser extent, income from our investment portfolio.
Reinsurance premiums are a function of the amount 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, particularly the first quarter. In the markets in which
we operate, in general, approximately 40% of gross premiums written relates to
contracts that renew in the first quarter, approximately 25% relates to
contracts that renew in the

                                        27
beginning of the second quarter, approximately 25% relates to contracts that
renew in the beginning of the third quarter with the remainder renewing at
various times throughout the year. Premiums are generally due in installments
and earned ratably over the contract term, which ordinarily is twelve months.

     Our fixed income investments are held as available for sale. Under U.S.
GAAP, these securities are carried at fair value, and unrealized gains and
losses on these securities are not included in investment income in our combined
statements of income, but are included in other comprehensive income as a
separate component of shareholders' equity.

EXPENSES

     Our expenses consist primarily of three types: loss and loss adjustment
expenses, policy acquisition costs and general and administrative expenses. In
our first period of operations we also incurred organizational expenses,
interest expense and expense associated with the issuance of warrants.

     Loss and loss adjustment expenses are a function of the amount and type of
reinsurance contracts we write and of the loss experience of the underlying
risks. We record loss and loss adjustment expenses based on an actuarial
analysis of the estimated losses we expect to be reported on contracts written.
As described above, we will 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 and commissions that
represent a percentage of the premiums on reinsurance contracts written, and
vary depending upon the amount and types of contracts written, and to a lesser
extent ceding commissions paid to ceding insurers and excise taxes.

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

     We have awarded, and will in the future award, performance units to some of
our employees. The ultimate value of these performance units to employees is
dependent upon our achievement of specified underwriting targets over the course
of overlapping three-year periods. We accrue the projected value of these units
and expense the value to our income statement over the course of each three-year
performance period. We have granted stock options to Mr. Taylor as part of our
formation. We do not anticipate awarding additional stock options to employees.
We have adopted FAS 123 "Accounting for Stock-Based Compensation," which
requires the recognition of compensation expense for the fair value of stock
compensation awards.

RECENT DEVELOPMENT

     On May 28, 2002, we signed a subscription and shareholders agreement to
invest in the Bermuda-based holding company of Wellington Re Limited
("Wellington Re"), a London-based reinsurance company to be founded by
Wellington Underwriting plc. The investor group is led by The Blackstone Group
and Candover Partners, and also includes affiliates of Credit Suisse First
Boston Private Equity, Inc., 3i Group plc, Phoenix Equity Partners, Olympus
Partners, Lexicon Partners and members of the management of Wellington Re.
Subject to various conditions, Montpelier Re has agreed to invest up to
approximately 9% of the total investor commitments of L448 million (or $653
million), or approximately $60 million, in two separate tranches. The first
tranche of L22.1 million (or $32.2 million) is expected to close prior to June
30, 2002 and the second tranche is expected to close in November, 2002.

     In addition, Montpelier Re has agreed to provide quota share reinsurance to
Wellington Re involving annual ceded premiums to us of approximately $60 million
for the underwriting years 2003, 2004 and 2005. These arrangements would cover
mainly property and casualty risks. Anthony Taylor will join the board of
directors of Wellington Re and will remain on the board so long as we retain a
specified level of shareholdings and maintain the quota share business.
                                        28
The formation of Wellington Re, as well as our funding and reinsurance
commitments to it, are subject to a number of conditions, including the
confirmation of acceptable indicative financial strength ratings, the approvals
of Lloyd's of London, third party capital providers on Syndicate 2020 managed by
Wellington Underwriting Agencies Ltd. and the U.K.'s Financial Services
Authority and the completion of the purchase of a predecessor company which will
be renamed Wellington Re.

RESULTS OF OPERATIONS

     Montpelier Re Holdings Ltd. and Montpelier Re were formed on November 14,
2001, and Montpelier Re commenced insurance operations on December 16, 2001.
Neither company had any prior operating history. Accordingly, we have no
comparable results from prior periods. Our fiscal year ends on December 31. Our
financial statements are prepared in accordance with U.S. GAAP.

  PERIOD ENDED DECEMBER 31, 2001

     During the period from inception to December 31, 2001, Montpelier Re wrote
one policy with gross premiums written of $0.2 million and incurred no losses.
An insignificant amount of premium was earned. Net investment income resulting
from the investment of the proceeds of our private placement contributed $1.1
million to our net income. This was offset, however, by general and
administrative expenses of $1.1 million and interest on long-term debt of $0.2
million. In addition, we incurred certain one-time expenses in connection with
our formation, consisting of incorporation expenses of $0.1 million and 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.

  THREE MONTHS ENDED MARCH 31, 2002

     Gross Premiums Written.  In the three months ended March 31, 2002,
Montpelier Re's gross premiums written were $203.7 million. Gross premiums
written were primarily driven by excess of loss contracts, which accounted for
$129.9 million of premium and three Qualifying Quota Share ("QQS") arrangements,
which accounted for $73.8 million of premium. The QQS business incepting in the
first three months of 2002 is based on projections supplied by the underlying
syndicates. Gross premiums written related to QQS arrangements have been shown
on a gross basis.

     Reinsurance Premiums Ceded.  Reinsurance premiums ceded for the three
months ended March 31, 2002 were $14.3 million, which was attributable to the
reinsurance purchased by the QQS syndicates with respect to the QQS contracts in
which we participated.

     Net Premiums Written.  Net premiums written for the three months ended
March 31, 2002 were $189.4 million, which were primarily derived from excess of
loss contracts and QQS contracts, net of reinsurance.

     Net Change in Unearned Premiums.  Net change in unearned premiums for the
three months ended March 31, 2002 was $152.7 million, which was primarily
attributable to excess of loss contracts and QQS contracts, and reflects the
fact that most of our contracts are written on a calendar year basis, with the
premiums earned over the course of the year.

     Net Premiums Earned.  Net premiums earned for the three months ended March
31, 2002 were $36.6 million, which were primarily attributable to the excess of
loss contracts and QQS contracts. The large difference between net premiums
written and net premiums earned during the three months ended March 31, 2002
reflects the fact that most of our contracts are written on a calendar year
basis, with the premiums earned over the course of the year.

     Loss and Loss Adjustment Expenses.  Loss and loss adjustment expenses for
the three months ended March 31, 2002 were $14.4 million. The amount recorded
represents our estimate of expected losses on QQS premiums earned. This was
principally due to losses that we estimate have been "incurred but not yet
                                        29
reported" (IBNR) of $13.7 million and one claim that was reported to us with an
unadjusted net loss of $0.7 million. There are no amounts included for
catastrophe losses as no such events occurred during the quarter.

     Acquisition Costs.  Acquisition costs for the three months ended March 31,
2002 were $6.5 million, which were principally due to brokerage commissions for
our reinsurance contracts of $3.1 million and commissions paid to ceding
insurers and other costs of $3.4 million.

     General and Administrative Expenses.  General and administrative expenses
for the three months ended March 31, 2002 were $4.2 million, which were driven
primarily by fixed expenses of $2.4 million, $0.6 million accrual related to the
performance units granted under our performance unit plan and current incentive
compensation bonuses accrued and $1.2 million related to the accrual of the fair
value of stock options granted.

     Net Investment Income.  Net investment income for the three months ended
March 31, 2002 was $7.6 million, which was primarily comprised of interest on
coupon-paying bonds and bank interest of $9.1 million, partially offset by
amortization of premium (discount) on bonds, investment management fees and
foreign currency losses of $1.5 million.

     Net Realized Investment Gains (Losses).  Net investment gains for the three
months ended March 31, 2002 were $0.5 million, which were principally due to
gains realized from the sale of fixed income securities.

     Interest on Long-Term Loan.  Interest on long-term loan for the three
months ended March 31, 2002 was $1.0 million, which was attributable to interest
expenses on the $150 million outstanding balance on our long-term loan facility
described below.

     Incorporation Expenses.  Incorporation expenses for the three months ended
March 31, 2002 were $42,000.

     Net Income (Loss).  Net income (loss) for the three months ended March 31,
2002 was $18.7 million, which was principally due to net underwriting income of
$11.6 million, primarily reflecting the lack of reported claims, net investment
income of $7.6 million and net investment gains of $0.5 million, partially
offset by interest on the long-term loan of $1.0 million.

LIQUIDITY AND CAPITAL RESOURCES

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

     Cash Flows for the Period from Inception to December 31, 2001.  In the
period from November 14, 2001, our date of incorporation to December 31, 2001,
we received $848.2 million in cash from a private placement of our common
shares, which was partially offset by equity raising costs paid of $5.2 million.
Substantially all of these funds were contributed to Montpelier Re to provide
capital for its underwriting operations. During this period we used $3.9 million
of cash in operating activities, largely because Montpelier Re did not commence
insurance operations until late December. Montpelier Re invested $638.5 million
in investments in the period, and had a cash balance of $350.6 million at
December 31, 2001.

     Prior to December 31, 2001, we also entered into two senior credit
facilities with Bank of America, N.A. and a syndicate of commercial banks. The
credit facilities consist of a 364-day revolving credit facility with a $50
million borrowing limit and a three-year term loan facility with a $150 million
aggregate borrowing limit. As of March 31, 2002, we had borrowed $150 million
under the term loan facility and had not accessed the revolving credit facility.
Substantially all of the $150 million was contributed to Montpelier Re to
provide capital for its underwriting operations. These credit facilities contain
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 million; (y) 50% of positive quarterly net income (with no deduction for
net losses);
                                        30
and (z) 50% of any net equity proceeds (including from this offering), 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 final
judgments against us which exceed an aggregate of $5 million (excluding any
portion thereof which will likely be recovered through insurance) each
constitute an event of default under our credit facilities.

     Furthermore, our ability to pay dividends is limited under these credit
facilities. Under these facilities, we cannot pay dividends to our shareholders
until April 1, 2003. After this date, we can only pay dividends in an amount
equal to 50% of our net income at the end of any quarter, excluding all
extraordinary gains and losses. If we pay dividends in excess of this amount, we
are required to refund simultaneously our debt in an amount equal to at least
43% of the excess dividend payment. This debt repayment would be used to pay any
amounts owing under our term loan facility and then amounts outstanding under
the revolving loan facility.

     In the three months ended March 31, 2002, we generated an operating net
cash inflow of $35.7 million, primarily relating to premiums received by
Montpelier Re. We did not pay any losses during the quarter. We invested $282.8
million during the quarter, and as of March 31, 2002 had a cash balance of
$119.5 million.

     Fixed maturities, cash and cash equivalents were $1,028.8 million as of
March 31, 2002, compared to $991.0 million at December 31, 2001. The primary
cause of this increase was the receipt of $26.0 million in subscriptions for
common shares on January 3, 2002, which related to the second and final closing
of our initial capitalization. We had cash and cash equivalents of $119.5
million at March 31, 2002. We expect this to be sufficient to cover our cash
needs for the next twelve months.

     For the period from inception until March 31, 2002, we have had sufficient
cash flow from operations to meet our liquidity requirements. The cash generated
from the private placement together with our credit facilities, have provided us
with sufficient liquidity to enable Montpelier Re to meet its statutory
requirements under the Insurance Act, as described below.

     We did not make any significant capital expenditures during the period from
inception to March 31, 2002.

     Liquidity.  On an ongoing basis, our sources of funds primarily consist of
premiums written, investment income and proceeds from sales and redemptions of
investments.

     Cash is used primarily to pay losses and loss adjustment expenses,
brokerage commissions, excise taxes, and general and administrative expenses and
to purchase new investments. In the future, we may also use cash to pay for any
premiums retroceded and any authorized share repurchases.

     Our cash flows from operations represent the difference between premiums
collected and investment earnings realized, and the losses 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 all cash flows not required for operating
purposes. The potential for a large claim under one of our 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 using modeling techniques to structure
our investments in an effort to anticipate the payout patterns of our
liabilities under reinsurance policies. No assurance can be given, however, that
we will successfully match the structure of Montpelier Re's investments with its
liabilities under 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.

     Montpelier Re is registered under the Insurance Act. Under the Insurance
Act, Montpelier Re is required to prepare statutory financial statements and to
file a statutory financial return. The Insurance Act also requires Montpelier Re
to meet a minimum solvency margin equal to the greatest of (i) $100 million,

                                        31
(ii) 50% of net premiums written or (iii) 15% of the reserve for losses and loss
adjustment expenses. To satisfy these requirements, Montpelier Re was required
to maintain a minimum level of statutory capital and surplus of $100 million at
December 31, 2001 and a minimum share capital of $1 million. Montpelier Re's
statutory capital and surplus was $980.2 million at December 31, 2001, of which
$980.7 million is fully paid up share capital.

     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 January 1, 2002, without such
notification, was $39,540. Accordingly, there is no assurance that dividends
will be declared or paid in the future. See "Dividend Policy" and
"Regulation -- Bermuda Insurance Regulation" and "-- Certain Bermuda Law
Considerations."

     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 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. 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 $200 million,
which we consider sufficient to support Montpelier Re's estimated qualifying
quota share obligations during its first year of operation.

     We do not currently have any material commitments for any capital
expenditures over the next twelve months.

     We expect that the proceeds of this offering, together with the capital
base we established in the private placement, will permit us to continue to
implement our business strategy. On an ongoing basis, we expect our internally
generated funds, together with the revolving credit agreement and the capital
base established by this offering and the private placement, to be sufficient to
operate our business. Consequently, we do not presently anticipate that we will
incur any additional material indebtedness in the ordinary course of our
business other than obtaining letters of credit as security for Montpelier Re's
reinsurance agreements. However, there can be no assurance that we will not be
required to incur other indebtedness to implement our business strategy or pay
claims.

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 board of
directors, 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-income portfolio is exposed to interest rate risk.
Fluctuations in interest rates have a direct impact on the market valuation of
these securities. As interest rates rise, the market value of our fixed-income
portfolio falls, and the converse is also true. We expect to 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.

     Interest rate movements also affect the economic value of our long-term
debt obligation, on which the interest rate has been fixed at 2.96% until
October 21, 2002. Thereafter, we will have the option of fixing the rate again
or allowing it to vary based on LIBOR.

                                        32
As of March 31, 2002, we held $25.4 million, or 2.8% of our total invested
assets in mortgage-related 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 small 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.

     As of March 31, 2002, 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 2.4% or approximately $24.5 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
2.4% or approximately $24.5 million.

     Foreign Currency Risk.  We will attempt to manage our foreign currency risk
by seeking to match our liabilities under reinsurance policies that are payable
in foreign currencies with investments that are denominated in such currencies.
Furthermore, 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.

     Credit Risk.  We have exposure to credit risk primarily as a holder of
fixed income securities. 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.

CURRENCY

     Our functional currency is the United States dollar. However, because 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

     We do not believe that inflation has had a material effect on our combined
results of operations, except insofar as inflation may affect interest rates.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

     Our combined financial statements contain certain amounts that are
inherently subjective in nature and have required management to make assumptions
and best estimates to determine the reported values. If factors such as those
described in "Risk Factors" cause actual events or results to differ materially
from management's underlying assumptions or estimates, there could be a material
adverse effect on our results of operations and financial condition and
liquidity.

     We believe that the following critical accounting policies affect the more
significant estimates used in the preparation of our combined financial
statements. The descriptions below are summarized and have been simplified for
clarity. A more detailed description of the significant accounting policies we
use to prepare our financial statements is included in the notes to the combined
financial statements.

     Premiums.  Premium income is primarily earned ratably over the term of the
insurance policy. The portion of the premium related to the unexpired portion of
the policy at the end of any reporting period is reflected in unearned premiums.

                                        33
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. 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, 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 when 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.

     Premiums receivable are recorded at amounts due less any required provision
for doubtful accounts.

     Loss and Loss Adjustment Expense Reserves.  Loss and loss adjustment
expense reserves, including losses incurred but not reported and provisions for
loss adjustment expenses, includes amounts determined from loss reports on
individual cases, independent actuarial determinations and management estimates.
We currently do not have individual case or other data specific to our
portfolio, which means that we use industry data and professional judgment in
the reserving process.

     A significant portion of our business is in the property catastrophe market
and programs with higher layers of risks. Reserving for losses in such programs
is inherently complicated in that losses in excess of the attachment level of
Montpelier Re'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. These incurred but
not reported losses are inherently difficult to predict.

     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. Since the Company has insufficient past loss experience,
management relies on industry data and professional judgment. 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.

     These complications, together with the potential for unforeseen adverse
developments, may result in losses and loss 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 catastrophe 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.

     Other Than Temporary Declines in Investments.  Investments are reviewed
periodically to determine if they have sustained an impairment of 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. If investments are determined to be impaired,
a loss is charged to the income statement in the period in which it is
discovered. The current economic environment and recent volatility of securities
markets increase the difficulty in determining impairment. We do not currently
hold any investments which are not quoted. Should such investments be purchased,
fair value will be determined using the financial information received and other
economic and market knowledge as appropriate.

     Long-Term Incentive Award Accruals.  The Long-Term Incentive Plan provides
for the granting of performance units to management. The performance units
entitle the recipient to receive a specified amount subject to the achievement
of specific financial goals. Performance units vest at the end of a three year
period,
                                        34
and payout is linked to an average combined ratio. Management is required to
estimate the average combined ratio in order to accrue an appropriate expense in
the financial statements. Because of the inherent volatility in short term
underwriting results, and the resultant difficulty in estimating future
insurance ratios, management assumes a target combined ratio which results in a
100% realization by the recipients of the allocated performance units. When the
applicable three year vesting period has six months remaining, the assumed
combined ratio will be replaced by a combined ratio calculated by the
Compensation Committee based on actual results, and any adjustment required will
be recognized in the period in which the adjustment is calculated.

     New Accounting Policies.  The Financial Accounting Standards Board recently
issued FAS No. 143, "Accounting for Asset Retirement Obligations" and FAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." FAS No.
143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period such obligation is incurred. The
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. FAS No. 144 established a single accounting model
for long-lived assets to be disposed of by sale and resolves implementation
issues related to FAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of." The statement is effective
for financial statements issued for fiscal years beginning after December 15,
2001. Currently, the adoption of these statements will not have any impact on
our financial position.

                                        35
INDUSTRY BACKGROUND

THE TRADITIONAL INSURANCE AND REINSURANCE MARKETS

     Insurance.  The property and casualty insurance market is served by a
number of primary insurers, including stock, mutual and captive insurance
companies that write insurance policies directly for the public and for other
corporations or businesses. Captive insurance companies are insurance companies
that are owned by another company or group of companies and primarily insure the
risks of that parent company or group.

     The property and casualty insurance market covers a wide range of insurance
classes, including: homeowners, automobile, property, fire, catastrophe,
accident, liability, workers' compensation, professional/medical malpractice,
bankers, fidelity, marine, cargo, aviation, automobile and credit/financial
loss. Each of these insurance classes seeks to indemnify the insured against its
own losses or its liability to a third party for loss or damage.

     Reinsurance and Retrocession.  Primary insurers spread the risks they
assume by purchasing insurance, known as reinsurance, from other insurers, known
as reinsurers. A reinsurer agrees to indemnify another insurance company,
commonly referred to as the ceding company or cedent, for all or a portion of
the insurance risks underwritten by the ceding company under one or more of its
own insurance policies. Reinsurance does not legally discharge the primary
insurer from its liability with respect to its obligations to the insured.
Reinsurance benefits a ceding company in a number of ways, including:

     - reducing net liability on individual risks;

     - providing catastrophe protection from large or multiple losses;

     - stabilizing results; and

     - assisting in maintaining acceptable operating and leverage ratios.

     Reinsurance also provides a ceding insurer with additional underwriting
capacity by permitting it to assume larger risks and underwrite a greater number
of policies without being required to increase its capital and surplus.

