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As filed with the Securities and Exchange Commission on March 9, 2007

Registration No. 333-139993

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 1 TO FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Greenlight Capital Re, Ltd.

(Exact name of registrant as specified in its charter)


Cayman Islands 6331 Not Applicable
(State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Number) (IRS Employer
Identification No.)

802 West Bay Road, The Grand Pavilion
Grand Cayman, KY 1-1205
Cayman Islands
Telephone: (345) 745-4573
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Corporation Service Company
1133 Avenue of the Americas
Suite 3100
New York, New York 10036-6710
Telephone: (212) 299-5600
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:


Kerry E. Berchem, Esq.
Bruce Mendelsohn, Esq.
Akin Gump Strauss Hauer & Feld LLP
590 Madison Avenue
New York, New York 10022
(212) 872-1000
Fax: (212) 872-1002 		Leonard Goldberg
Chief Executive Officer
Greenlight Capital Re, Ltd.
802 West Bay Road, The Grand Pavilion
P.O. Box 31110
Grand Cayman, KY 1-1205
Cayman Islands
Telephone: (345) 745-4573
Facsimile: (345) 745-4576 		Gary Horowitz, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
(212) 455-2000
Fax: (212) 455-2502

Approximate date of commencement of proposed sale to the public:     As soon as practicable after the effective date of this registration statement.

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.     [ ]                         

CALCULATION OF REGISTRATION FEE


Title of Each Class of
Securities to be Registered 		Proposed Maximum
Aggregate Offering Price (1) 		Amount of Registration Fee
Class A Ordinary Shares, par value $.10 $ 175,000,000
$ 18,725 (2
)
(1) In accordance with Rule 457(o) under the Securities Act, the number of shares being registered and the proposed maximum offering price per share are not included in this table.
(2) Previously paid.

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 as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.



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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated March 9, 2007

P RELIMINARY P ROSPECTUS

             shares

Class A Ordinary Shares

Greenlight Capital Re, Ltd., or Greenlight Re, is making an initial public offering of its Class A Ordinary Shares. No public market currently exists for its Class A Ordinary Shares. Greenlight Re is offering all of the Class A Ordinary Shares offered by this prospectus. In addition, contingent upon the completion of this offering and certain other conditions, Greenlight Re will sell and David Einhorn, Chairman of our Board of Directors, will purchase in a concurrent private placement                      of our Class B Ordinary Shares at the initial public offering price, simultaneously with the completion of this offering.

We have applied to have our Class A Ordinary Shares included for quotation on the Nasdaq Global Select Market under the symbol ‘‘GLRE.’’ We anticipate that the initial public offering price will be between $             and $             per share.

Investing in our Class A Ordinary Shares involves risks. See ‘‘Risk Factors’’ beginning on page 11 of this prospectus.


  Per Share Total
Public offering price $     
$     
Underwriting discounts and commissions $
$
Proceeds to us before expenses $
$

We have granted the underwriters a 30-day option to purchase up to an additional                 Class A Ordinary Shares from us on the same terms and conditions as set forth above if the underwriters sell more than                 Class A Ordinary Shares in the offering.

None of the Securities and Exchange Commission, state securities regulators, the Cayman Islands Monetary Authority nor any other governmental or regulatory body in the Cayman Islands has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is unlawful.

The underwriters expect to deliver the Class A Ordinary Shares to purchasers against payment on or about                 , 2007.

L EHMAN B ROTHERS UBS I NVESTMENT B ANK

C ITIGROUP D OWLING   & P ARTNERS S ECURITIES F OX- P ITT, K ELTON

                , 2007



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Prospectus Page
Summary 1
Risk Factors 11
Information Regarding Forward Looking Statements 32
Use Of Proceeds 33
Dividend Policy 33
Capitalization 34
Dilution 35
Selected Consolidated Financial Data 36
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations 38
Business 50
Regulation 62
Management 64
Principal Shareholders 82
Certain Relationships And Related Party Transactions 84
Description Of Share Capital 87
Shares Eligible For Future Sale 93
Certain Cayman Islands Tax Considerations 96
Certain United States Tax Considerations 96
Underwriting 108
Legal Matters 113
Experts 113
Change in Auditor 113
Where To Find More Information 113
Enforceability Of Civil Liabilities Under U.S. Federal Securities Laws And Other Matters 114
Index To Consolidated Financial Statements F-1
Glossary Of Selected Reinsurance Terms G-1

You should rely only on the information contained in this prospectus. Neither we nor any underwriter or agent has authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. Neither we nor any underwriter or agent is making an offer to sell our Class A Ordinary Shares in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Class A Ordinary Shares.

Statements contained in this prospectus as to the contents of any contract or other document are not complete, and in each instance we refer you to the copy of the contract or document filed as an exhibit to the registration statement of which the prospectus constitutes a part, each of those statements being qualified in all respects by this reference.

Until                , 2007 (25 days after the date of this prospectus), all dealers that buy, sell or trade our Class A Ordinary 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.

For investors outside of the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

No invitation is being made to the public in the Cayman Islands to subscribe for the Class A Ordinary Shares.

Greenlight Re is our trademark. Other trademarks and trade names appearing in this prospectus are the property of their respective holders.

Greenlight Capital Re, Ltd. is incorporated under the laws of the Cayman Islands as an exempted company limited by shares. We were formed in July 2004. Our subsidiary, Greenlight Reinsurance,

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Ltd., is incorporated under the laws of the Cayman Islands as an exempted company limited by shares and has been granted an unrestricted Class B Insurers License from the Cayman Islands Monetary Authority, or CIMA, under the terms of the Insurance Law (as revised) of the Cayman Islands, or the Law. Our principal executive offices are located at 802 West Bay Road, The Grand Pavilion, Grand Cayman, KY 1-1205, Cayman Islands. Our telephone number is (345) 745-4573. Our website address is www.greenlightre.ky . The information contained in, or accessible through, our website is not part of this prospectus.

