Introduction

Lancashire Holdings Limited (“Lancashire” or “the Company”) today announces that it has raised approximately US$1 billion in new capital.

The Company has raised (subject, inter alia, to admission of the Company’s common shares to trading on London Stock Exchanges Alternative Investment Market ("AIM") (“Admission”) approximately US$910 million through a placing (the “Placing”) of 182 million common shares at a price of 284 pence (US$5.00) per share. Conditional dealings in the Common Shares commence today, with the Admission and unconditional dealings expected on 16 December 2005. In addition, (subject to Admission) the Company has raised approximately US$125 million through the issue of trust preferred securities and subordinated notes.

The Rating Committee of A.M. Best Company, Inc. notified Lancashire on 9 December 2005 that it intends to issue a Financial Strength Rating of A- (Excellent) to Lancashire Insurance Company Limited subject to confirmation of receipt of necessary funds. Confirmation is expected to be made on 16 December 2005 in conjunction with Admission.

Lancashire’s ticker will beLRE.

Lancashire’s Proposed Business Activities

The Company’s underlying objective in establishing a new insurance and reinsurance business is to take advantage of the favourable underwriting conditions expected to arise from the large insured losses incurred in 2004 and 2005.

Lancashire’s Directors expect that the most significant change in pricing and policy terms and conditions will occur in the retrocession, marine and energy, and property markets. Against this background of anticipated market dislocation, Lancashire will concentrate its business activities in these classes.

In the retrocession and reinsurance classes, Lancashire intends to focus on non marine property catastrophe retrocession and marine and energy excess of loss business. In the insurance classes, the business will concentrate on the offshore and onshore energy, property direct and facultative, property terrorism, marine (hull, total loss and war) and aviation terrorism classes.

Lancashire expects that all of its insurance and reinsurance business will be introduced by brokers - both the large international groups and the smaller, specialist intermediaries. Lancashire will conduct its operations and be managed and controlled from Bermuda. A UK incorporated marketing company, Lancashire Insurance Marketing Services Limited, has been formed for business introduction purposes.

Board and Management

Lancashire has assembled a carefully selected team chosen for their complementary skills, insurance market following and experience of building a business. Bob Spass of Capital Z will be Non-executive Chairman. Bob was a co-founder of both Insurance Partners L.P. and Capital Z, two private equity firms specialising in the financial services arena. Richard Brindle will be Chief Executive Officer and Chief Underwriting Officer. Richard brings a strong underwriting track record to the business from his time at Syndicate 488 and Syndicate 2488 at Lloyd’s. Ralf Oelssner, Colin Alexander, William Spiegel of Cypress and Barry Volpert of Crestview will be Non-executive Directors with effect from Admission.

Neil McConachie will join the Board as Chief Financial Officer and Chief Operating Officer from Montpelier Re where he is, inter alia, currently Treasurer and Chief Accounting Officer. Alex Richards (formerly of Renaissance Re), Alex Maloney (formerly of Zurich Global Energy) and Charles Mathias (formerly of RK Harrison) are also joining Lancashire’s executive team.

Financing

Lancashire’s founders and related investors have agreed to subscribe for approximately US $560 million of common shares (subject to Admission). This investor group includes Capital Z, Crestview Partners, Cypress, Moore Capital, Och-Ziff and SAB Capital.

In addition, a number of leading international investors have agreed to subscribe for approximately US $350 million of common shares (subject to Admission).

Lancashire also has agreements to issue (subject to Admission) a total of approximately US $125 million of debt capital through the issue of trust preferred securities and subordinated notes.

Merrill Lynch is acting as Nominated Adviser and Broker to Lancashire as well as Sole Bookrunner and Lead Manager on the Placing. Benfield Advisory and Kinmont are acting as Lancashire’s joint financial advisers. JPMorgan Cazenove is Joint Lead Manager on the Placing; Fox–Pitt, Kelton and Teather & Greenwood are Co-Lead Managers.

Placing statistics and expected timetable

Placing Price 284p (US$5.00)

Number of common share in issue on Admission 185,213,902

Market capitalisation of the Company on Admission at the Placing Price £526 million (US$926 million)

Conditional dealings in common shares commence 13 December 2005

Admission and commencement of unconditional dealings 16 December 2005

It should be noted that if Admission does not occur, all conditional dealings will be of no effect and any share dealings will be at the sole risk of the parties concerned. In addition, it should be noted that although A.M. Best has indicated that (subject to receipt of necessary funds) Lancashire Insurance Company Limited will be granted an “A-” financial strength rating, if A.M. Best is unable or unwilling for any reason to grant the initial “A-” financial strength rating to Lancashire Insurance Company Limited after the group has demonstrated to A.M. Best the receipt of necessary funds, it is likely that the common shares would be suspended and the Company may seek to return the net proceeds of the Placing to shareholders.

Contacts

Merrill Lynch

Rupert Hume-Kendall +44 (0)207 628 1000
Simon Fraser
Matthew Thomson

Benfield Advisory

Tristan McDonald +44 (0)207 578 7000
Ross Milburn

Kinmont

Gavin Kelly +44 (0)207 493 8488
John O’Malley

Financial Dynamics

Robert Bailhache +44 (0)207 269 7200
Dominick Peasley

Lancashire Holdings Limited

LANCASHIRE RAISES US$1 BILLION

PROPOSED ADMISSION TO TRADING IN LONDON ON AIM