     Traditional reinsurance principally consists of treaty reinsurance and
facultative reinsurance. Under treaty reinsurance, the reinsurer is obliged to
reinsure a range of risks or policies, as defined in a standing arrangement,
referred to as a treaty, which is usually valid for a period of one year. Under
facultative reinsurance, a separate reinsurance contract is negotiated in
respect of each original insurance policy to be reinsured. Facultative
reinsurance is normally purchased to cover unique or large individual risks or
for amounts in excess of limits on risks already reinsured elsewhere.

     Both treaty and facultative reinsurance can be written on either a
proportional, also known as a quota share or pro rata, basis or a
non-proportional, referred to as excess of loss, basis. Under quota share
reinsurance, the reinsurer indemnifies the insurer against a predetermined
percentage or share of the losses and loss adjustment expenses incurred by the
insurer under policies it has issued and usually participates on any reinsurance
protection purchased by the ceding company. In reinsurance written on an excess
of loss basis, the reinsurer indemnifies the insurer against that portion of
losses and loss adjustment expenses incurred on the original policy in excess of
a specified dollar or percentage loss ratio amount.

     Reinsurers may also purchase reinsurance to cover their own assumed risk.
This is known as retrocessional reinsurance. Reinsurance companies enter into
retrocessional agreements for reasons similar to those for which insurers
purchase reinsurance, such as to spread risk and increase capacity. As with
reinsurance, retrocessions can be written on a treaty or facultative basis, and
on a quota share or excess of loss basis.

THE BERMUDA INSURANCE INDUSTRY

     The insurance industry in Bermuda has existed for over 50 years, and
experienced rapid expansion in the 1970s with the development of captive
insurance companies. We believe Bermuda is now the world's leading center for
reinsurance companies as well as a leading center for captive insurance
companies. There are a
                                        36
number of factors that make Bermuda an attractive location from which to carry
on insurance and reinsurance business, including:

     - an established history as a highly reputable business center;

     - excellent professional and other business services;

     - a well-developed captive insurance industry with the attendant insurance
       underwriting and managerial expertise;

     - a regulatory system with minimum regulatory involvement for those
       companies that meet certain solvency, liquidity and other requirements;

     - political and economic stability; and

     - ease of access to global insurance markets.

MARKET ENVIRONMENT

     Since the late eighties, the worldwide insurance and reinsurance industry
has been characterized by highly competitive market conditions. Excess capacity,
declining premium rates, less favorable policy terms and adverse reserve
developments all contributed to poor underwriting results. The following table
sets forth the statutory loss ratios for U.S. commercial insurers and
professional reinsurers for the last five years:
FORECAST
                                                1997    1998    1999    2000      2001
                                                -----   -----   -----   -----   --------
Calendar Year Combined Ratios(1)
  Commercial Lines Insurers...................  103.4%  106.9%  109.1%  108.0%   116.6%
  Professional Reinsurers.....................  100.4%  104.8%  105.5%  110.5%   111.7%
---------------

(1) Equal to the ratio of incurred losses and loss adjustment expenses to net
    earned premiums.

Source:  Fitch Special Report dated January 17, 2002.

     We believe that underwriting results for reinsurers outside the U.S.,
including Lloyds, have also suffered.

     Losses from the September 11th terrorist attacks are estimated to be $30-70
billion, before taxes. This represents the largest insured catastrophe in the
history of the insurance industry, surpassing the $20.2 billion in losses from
Hurricane Andrew in 1992, previously the largest insured event in history. The
following table shows the previous ten largest insured losses:
EVENT                              DATE              COUNTRY               INSURED DAMAGE(1)
-----                              ----              -------               -----------------
                                                                         (DOLLARS IN BILLIONS)
Hurricane Andrew...............   8/23/92   United States, Bahamas               20.2
Northridge Earthquake..........   1/17/94   United States                        16.7
Typhoon Mireille...............   9/27/91   Japan                                 7.3
Winterstorm Daria..............   1/25/90   France, Great Britain                 6.2
Winterstorm Lothar.............  12/25/99   Western Europe                        6.2
Hurricane Hugo.................   9/15/89   United States, Puerto Rico            6.0
Storm and Floods...............  10/15/87   Europe                                4.7
Windstorm Vivian...............   2/25/90   Western/Central Europe                4.3
Typhoon Bart...................   9/22/99   Japan                                 4.3
Hurricane Georges..............   9/20/98   United States, Caribbean              3.8
---------------

(1) Source:  Swiss Re Sigma. Amounts are shown in 2001 U.S. dollars.

     The September 11th terrorist attacks have led to a fundamental reevaluation
of risk by commercial insureds, as well as insurance and reinsurance companies,
which we believe has resulted in increased demand

                                        37
for reinsurance. Following the events of September 11th, there is uncertainty in
the insurance and reinsurance markets about the extent to which future coverages
will extend to terrorist acts as well as the definition of terrorist acts. We
believe that coverage of claims that are the result of terrorist acts (as they
are ultimately defined by industry and government standards) will generally be
excluded from property catastrophe reinsurance contracts covering large
commercial risks, above specified property values, but usually will not be
excluded for smaller commercial coverages, personal lines or other coverages.
The effect of potential U.S. and other governmental intervention on the
insurance and reinsurance markets we serve, including the extent to which
coverage for terrorist acts is offered by the insurance and reinsurance markets
in the future, is uncertain. It remains to be seen whether the insurance
industry's attempts to exclude coverage for terrorist acts will be effective.

     Beyond poor underwriting results, insurers and reinsurers are negatively
impacted by the decline in global equity markets. Since many insurers and
reinsurers invest significant portions of their investment portfolios in the
equity markets, the prolonged downturn in the equity markets will likely reduce
available capacity. Additionally, the low interest rate environment is resulting
in reduced fixed maturity investment income and is having a negative impact on
economic underwriting returns.

                                        38
BUSINESS

OVERVIEW

     We are a Bermuda-based provider of reinsurance for the global insurance
market, conducting our reinsurance operations through our wholly owned
subsidiary, Montpelier Re. We were founded by White Mountains and Benfield 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 aim to achieve superior
returns on capital by writing global specialty property and other classes of
reinsurance while maintaining disciplined underwriting practices. We seek to
identify attractive reinsurance opportunities by capitalizing on our
management's significant underwriting experience, utilizing modeling tools and
technologies and developing proprietary systems. Since Montpelier Re commenced
operations, we believe we have become a leading provider of reinsurance products
to the global market. During the three months ended March 31, 2002, we
underwrote $203.7 million in gross premiums written. 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.)("Guy
Carpenter"), Aon Re Worldwide (a subsidiary of Aon Corporation) ("Aon Re
Worldwide"), Benfield Group plc ("Benfield") and Willis Group Holdings Ltd.
("Willis Group") among others.

MARKET OPPORTUNITIES AND INDUSTRY TRENDS

     As a result of the September 11th terrorist attacks and the years of poor
rates and conditions in the worldwide reinsurance markets which preceded them,
there has been a contraction of global underwriting capacity combined with a
substantial increase in demand for reinsurance products. We believe this has
created favorable opportunities for new specialty reinsurance market entrants.
Some of the principal factors giving rise to these market opportunities include:

     - record loss events from the September 11th terrorist attacks, the Enron
       collapse and the Sri Lanka airport attack;

     - poor underwriting results in recent years as a result of excess capacity,
       declining premium rates, less favorable policy terms and adverse loss
       reserve developments from prior policy years (including asbestos,
       environmental and other mass tort liabilities);

     - withdrawal of capacity from important segments of the reinsurance market
       and substantial reductions in capital at some reinsurance companies due
       to excessive unanticipated claims; and

     - the decline in global equity markets and a low interest rate environment
       leading to lower investment returns.

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 Like 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 23 years of experience in the
     insurance and reinsurance industry. This experience creates the opportunity
     for disciplined and

                                        39
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
     provided significant business to us in the first quarter of 2002. 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 newly 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 billion, which provides a high degree of financial strength to our
     clients. On December 19, 2001, A.M. Best Company Inc. assigned an "A-"
     (Excellent) rating to Montpelier Re. This rating reflects A.M. Best's
     opinion of our initial capitalization, management expertise and sound
     sponsorship and is not applicable to the securities offered by this
     prospectus.

          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 Mountains has substantial
     experience in managing companies and sponsoring the development of other
     insurance companies. Mr. Byrne, our Chairman and the Chairman and Chief
     Executive Officer 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.

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. We intend to manage our capital prudently relative to our
     risk exposure in an effort to maximize sustainable long-term growth in
     shareholder value. Currently, we do not intend to buy retrocessional
     protection and will expect to do so only as the pricing and terms in the
     retrocessional market become more attractive. Our capital management
     strategy will emphasize the appropriate use of leverage and share
     repurchases to manage idle or excess capital. 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

                                        40
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
     will allow them to build, over time, a substantial book of reinsurance
     business exhibiting superior performance. We believe that there has been a
     decline in the number of acknowledged program leaders both in North America
     and internationally exacerbated by the events of September 11th, which has
     increased our access to business.

          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,
     together with their market knowledge and judgment, to achieve the highest
     available price per unit of risk.

          Develop and Maintain Balanced Portfolio of Reinsurance Risks.  We aim
     to craft a balanced portfolio of primarily property related risks,
     diversified across products, geographic areas of coverage, cedents and
     distribution sources. 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, unlike
     the Bermuda companies that were formed in 1993 and 1994 which were more
     heavily focused on U.S. property catastrophe business. We will employ risk
     management techniques to monitor correlation risk and seek to enhance the
     portfolio returns through capital allocation. 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 Reinsurance and Insurance
     Solutions for Our Clients. We intend to establish ourselves as a premier
     provider of global specialty property reinsurance products and seek to
     provide superior customer service. Our objective is to solidify long-term
     relationships with brokers and clients while establishing an industry
     reputation for innovative and timely quotes for difficult technical risks.

REINSURANCE PRODUCTS

     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 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 client.

     We primarily focus on writing the following products:

     Property Catastrophe.  We believe our largest opportunity, excluding quota
share and pro-rata, is in property catastrophe coverage for insurance companies.
In addition to seeking profitable pricing, we manage our risk using contract
terms and conditions that can be varied based on the nature and scope of
coverage. Our

                                        41
standard coverage excludes the peril of terrorism in respect of commercial risks
worldwide although there are modifications of this exclusion, principally in the
United States, to take account of regulatory and commercial considerations in
certain jurisdictions. However, we also underwrite specific terrorism-only
contracts when we believe we receive adequate pricing and are able to actively
control our exposures. To date we have written a limited number of contracts
covering terrorism specifically as customers find the prices of this coverage
high, and the scope limited as we typically exclude nuclear, chemical and
biological attacks.

     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 and nuclear contamination, are generally excluded
from all contracts.

     Property catastrophe reinsurance is generally written on an excess of loss
basis. Excess of loss reinsurance 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.

     Other Property.  We provide retrocessional coverage, which is reinsurance
protection to other reinsurers or retrocedents. Coverage is focused on
catastrophe protection for property portfolios. We believe, based on the
historical experience of management, the most opportune time to write
retrocessional coverage follows major catastrophes. Given the dislocation
expected in the current market, we believe that there may be an opportunity for
"private" treaties where there is the opportunity to write 100% of a layer or
layers on behalf of a program on behalf of a ceding company. The terms of these
transactions are typically kept confidential from the market, which is different
than the subscription market where all parties to the transaction are aware of
the terms under which each participates.

     Retrocessional coverage typically carries a higher degree of volatility
versus reinsurance as it covers the concentration of catastrophe exposure
written by retrocedents, which in turn may have an aggregation of losses from a
single catastrophic event. In addition, the information available in pricing
retrocessional coverage can be less precise than the information received
directly from the primary companies.

     We also provide property risk excess of loss reinsurance to protect
insurance companies on their primary insurance risks and facultative reinsurance
transactions on a "single risk" basis. Coverage is triggered by a large loss
sustained by an individual risk rather than by smaller losses which fall below
the specified attachment point 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 non-U.S. risk coverages have experienced
substantial increases over their expiring terms. We expect there to be
significant restrictions on policy terms and conditions, 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 facultative coverage for commercial property risks where the
reinsurer assumes all or part of a risk under a single insurance contract.
Facultative reinsurance is negotiated separately for each contract. 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.

                                        42
In general, we exclude terrorism risk from our retrocessional, property
risk excess of loss and facultative coverages.

     Qualifying Quota Share.  We anticipate that at least during the early years
of our operation, we will continue to provide whole account quota share
reinsurance, or QQS, to select Lloyd's syndicates and specialty insurance
companies. We will continue to target syndicates and companies which have a
proven underwriting franchise, long-term customer relationships and whose
ability to write premiums is limited by their current capital level or, in the
case of Lloyd's syndicates, 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 allowed syndicates to write up to 120% of their
stamp capacity, with the ability to cede 16% to quota share reinsurers. We do
not have exposure to underwriting in earlier years and the contracts can be
commuted after 36 months, the point at which the underwriting year is closed
into future years. We also write business from specialty insurance companies
outside of Lloyd's.

     Under a quota share reinsurance contract, a specified proportion of the
risk on a specified coverage is typically assumed in exchange for an equal
proportion of the premiums. The ceding insurer receives a commission, based on
the amount of the premiums ceded, which is intended to reimburse the insurer for
the costs of writing and administering the business. The reinsurer is dependent
on the ceding company's ability in underwriting, pricing and claims
administration.

     As a newly formed company, quota share contracts provide us with an
immediate source of 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 the quota share
reinsurance usually benefits from all reinsurance purchased by the syndicate.

     Specialty and Other.  We also write specialty risks such as aviation,
marine, personal accident, casualty and other reinsurance business. The marine
and aviation business is primarily written on a retrocessional excess of loss
basis. We also wrote a limited amount of aviation war risk business as prices
renewed at multiples of their expiring prices following significant industry
losses from Sri Lanka and the September 11th terrorist attacks. We expect to
increase our marine and aviation business based on our assessment of the market
environment.

     Our casualty portfolio of risks focuses on selected classes, with an
initial emphasis on workers' compensation, personal accident catastrophe and
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.

     Coverage for casualty and personal accident insurance is generally written
to restrict recoveries by the cedent unless a minimum of fifty insured persons
are involved in the same event. As a result of the number of fatalities arising
from the September 11th terrorist attacks, catastrophe and personal accident
reinsurers experienced significant underwriting losses. Accordingly, many
reinsurers were reluctant to provide this type of cover in December 2001. We
quoted and led what we believe to be the first treaties of this kind purchased
after September 11th. Although we cover terrorism, we exclude, in almost all
cases, losses arising from nuclear, biological and chemical attack. This
business is written to provide coverage generally worldwide.

                                        43
The following tables set forth a breakdown of our gross premiums written by
line of business and by geographic area:

                         GROSS PREMIUMS WRITTEN BY LINE
THREE MONTHS ENDED
                                                                MARCH 31, 2002
                                                              ------------------
                                                               ($ IN MILLIONS)
Property Catastrophe........................................  $ 79.1       38.8%
Other Property..............................................    35.6       17.5
Qualifying Quota Share......................................    73.8       36.2
Specialty and Other.........................................    15.2        7.5
                                                              ------      -----
Total.......................................................  $203.7      100.0%
                                                              ======      =====
GROSS PREMIUMS WRITTEN BY GEOGRAPHIC AREA
THREE MONTHS ENDED
                                                                MARCH 31, 2002
                                                              ------------------
                                                               ($ IN MILLIONS)
U.S.A. and Canada...........................................  $ 59.0       45.4%
Worldwide...................................................    38.2       29.4
Worldwide, excluding U.S.A..................................     9.1        7.0
United Kingdom and Ireland..................................     5.4        4.2
Western Europe excluding Scandinavia........................     5.1        3.9
Japan.......................................................     3.1        2.4
Scandinavia.................................................     2.5        1.9
Caribbean...................................................     1.8        1.4
Others (1.5% or less).......................................     5.7        4.4
                                                              ------      -----
Total, excluding pro-rata...................................  $129.9      100.0%
                                                              ======      =====
UNDERWRITING AND RISK MANAGEMENT

     Our objective is to create a balanced portfolio of risks, diversified
across classes, products, geographic areas of coverage, cedents and source. For
example, our current policy is to limit our exposure to $100 million on any
single coverage. We attempt to limit the amount of potential loss that may arise
from a single catastrophic event. We also 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 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:

     - the attachment point of business written on an excess of loss basis is
       required to be above the level of attritional losses, thereby covering
       infrequent large losses;

     - limit the scope of coverage on regular property classes to "traditional
       perils" and exclude unquantifiable perils such as cyber risks and
       terrorism;

     - entertain difficult risks such as terrorism but only on a specific basis
       whereby exposures are carefully controlled through limits, terms and
       conditions and monitoring aggregates, and an appropriate price is
       charged;

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

                                        44
- be prepared to lead business but work with and follow respected existing
       leaders where appropriate; and

     - use risk assessment models such as RMS, Remetrica II and Catalyst to
       assist in the underwriting process and the quantification of our
       catastrophe aggregate exposures.

     We aim to develop sophisticated modeling tools to analyze and manage the
reinsurance exposures we assume from cedents. We are currently developing CATM,
a proprietary computer-based underwriting system, the technical components of
which incorporate the fundamentals of modern portfolio theory, 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 will be comprised of risk assessment tools, exposure data bases and
intelligent systems, enabling us to price contracts according to actual
exposures and estimate the amount of loss and volatility associated with the
contracts we assume. For analysis of property risks and certain liability risks,
CATM is being designed to use output from models developed by our actuarial
staff as well as from those of commercial vendors. In addition, CATM would serve
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.

     We frequently seek to act as the lead in our reinsurance contracts.
Typically, one reinsurer acts as the "lead" in negotiating principal policy
terms and pricing of reinsurance contracts with a reinsurance broker. 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
take a lead role in underwriting many of our reinsurance contracts. We believe
that being a lead underwriter will be an important factor in achieving
longer-term success because we believe that lead underwriters generally have
greater influence in negotiation of policy terms, attachment points and premium
rates than following reinsurers. In addition, we believe that reinsurers that
lead policies 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) timely payment
of claims and (iii) innovative and customized reinsurance and insurance
solutions to clients. 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.

     Montpelier Marketing Services (UK) Ltd., our marketing subsidiary in
London, is experiencing a flow of introductions from brokers who either are
seeking new markets to channel their business or desire a personal dialogue
prior to rating and acceptance by our Bermuda underwriters. It conducts meetings
with major London brokers, smaller brokers, UK cedents and international cedents
visiting London. In addition, it has conducted specific client trips to Japan,
Australia and Scandinavia.

     The following table shows our gross premiums written by broker:
THREE MONTHS ENDED
                                                                MARCH 31, 2002
                                                              ------------------
                                                               ($ IN MILLIONS)
Benfield....................................................  $ 74.4       36.5%
Willis Group................................................    53.7       26.4
Guy Carpenter...............................................    35.2       17.3
Aon Re Worldwide............................................    24.9       12.2
Others......................................................    15.5        7.6
                                                              ------      -----
Total.......................................................  $203.7      100.0%
                                                              ======      =====
We are also focused on marketing to smaller specialist intermediaries based
in the U.S. and London markets.

                                        45
CLAIMS MANAGEMENT

     As a newly formed company, we have not experienced a high volume of claims.
Pursuant to our claims management process, upon notification of a claim, a
member of our staff performs an initial review and prepares a control sheet. Our
underwriters then adjust the claim, if necessary, at which point it is submitted
to our Chief Underwriting Officer for his final review and approval for payment.
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 reserves for
the ultimate settlement costs of all loss and loss adjustment expenses incurred.

     Under U.S. GAAP, we are not permitted to establish loss and loss adjustment
reserves with respect to our property catastrophe reinsurance until an event
which gives rise to a loss occurs. Generally, reserves will be established
without regard to whether we believe we may subsequently contest a future claim.
Any reserve for losses and loss adjustment expenses may also include loss and
loss adjustment expense reserves for estimated losses that have been incurred
but not reported to us. Such reserves are estimated by our management based upon
reports received from ceding companies, as supplemented by our own estimates of
reserves for which ceding company reports have not been received, and our own
historical experience. To the extent that in the future our own historical
experience is inadequate for estimating reserves, such estimates may be
actuarially determined based upon industry experience and our management's
judgment. Our reserve estimates will be continually reviewed and as adjustments
to these reserves become necessary, such adjustments will be reflected in
current operations.

     Loss and loss adjustment reserves represent estimates, including actuarial
and statistical projections at a given point in time, of an insurer's or
reinsurer's 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 contract. However, reserve
estimates by new property catastrophe reinsurers may be inherently less reliable
than the reserve estimates of a reinsurer with a stable volume of business and
an established claim history.

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. The initial composition of the investments is a diversified
portfolio of highly rated, liquid, fixed income securities of short to medium
term duration. In determining our investment decisions, we consider the impact
of various catastrophic events, particularly those to which our reinsurance and
insurance portfolio may be exposed, on our invested assets to protect our
financial position. While investment in common equity securities does not
presently comprise a significant amount of the investment portfolio, 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.

                                        46
The types of securities in our fixed income portfolio and their fair values
and amortized costs were as follows as of March 31, 2002:
AMORTIZED   UNREALIZED
                                                         COSTS       (LOSS)     FAIR VALUE
                                                       ---------   ----------   ----------
                                                                 (IN THOUSANDS)
TYPE OF INVESTMENT
U.S. government and agencies.........................  $633,624     $ (5,921)    $627,703
U.S. corporate securities............................   261,626       (5,508)     256,118
Mortgage-backed securities...........................    25,727         (285)      25,442
                                                       --------     --------     --------
Total................................................  $920,977     $(11,714)    $909,263
                                                       ========     ========     ========
The investment ratings (provided by major rating agencies) for fixed income
securities held as of March 31, 2002 were as follows:
AMORTIZED
                          RATINGS                               COST      PERCENTAGE
                          -------                             ---------   ----------
                                                                  (IN THOUSANDS)
US Government and government agencies.......................  $590,900       64.2%
AAA/Aaa.....................................................    10,328        1.1
AA/Aa.......................................................   133,397       14.5
A/A.........................................................   186,352       20.2
                                                              --------      -----
                                                              $920,977      100.0%
                                                              ========      =====
The average duration of our fixed income portfolio is 3.0 years. The
maturity distribution for fixed income securities held as of March 31, 2002 were
as follows:
AMORTIZED   ESTIMATED
                          MATURITY                              COST      FAIR VALUE
                          --------                            ---------   ----------
                                                                  (IN THOUSANDS)
Within one year.............................................  $     --     $     --
From one to five years......................................   815,354      805,020
From five to ten years......................................   105,623      104,243
                                                              --------     --------
                                                              $920,977     $909,263
                                                              ========     ========
Our Finance Committee establishes investment guidelines and supervises our
investment activity. 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 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 OneBeacon Asset Management ("OneBeacon"), a wholly owned
indirect subsidiary of White Mountains, to provide investment advisory and
management services. We have agreed to pay investment management 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%. A
portfolio of $1.0 billion would incur an annual fee of 0.18%. In addition, we
have agreed to reimburse out-of-pocket expenses. These fees are included in net
investment income. This agreement may be terminated by either party upon 30 days
written notice. OneBeacon Asset Management earned $73,733 for the period ended
December 31, 2001 for managing these funds. In the three months ended March 31,
2002 OneBeacon earned $0.5 million in fees.

                                        47
RETROCESSIONS

     We do not anticipate the need to purchase retrocessional coverage at this
time, although we do indirectly benefit from the purchase of reinsurance by the
Lloyd's syndicates in our Qualifying Quota Share arrangements. We will monitor
the opportunity to purchase reinsurance on a cost effective basis based on
market conditions, and review the need for reinsurance more generally as our
business develops.

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 Ltd., Converium, Everest Reinsurance Company, IPCRe
Limited, Lloyd's of London syndicates, Munich Re, PartnerRe Ltd., PXRE
Reinsurance Company, Renaissance Reinsurance Ltd., St. Paul Re, Inc., Swiss Re
and XL Capital. 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. and Olympus Re Holdings, Ltd.
Competition varies depending on the type of business being reinsured and whether
we are in a leading position or acting on a following basis.

     In addition, since September 11th, 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.

RATINGS

     Ratings are an important factor in establishing the competitive position of
insurance and reinsurance companies and are important to our ability to market
and sell our products. Rating organizations continually review the financial
positions of insurers, including us. A.M. Best maintains a letter scale rating
system ranging from "A++" (Superior) to "F" (in liquidation). We have been rated
"A-" (Excellent) by A.M. Best, which reflects A.M. Best's opinion of
Montpelier's initial capitalization, management expertise and sound sponsorship.
This opinion is not an evaluation directed toward the protection of investors.

ADMINISTRATION

     We have engaged International Advisory Services Ltd., an insurance
management company located in Bermuda, to provide certain management and
administrative services to us. We pay IAS a fee based upon the time and expense
incurred for the provision of such services and pursuant to our contract with
IAS, we are

                                        48
required to pay them a minimum of $75,000 per quarter. For the three months
ended March 31, 2002, we paid IAS approximately $300,000 for these services. We
currently intend to hire additional staff to perform many of the services that
IAS is providing to us, and we intend to reduce our use of IAS's services in the
future.

PROPERTIES

     We currently lease office space in Pembroke, Bermuda; however, we have
entered into an agreement to lease new, replacement office space in Hamilton,
Bermuda, to accommodate our growth, for a term ending December 31, 2005. In
addition, we have entered into an agreement to lease additional space in London,
England. We believe that for the foreseeable future this office space is
sufficient for us to conduct our operations.

EMPLOYEES

     As of May 21, 2002, we had fourteen employees. The majority of our
employees is employed by Montpelier Re or by Montpelier Marketing Services (UK)
Ltd., our wholly owned marketing subsidiary. See "Risk Factors -- Risks Related
to Our Company -- Our ability to conduct our business may be adversely affected
by Bermuda employment restrictions."

LEGAL PROCEEDINGS

     We are not currently involved in any litigation or arbitration. We
anticipate that, similar to the rest of the insurance and reinsurance industry,
we will be subject to litigation and arbitration in the ordinary course of
business.

                                        49
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, being 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 after consultation with the Insurance Advisory
Committee, 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.

                                        50
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 provisions.
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 are not prepared in accordance
with U.S. GAAP and are distinct from the financial statements prepared for
presentation to Montpelier Re's shareholders (the Company) under the Companies
Act, which financial statements are prepared in accordance with U.S. GAAP.
Montpelier Re, as a general business insurer, is required to submit the 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

                                        51
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;

     (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. Each of the Company and Montpelier Re is required
to obtain the permission of the BMA for the issue and transfer of all of their
shares. We intend to apply for and expect to obtain consent from the BMA for the
issue and transfer of our common shares to and between non-residents of Bermuda
for exchange control
                                        52
purposes, subject to the condition that our common shares shall be listed on the
Nasdaq National Market System or any other appointed stock exchange.

     The transfer and issuance of our common shares 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 and Montpelier Re are
designated as non-resident for Bermuda exchange control purposes, they are
allowed to engage in transactions, and to pay dividends to Bermuda non-residents
who are holders of the common shares, in currencies other than the Bermuda
Dollar. In addition, share transfers must be by written instrument and comply
with our bye-laws.

     In accordance with Bermuda law, share certificates are issued only in the
names of corporations or individuals. In the case of an applicant acting in a
special capacity (for example, as an executor or trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity, we are not
bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust. We will take no notice of any trust
applicable to any of our common shares whether or not we have notice of such
trust.

     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.

     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 may be used in paying up unissued shares of the same
class 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.

                                        53
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 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 recently
announced a new 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 non-
licensed 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.

                                        54
MANAGEMENT

DIRECTORS

     The table below sets forth certain information concerning our directors as
of May 21, 2002:
NAME                                     AGE                     POSITIONS
----                                     ---                     ---------
John J. (Jack) Byrne(1)................  69    Chairman
Anthony Taylor(1)......................  56    Deputy Chairman, Director, President and
                                               Chief Executive Officer of the Company,
                                               President and Chief Underwriting Officer of
                                               Montpelier Re
John D. Gillespie(3)...................  43    Director
Allan L. Waters(2).....................  44    Director
Raymond Barrette(3)....................  51    Director
Tom Hutton(2)..........................  46    Director
Raymond M. Salter(2)...................  67    Director
Allan W. Fulkerson(1)..................  68    Director
William Spiegel(3).....................  39    Director
Steven J. Gilbert(3)...................  55    Director
Kamil M. Salame(2).....................  33    Director
K. Thomas Kemp(4)......................  61    Director Nominee
---------------

(1) Denotes Class A Director with a 2 year term.

(2) Denotes Class B Director with a 3 year term.

(3) Denotes Class C Director with a 4 year term.

(4) The Board of Directors intends to recommend that the shareholders approve an
    increase to the size of the Board and has nominated Mr. Kemp to serve as a
    Director.

     John J. (Jack) Byrne.  Mr. Byrne has been our Chairman since our inception.
He is also currently the Chairman of White Mountains, a position he has held
since 1985, and the CEO of White Mountains, a position he has held since
February 2002, and from time to time since 1985. 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., FSA Holdings, and Overstock.com. 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. 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 has served as Managing Director of OneBeacon since June 2001. He
is also the founder and Managing Partner of his own investment firm, Prospector
Partners, LLC, in Guilford, Connecticut. Mr. Gillespie is a Managing Director of
OneBeacon and also serves as a director of Folksamerica. 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.

     Allan Waters.  Mr. Waters is the founder and Chief Executive Officer of
Mulherrin Capital Advisors, LLC, a financial advisory firm in Hanover, New
Hampshire. Previously Mr. Waters served as Senior Vice

                                        55
President and Chief Financial Officer of White Mountains from 1993 to 1997. He
was formerly Vice President and Controller of Fund American Enterprises from
1991 to 1993; was Vice President, Controller and Assistant Secretary of White
Mountains from 1990 to 1991, and was Vice President, Finance of the Company from
1988 to 1990.

     Raymond Barrette.  Mr. Barrette has been a director of White Mountains
since 2000 and has served as Managing Director and Chief Executive Officer of
OneBeacon since June 2001. 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 Holding Company Inc.

     Tom Hutton.  Mr. Hutton is a private equity and venture capitalist investor
based in Palo Alto, California. Mr. Hutton is a consultant/venture partner at
Trident Capital and was formerly associated with Morgan Stanley Venture Partners
in a similar capacity. 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.  Mr. Fulkerson currently serves as a director of The
Galtney Group, Inc., HCC Insurance Holdings, Inc., International Financial
Group, Inc., Asset Allocation & Management Company, LLC and one of the directors
of Wellington Underwriting plc. 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., LUA Seguros La
Portena, S.A. and United Educators Risk Retention Group, Inc. He is a member of
the Boston Society of Security Analysts and the Association of Insurance and
Financial Analysts. 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 with The Cypress Group
L.L.C., 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 Cinemark USA, Inc.
and Medpointe 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 is Chairman of the Board of Gilbert Global
Equity Partners, L.P., a private equity fund. 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 was Managing
General Partner until 1988. Mr. Gilbert is currently a Director of Veritas,
Inc., LCC International, Inc., Edmunds.com, Optical Capital Group, iSky, Ionex,
and the Asian Infrastructure Fund.

     Kamil M. Salame.  Mr. Salame is a Director of the Private Equity Group of
Credit Suisse First Boston, which has the DLJ Merchant Banking PartnersIII, L.P.
$5.3 billion private equity fund. Mr. Salame joined DLJ's Merchant Banking
Group, a predecessor to Credit Suisse First Boston Private Equity, Inc., in
1997.

                                        56
Previously he was a member of DLJ's Leveraged Finance Group. Mr. Salame is a
director of Hardin Capital, ProChannel Distribution Partners and PM Realty
Group. Mr. Salame 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 has
been nominated to serve as a director. He is also President of White Mountains,
a position he has held since June 2001. From January 2000 to June 2001, Mr. Kemp
was Deputy Chairman, and from 1997 to 2000, he was President and CEO of White
Mountains. Mr. Kemp has been a Director of White Mountains since 1994. He also
serves as a director of Folksamerica, Amlin, PECO Pallets, Main Street America
and Fund American Re.

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
2003, are Messrs. Byrne, Taylor and Fulkerson. Our Class B directors, whose
terms expire in 2004, are Messrs. Waters, Hutton, Salter and Salame. Our Class C
directors, whose terms expire in 2005, are Messrs. Gillespie, Barrette, Spiegel
and Gilbert. The Board of Directors intends to recommend that the shareholders
approve an increase to the size of the Board by one director, and has nominated
K. Thomas Kemp to serve in the newly created directorship.

COMMITTEES OF THE BOARD OF DIRECTORS

     Audit Committee.  The Audit Committee, comprised of Messrs. Barrette,
Fulkerson, Hutton, Salame, Spiegel and Waters, 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. Barrette is
Chairman of the Audit Committee.

     Compensation Committee.  The Compensation Committee, comprised of Messrs.
Barrette, Byrne, Gilbert, Salter and Waters, oversees our compensation and
benefit policies and programs, including administration of our annual bonus
awards and long-term incentive plans. Mr. Byrne is Chairman of the Compensation
Committee.

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

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

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     K. Thomas Kemp, our Chief Financial Officer, is President and a Director of
White Mountains. The Chief Executive Officer of White Mountains, Mr. Byrne, is
Chairman of the Compensation Committee. Mr. Barrette, a member of the
Compensation Committee, is also a Director of White Mountains.

DIRECTOR COMPENSATION

     Directors, who are also our employees, are not paid any fees or other
compensation for services as members of the board of directors or any committee
of the board. Each other director receives cash in the amount of $25,000 per
year and $2,000 per board or committee meeting attended, including formal
telephonic meetings, but not including informal informational meetings. In
addition, committee chairs receive an annual fee of $5,000 for each committee
chaired.

                                        57
EXECUTIVE OFFICERS

     The table below sets forth certain information concerning some of our
executive officers as of May 21, 2002:
NAME                                     AGE                     POSITIONS
----                                     ---                     ---------
Anthony Taylor(1)......................  56    Deputy Chairman, Director, President and
                                               Chief Executive Officer of the Company,
                                               President and Chairman and Chief Underwriting
                                               Officer of Montpelier Re
Thomas George Story Busher.............  46    Chief Operating Officer, Executive Vice
                                               President and Secretary of the Company and
                                               Montpelier and Deputy Chairman of Montpelier
                                               Re
K. Thomas Kemp(2)......................  61    Director Nominee and Chief Financial Officer
C. Russell Fletcher III................  49    Chief Reinsurance Officer and Executive Vice
                                               President
Nicholas Newman-Young..................  50    Marketing Director and Executive Vice
                                               President of Montpelier Re
Neil McConachie........................  30    Financial Controller and Senior Vice
                                               President
---------------

(1) Anthony Taylor is also a director; detailed information regarding his
    experience is set forth in the prior section.

(2) K. Thomas Kemp is also a director nominee; detailed information regarding
    his 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, Aon Corporation
and Marsh & McLennan Companies, Inc.

     Nicholas Newman-Young.  Mr. Newman-Young serves as Marketing Director and
Executive Vice President for Montpelier Re. 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.

     Neil McConachie.  Mr. McConachie serves as our Financial Controller and
Senior Vice President. From 2000 to 2002, he was an Assistant Controller at
Stockton Holdings Limited in Bermuda. From 1996 to 2000, Mr. McConachie was
employed as an Audit Manager in the Insurance Focus Group at
PricewaterhouseCoopers in London and Bermuda.

MANAGEMENT COMPENSATION AND INCENTIVE PLANS

     Because we commenced operations on December 16, 2001, we did not pay any
executive officer compensation in excess of $100,000 during the fiscal period
ended December 31, 2001. Our Chief Executive

                                        58
Officer, Anthony Taylor, was employed by us as of January 1, 2002. Our current
executive officers, Messrs. Taylor, Fletcher, Busher, Sinnott and Chattock are
compensated according to the terms of their respective employment agreements,
which are described below.

     Our compensation committee designs and approves all compensation policies.
Our policies are designed with the single goal of maximizing shareholder value
over long periods of time.

     The committee believes that this goal is best pursued by utilizing a
pay-for-performance program which serves to attract and retain superior
executive talent and provide management with performance-based incentives to
maximize shareholder value. Through the compensation program, the committee
seeks to maximize shareholder value by aligning closely the financial interests
of management with those of our shareholders. Compensation of our management
team consists primarily of three components: base salary, annual bonus and
long-term incentive awards. The level of compensation is based on numerous
factors, including achievement of underwriting results and financial objectives
established by our compensation committee and our board of directors.

     Long-term incentive awards provide for the granting to our executive
officers, and certain other principal employees, of various types of incentive
awards, some of which may be stock based. For example, we employ a performance
unit plan in which employees are granted units, each representing the fair value
of a common share. The payment to a participant of this fair value is dependent
on the achievement of specific goals relating to our underwriting performance,
generally over a three-year period or as otherwise determined by the
Compensation Committee. At the discretion of the compensation committee, payment
may take the form of common shares.

EMPLOYMENT-RELATED AGREEMENTS AND EXECUTIVE COMPENSATION

     The following information summarizes the employment-related agreements for
our Deputy Chairman, President and Chief Executive Officer and our four other
most highly compensated executive officers.

     Anthony Taylor.  We have entered into an employment agreement with Mr.
Taylor under which he has 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 agreement provides that Mr. Taylor shall be paid an
annual salary of L300,000 (approximately $432,000) which is subject to annual
increase or decrease (but not below L300,000) as determined by the Compensation
Committee of the board of directors, subject to ratification by the full board.
The agreement further provides that Mr. Taylor receive a housing allowance of
$132,000 per year. Mr. Taylor received a signing bonus of $400,000 upon entering
into the employment agreement.

     If Mr. Taylor's employment agreement is terminated prior to its 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 employment agreement, or
we terminate his agreement for cause, we will have no further obligations to Mr.
Taylor under the agreement.

     Mr. Taylor's agreement entitles him to participate in our annual bonus and
long-term incentive plans, which are described below, pursuant to which he has
been granted 13,114 units under the performance unit plan ("PUP") and options to
purchase 340,000 common shares. The options will vest over four years and have
an annually escalating exercise price, as follows: 85,000 options will vest on
December 31, 2002 with an exercise price of $100; 85,000 options will vest on
December 31, 2003 with an exercise price of $105; 85,000 options will vest on
December 31, 2004 with an exercise price of $110; and 85,000 options will vest
on December 31, 2005 with an exercise price of $115. The agreement also contains
provisions relating to confidentiality, non-competition and non-solicitation.

     C. Russell Fletcher III.  We have entered into an employment agreement with
Mr. Fletcher pursuant to which he has agreed to serve as our Chief Reinsurance
Officer and Executive Vice President and will be paid an annual salary of
$400,000 as well as a housing allowance of $144,000 per year. Mr. Fletcher's
employment agreement also entitles him to participate in our PUP plan, pursuant
to which he has been granted 9,835 units. The remaining material terms of Mr.
Fletcher's employment agreement are common to the other officers' employment
agreements and are described below.

     Thomas George Story Busher.  We have entered into an employment agreement
with Mr. Busher pursuant to which he has agreed to serve as our Chief Operating
Officer and Executive Vice President and will
                                        59
be paid an annual salary of $300,000 as well as a housing allowance of $90,000
per year. Mr. Busher's employment agreement also entitles him to participate in
our PUP plan, pursuant to which he has been granted 5,245 units. The remaining
material terms of Mr. Busher's employment agreement are common to the other
officers' employment agreements and are described below.

     David Sinnott.  We have signed an offer letter, and expect to enter into a
similar employment agreement, with Mr. Sinnott pursuant to which he has agreed
to serve as our Chief International Underwriter and will be paid an annual
salary of $250,000 as well as a housing allowance of $90,000 per year. Mr.
Sinnott has also been awarded 3,934 units under our PUP plan. The remaining
material terms of Mr. Sinnott's employment agreement are common to the other
officers' employment agreements and are described below.

     Richard Chattock.  We have entered into an employment agreement with Mr.
Chattock pursuant to which he has agreed to serve as our Facultative Property
Underwriter and will be paid an annual salary of $243,000 as well as a housing
allowance of $90,000 per year. Mr. Chattock's employment agreement entitles him
to participate in our PUP plan, pursuant to which he has been granted 2,623
units. The remaining material terms of Mr. Chattock's employment agreement are
common to the other officers' employment agreements and are described below.

     Provisions Common to the Employment Agreements.  In addition to the
provisions described above, the employment agreements of Messrs. Fletcher,
Busher and Chattock each contain the following provisions. Each employment
agreement is continuous from January 1, 2002, except for Mr. Chattock's which is
from March 6, 2002, and 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 participate
in our annual bonus and long-term incentive plans described below.

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 Committee of
the board of directors. The Compensation 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 of a
specified number of common shares or an equivalent amount of cash. Grants are
generally earned, subject to the attainment of pre-specified performance goals,
at the end of a three-year period or as otherwise determined by the Compensation
Committee of the Board. The performance goal 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 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 other principal
employees. As of March 31, 2002, only Mr. Taylor had received options under the
plan. The options expire ten years after date of grant and require full payment
in cash prior to exercise. A maximum of 425,000 options may be granted under the
Share Option Plan. On January 8, 2002, the committee granted 340,000 options.
The numbers representing maximum options available for grant and options granted
exclude the effects of the anticipated share split.

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.

                                        60
PRINCIPAL SHAREHOLDERS

     The following table sets forth information as of May 21, 2002 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 named executive officers; and

     - All of our executive officers and directors as a group.
BENEFICIAL OWNERSHIP OF    BENEFICIAL OWNERSHIP OF
                                                             PRINCIPAL SHAREHOLDERS     PRINCIPAL SHAREHOLDERS
                                                            PRIOR TO THE OFFERING(1)    AFTER THE OFFERING(1)
                                                            ------------------------   ------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(2)                       NUMBER     PERCENTAGE      NUMBER     PERCENTAGE
---------------------------------------                     ----------   -----------   ----------   -----------
White Mountains Insurance Group, Ltd.(3)..................  2,574,929        27.0%     1,800,000
  One Beacon Street
  Boston, MA 02108
Cypress Associates II (Cayman)(4).........................  1,500,000        17.2%     1,500,000
  65 East 55th Street, 28th Floor
  New York, New York 10022
Credit Suisse First Boston Private Equity, Inc. (5).......  1,200,000        13.7%     1,200,000
  11 Madison Avenue, 16th Floor
  New York, NY 10010
Vestar-Montpelier Associates L.P.(6)......................    750,000         8.6%       750,000
  c/o Walkers SPV Limited,
  Walker House, Mary Street
  P.O. Box 908 G.T.
  George Town, Grand Cayman
  Cayman Islands
Benfield Group plc(7).....................................    637,464         7.0%       637,464
  55 Bishopsgate
  London
  EC2N 3BD
  United Kingdom
Jack Byrne(8).............................................    100,000         1.1%       100,000
Allan W. Fulkerson(9).....................................    100,000         1.1%       100,000
Anthony Taylor(10)........................................     10,000           *         10,000
K. Thomas Kemp(11)........................................     10,000           *         10,000
John D. Gillespie(12).....................................     10,000           *         10,000
Allan L. Waters...........................................      5,000           *          5,000
C. Russell Fletcher.......................................      1,000           *          1,000
Tom Hutton................................................      1,000           *          1,000
Raymond M. Salter.........................................         --           *             --
William Spiegel...........................................         --           *             --
Steven J. Gilbert(13).....................................         --           *             --
Kamil M. Salame...........................................         --           *             --
Raymond Barrette..........................................         --           *             --
Thomas G.S. Busher........................................         --           *             --
David Sinnott.............................................         --           *             --
Richard Chattock..........................................         --           *             --
All directors and named executive officers as a group (16
  persons)................................................    237,000         2.7%       237,000
                                                            ---------       -----      ---------       -----
---------------

  *  Less than 1%

 (1) 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. See "Description of Share Capital -- Voting Rights."

                                        61
(2) Unless otherwise stated, the address for each beneficial owner is c/o
     Montpelier Re Holdings Ltd., 30 Woodbourne Avenue, Pembroke HM HX, Bermuda.

 (3) Includes 150,000 common shares held by Camden Fire Insurance Company,
     1,350,000 common shares held by OneBeacon Insurance Company and 300,000
     common shares held by Pennsylvania General Insurance Company and warrants
     to purchase up to 774,929 common shares which are currently exercisable.

 (4) Includes 13,730 common shares held by 55th Street Partners II (Cayman)
     L.P., 1,422,785 common shares held by Cypress Merchant B Partners II
     (Cayman) L.P., 60,485 common shares held by Cypress Merchant Banking II-A.
     C.V. and 3,000 common shares held by Cypress Side-By-Side (Cayman) L.P.

 (5) Includes 7,852 common shares held by DLJ MB PartnersIII GmbH & Co. KG,
     63,951 common shares held by DLJ Offshore Partners III, C.V., 16,614 common
     shares held by DLJ Offshore Partners III-1, C.V., 11,834 common shares held
     by DLJ Offshore Partners III-2, C.V., 193,694 common shares held by
     Donaldson, Lufkin & Jenrette Securities Corporation, as nominee for Credit
     Suisse First Boston Private Equity, Inc., DLJ First ESC, L.P., EMA 2001
     Plan, L.P., Docklands 2001 Plan, L.P., Paradeplatz 2001 Plan, L.P. and CSFB
     2001 Investors, L.P. and 906,055 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.
     (formerly Donaldson Lufkin & Jenrette, Inc.) ("CSFB-USA"). The DLJ related
     entities named above (the "DLJ Related Entities") are direct and indirect
     subsidiaries of CSFB-USA and merchant banking funds advised by subsidiaries
     of CSFB-USA. Credit Suisse First Boston Corporation, one of the
     underwriters in this offering, is a direct subsidiary of CSFB-USA and
     itself does not hold any ownership interest in either Credit Suisse First
     Boston Private Equity, Inc. or any of the DLJ Related Entities.

 (6) Includes 9,402 common shares held by Vestar-Montpelier Employees Ltd.,
     734,350 common shares held by Vestar-Montpelier Holdings A L.P. and 6,247
     common shares held by Vestar-Montpelier Holdings B L.P.

 (7) Includes 387,464 warrants, which are currently exercisable.

 (8) Includes 10,000 common shares held by Dorothy Byrne, 50,000 common shares
     held by John J. Byrne, III, and 40,000 common shares held by Jack Byrne.
     Mr. Byrne is also the Chairman and Chief Executive Officer of White
     Mountains Insurance Group, Ltd., another one of our shareholders.

 (9) Includes 100,000 common shares held by Century Capital Partners II, L.P.
     ("Century"), to which Mr. Fulkerson disclaims beneficial ownership. Mr.
     Fulkerson is a general partner of the partnership that is the general
     partner of Century.

(10) Does not include options to purchase 340,000 common shares, which are not
     currently exercisable and which vest over four years.

(11) Includes 2,500 common shares held by Little Oak Hill Partnership.

(12) Includes 10,000 common shares held by Gillespie Family 2000, LLC.

(13) Includes 5,250 common shares held by GGEP-SK, LLC, 60,844 common shares
     held by Gilbert Global Equity Partners (Bermuda), L.P. and 333,906 common
     shares held by Gilbert Global Equity Partners, L.P.

                                        62
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

     Investments by Our Founders.  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 entitling them to purchase 774,929 common shares and 387,464 common
shares, respectively. See "Description of Share Capital -- Warrants."

     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, $161,815 each, being repaid as of March 26, 2002.

     We have engaged OneBeacon Asset Management, a wholly owned indirect
subsidiary of White Mountains, to provide investment advisory and management
services. We have agreed to pay investment management 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%. A portfolio
of $1.0 billion would incur an annual fee of 0.18%. In addition, we have agreed
to reimburse fees and out-of-pocket expenses. These fees are included in net
investment income. This agreement may be terminated by either party upon 30 days
written notice. An amount of $73,733 was payable as of December 31, 2001 to
OneBeacon Asset Management for these services.

     We have also entered into an agreement with Remetrics, a subsidiary of
Benfield, for the provision of catastrophe modeling services. Under this
agreement, we accrued approximately $650,000 in expenses during the three months
ended March 31, 2002.

     In addition, we pay brokerage commissions to Benfield Greig Limited, a
subsidiary of Benfield, on business generated by Benfield Greig Limited. These
commissions were consistent with commissions that we pay to other brokers in the
ordinary course of business.

RELATIONSHIPS WITH STRATEGIC INVESTORS AND UNDERWRITERS

     Mr. Kamil M. Salame is a Director of the Private Equity Group of Credit
Suisse First Boston, which has the DLJ Merchant Banking PartnersIII, L.P.
private equity fund, an affiliate of which, Credit Suisse First Boston
Corporation, is acting as an underwriter in this offering.

     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. Under these
facilities, we have a revolving credit line with a $50 million borrowing limit
and have a three-year term loan of a $150 million. Credit Suisse First Boston,
an affiliate of Credit Suisse First Boston Corporation, one of the underwriters
in this offering, is also a lender in our credit facilities.

     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. We receive $0.7 million in aggregate annual premiums
from these contracts.

                                        63
MATERIAL TAX CONSIDERATIONS

     The following summary of our taxation, the taxation of Montpelier Re and
the taxation of our shareholders 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
Shareholders -- 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" and "Taxation of Shareholders -- United
States Taxation" and "-- United States Taxation of Non-U.S. Shareholders" is the
opinion of Cahill Gordon & Reindel, New York, New York, special tax counsel (the
advice of such firms does not include any factual or accounting matters,
determinations or conclusions such as RPII (as defined below), amounts and
computations and amounts of components thereof (for example, amounts or
computations of income or expense items or reserves entering into RPII
computations) or facts relating to the business or activities 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 common shares.
The tax treatment of a holder of common shares, or of a person treated as a
holder of common shares 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 COMMON SHARES.

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 Undertakings Tax
Protection Act 1966, 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) 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.

                                        64
United States.  The Company and Montpelier Re currently intend to conduct
their operations such that they will not be engaged in a trade or business in
the United States in the future. 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 Internal Revenue Service ("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 be subject to U.S. income tax on any income found
to be effectively connected with a U.S. trade or business only if that trade or
business is conducted through a permanent establishment in the United States. No
regulations interpreting the Treaty have been issued. While there can be no
assurance, Montpelier Re currently intends to conduct its operations such that
it will not have a permanent establishment in the United States.

     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 immediately following the 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 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.  The Company does not believe that it or any
subsidiary will be considered a PHC 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. The PHC rules contain an
exception for non-U.S. corporations that are classified as Foreign Personal
Holding Companies (as discussed below).

                                        65
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 U.S.). Thus, the PHC income of the
Company and its non-US 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 immediately following the offering or 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 SHAREHOLDERS

  BERMUDA TAXATION

     Currently, there is no Bermuda withholding tax on dividends 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 common
shares. Unless otherwise stated, this summary deals only with shareholders that
are United States Persons (as defined below) who purchase their common shares in
this offering and who hold their common shares 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 shareholder
in light of such shareholder's specific circumstances. In addition, the
following summary does not describe the U.S. federal income tax consequences
that may be relevant to special classes of shareholders, 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, persons who are considered with respect to us
or Montpelier Re "United States shareholders" for purposes of the controlled
foreign corporation ("CFC") rules of the Code (generally, a United States
Person, as defined below, who owns or is deemed to own 10% or more of the total
combined voting power of all classes of our stock or the stock of Montpelier Re
entitled to vote), or persons who hold the common shares 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 common shares or the shareholders.
Persons considering making an investment in the common shares 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.

     If a partnership holds the common shares, 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 common shares, you
should consult your tax advisor.

                                        66
For purposes of this discussion, the term "United States Person" means a
person 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.

     Taxation of Dividends.  Subject to the discussions below relating to the
potential application of the RPII and PFIC rules, cash distributions, if any,
made with respect to the common shares will constitute dividends for U.S.
federal income tax purposes to the extent paid out of current or accumulated
earnings and profits of the Company (as computed using U.S. tax principles). To
the extent such distributions exceed the Company's earnings and profits, they
will be treated first as a return of the shareholder's basis in the common
shares to the extent thereof, and then as gain from the sale of a capital asset.

     Sale, Exchange or Other Disposition.  Subject to the discussions below
relating to the potential application of the RPII, PFIC and foreign personal
holding company ("FPHC") rules, holders of common shares generally will
recognize capital gain or loss for U.S. federal income tax purposes on the sale,
exchange or other disposition of common shares in the same manner as on the
sale, exchange or other disposition of any other shares held as capital assets.

     The RPII Provisions.  The following discussion generally is applicable only
if the Related Person Insurance Income ("RPII") of Montpelier Re, determined on
a gross basis, is 20% or more of Montpelier Re's gross insurance income for the
taxable year. The following discussion generally would not apply for any fiscal
year in which Montpelier Re's RPII falls below the 20% threshold. While there
can be no assurance, the Company believes that Montpelier Re's gross RPII as a
percentage of gross insurance income will be below the 20% threshold for the
foreseeable future.

     RPII Companies.  RPII is any "insurance income" (as defined in the Code)
attributable to policies of insurance or reinsurance with respect to which the
person (directly or indirectly) insured is a "United States shareholder" or a
"related person" to such a shareholder. Generally, the term "related person" for
this purpose means someone who controls or is controlled by the United States
shareholder or someone who is controlled by the same person or persons which
control the U.S. shareholder. Control is measured by either more than 50% in
value or more than 50% in voting power of stock applying certain constructive
ownership principles. A corporation's pension plan is ordinarily not a "related
person" with respect to the corporation unless the pension plan owns, directly
or indirectly through the application of certain constructive ownership rules,
more than 50% measured by vote or value, of the stock of the corporation. For
purposes of inclusion of Montpelier Re's RPII in the income of United States
shareholders, unless an exception applies, the term "United States shareholder"
includes any United States Persons who beneficially own any amount (rather than
stock possessing 10% or more of the total combined voting power) of Montpelier
Re's stock, and Montpelier Re will be treated as a CFC if such persons are
treated as owning 25% or more of the stock of Montpelier Re by vote or value.

     RPII Exceptions.  The special RPII rules do not apply if (A) direct and
indirect insureds and persons related to such insureds, whether or not United
States Persons, are treated as owning less than 20% of the voting power and less
than 20% of the value of the stock of Montpelier Re, (B) RPII, determined on a
gross basis, is less than 20% of Montpelier Re's gross insurance income for the
taxable year, (C) Montpelier Re elects to be taxed on its RPII as if the RPII
were effectively connected with the conduct of a U.S. trade or

                                        67
business, or (D) Montpelier Re elects to be treated as a U.S. corporation. Where
none of these exceptions applies, each United States Persons owning or treated
as owning any stock in the Company (and therefore, indirectly, in Montpelier Re)
on the last day of the Company's fiscal year will be required to include in its
gross income for U.S. federal income tax purposes its share of the RPII for the
portion of the taxable year during which Montpelier Re was a CFC under the RPII
provisions, determined as if all such RPII were distributed proportionately only
to such United States Persons at that date, but limited by each such United
States Person's share of Montpelier Re's current-year earnings as reduced
profits by the United States Person's share, if any, of certain prior-year
deficits in earnings and profits.

     Computation of RPII.  In order to determine how much RPII the Company has
earned in each fiscal year, the Company may obtain and rely upon information
from its insureds to determine whether any of the insureds or persons related to
such insureds own shares of the Company and are U.S. Persons. For any year in
which Montpelier Re's gross RPII is 20% or more of Montpelier Re's gross
insurance income for the year, the Company may also seek information from its
shareholders as to whether beneficial owners of common shares at the end of the
year are United States Persons so that the RPII may be determined and
apportioned among such persons; to the extent the Company is unable to determine
whether a beneficial owner of shares is a United States Person, the Company may
assume that such owner is not a United States Person, thereby increasing the per
share RPII amount for all known United States shareholders.

     If, as believed, RPII is less than 20% of gross insurance income, United
States shareholders will not be required to include RPII in their taxable
income. The amount of RPII includable in the income of a United States
shareholder is based upon the net RPII income for the year after deducting
related expenses such as losses, loss reserves and operating expenses.

     Apportionment of RPII to U.S. Shareholders.  Every United States Person who
owns common shares on the last day of any fiscal year of the Company in which
Montpelier Re's gross insurance income constituting RPII for that year equals or
exceeds 20% of Montpelier Re's gross insurance income should expect that for
such year it will be required to include in gross income its share of Montpelier
Re's RPII for the portion of the taxable year during which Montpelier Re was a
CFC under the RPII provisions, whether or not distributed, even though it may
not have owned the shares throughout such period. A United States Person who
owns common shares during such fiscal year but not on the last day of the fiscal
year is not required to include in gross income any part of Montpelier Re's
RPII.

     Basis Adjustments.  A United States shareholder's tax basis in its common
shares will be increased by the amount of any RPII that the shareholder includes
in income. The shareholder may exclude from income the amount of any
distributions by the Company to the extent of the RPII included in income for
the year in which the distribution was paid or for any prior year. The United
States shareholder's tax basis in its common shares will be reduced by the
amount of such distributions that are excluded from income.

     Dispositions of common shares.  The Code provides that any gain from the
sale or exchange of shares of a foreign corporation that earns any RPII and that
would be treated as an insurance company if it were a U.S. corporation may be
treated as ordinary income to the extent of a United States shareholder's share
of the corporation's earnings and profits during the period that the shareholder
held the shares (with certain adjustments) and while such entity was a CFC. A
United States shareholder may in certain circumstances be required to report a
disposition of shares of such a CFC by attaching IRS Form 5471 to the U.S.
income tax or information return that it would normally file for the taxable
year in which the disposition occurs. Existing Treasury Department regulations
do not address whether these rules would apply when the foreign corporation
(such as the Company) is not a CFC but the foreign corporation has a subsidiary
(such as Montpelier Re) that is a CFC or that would be taxed as an insurance
company if it were a domestic corporation.

     The Company believes that these rules will not apply to dispositions of
common shares because the Company will not have any 10% voting shareholders as a
result of the offering of common shares and the Company will not be directly
engaged in the insurance business, and that the proposed regulations issued by
the U.S. Treasury Department should be interpreted in this manner. There can be
no assurance, however, that the IRS will interpret the proposed regulations in
this manner or that the Treasury Department will not amend the proposed
regulations to provide that these rules will apply to dispositions of common
shares.
                                        68
The Company will notify shareholders if the IRS or Treasury Department take
such action. Thereafter, the Company will send a notice after the end of each
calendar year to all persons who were shareholders during the year notifying
them that these rules will apply to dispositions of common shares. The Company
will attach to this notice a copy of Form 5471 completed with all Company
information and instructions for completing the shareholder information.

     Uncertainty as to Application of RPII.  The RPII provisions of the Code
have never been interpreted by the courts or the U.S. Treasury Department.
Regulations interpreting the RPII provisions of the Code exist only in proposed
form. It is not certain whether these regulations will be adopted in their
proposed form or what changes or clarifications might ultimately be made thereto
or whether any such changes, as well as any interpretation or application of
RPII by the IRS, the courts or otherwise, might have retroactive effect. The
description of RPII herein is therefore qualified. Accordingly, the meaning of
the RPII provisions and the application thereof to the Company and Montpelier Re
is uncertain. These provisions include the grant of authority to the U.S.
Treasury Department to prescribe "such regulations as may be necessary to carry
out the purpose of this subsection including . . . regulations preventing the
avoidance of this subsection through cross insurance arrangements or otherwise."
In addition, there can be no assurance that the amounts of the RPII inclusions
will not be subject to adjustment based upon subsequent IRS examination. Each
United States Person who is considering an investment in common shares should
consult his tax advisor as to the effects of these uncertainties.

     Passive Foreign Investment Companies.  The Company believes that it will
not be considered a "passive foreign investment company" or, PFIC, for U.S.
federal income tax purposes. The PFIC statutory provisions contain special rules
for corporations engaged in the "active conduct of an insurance business";
however, there are no regulations interpreting the application of the PFIC rules
to an insurance company and there is no explicit guidance on the application of
these provisions to the Company's situation. Regulations interpreting these
rules may be forthcoming and could have a negative impact on a United States
Person who holds common shares. Because of the uncertainty in the proper
application of these rules and because PFIC status depends upon the composition
of a company's income and assets and the market value of its assets (including,
among others, less than 25 percent owned equity investments) from time to time,
there can be no assurance that the Company will not be considered a PFIC for any
taxable year. If the Company were treated as a PFIC for any taxable year during
which a United States Person held common shares, certain adverse consequences
could apply, including a material increase in the amount of tax that the United
States Person would owe, an imposition of tax earlier than it would otherwise be
imposed and additional tax form filing requirements. Each United States Person
who is considering an investment in common shares should consult his tax advisor
as to the effects of these rules.

     Foreign Personal Holding Companies.  The Company believes that neither it
nor any of its subsidiaries will be classified as a FPHC. A non-U.S. corporation
will not be classified as a FPHC for U.S. federal income tax purposes unless, at
some time during the taxable year at issue, five or fewer individuals who are
U.S. citizens or residents own or are deemed to own (pursuant to certain
constructive ownership rules) more than 50% of all classes of the corporation's
stock measured by voting power or value. For purposes of this test, all of the
common shares owned by an investment partnership will be attributed to each of
its partners, if any, who are individuals. Depending on the Company's
shareholder base, the Company and its subsidiaries could satisfy the FPHC
ownership test immediately following the offering or in the future. If the
Company or any of its subsidiaries were to become FPHCs, a portion of the
"undistributed foreign personal holding company income" (as defined for U.S.
federal income tax purposes) of each such FPHC would be imputed to all of the
Company's shareholders who are United States Persons. Such income would be
taxable as a dividend, even if no cash dividend were actually paid. In such
event, subsequent cash distributions will first be treated as a tax-free return
of any previously taxed and undistributed amounts. In addition, in such case,
upon the death of any U.S. individual owning common shares, such individual's
heirs or estate would not be entitled to a "step-up" in the basis of the common
shares which might otherwise be available under U.S. federal income tax laws.
There can be no assurance that the Company and each of its subsidiaries will not
become FPHCs because of factors including legal and factual uncertainties
regarding the application of the constructive ownership rules,

                                        69
the makeup of the Company's shareholder base and other circumstances that could
change the application of the FPHC rules to the Company and its subsidiaries.

     Information Reporting and Backup Withholding.  Information returns may be
filed with the IRS in connection with distributions on the common shares and the
proceeds from a sale or other disposition of the common shares unless the holder
of the common shares establishes an exemption from the information reporting
rules. A holder of common shares 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 United States Person will be allowed as a credit against the United States
Person's U.S. federal income tax liability and may entitle the United States
Person to a refund, provided that the required information is furnished to the
IRS.

  OTHER TAX LAWS

     Shareholders should consult their own tax advisors with respect to the
applicability to them of the tax laws of other jurisdictions.

                                        70
DESCRIPTION OF SHARE CAPITAL

GENERAL

     Upon the completion of this offering, our authorized share capital will
consist of 200,000,000 common shares, at a $0.01 par value per share, of which
          common shares will be issued and outstanding (          common shares
if the underwriters exercise their over-allotment option in full). Under certain
circumstances, we have the right to purchase all or a portion of our common
shares held by shareholders. See "-- Acquisition of Common Shares by the
Company" below. When issued and paid for, all of the common shares sold pursuant
to this offering will be fully paid and nonassessable. As of May 1, 2002, there
were approximately 90 holders of record of our common shares. The following
summary of our share capital is qualified in its entirety by reference to our
memorandum of association and bye-laws, the shareholders agreement and the
warrants.

     Holders of our common shares have no preemptive, redemption, conversion or
sinking fund rights. In the event of our liquidation, dissolution or winding-up,
the holders of our common shares are entitled to share equally and ratably in
our assets, if any remain after the payment of all our debts and liabilities and
the liquidation preference of any outstanding preferred shares.

VOTING RIGHTS

     In general, and except as provided below, shareholders have one vote for
each common share held by them and are entitled to vote, on a non-cumulative
basis, at all meetings of shareholders. If, and so long as, the "controlled
shares" (as defined below) of any person would otherwise represent more than
9.5% of the voting power of all of the shares entitled to vote generally at an
election of directors, then the votes conferred by the controlled shares owned
by such person shall be reduced by whatever amount is necessary so that after
any such reduction the votes conferred by the controlled shares of such person
shall constitute 9.5% of the total voting power of all the shares entitled to
vote generally at any election of directors as set forth in our bye-laws. In
addition, our board may adjust a shareholder's voting rights to the extent that
the board reasonably determines in good faith that it is necessary to do so to
avoid adverse tax consequences or materially adverse legal or regulatory
treatment to us or any subsidiary. "Controlled shares" shall include, among
other things, all common shares that a person is deemed to beneficially own
directly, indirectly or constructively (within the meaning of Section 958 of the
Internal Revenue Code).

     Pursuant to our bye-laws, our shareholders have certain rights with respect
to the election and removal of directors of Montpelier Re. See
"-- Bye-laws -- Shareholder Action."

     We are authorized to require any shareholder to provide information as to
that shareholder's beneficial share ownership, the names of persons having
beneficial ownership of the shareholder's shares, relationships with other
shareholders or any other facts the directors may deem relevant to a
determination of the number of common shares attributable to any person. We may,
in our reasonable discretion, disregard the votes attached to shares of any
holder failing to respond to such a request or submitting incomplete or
inaccurate information.

RESTRICTIONS ON TRANSFER OF COMMON SHARES OR WARRANTS

     Although our board of directors may decline to register certain transfers
of shares, pursuant to our bye-laws, our board is required to register any
transfer settled on a stock exchange or automated quotation system on which
shares are listed or traded from time to time. Except in connection with the
settlement of trades or transactions entered into through the facilities of a
stock exchange or automated quotation system on which the shares are listed or
traded from time to time, our board may generally require any shareholder or any
person proposing to acquire our shares or warrants to provide the information
required under our bye-laws. If any such shareholder or proposed acquiror does
not provide such information, or if the board has reason to believe that any
certification or other information provided pursuant to any such request is
inaccurate or incomplete, the board may decline to register any transfer or to
effect any issuance or purchase of shares or warrants to which such request is
related. Although these restrictions on transfer will not interfere with the

                                        71
settlement of trades on NASDAQ, we may decline to register transfers in
accordance with our bye-laws and board resolutions after a settlement has taken
place.

     The restrictions on transfer and voting restrictions described above may
have the effect of delaying, deferring or preventing a change in control of our
company.

ACQUISITION OF COMMON SHARES BY THE COMPANY

     Under our bye-laws and subject to Bermuda law, we have the option, but not
the obligation, to require a shareholder to sell to us at fair market value the
minimum number of common shares which is necessary to avoid or cure any adverse
tax consequences or materially adverse regulatory or legal treatment to us, our
subsidiaries or our shareholders if we reasonably determine, in good faith, that
failure to exercise our option would result in such adverse consequences or
treatment.

ISSUANCE OF SHARES

     Subject to our bye-laws and Bermuda law, our board has the power to issue
any of our shares as it determines, including the issuance of any shares or
class of shares with preferred, deferred or other special rights. Subject to
certain exceptions in the shareholders agreement, we will not issue additional
equity securities or securities exercisable for or convertible or exchangeable
into equity securities without the approval of a majority of the votes conferred
by the issued and outstanding common shares entitled to vote (after taking into
account any voting reduction as set forth in our bye-laws). We may issue
additional securities without such approval in certain circumstances, including
any issuance by us pursuant to an underwritten public offering having a proposed
aggregate offering price of at least $75 million.

SHAREHOLDERS AGREEMENT

     We entered into a shareholders agreement with all of our existing
shareholders at the time of their original investment. Except for specific
provisions described below which survive termination, the shareholders agreement
will generally terminate upon the earliest of (i) this initial public offering,
(ii) consent among us and the shareholders, (iii) an exchange of a third party's
securities for all of our common shares, (iv) our liquidation or dissolution or
(v) December 12, 2011.

     The shareholders agreement, together with the bye-laws, define the rights
and obligations of existing shareholders party to the shareholders agreement
with respect to the transfer of common shares, our corporate governance and
related matters. The shareholders agreement may be amended only with our consent
and the consent of the holders of at least a majority (or higher in certain
circumstances) of the common shares held by shareholders party to the
shareholders agreement. Amendments which adversely affect the rights,
obligations or tax treatment of any shareholder shall in general not be
effective unless: (i) signed by shareholders holding at least 75% of the common
shares then held by shareholders party to the shareholders agreement; (ii) all
similarly situated shareholders are proportionately adversely affected; and
(iii) the amendment is approved by at least 75% of the adversely affected
shareholders.

     Pursuant to the terms of our shareholders agreement, if any existing
shareholder (or group of existing shareholders) proposes to sell 20% or more of
our outstanding shares within the first 18 months following the date of this
prospectus, then the other shareholders will have the right to participate
proportionately in such sale.

     At any time after the date of this prospectus, existing shareholders who
are party to the shareholders agreement who hold 15% of the issued and
outstanding shares entitled to vote (or 20% after the first such request), will
have the right to request registration for a public offering of common shares.
We will use our best efforts to cause the prompt registration of common shares,
but will not be required to file a registration statement if the proposed
offering is not an appropriate size, if the managing underwriter determines that
a registration would be adverse to another proposed offering for a period of
time, if we hold material non-public information that our board determines we
should not disclose (for a period of time) or if we have filed a registration
statement within a period of time before the proposed registration. If the
number of common

                                        72
shares to be sold in the offering is limited by the managing underwriter, then
the number of shares requested to be registered will be allocated, pro rata,
among the requesting shareholders.

     The shareholders agreement provides that neither we, nor the existing
shareholders party to the shareholders agreement, will offer, sell, or otherwise
dispose of any common shares or other securities convertible or exchangeable for
common shares for a specified period of time, not to exceed 180 days after the
date of this prospectus or, in the case of all other offerings, 90 days
following the effective date of the corresponding registration statement.

BYE-LAWS

     The following provisions are a summary of some of the other important
provisions of our bye-laws.

     Our Board and Corporate Action.  Our bye-laws provide that the board shall
consist of 5 directors, or such larger number agreed by the shareholders,
divided into three approximately equal classes. Currently, the board has three
Class A directors with an initial 2 year term, four Class B directors with an
initial 3 year term and four Class C directors with an initial 4 year term.
After the initial respective terms of these directors, the term of each class of
directors shall be 3 years. Shareholders may only remove a director for
specified reasons under our bye-laws, including willful misconduct, fraud or
other criminal conduct, prior to the expiration of such director's term. The
reappointment of a director requires the affirmative vote of shareholders
holding at least a majority of the total combined voting power of all of our
issued and outstanding shares at a meeting of shareholders. A special meeting of
shareholders may be convened by the President, the Chairman, any two directors,
any director and the Secretary, or the board. Our bye-laws also provide that the
board shall convene a special general meeting at the requisition of shareholders
holding at the date of the deposit of the requisition not less than 10% of the
total combined voting power of all of our issued and outstanding shares carrying
the right to vote at our general meetings.

     Generally, the affirmative vote of a majority of the directors present at
any meeting at which a quorum is present shall be required to authorize
corporate action provided that no director participates in the meeting from
within the United States or the United Kingdom. Corporate action may also be
taken by a unanimous written resolution of the board without a meeting, provided
that the last director to sign the written resolution does so outside of the
U.S. and U.K. A quorum shall be a majority of the directors in office from time
to time, provided that in no event shall it be less than 3 directors.

     Shareholder Action.  At any general meeting, two or more persons present in
person and representing more than 50% of the total combined voting power of all
of our issued and outstanding shares throughout the meeting shall constitute a
quorum for the transaction of business. In general, any action that we may take
by resolution in a general meeting may, without a meeting, be taken by a
resolution in writing signed by all of the shareholders entitled to attend such
meeting and vote on the resolution. In general, any question proposed for the
consideration of the shareholders at any general meeting shall be decided by the
affirmative votes of a majority of the votes cast in accordance with the
bye-laws.

     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 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. The bye-laws of Montpelier Re provide that the only persons
eligible to be elected as Montpelier Re's directors are those persons who first
have been elected by the shareholders of the Company as designated directors in
accordance with the Company's bye-laws (including any limitation on voting
rights).

     Amendment.  The bye-laws may only be amended by a resolution adopted by the
board and by resolution of the shareholders.

                                        73
WARRANTS

     The following table shows the number of warrants to purchase common shares
currently outstanding:
WARRANTS TO    PERCENTAGE OF
                                      ACQUIRE         COMMON       EXERCISE
HOLDER                             COMMON SHARES     SHARES(1)      PRICE       EXPIRATION
------                             -------------   -------------   --------   ---------------
White Mountains Insurance Group
  Limited........................      774,929          7.8%         $100     January 3, 2012
Benfield Group plc...............      387,464          3.9          $100     January 3, 2012
Banc of America Securities LLC...       24,217          0.2          $100     January 3, 2007
                                     ---------         ----
  Total..........................    1,186,610         11.9%
---------------

(1) Percentages are based upon current outstanding shares of 8,740,000 plus the
    1,186,610 common shares issuable upon exercise of outstanding warrants. If
    the warrants were immediately exercised for cash, White Mountains and its
    subsidiaries, Benfield and Banc of America would own 28.6%, 6.6% and 2.8%,
    respectively, of our common shares.

     The warrants included in the table above will expire either five or ten
years from the date of issue depending on the grant terms, will be exercisable
at a price per share of $100, equal to the price per share paid by investors in
our initial private offering, and may be settled using either the physical
settlement or net-share settlement methods.

     White Mountains and Benfield may exercise their warrants in whole or in
part. Subject to Bermuda law, White Mountains and Benfield have the option to
exercise their warrants on a cashless basis, in which case the warrant holder
will receive a reduced number of common shares. The exercise price and number of
such shares for each warrant will be subject to adjustment in respect of certain
events. In certain of these events, the warrant holders will receive the right
to receive the full intrinsic time value of the warrants instead of the assets
acquirable and receivable upon exercise. In the event we pay cash or stock
dividends or other distributions to our shareholders, the warrant holders will
also be entitled to such dividends or distributions. The shareholders agreement
contains registration rights for warrant holders similar to those applicable to
holders of our common shares, as set forth in the shareholders agreement. Each
warrant holder will have a right of first refusal to any transfer of any other
warrants, after which we, and then the signatories to the shareholders
agreement, will have such right of first refusal on any remaining portion
proposed to be sold.

DIFFERENCES IN CORPORATE LAW

     The Companies Act, which applies to us, differs in certain material
respects from laws generally applicable to United States corporations and their
shareholders. Set forth below is a summary of certain significant provisions of
the Act (including modifications adopted pursuant to our bye-laws) applicable to
us which differ in certain respects from provisions of the State of Delaware
corporate law. Because the following statements are summaries, they do not
address all aspects of Bermuda law that may be relevant to us and our
shareholders.

     Interested Directors.  Bermuda law and our bye-laws provide that any
transaction entered into by us in which a director has an interest is not
voidable by us nor can such director be liable to us for any profit realized
pursuant to such transaction provided the nature of the interest is disclosed at
the first opportunity at a meeting of directors, or in writing to the directors.
Under Delaware law, such transaction would not be voidable if (1) the material
facts as to such interested director's relationship or interests are disclosed
or are known to the board of directors and the board in good faith authorizes
the transaction by the affirmative vote of a majority of the disinterested
directors, (2) such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the transaction is
specifically approved in good faith by vote of the majority of shares entitled
to vote thereon or (3) the transaction is fair as to the corporation as of the
time it is authorized, approved or ratified. Under Delaware law, such interested
director could be held liable for a transaction in which such director derived
an improper personal benefit.

                                        74
Mergers and Similar Arrangements.  We may acquire the business of another
Bermuda exempted company or a company incorporated outside Bermuda when such
business purpose is within our objects as set forth in our Memorandum of
Association. We may, with the approval of a majority of votes cast at a general
meeting of our shareholders at which a quorum is present, amalgamate with
another Bermuda company or with a body incorporated outside Bermuda. In the case
of an amalgamation, a shareholder may apply to a Bermuda court for a proper
valuation of such shareholder's shares if such shareholder is not satisfied that
fair value has been paid for such shares. The court ordinarily would not
disapprove the transaction on that ground absent evidence of fraud or bad faith.
Under Delaware law, with certain exceptions, a merger, consolidation or sale of
all or substantially all the assets of a corporation must be approved by the
board of directors and a majority of the outstanding shares entitled to vote
thereon. Under Delaware law, a stockholder of a corporation participating in
certain major corporate transactions may, under certain circumstances, be
entitled to appraisal rights pursuant to which such stockholder may receive cash
in the amount of the fair value of the shares held by such stockholder (as
determined by a court) in lieu of the consideration such stockholder would
otherwise receive in the transaction.

     Takeovers.  Bermuda law provides that where an offer is made for shares of
a company and, within four months of the offer, the holders of not less than 90%
of the shares which are the subject of the offer accept, the offeror may by
notice require the nontendering shareholders to transfer their shares on the
terms of the offer. Dissenting shareholders may apply to the court within one
month of the notice objecting to the transfer. The burden is on the dissenting
shareholders to show that the court should exercise its direction to enjoin the
required transfer, which the court will be unlikely to do unless there is
evidence of fraud or bad faith or collusion between the offeror and the holders
of the shares who have accepted the offer as a means of unfairly forcing out
minority shareholders. Delaware law provides that a parent corporation, by
resolution of its board of directors and without any stockholder vote, may merge
with any subsidiary of which it owns at least 90% of each class of capital
stock. Upon any such merger, dissenting stockholders of the subsidiary would
have appraisal rights.

     Shareholders' Suits.  The rights of shareholders under Bermuda law are not
as extensive as the rights of shareholders under legislation or judicial
precedent in many United States jurisdictions. Class actions and derivative
actions are generally not available to shareholders under the laws of Bermuda.
However, the Bermuda courts ordinarily would be expected to follow English case
law precedent, which would permit a shareholder to commence an action in our
name to remedy a wrong done to us where the act complained of is alleged to be
beyond our corporate power or is illegal or would result in the violation of our
Memorandum of Association or bye-laws. Furthermore, consideration would be given
by the court to acts that are alleged to constitute a fraud against the minority
shareholders or where an act requires the approval of a greater percentage of
our shareholders than actually approved it. The winning party in such an action
generally would be able to recover a portion of attorneys' fees incurred in
connection with such action. Our bye-laws provide that shareholders waive all
claims or rights of action that they might have, individually or in our right,
against any of our directors or officers for any act or failure to act in the
performance of such director's or officer's duties, except with respect to any
fraud or dishonesty of such director or officer. Class actions and derivative
actions generally are available to stockholders under Delaware law for, among
other things, breach of fiduciary duty, corporate waste and actions not taken in
accordance with applicable law. In such actions, the court generally has
discretion to permit the winning party to recover attorneys' fees incurred in
connection with such action.

     Indemnification of Directors.  We may indemnify our directors, officers or
any other person appointed to a board committee in their capacity as such in
respect of any loss arising or liability attaching to them by virtue of any rule
of law in respect of any action, damages or expenses brought against or incurred
by such person in or about the execution of such person's duty or supposed duty,
or in such person's respective office, other than in respect of such person's
own fraud or dishonesty. Under Delaware law, a corporation may indemnify a
director or officer of the corporation against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in defense of an action, suit or proceeding by reason of such position
if (i) such director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and (ii) with respect to any criminal action or proceeding, such
director or officer had no reasonable cause to believe his conduct was unlawful.

                                        75
Inspection of Corporate Records.  Members of the general public have the
right to inspect our public documents available at the office of the Registrar
of Companies in Bermuda and our registered office in Bermuda, which will include
our Memorandum of Association (including its objects and powers) and any
alteration to our Memorandum of Association and documents relating to any
increase or reduction of authorized capital. Our shareholders have the
additional right to inspect our bye-laws, minutes of general meetings and
financial statements, which must be presented to the annual general meeting of
shareholders. The register of our shareholders is also open to inspection by
shareholders without charge, and to members of the public for a fee. We are
required to maintain our share register in Bermuda but may establish a branch
register outside of Bermuda. We are required to keep at our registered office a
register of its directors and officers which is open for inspection by members
of the public without charge. Bermuda law does not, however, provide a general
right for shareholders to inspect or obtain copies of any other corporate
records. Delaware law permits any shareholder to inspect or obtain copies of a
corporation's shareholder list and its other books and records for any purpose
reasonably related to such person's interest as a shareholder.

                                        76
SHARES ELIGIBLE FOR FUTURE SALE

     Upon completion of the offering we will have a total of      common shares
outstanding. All of the
shares (     shares if the underwriters exercise the over-allotment option in
full) sold in the offering will be freely tradeable without restriction or
further registration under the Securities Act by persons other than our
"affiliates." Under the Securities Act, an "affiliate" of a company is a person
that directly or indirectly controls, is controlled by, or is in common control
with that company.

     The remaining      common shares outstanding will be "restricted
securities" within the meaning of Rule 144 under the Securities Act and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the exemptions contained in
Rule 144.

     In general, under Rule 144, a person (or persons whose shares are
aggregated), including any person who may be deemed our affiliate, is entitled
to sell within any three-month period, a number of restricted securities that
does not exceed the greater of 1% of the then outstanding shares of common stock
and the average weekly trading volume in the over-the-counter market during the
four calendar weeks preceding each such sale, provided that at least one year
has elapsed since such shares were acquired from us or any affiliate of ours and
certain manner of sale, notice requirements and requirements as to availability
of current public information about us are satisfied. Any person who is deemed
to be our affiliate must comply with the provisions of Rule 144 (other than the
one-year holding period requirement) in order to sell shares of common stock
which are not restricted securities (such as shares acquired by affiliates
either in the offering or through purchases in the open market following the
offering). In addition, under Rule 144(k), a person who is not our affiliate,
and who has not been our affiliate at any time during the 90 days preceding any
sale, is entitled to sell such shares without regard to the foregoing
limitations, provided that at least two years have elapsed since the shares were
acquired from us or any affiliate of ours.

     Pursuant to the shareholders agreement, our initial investors have certain
demand registration rights which will continue to apply to all of such shares
after the offering. At any time after this offering subject to exceptions, such
shareholders may request that we file a registration statement under the
Securities Act covering their shares, subject to certain minimum offering size
requirements. Upon receipt of any such request, we generally will be required to
use our best efforts to effect such registration. We are not required to effect
any registration requested by any such shareholders if we have effected two or
more registration statements for such shareholders or if we have effected any
registration (other than on Form S-3 or any successor form relating to secondary
offerings) within six months prior to such request. We are generally obligated
to bear the expenses, other than underwriting discounts and sales commissions,
of all such registrations.

     Pursuant to the shareholders agreement, our initial investors also have
certain "piggyback" registration rights with respect to our common shares.
Accordingly, if we propose to register any of our securities, either for our own
account or for the account of other shareholders, with certain exceptions, we
are required to notify such shareholders and to include in such registration all
the common shares requested to be included by them, subject to rejection of such
shares under certain circumstances by an underwriter.

     No prediction can be made as to the effect, if any, future sales of shares,
or the availability of shares for future sales, will have on the market price of
our common shares prevailing from time to time. The sale of substantial amounts
of our common shares in the public market, or the perception that such sales
could occur, could harm the prevailing market price of our common shares.

                                        77
UNDERWRITERS

     Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, Credit
Suisse First Boston Corporation and J.P. Morgan Securities Inc. are acting as
representatives, have severally agreed to purchase, and Montpelier Re Holdings
Ltd. has agreed to sell to them, the number of common shares indicated below:
NAME                                                           NUMBER OF SHARES
----                                                           ----------------
Morgan Stanley & Co. Incorporated...........................
Banc of America Securities LLC..............................
Credit Suisse First Boston Corporation......................
J.P. Morgan Securities Inc..................................

                                                                   --------
     Total..................................................
                                                                   ========
The underwriters are offering the common shares subject to their acceptance
of the common shares from Montpelier Re Holdings Ltd. [and subject to prior
sale]. The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the common shares offered by this
prospectus are subject to the approval of certain legal matters by their counsel
and to certain other conditions. The underwriters are obligated to take and pay
for all of the common shares offered by this prospectus if any such common
shares are taken. However, the underwriters are not required to take or pay for
the common shares covered by the underwriters' over-allotment option described
below.

     The underwriters initially propose to offer part of the common shares
directly to the public at the public offering price listed on the cover page of
this prospectus and part to certain dealers at a price that represents a
concession not in excess of $          a common share under the public offering
price. Any underwriter may allow, and such dealers may reallow, a concession not
in excess of $          a common share to other underwriters or to certain
dealers. After the initial offering of the common shares, the offering price and
other selling terms may from time to time be varied by the representatives of
the underwriters.

     We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional common
shares at the public offering price set forth on the cover page of this
prospectus, less underwriting discounts and commissions. The underwriters may
exercise this option solely for the purpose of covering over-allotments, if any,
made in connection with the offering of the common shares offered by this
prospectus. To the extent the option is exercised, each underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of the additional common shares as the number listed next to the
underwriter's name in the preceding table bears to the total number of common
shares listed next to the names of all underwriters in the preceding table. If
the underwriters' option is exercised in full, the total price to the public
would be $          assuming an initial public offering price of $     per
share, the total underwriters' discounts and commissions would be $          and
total proceeds to us would be $          .

     Our estimated offering expenses, in addition to the underwriting discounts
and commissions, are approximately $          , which includes legal, accounting
and printing costs and various other fees associated with registration and
quotation of the common shares.

     The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.

     We have made an application to have the common shares approved, subject to
official notice of issuance, for quotation on the Nasdaq National Market under
the symbol "MRHL."

                                        78
Each of the Company, the directors and executive officers of our Company,
and certain other shareholders of the Company has agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, it will not, during the period ending 180 days after the date of
this prospectus:

     - offer, pledge, sell, contract to sell, sell any option or contract to
       purchase, purchase any option or contract to sell, grant any option,
       right or warrant to purchase, lend, or otherwise transfer or dispose of,
       directly or indirectly, any common shares or any securities convertible
       into or exercisable or exchangeable for common shares; or

     - enter in any swap or other arrangement that transfers to another, in
       whole or in part, any of the economic consequences of ownership of the
       common shares;

whether any such transaction is to be settled by delivery of common shares or
such other securities, in cash or otherwise. The restrictions described in this
paragraph do not apply to:

     - the sale of common shares to the underwriters;

     - the issuance by the Company of common shares upon the exercise of an
       option or a warrant or the conversion of a security outstanding on the
       date of this prospectus of which the underwriters have been advised in
       writing;

     - transactions by any person other than the Company relating to common
       shares or other securities acquired in open market transactions after the
       completion of the offering of the common shares; and

     - transfers by any person other than the Company to an affiliate of such
       person, a family member of such person or a trust created for the benefit
       of such person or family member, provided that any transferee agrees to
       be bound by the transfer restrictions described here and subject to
       certain other conditions.

     In order to facilitate the offering of the common shares, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common shares. Specifically, the underwriters may sell more common
shares than they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short position is no
greater than the number of common shares available for purchase by the
underwriters under the over allotment option. The underwriters can close out a
covered short sale by exercising the over allotment option or purchasing common
shares in the open market. In determining the source of common shares to close
out a covered short sale, the underwriters will consider, among other things,
the open market price of common shares compared to the price available under the
over allotment option. The underwriters may also sell common shares in excess of
the over allotment option, creating a naked short position. The underwriters
must close out any naked short position by purchasing common shares in the open
market. A naked short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the price of the common
shares in the open market after pricing that could adversely affect investors
who purchase in the offering. As an additional means of facilitating the
offering or to cover any over allotments, the underwriters may bid for, and
purchase, common shares in the open market to stabilize the price of the common
shares. The underwriting syndicate may also reclaim selling concessions allowed
to an underwriter or a dealer for distributing the common shares in the
offering, if the syndicate repurchases previously distributed common shares to
cover syndicate short positions or to stabilize the price of the common shares.
These activities may raise or maintain the market price of the common shares.
The underwriters are not required to engage in these activities, and may end any
of these activities at any time.

     It is anticipated that Morgan Stanley DW Inc., an affiliate of Morgan
Stanley & Co. Incorporated, through Morgan Stanley Online, its online service,
may be a member of the syndicate and engage in electronic offers, sales and
distribution of the shares being offered. A prospectus in electronic format may
be made available on the web sites maintained by one or more underwriters. The
underwriters may agree to allocate a number of shares to underwriters for sale
to their online brokerage account holders.

     We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.
                                        79
RELATIONSHIPS WITH UNDERWRITERS

     From time to time certain of the underwriters have provided us, and
continue to provide us, with commercial, investment banking and other financial
services. In addition, affiliates of Banc of America Securities LLC and
subsidiaries of Credit Suisse First Boston Private Equity, Inc., an affiliate of
Credit Suisse First Boston Corporation, currently own 2.9% and 13.7%
respectively, of the outstanding common shares of the Company. In addition,
Kamil M. Salame, one of our directors, is a Director of the Private Equity Group
of Credit Suisse First Boston, which has the DLJ Merchant Banking PartnersIII,
L.P. private equity fund, an affiliate of Credit Suisse First Boston
Corporation.

PRICE OF THE OFFERING

     Prior to this offering, there has been no public market for the common
shares. The initial public offering price will be determined by negotiations
between the Company and the representative of the underwriters. Among the
factors to be considered in determining the initial public offering price will
be the future prospects of the Company and its industry in general, premiums,
earnings and certain other financial and operating information of the Company in
recent periods, and the price-earnings ratios, price-book value ratios, market
prices of securities and certain financial and operating information of
companies engaged in activities similar to those of the Company. The estimated
initial public offering price range set forth on the cover page of this
preliminary prospectus is subject to change as a result of market conditions and
other factors.

                                        80
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, special tax counsel to the Company. The validity of
the issuance of common shares under Bermuda law will be passed upon for us by
Conyers Dill & Pearman, Hamilton, Bermuda. Certain legal matters 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, 2001 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 common shares
offered in 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 our common shares, 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, 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.

     Upon completion of this offering, we will become subject to the
informational requirements of the Exchange Act and will be required to file
reports, proxy statements and other information with the SEC. You will be able
to 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 will be able to 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. We intend to furnish our shareholders with annual reports
containing combined financial statements audited by an independent accounting
firm.

                                        81
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 common shares 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 intend to apply for and expect to obtain consent for the issue and
transfer of the common shares to and between non-residents of Bermuda for
exchange control purposes from the BMA as required by the Exchange Control Act
1972 of Bermuda and related regulations, subject to the condition that the
common shares shall be listed on the Nasdaq National Market System or any other
appointed stock exchange. In addition, we have delivered 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.

                                        82
INDEX TO COMBINED FINANCIAL STATEMENTS
PAGE
                                                               ----
Report of Independent Accountants...........................    F-2
Combined Balance Sheet as at December 31, 2001..............    F-3
Combined Statement of Operations and Comprehensive Income
  for the period from
  November 14, 2001 to December 31, 2001....................    F-4
Combined Statement of Shareholders' Equity for the period
  from November 14, 2001
  to December 31, 2001......................................    F-5
Combined Statement of Cash Flows for the period from
  November 14, 2001 to
  December 31, 2001.........................................    F-6
Notes to Combined Financial Statements as at December 31,
  2001......................................................    F-7
Unaudited Financial Statements as at March 31, 2002 and for
  the three months then ended
  Combined Balance Sheets as of December 31, 2001 and March
     31, 2002...............................................   F-16
  Combined Statement of Operations and Comprehensive
     Income.................................................   F-17
  Combined Statement of Cash Flows..........................   F-18
  Notes to Combined Financial Statements....................   F-19
F-1
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS OF
MONTPELIER RE HOLDINGS LTD.

To the Board of Directors and Shareholders of Montpelier Re Holdings Ltd.

     In our opinion, the combined balance sheet and the related combined
statements of operations and comprehensive income, shareholders' equity and cash
flows included on pages F-3 to F-15 of the Montpelier Re Holdings Ltd.
Registration Statement Form S-1, present fairly, in all material respects, the
financial position of Montpelier Re Holdings Ltd. and its subsidiary at December
31, 2001, and the results of their operations and their cash flows for 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 audit. We conducted our audit of
these combined financial statements in accordance with auditing standards
generally accepted in the United States of America which require that we plan
and perform the audit 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 combined 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 audit provides a
reasonable basis for our opinion.

/s/ PricewaterhouseCoopers
Chartered Accountants

February 12, 2002, except for Note 15, which is as of May 29, 2002

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

MAILING ADDRESS:  PO BOX HM 1171, Hamilton, Bermuda HM EX

A list of partners can be obtained from the above address.

                                       F-2
MONTPELIER RE HOLDINGS LTD.

                             COMBINED BALANCE SHEET
DECEMBER 31, 2001
                                                               -------------------------
                                                                (EXPRESSED IN THOUSANDS
                                                               OF UNITED STATES DOLLARS)
ASSETS
  Fixed maturities, at fair value (amortized cost:
     $638,525)..............................................          $  640,403
  Cash and cash equivalents, at fair value..................             350,606
  Accrued investment income.................................               1,699
  Premium receivable........................................                 133
  Deferred acquisition costs................................                  16
  Deferred financing costs..................................               2,005
  Common voting shares subscriptions receivable.............              26,000
  Other assets..............................................                 936
                                                                      ----------
     Total assets...........................................          $1,021,798
                                                                      ==========
LIABILITIES
  Loss and loss adjustment expense reserves.................                  --
  Unearned premium..........................................                 142
  Amount due to affiliates..................................                 574
  Accounts payable, accrued expenses and other
     liabilities............................................              10,429
  Long-term debt............................................             150,000
                                                                      ----------
     Total liabilities......................................          $  161,145
                                                                      ==========
SHAREHOLDERS' EQUITY
  Common voting shares ($0.01 par value; 200,000,000 shares
     authorized; 8,740,000 shares issued and outstanding)...                  87
  Additional paid-in capital................................             920,306
  Accumulated other comprehensive income....................               1,878
  Accumulated deficit.......................................             (61,618)
                                                                      ----------
     Total shareholders' equity.............................             860,653
                                                                      ----------
     Total liabilities and shareholders' equity.............          $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 STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
PERIOD FROM
                                                                 NOVEMBER 14, 2001 TO
                                                                   DECEMBER 31, 2001
                                                               -------------------------
                                                                (EXPRESSED IN THOUSANDS
                                                               OF UNITED STATES DOLLARS,
                                                                 EXCEPT SHARE AMOUNTS)
REVENUES
  Gross premiums written....................................          $      150
  Reinsurance premiums ceded................................                  --
                                                                      ----------
  Net premiums written......................................                 150
  Change in unearned premiums...............................                (142)
                                                                      ----------
  Net premiums earned.......................................                   8
  Net investment income.....................................               1,139
                                                                      ----------
  Total revenues............................................               1,147
                                                                      ----------
EXPENSES
  Loss and loss adjustment expenses.........................                  --
  Acquisition costs.........................................                   1
  General and administrative expenses.......................               1,061
  Interest on long-term loan................................                 236
  Incorporation expenses....................................                 146
  Fair value of warrants issued.............................              61,321
                                                                      ----------
  Total expenses............................................              62,765
                                                                      ----------
NET INCOME (LOSS)...........................................          $  (61,618)
                                                                      ==========
COMPREHENSIVE INCOME (LOSS)
  Net income (loss).........................................          $  (61,618)
  Net unrealized gains (losses) on investments..............               1,878
                                                                      ----------
  Comprehensive income (loss)...............................          $  (59,740)
                                                                      ==========
PER SHARE DATA
  Weighted average number of common and common equivalent
     shares outstanding:
     Basic..................................................           8,740,000
     Diluted................................................           8,740,000
  Basic earnings (loss) per share...........................          $    (7.05)
                                                                      ==========
  Diluted earnings (loss) per share.........................          $    (7.05)
                                                                      ==========
The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-4
MONTPELIER RE HOLDINGS LTD.

                   COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
PERIOD FROM
                                                                NOVEMBER 14, 2001 TO
                                                                  DECEMBER 31, 2001
                                                              -------------------------
                                                               (EXPRESSED IN THOUSANDS
                                                              OF UNITED STATES DOLLARS)
Common shares
  Balance -- beginning of period............................          $     --
  Issue of common shares....................................                87
                                                                      --------
     Balance -- end of period...............................                87
                                                                      --------
Additional paid-in-capital
  Balance -- beginning of period............................                --
  Issue of common shares....................................           873,912
  Direct equity offering expenses...........................           (14,927)
  Fair value of warrants qualifying as equity...............            61,321
                                                                      --------
     Balance -- end of period...............................           920,306
                                                                      --------
Accumulated other comprehensive income
  Balance -- beginning of period............................                --
  Net unrealized gains (losses) on investments..............             1,878
                                                                      --------
     Balance -- end of period...............................             1,878
                                                                      --------
Accumulated deficit
  Balance -- beginning of period............................                --
  Net income (loss).........................................           (61,618)
                                                                      --------
     Balance -- end of period...............................           (61,618)
                                                                      --------
     Total shareholders' equity.............................          $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 STATEMENT OF CASH FLOWS
PERIOD FROM
                                                                NOVEMBER 14, 2001 TO
                                                                  DECEMBER 31, 2001
                                                              -------------------------
                                                               (EXPRESSED IN THOUSANDS
                                                              OF UNITED STATES DOLLARS)
Cash flows from operating activities
  Net income (loss).........................................          $(61,618)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Amortization of premium/discount on fixed maturities...               (27)
     Fair value of warrants issued..........................            61,321
  Change in:
     Investment income due and accrued......................            (1,699)
     Premium receivable.....................................              (133)
     Deferred financing expenses............................            (2,005)
     Deferred acquisition costs.............................               (16)
     Other assets...........................................              (936)
     Interest accrued on long-term debt.....................               236
     Amount due to affiliated companies.....................               324
     Unearned premium.......................................               142
     Accounts payable, accrued expenses and other
      liabilities...........................................               497
                                                                      --------
  Net cash used in operating activities.....................            (3,914)
                                                                      --------
Cash flows from investing activities
  Purchases of fixed maturities.............................          (638,498)
                                                                      --------
  Cash used in investing activities.........................          (638,498)
                                                                      --------
Cash flows from financing activities
  Issue of common shares....................................           848,250
  Direct equity offering expenses...........................            (5,232)
  Long-term debt............................................           150,000
                                                                      --------
Cash provided by financing activities.......................           993,018
                                                                      --------
  Increase in cash and cash equivalents.....................           350,606
  Cash and cash equivalents -- Beginning of period..........                --
                                                                      --------
  Cash and cash equivalents -- End of period................          $350,606
                                                                      ========
Supplemental cash flow information
  Interest paid on long-term debt...........................                --
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, 2001
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

1.  GENERAL

     Montpelier Re Holdings Ltd. (the "Company") was incorporated under the laws
of Bermuda on November 14, 2001. The Company's principal operating subsidiary is
Montpelier Reinsurance Ltd. ("Montpelier Re"). Montpelier Re is incorporated in
Bermuda and is registered as a Class 4 insurer under the Insurance 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 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.

     The Company, through Montpelier Re, intends to write a diversified range of
insurance and reinsurance business on a global basis with an initial emphasis on
property exposed business.

     Subsequent to December 31, 2001, Montpelier Re's wholly-owned subsidiary,
Montpelier Marketing Services (UK) Limited ("MMSL") commenced operations. MMSL
provides business introduction and other support services to Montpelier Re.

2.  SIGNIFICANT ACCOUNTING POLICIES

     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 subsidiary Montpelier Re. 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. The preparation
of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect
reported amounts of assets and liabilities, as well as disclosure of contingent
assets and liabilities as at the balance sheet date. Estimates also affect the
reported amounts of income and expenses for the reporting period. Actual results
could differ from those estimates.

  PREMIUMS

     Written premiums are recognized 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.

     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 in which 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
when 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 at the
end of the fiscal year is reflected in unearned premiums.

     Premiums receivable are recorded at amounts due less any required provision
for doubtful accounts.

                                       F-7
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

  DEFERRED ACQUISITION COSTS

     Acquisition costs are comprised of ceding commissions, brokerage, premium
taxes and other expenses that relate directly to the writing of reinsurance
contracts. These costs are deferred and amortized over the terms of the related
contracts. Deferred acquisition costs are reviewed to determine if they are
recoverable from future underwriting profits, including investment income. If
such costs are estimated to be unrecoverable, they are expensed.

  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

     Loss and loss adjustment expense reserves, including losses incurred but
not reported and provisions for settlement expenses, includes amounts determined
from loss reports on individual cases, independent actuarial determinations and
management estimates. Our limited historical experience and resultant lack of
reported losses means that industry data must be relied upon in the reserving
process.

     A significant portion of our business is in the property catastrophe market
and programs with higher layers of risks. Reserving for losses in such programs
is inherently complicated in that losses in excess of the attachment level of
Montpelier Re'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 losses following a loss event.

     Management uses industry data and professional judgment to estimate the
ultimate loss to the Company from reinsurance contracts exposed to a loss event.
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 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 it
involves a catastrophe 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.

  INVESTMENTS

     The Company's investments in fixed maturities and equity securities are
classified as "available-for-sale" and are carried at fair value, based on
quoted market prices. Unrealized gains and losses are included within
accumulated other comprehensive income in shareholders' equity.

     Net investment income is stated net of investment management and custody
fees. Interest income is recognized on the accrual basis and includes the
amortization of premium or discount on fixed interest securities purchased at
amounts different from their par value.

     Gains and losses on investments are included in investment income when
realized. Investments are recorded on a trade date basis and the cost of
securities sold is determined on the basis of first-in, first-out.

     Investments are reviewed periodically to determine if they have sustained
an impairment of 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. If
investments are determined to be impaired, a loss is charged to the income
statement in the period in which it is discovered.

                                       F-8
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

  CASH AND CASH EQUIVALENTS

     Cash and cash equivalents include debt securities and time deposits with a
maturity of three months or less from the date of purchase.

  EARNINGS (LOSS) PER SHARE

     Diluted earnings per common share are based upon the weighted average
number of common shares and common share equivalents outstanding, using the
treasury stock method. Common share equivalents comprise warrants, which are
dilutive when the book value of the Company exceeds the strike price of the
warrants. Basic earnings per ordinary share give no effect for dilutive
securities.

  TRANSLATION OF FOREIGN CURRENCY

     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
included in income. The Company has no operations that have a functional
currency other than the United States dollar.

  INCORPORATION AND CAPITALIZATION COSTS

     Expenses related to the issue of common shares are recorded as a reduction
of the proceeds from shares issued. Expenses related to the acquisition of
long-term debt are capitalized and amortized over the expected term of the
agreement. Incorporation costs not related to the raising of capital have been
expensed as incurred.

3.  INVESTMENTS

     The amortized cost, gross unrealized gains, gross unrealized losses and
fair value of investments available for sale at December 31, 2001 were as
follows:
AMORTIZED   UNREALIZED   UNREALIZED
                                               COST         GAIN         LOSS      FAIR VALUE
                                             ---------   ----------   ----------   ----------
Fixed Maturities:
  U.S. government and agency...............  $638,525      $1,878           --      $640,403
  Corporate................................        --          --           --            --
  Mortgage-backed securities...............        --          --           --            --
  Foreign government and agencies..........        --          --           --            --
                                             --------      ------       ------      --------
                                              638,525       1,878           --       640,403
                                             --------      ------       ------      --------
Equities...................................        --          --           --            --
                                             --------      ------       ------      --------
                                             $638,525      $1,878           --      $640,403
                                             ========      ======       ======      ========
F-9
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

     The following table sets forth certain information regarding the investment
ratings of the Company's fixed maturity securities portfolio:
AMORTIZED
RATINGS                                                         COST        %
-------                                                       ---------   -----
US Government & government agencies.........................  $638,525    100.0
AAA.........................................................        --       --
AA..........................................................        --       --
A...........................................................        --       --
Not rated...................................................        --       --
                                                              --------    -----
                                                              $638,525    100.0
                                                              ========    =====
LIQUIDITY AND INTEREST RATE RISK

     The amortized cost and estimated fair value amounts for fixed maturity
securities held at December 31, 2001 are shown by contractual maturity.
AMORTIZED   ESTIMATED
                                                                COST      FAIR VALUE
                                                              ---------   ----------
Due within one year.........................................  $     --           --
Due after one year through five years.......................   638,525      640,403
Due after five years through ten years......................        --           --
                                                              --------     --------
Mortgage-backed securities..................................        --           --
                                                              --------     --------
                                                              $638,525     $640,403
                                                              ========     ========
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.

  NET REALIZED GAINS (LOSSES) ON INVESTMENTS

     During the period ended December 31, 2001, no sales of available-for-sale
securities were made.

  NET INVESTMENT INCOME
PERIOD ENDED
                                                               DECEMBER 31,
                                                                   2001
                                                               ------------
Interest on fixed maturities................................      $  697
Net amortization of premium/discount on fixed maturities....          27
Interest on cash and cash equivalents.......................         491
                                                                  ------
                                                                   1,215
Net investment expenses.....................................         (76)
                                                                  ------
                                                                  $1,139
                                                                  ======
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
                                       F-10
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

frequency of claims from historical trends. Loss and loss adjustment expense
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.

     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.

5.  LONG-TERM DEBT

     On incorporation, the Company obtained a term loan from a syndicate of
lenders, totaling $150,000 in aggregate. 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. No
principal repayments 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. At December 31, 2001, the Company
accrued interest expense of $236 in 2001, at an average interest rate of 2.99%.

6.  RELATED PARTY TRANSACTIONS

     White Mountains and Benfield sponsored the formation of the Company and
invested $180,000 and $25,000 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 were granted warrants
entitling them to purchase 774,929 common shares and 387,464 common shares,
respectively. In connection with the Company's formation, 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 is $324 due to White Mountains and Benfield for reimbursement
of these funds.

     The Company has engaged OneBeacon Asset Management, a wholly-owned indirect
subsidiary of White Mountains, to provide investment advisory and management
services. The Company has agreed to pay fees of between 0.15% and 0.30% per
annum based on the month-end market values held under custody plus reimbursement
of fees and out-of-pocket expenses. These fees are charged against net
investment income. 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 and is the Principal
Executive Officer of OneBeacon Asset Management. An amount of $74 was payable as
of December 31, 2001 to OneBeacon Asset Management for services provided during
the period November 16, 2001 to December 31, 2001.

     Subsequent to December 31, 2001, the Company entered into an agreement with
Remetrics, a subsidiary of Benfield, for the provision of catastrophe modeling
services.

     In addition, the Company pays brokerage commissions to Benfield Greig
Limited, a subsidiary of Benfield, on business brought in by Benfield Greig
Limited. These commissions are consistent with commissions paid to other brokers
in the ordinary course of business. The Company may, in the ordinary course of
business, reinsure portions of White Mountains' insurance risks that come to
market through reinsurance brokers.

     Also included in Amount due to affiliates is $250 due to a shareholder for
an overpaid subscription payment.
                                       F-11
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

     Three directors, including the Company's Chairman, are employed by White
Mountains.

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 SHARES

     At December 31, 2001, the total authorized shares of the Company were
200,000,000, with a par value of $0.01 each.

  COMMON SHARES

     At December 31, 2001, the total issued and outstanding shares of the
Company were 8,740,000, with a par value of $0.01 each. The holders of ordinary
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. Following receipt of the outstanding subscriptions payments, all
issued and outstanding common voting shares were fully paid.

  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 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 1,186,610 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 $100, 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.

     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
illiquidity 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%.

                                       F-12
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

  DIVIDENDS

     The Company did not declare any dividends for the period to December 31,
2001.

9.  SEGMENT REPORTING

     Management views the operations and management of the Company as one
operating segment. As such, no segmental analyses of lines of business or
premium by geographic zone are prepared.

     The Company has established relationships with the major global reinsurance
brokers. Four of these brokers are significant customers for the Company.

10.  EARNINGS (LOSS) PER SHARE

     The net income (loss) used in the Company's basic and diluted loss per
share calculation is identical. There were no dilutive securities at December
31, 2001. The Company's 8,740,000 shares are considered to be issued and
outstanding throughout the period from November 14, 2001 to December 31, 2001.

11.  COMMITMENTS AND CONTINGENCIES

  CONCENTRATIONS 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.

  CREDIT FACILITIES

     On incorporation, 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, 2001, no amounts had been drawn down under this facility.

  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: 2002 -- $248; 2003 -- $267; 2004 -- $245.

12.  EMPLOYEE INCENTIVE PLANS

     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"), performance units may
be granted to executive officers and certain other key employees. Performance
units

                                       F-13
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

entitles the recipient to receive, without payment to the Company, all or part
of a specified amount determined by the Committee, subject to the achievement of
specific financial goals. Performance units are generally payable at the end of
a three-year performance cycle, and can be denominated in common stock at market
value and are payable in cash, common stock or a combination thereof at the
discretion of the Committee.

     On January 8, 2002, the Committee approved the grant of up to 52,000
performance units for the 2002-2004 performance cycle.

  OPTION PLAN

     Pursuant to the terms of the Option Plan, at the discretion of the
Committee, share options may be granted to certain key employees of the Company.
The options expire ten years after date of grant and require full payment in
cash prior to exercise.

     A maximum of 425,000 options may be granted under the Option Plan. On
January 8, 2002, 340,000 options were granted, with vesting dates of between
December 31, 2002 to December 31, 2005, and strike prices of between $100 and
$115.

  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 is 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.

  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

     Subsequent to December 31, 2001, Montpelier Re's wholly-owned subsidiary,
Montpelier Marketing Services (UK) Limited ("MMSL") commenced operations. MMSL
is to provide business introduction and other support services to Montpelier Re.
Appropriate arms' length fees will be charged for such services. Normal UK tax
will be payable on profits made by MMSL.

     Montpelier Re intends to capitalize a wholly-owned subsidiary, Montpelier
Enterprises (Barbados) Limited ("MEBL"), to act as a holding company for a
proportion of the Company's investment portfolio. Normal Barbados tax will be
payable on profits made by MEBL.

     It is not anticipated that any such tax charges of MMSL or MEBL will have a
material effect on the combined financial results of the Company.

                                       F-14
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
  (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

14.  STATUTORY REQUIREMENTS

     Montpelier Re is registered under The Insurance Act 1978 (Bermuda),
Amendments Thereto and Related Regulations ("The Act"). Under the Insurance Act,
Montpelier Re is required to prepare Statutory Financial Statements and to file
a Statutory Financial Return. The Act also requires Montpelier Re to maintain a
minimum share capital of $1,000 and to meet a minimum solvency margin equal to
the greater of $100,000, 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
$100,000 at December 31, 2001. Montpelier Re's statutory capital and surplus was
$980,170 at December 31, 2001, of which $980,727 is fully paid up share capital.

     The Insurance 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 BMA of such payment.
The maximum amount of dividends that could be paid by Montpelier Re to the
Company at January 1, 2002, without such notification, was $39.

     Montpelier Re is also required to maintain a minimum liquidity ratio, which
was met as at December 31, 2001.

15.  SUBSEQUENT EVENTS

     In May 2002, the Board of Directors of the Company authorized an Initial
Public Offering of common shares of the Company. The terms of the transaction
will be finalized prior to the closing of the offering. Net proceeds of the
offering will be used in the ordinary operations of the business.

     In May 2002, the Company entered into a new lease agreement for its office
space. Future minimum annual commitments under this lease are as follows:
2002 -- $313; 2003 -- $347; 2004 -- $347. The lease on its former premises in
Bermuda, was cancelled without penalty.

     Subsequent to December 31, 2001, the Company has written a significant
volume of reinsurance contracts.

     On May 28, 2002, the Company signed a subscription and shareholders
agreement to invest in the Bermuda-based holding company of Wellington Re
Limited ("Wellington Re"), a London-based reinsurance company to be founded by
Wellington Underwriting plc. Subject to various conditions, Montpelier Re has
agreed to invest up to approximately 9% of the total investor commitments of
L448 million or approximately $60 million, in two separate tranches. The first
tranche of L22.1 million is expected to be paid in June 2002 and the second and
final tranche is expected to be paid in November 2002. Anthony Taylor, the Chief
Executive Officer and President of Montpelier Re, will join the board of
directors of Wellington Re.

                                       F-15
MONTPELIER RE HOLDINGS LTD.

                            COMBINED BALANCE SHEETS
DECEMBER 31,   MARCH 31,
                                                                  2001          2002
                                                              ------------   ----------
                                                               (EXPRESSED IN THOUSANDS
                                                              OF UNITED STATES DOLLARS)
                                                                             UNAUDITED
ASSETS
  Fixed maturities, at fair value (amortized cost:             $  640,403    $  909,263
     2001 -- $638,525; 2002 -- $920,977)....................
  Cash and cash equivalents, at fair value..................      350,606       119,508
  Unearned premium ceded....................................           --        13,002
  Accrued investment income.................................        1,699         8,767
  Premium receivable........................................          133       119,789
  Reinsurance recoverable...................................           --           644
  Deferred acquisition costs................................           16        26,090
  Deferred financing costs..................................        2,005         1,834
  Common voting shares subscriptions receivable.............       26,000            --
  Other assets..............................................          936           946
                                                               ----------    ----------
     Total assets...........................................   $1,021,798    $1,199,843
                                                               ==========    ==========
LIABILITIES
  Loss and loss adjustment expense reserves.................   $       --    $   15,011
  Unearned premium..........................................          142       165,892
  Amount due to affiliates..................................          574            --
  Accounts payable, accrued expenses and other                     10,429         2,054
     liabilities............................................
  Long-term debt............................................      150,000       150,000
                                                               ----------    ----------
     Total liabilities......................................   $  161,145    $  332,957
                                                               ==========    ==========
SHAREHOLDERS' EQUITY
  Common voting shares ($0.01 par value, 200,000,000 shares    $       87    $       87
     authorized; 8,740,000 shares issued and outstanding)...
  Additional paid-in capital................................      920,306       921,472
  Accumulated other comprehensive income....................        1,878       (11,714)
  Accumulated deficit.......................................      (61,618)      (42,959)
                                                               ----------    ----------
     Total shareholders' equity.............................      860,653       866,886
                                                               ----------    ----------
     Total liabilities and shareholders' equity.............   $1,021,798    $1,199,843
                                                               ==========    ==========
The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-16
MONTPELIER RE HOLDINGS LTD.

           COMBINED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
THREE MONTHS ENDED
                                                                   MARCH 31, 2002
                                                              -------------------------
                                                               (EXPRESSED IN THOUSANDS
                                                              OF UNITED STATES DOLLARS,
                                                                EXCEPT SHARE AMOUNTS)
                                                                      UNAUDITED
REVENUES
  Gross premiums written....................................          $ 203,679
  Reinsurance premiums ceded................................            (14,320)
                                                                      ---------
  Net premiums written......................................            189,359
  Change in unearned premiums...............................           (152,748)
                                                                      ---------
  Net premiums earned.......................................             36,611
                                                                      ---------
  Net investment income.....................................              7,633
  Net realized investment gains (losses)....................                484
                                                                      ---------
  Total revenues............................................             44,728
EXPENSES
  Loss and loss adjustment expenses.........................             14,367
  Acquisition costs.........................................              6,467
  General and administrative expenses.......................              4,198
  Interest on long-term loan................................                995
  Incorporation expenses....................................                 42
                                                                      ---------
  Total expenses............................................             26,069
                                                                      ---------
NET INCOME (LOSS)...........................................          $  18,659
                                                                      =========
COMPREHENSIVE INCOME (LOSS)
  Net income (loss).........................................          $  18,659
  Net unrealized gains (losses) on investments..............            (13,592)
                                                                      ---------
  Comprehensive income (loss)...............................          $   5,067
                                                                      =========
PER SHARE DATA
  Weighted average number of common and common equivalent
     shares outstanding:
     Basic..................................................
     Diluted................................................
  Basic earnings (loss) per share...........................
                                                                      =========
  Diluted earnings (loss) per share.........................
                                                                      =========
The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-17
MONTPELIER RE HOLDINGS LTD.

                        COMBINED STATEMENT OF CASH FLOWS
THREE MONTHS
                                                                        ENDED
                                                                    MARCH 31, 2002
                                                              --------------------------
                                                               (EXPRESSED IN THOUSANDS
                                                              OF UNITED STATES DOLLARS)
                                                                      UNAUDITED
Cash flows from operating activities
  Net income................................................          $  18,659
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Amortization of premium/discount on fixed maturities...                874
     Depreciation...........................................                 30
     Fair value of options issued as compensation...........              1,227
     Realized (gains) losses on marketable securities.......               (484)
  Change in:
     Unearned premium ceded.................................            (13,002)
     Investment income due and accrued......................             (7,068)
     Premium receivable.....................................           (119,656)
     Reinsurance recoverable................................               (644)
     Deferred acquisition costs.............................            (26,074)
     Deferred financing costs...............................                171
     Other assets...........................................                (40)
     Interest accrued on long-term debt.....................                (93)
     Loss and loss adjustment expense reserves..............             15,011
     Amount due to affiliates...............................               (324)
     Unearned premium.......................................            165,750
     Accounts payable, accrued expenses and other
      liabilities...........................................              1,317
                                                                      ---------
  Net cash provided by operating activities.................             35,654
                                                                      ---------
Cash flows from investing activities
  Purchases of fixed maturities.............................           (282,842)
                                                                      ---------
  Sales of fixed maturities.................................                 --
                                                                      ---------
  Cash used in investing activities.........................           (282,842)
                                                                      ---------
Cash flows from financing activities
  Issue of common shares....................................             25,750
  Direct equity offering expenses...........................             (9,660)
  Long-term debt............................................                 --
                                                                      ---------
     Cash provided by financing activities..................             16,090
                                                                      ---------
  Increase (Decrease) in cash and cash equivalents..........           (231,098)
  Cash and cash equivalents -- Beginning of period..........            350,606
                                                                      ---------
  Cash and cash equivalents -- End of period................          $ 119,508
                                                                      =========
Supplemental cash flow information
  Interest paid on long-term debt...........................          $   1,069
The accompanying Notes to the Combined Financial Statements are an
              integral part of the Combined Financial Statements.
                                       F-18
MONTPELIER RE HOLDINGS LTD.

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                 MARCH 31, 2002
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)

1.  GENERAL

     The combined financial statements have been prepared on the basis of
accounting principles generally accepted in the United States ("GAAP") and
include the accounts of Montpelier Re Holdings Ltd. and its wholly owned
subsidiary Montpelier Reinsurance Ltd. In the opinion of management, these
financial statements reflect all the normal recurring adjustments necessary for
a fair presentation of the Company's financial position as of December 31, 2001
and March 31, 2002 and its results and cash flows for the period from November
14, 2001 (date of incorporation) to December 31, 2001 and for the three months
ended March 31, 2002. These combined financial statements should be read in
conjunction with the 2001 audited combined financial statements and related
notes thereto.

     The results for the three months to March 31, 2002 are not necessarily
indicative of the expected results for the remainder of 2002.

2.  SIGNIFICANT ACCOUNTING POLICIES

  PREMIUMS

     Written premiums are recognized 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.

     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 in which 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
when 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 at the
end of the fiscal year is reflected in unearned premiums.

     Premiums receivable are recorded at amounts due less any required provision
for doubtful accounts.

  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

     Loss and loss adjustment expense reserves, including losses incurred but
not reported and provisions for settlement expenses, includes amounts determined
from loss reports on individual cases, independent actuarial determinations and
management estimates. Our limited historical experience and resultant lack of
reported losses means that industry data must be relied upon in the reserving
process.

     A significant portion of our business is in the property catastrophe market
and programs with higher layers of risks. Reserving for losses in such programs
is inherently complicated in that losses in excess of the attachment level of
Montpelier Re'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 losses following a loss event.

     Management uses industry data and professional judgment to estimate the
ultimate loss to the Company from reinsurance contracts exposed to a loss event.
Delays in ceding companies reporting losses to the Company together with the
potential for unforeseen adverse developments, may result in losses and loss
adjustment expenses significantly greater or less than the reserve provided at
the time of the loss event.
                                       F-19
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)

Reserving can prove especially difficult should a significant loss event take
place near the end of an accounting period, particularly if it involves a
catastrophe event.

     Loss and loss adjustment expense 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.

3.  EARNINGS (LOSS) PER SHARE

     Diluted earnings per common share are based upon the weighted average
number of common shares and common share equivalents outstanding, using the
treasury stock method. Common share equivalents comprise warrants, which are
dilutive when the book value of the Company exceeds the strike price of the
warrants. Basic earnings per ordinary share give no effect for dilutive
securities.

4.  EMPLOYEE INCENTIVE PLAN

  PERFORMANCE UNIT PLAN (THE "PUP")

     The PUP is the Company's primary executive long-term incentive scheme.
Performance units are conditional grants of a specified number of common shares
or an equivalent amount of cash. Grants are generally earned, subject to the
attainment of pre-specified performance goals, at the end of a three-year period
or as otherwise determined by the Compensation Committee of the Board.

     For the three-year performance period beginning 2002, the Company has
granted 30,817 performance units through March 31, 2002. The associated accrual
for the performance unit expense was $0.4 million for the three month period
ended March 31, 2002.

  OPTION PLAN

     Under the option plan, options expire 10 years after the award date, and
are subject to various vesting periods. Stock options granted under the option
plan may be exercised for common shares upon vesting. A total of 425,000 common
shares may be issued under the option plan.

     A summary of options issued and outstanding for the period ended March 31,
2002 is as follows:
AVERAGE    OPTIONS FOR
                                                         YEAR OF     EXERCISE    ORDINARY
                                                        EXPIRATION    PRICE       SHARES
                                                        ----------   --------   -----------
Balance at January 1, 2002............................        --          --           --
Options granted.......................................   340,000     $107.50      340,000
Options exercised.....................................        --          --           --
Options forfeited.....................................        --          --           --
Balance at March 31, 2002.............................   340,000     $107.50      340,000
F-20
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)

     The following table summarizes the range of exercise prices for outstanding
options at March 31, 2002:
WEIGHTED
                                                          AVERAGE     WEIGHTED                 WEIGHTED
                                                         REMAINING    AVERAGE                  AVERAGE
                                            OPTIONS     CONTRACTUAL   EXERCISE     OPTIONS     EXERCISE
EXERCISE PRICES                           OUTSTANDING      LIFE        PRICE     EXERCISABLE    PRICE
---------------                           -----------   -----------   --------   -----------   --------
$100.00.................................     85,000     9.75 years    $100.00           --          --
$105.00.................................     85,000     9.75 years    $105.00           --          --
$110.00.................................     85,000     9.75 years    $110.00           --          --
$115.00.................................     85,000     9.75 years    $115.00           --          --
                                            -------                                -------     -------
                                            340,000                                     --          --
                                            =======                                =======     =======
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 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     FAIR VALUE ON
EXERCISE PRICES             OUTSTANDING     VESTING DATE      AT DATE OF GRANT   DATE OF GRANT
---------------             -----------   -----------------   ----------------   -------------
$100.00...................     85,000     December 31, 2002       3 years           $ 2,116
$105.00...................     85,000     December 31, 2003       4 years           $ 2,384
$110.00...................     85,000     December 31, 2004       5 years           $ 2,639
$115.00...................     85,000     December 31, 2005       6 years           $ 2,885
                              -------                                               -------
                              340,000                                               $10,024
                              =======                                               =======
A compensation expense of $1,227 was recorded in general and administrative
expenses in the income statement in the period to March 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.

5.  EARNINGS (LOSS) PER SHARE

     The net income (loss) used in the Company's basic and diluted earnings per
share calculations is identical. There were no dilutive securities at March 31,
2002.

                                       F-21
MONTPELIER RE HOLDINGS LTD.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)
THREE MONTHS
                                                                 ENDED
                                                               MARCH 31,
                                                                  2002
                                                              ------------
Basic
  Net income (loss).........................................     18.659
  Weighted average common shares outstanding................
Basic earnings (loss) per share.............................
Diluted
  Net income (loss).........................................     18.659
  Weighted average common equivalent shares outstanding.....
Diluted net earnings (loss) per share.......................
6.  SEGMENT REPORTING

     We have primarily focused on writing global specialty property and other
classes of reinsurance business. The following tables set forth a breakdown of
our gross premiums written by line of business:

                         GROSS PREMIUMS WRITTEN BY LINE
THREE MONTHS ENDED
                                                                MARCH 31, 2002
                                                              -------------------
                                                                ($ IN MILLIONS)
Property Catastrophe........................................  $ 79.1       38.8%
Other Property..............................................    35.6        17.5
Qualifying Quota Share......................................    73.8        36.2
Specialty and Other.........................................    15.2         7.5
                                                              ------       -----
Total.......................................................  $203.7       100.0%
                                                              ======       =====
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 three months to March 31, 2002, premium produced by each of the four
large brokers was as follows: Benfield $74.4 million; Willis Group $53.7
million; Guy Carpenter $35.2 million; Aon Re $24.9 million.

7.  RELATED PARTIES

     The Company's Chairman, Chief Financial Officer and another director are
shareholders in both the Company and in Olympus Re Holdings, Ltd., the parent
company of a Bermuda domiciled reinsurer writing certain lines of business which
are similar to some of those written by Montpelier Re. The Company does not have
an investment in Olympus Re Holdings, Ltd.

     The Company's Chief Financial Officer is also a director of a significant
customer of the Company.

                                       F-22
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."

CLASH COVERAGE:...............   Exposure to a larger single loss than intended
                                 due to losses incurred under two or more
                                 coverages or policies for the same event.

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 determined 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.

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 (OR CLAIM
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.

PROPORTIONAL REINSURANCE:.....   A generic term describing all forms of
                                 reinsurance in which the reinsurer shares a
                                 proportional part of the original premiums and
                                 losses of the reinsured. Proportional
                                 reinsurance is also known as pro rata
                                 reinsurance, quota share reinsurance or
                                 participating reinsurance. In proportional
                                 reinsurance the reinsurer generally pays the
                                 ceding company a ceding commission. The ceding
                                 commission generally is based on the ceding
                                 company's cost of acquiring the business being
                                 reinsured (including commissions, premium
                                 taxes, assessments and miscellaneous
                                 administrative expense) and also may include a
                                 profit factor.

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.

REINSTATEMENT PREMIUMS:.......   The premiums charged for the restoration of the
                                 reinsurance limit of a contract to its full
                                 amount after payment by the reinsurer of losses
                                 as a result of an occurrence.

                                       G-2
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.
                                 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
                                 reinsurer 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.

                                       G-3
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.

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 common shares being
registered hereby. All of such expenses are estimates, other than the filing and
quotation fees payable to the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc. and the Nasdaq National Market.
Filing Fee -- Securities and Exchange Commission............  $23,000
Filing Fee -- National Association of Securities Dealers,
  Inc.......................................................  $25,500
Quotation Fees -- The Nasdaq National Market................        *
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:
(a) the directors and officers of the Registrant, 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 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, 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 in respect of any
fraud or dishonesty 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").

     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.

                                       II-1
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     Since its formation, the Registrant has issued unregistered securities as
described below. None of the 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 was 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.

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.
 3.2*    Bye-Laws.
 4.1*    Specimen Common Share Certificate.
 4.2*    Form of Warrant.
 5.1*    Opinion of Conyers Dill & Pearman.
10.1*    Shareholders Agreement, dated as of December 12, 2001, among
         the Registrant and certain other signatories.
10.2*    Service Agreement, dated as of December 12, 2001, between
         Anthony Taylor and the Registrant.
10.3*    Form of Officer Service Agreement.
21.1*    Subsidiaries of the Registrant.
23.1*    Consent of Conyers Dill & Pearman (included in Exhibit 5.1).
23.2     Consent of PricewaterhouseCoopers (Bermuda).
24.1     Power of Attorney (included as part of the signature pages).
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
                                       II-2
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.

     The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

                                       II-3
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 30th day of May, 2002.

                                          MONTPELIER RE HOLDINGS LTD.

                                          By:      /s/ ANTHONY TAYLOR
                                            ------------------------------------
                                            Name: Anthony Taylor
                                            Title:  President and Chief
                                              Executive Officer

                               POWER OF ATTORNEY

     Know all men by these presents, that the undersigned directors and officers
of the Company, a Bermuda limited liability company, which is filing a
Registration Statement on Form S-1 with the Securities and Exchange Commission,
Washington, D.C. 20549 under the provisions of the Securities Act of 1933 hereby
constitute and appoint Anthony Taylor and Thomas Busher, and each of them, the
individual's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the person and in his or her name, place
and stead, in any and all capacities, to sign such registration statement and
any or all amendments, including post-effective amendments to the registration
statement, including a prospectus or an amended prospectus therein and any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act, and all other documents in
connection therewith to be filed with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact as agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 30th day of May, 2002.
SIGNATURE                                                  TITLE
                       ---------                                                  -----
/s/ JOHN J. BYRNE                                            Chairman
 ------------------------------------------------------
                  John J. (Jack) Byrne

                   /s/ ANTHONY TAYLOR                           President and Chief Executive Officer and
 ------------------------------------------------------          Director (Principal Executive Officer)
                     Anthony Taylor

                   /s/ K. THOMAS KEMP                              Chief Financial Officer (Principal
 ------------------------------------------------------                    Financial Officer)
                     K. Thomas Kemp

                  /s/ NEIL MCCONACHIE                                (Principal Accounting Officer)
 ------------------------------------------------------
                    Neil McConachie

                 /s/ JOHN D. GILLESPIE                                          Director
 ------------------------------------------------------
                   John D. Gillespie

                                                                                Director
 ------------------------------------------------------
                    Allan L. Waters
II-4
SIGNATURE                                                  TITLE
                       ---------                                                  -----
/s/ RAYMOND BARRETTE                                          Director
 ------------------------------------------------------
                    Raymond Barrette

                     /s/ TOM HUTTON                                             Director
 ------------------------------------------------------
                       Tom Hutton

                 /s/ RAYMOND M. SALTER                                          Director
 ------------------------------------------------------
                   Raymond M. Salter

                  /s/ ALLEN FULKERSON                                           Director
 ------------------------------------------------------
                    Allen Fulkerson

                  /s/ WILLIAM SPIEGEL                                           Director
 ------------------------------------------------------
                    William Spiegel

                 /s/ STEVEN J. GILBERT                                          Director
 ------------------------------------------------------
                   Steven J. Gilbert

                  /s/ KAMIL M. SALAME                                           Director
 ------------------------------------------------------
                    Kamil M. Salame

                 /s/ JOHN D. GILLESPIE
 ------------------------------------------------------
                   John D. Gillespie
    (authorized representative in the United States)

 ------------------------------------------------------
                    Attorney-in-fact
II-5
REPORT ON SCHEDULES I-IV

                      REPORT OF INDEPENDENT ACCOUNTANTS ON

                         FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Stockholders of
Montpelier Re Holdings Ltd. and Subsidiaries:

Our audit of the combined financial statements referred to in our report dated
February 12, 2002, except for Note 15, which is as of May 29, 2002, appearing on
page F-2 in this Registration Statement 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 LLP

Hamilton, Bermuda
May 29, 2002

                                       S-1
MONTPELIER RE HOLDINGS LTD.

                                   SCHEDULE I

      SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES
AMOUNT AT
                                                                                      WHICH SHOWN
                                                                        ESTIMATED       IN THE
TYPE OF INVESTMENT                                             COST     FAIR VALUE   BALANCE SHEET
------------------                                            -------   ----------   -------------
Fixed maturities:
  Bonds:
     United States Government and government agencies and
       authorities..........................................  638,525    640,403        640,403
     States, municipalities and political subdivisions......
     Foreign governments....................................
     Public utilities.......................................
     Convertibles and bonds with warrants attached..........
     All other corporate bonds..............................
  Certificates of deposit...................................
  Redeemable preferred stocks...............................
                                                              -------    -------        -------
          Total fixed maturities............................  638,525    640,403        640,403
                                                              -------    -------        -------
Equity securities:
  Common stocks:
     Public utilities.......................................
     Banks, trust and insurance companies...................
     Industrial, miscellaneous and all other................
  Nonredeemable preferred stocks............................
                                                              -------    -------        -------
          Total equity securities...........................       --         --             --
                                                              -------    -------        -------
Mortgage loans on real estate...............................
Real estate.................................................
Policy loans................................................
Other long-term investments.................................
Short-term investments......................................
                                                              -------    -------        -------
          Total investments.................................  638,525                   640,403
                                                              -------    -------        -------
S-2
MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE II

         CONDENSED FINANCIAL INFORMATION OF MONTPELIER RE HOLDINGS LTD.
                                 BALANCE SHEET
                               DECEMBER 31, 2001
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
2001
                                                              ----------
ASSETS
Cash and cash equivalents...................................      10,183
Investment in combined subsidiaries.........................     982,645
                                                              ----------
     Total investments......................................     992,828
Subscriptions receivable....................................      26,000
Other assets................................................       2,330
                                                              ----------
     Total assets...........................................  $1,021,158
                                                              ==========
LIABILITIES
Accounts payable and accrued liabilities....................      10,505
Long-term debt..............................................     150,000
                                                              ----------
     Total liabilities......................................  $  160,505
                                                              ----------
SHAREHOLDERS' EQUITY
Common voting shares ($0.01 par value; 200,000,000 shares
  authorized; 8,740,000 shares issued and outstanding)......          87
Additional paid in capital..................................     920,306
Accumulated other comprehensive income......................       1,878
Accumulated deficit.........................................     (61,618)
                                                              ----------
     Total shareholders' equity.............................  $  860,653
                                                              ----------
     Total liabilities and shareholders' equity.............  $1,021,158
                                                              ==========
The Condensed Financial Statements of Montpelier Re Holdings Ltd. should be read
in conjunction with the Combined Financial Statements and accompanying notes of
             Montpelier Re Holdings Ltd. included elsewhere herein.

                                       S-3
SCHEDULE II

                          MONTPELIER RE HOLDINGS LTD.

         CONDENSED FINANCIAL INFORMATION OF MONTPELIER RE HOLDINGS LTD.
                            STATEMENT OF OPERATIONS
               PERIOD FROM NOVEMBER 14, 2001 TO DECEMBER 31, 2001
                                 (IN THOUSANDS)
2001
                                                               --------
REVENUE
  Equity in net earnings of subsidiaries....................   $     39
  Net investment income.....................................         43
                                                               --------
     Total revenue..........................................         82

EXPENSES
  Fair value of warrants issued as consideration for capital
     raising services.......................................     61,321
  Other expenses............................................        379
                                                               --------
     Total expenses.........................................     61,700
                                                               --------
NET LOSS....................................................   $ 61,618
                                                               --------
The Condensed Financial Statements of Montpelier Re Holdings Ltd. should be read
in conjunction with the Combined Financial Statements and accompanying notes of
             Montpelier Re Holdings Ltd. included elsewhere herein.

                                       S-4
SCHEDULE II

                          MONTPELIER RE HOLDINGS LTD.

         CONDENSED FINANCIAL INFORMATION OF MONTPELIER RE HOLDINGS LTD.
                            STATEMENT OF CASH FLOWS
               PERIOD FROM NOVEMBER 14, 2001 TO DECEMBER 31, 2001
2001
                                                              ---------
OPERATING ACTIVITIES:
  Net loss..................................................  $ (61,618)
Adjustments to reconcile loss to net cash used in operating
  activities:
  Equity in net earnings of subsidiaries....................        (39)
  Fair value of warrants issued as consideration for capital     61,321
     raising services.......................................
  Other.....................................................     (1,771)
                                                              ---------
     Net cash used in operating activities..................     (2,107)

INVESTING ACTIVITIES:
  Capital contribution to subsidiary........................   (980,728)
                                                              ---------
  Net cash used in investing activities.....................   (980,728)
                                                              ---------

FINANCING ACTIVITIES:
  Issue of common shares....................................    843,018
  Long-term debt............................................    150,000
                                                              ---------
  Net cash provided by financing activities.................    993,018
                                                              ---------
Cash and cash equivalents, beginning of period..............         --
Cash and cash equivalents, end of period....................  $  10,183
                                                              =========
The Condensed Financial Statements of Montpelier Re Holdings Ltd. should be read
in conjunction with the Combined Financial Statements and accompanying notes of
             Montpelier Re Holdings Ltd. included elsewhere herein.

                                       S-5
MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE III

                      SUPPLEMENTARY INSURANCE INFORMATION
                AS AT AND FOR THE PERIOD ENDED DECEMBER 31, 2001
                    (EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
FUTURE POLICY
                             BENEFITS, LOSSES,                                         NET          BENEFITS
                                CLAIMS AND                                 NET      INVESTMENT   CLAIMS, LOSSES     OTHER
                                   LOSS          UNEARNED   EXPERIENCE   PREMIUMS     INCOME     AND SETTLEMENT   OPERATING
SEGMENT                          EXPENSES        PREMIUMS    REFUNDS      EARNED     (NOTE 2)       EXPENSES      EXPENSES
-------                      -----------------   --------   ----------   --------   ----------   --------------   ---------
Property and Casualty......         $0              142          0           8         1,139            0           1,061
NET
                             PREMIUMS
SEGMENT                      WRITTEN
-------                      --------
Property and Casualty......     150
Notes:

1.  There are no comparatives as the company did not commence writing business
until December 16, 2001.

2.  Net investment income has been allocated in the same ratio as net premiums
earned.

                                       S-6
MONTPELIER RE HOLDINGS LTD.

                                  SCHEDULE IV

                                  REINSURANCE
                     FOR THE PERIOD ENDED DECEMBER 31, 2001
                    (EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
PERCENTAGE
                                                       CEDED TO     ASSUMED              OF AMOUNT
                                              GROSS      OTHER     FROM OTHER    NET      ASSUMED
                                              AMOUNT   COMPANIES   COMPANIES    AMOUNT     TO NET
                                              ------   ---------   ----------   ------   ----------
Property and casualty.......................   $150        0           150        150       100%
Notes:

1.  There are no comparatives as the company did not commence writing business
until December 16, 2001.

                                       S-7