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SUMMARY

This summary highlights certain information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A Ordinary Shares. You should carefully read the entire prospectus, including ‘‘Risk Factors’’ and our financial statements and related notes, before you decide whether to invest in our Class A Ordinary Shares. References to ‘‘we,’’ ‘‘our,’’ ‘‘our company,’’ ‘‘us,’’ ‘‘Greenlight Re,’’ or ‘‘the Company’’ refer to Greenlight Capital Re, Ltd. and our wholly-owned subsidiary, Greenlight Reinsurance, Ltd., unless the context dictates otherwise. References to our ‘‘Ordinary Shares’’ refers collectively to our Class A Ordinary Shares and Class B Ordinary Shares. References in this prospectus to our ‘‘Articles’’ refer to the third amended and restated memorandum and articles of association of Greenlight Re. Investing in our Class A Ordinary Shares, involves risks. See ‘‘Risk Factors.’’ For your convenience, we have included a glossary beginning on page G-1 of selected reinsurance terms. All dollar amounts referred to in this prospectus are in U.S. dollars unless otherwise indicated. Any discrepancies in the tables included herein between the amounts listed and the totals thereof are due to rounding.

Greenlight Capital Re, Ltd.

Company Overview

We are a Cayman Islands-based specialty property and casualty reinsurer with a reinsurance and investment strategy that we believe differentiates us from our competitors. Our goal is to build long-term shareholder value by selectively offering customized reinsurance solutions, in markets where capacity and alternatives are limited, that we believe will provide favorable long-term return on equity. We manage our investment portfolio according to a value-oriented philosophy, in which we take long positions in perceived undervalued securities and short positions in perceived overvalued securities.

Our reinsurance strategy is to build a portfolio of contracts that contain either a potentially large number of small losses from multiple events, which we refer to as frequency contracts, and contracts that contain the potential for significant losses from one event, which we refer to as severity contracts. We intend to focus on offering frequency and severity contracts customized to meet client needs that are not being met in the traditional reinsurance marketplace. We have established a senior team of generalist underwriters and actuaries to operate our reinsurance business. We believe that our generalist underwriting capabilities, together with our customized underwriting approach:

•  allow us to deploy our capital opportunistically in a variety of property and casualty lines of business;
•  enable us to be the lead underwriter on a majority of the premium we write;
•  allow us to structure many of our contracts so that our clients participate in the loss experience of the underlying risks, which should align their interests with ours; and
•  allow us to better understand our risks and exposures.

In addition to underwriting customized contracts, we may also, from time to time, participate in traditional reinsurance programs that we believe will provide us with favorable returns on equity. We intend to underwrite contracts only where we believe we can model, analyze and monitor our risks effectively. Our underwriters are responsible for contracts from origination until final disposition, including underwriting, pricing, servicing, monitoring and claims processing. We anticipate that this integrated approach will translate to superior contract management, better client service and superior economic returns over the long term.

Our investment strategy, like our reinsurance strategy, is designed to maximize returns over the long term while minimizing the risk of capital loss. Unlike the investment strategy of many of our competitors, which invest primarily in fixed-income securities, our investment strategy is to invest in

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long and short positions primarily in publicly-traded equity and corporate debt securities. As of December 31, 2006, 98.1% of our investments in securities was invested in publicly-traded equity securities primarily in North America and Western Europe. Our investment portfolio is managed exclusively by an outside advisor, DME Advisors, LP, or DME Advisors. DME Advisors, a value-oriented investment advisor, analyzes companies’ available financial data, business strategies and prospects in an effort to identify undervalued and overvalued securities. DME Advisors is controlled by David Einhorn, the Chairman of our Board of Directors and the president of Greenlight Capital, Inc. Although DME Advisors is required to follow our investment guidelines and to act in a manner that is fair and equitable in allocating investment opportunities to us, it has the exclusive right to manage our investment portfolio and is not otherwise restricted with respect to the nature or timing of making investments for our account. The returns on our investment portfolio for the years ended December 31, 2006 and 2005 were 24.4% and 14.2%, respectively. We note that past performance is not necessarily indicative of future results.

We measure our success by long-term growth in book value per share, which we believe is the most comprehensive gauge of the performance of our business. Accordingly, our incentive compensation plans are designed to align employee and shareholder interests. Compensation under our cash bonus plan is based on the ultimate underwriting returns of our business measured over a multi-year period, rather than premium targets or estimated underwriting profitability for the year in which we initially underwrote the business.

We began underwriting business in April 2006, once our senior underwriting team and infrastructure were in place. In August 2006, we received an A− (Excellent) financial strength rating with a stable outlook from A.M. Best & Co. Inc., or A.M. Best, which is the fourth highest of 15 ratings A.M. Best issues. This rating reflects the rating agency’s opinion of our financial strength, operating performance and ability to meet obligations and it is not an evaluation directed toward the protection of investors or a recommendation to buy, sell or hold our Class A Ordinary Shares.

For the year ended December 31, 2006, we generated earned premiums of $26.6 million, net investment income of $58.5 million, net income of $57.0 million and incurred losses of $9.7 million, of which $4.7 million were paid. Given our limited operating history, these results should not be relied upon as a basis for evaluating the potential success of our business strategy. As of December 31, 2006, we had total assets of $518.6 million and total shareholders’ equity of $312.2 million.

Market Trends and Opportunities

In the past, extended periods of competitive pricing, increases in reserves, rating downgrades, higher than expected losses and rating agency changes in capital requirements for certain lines of business have caused capacity shortages in certain product lines in the property and casualty industry. These market dislocations have created considerable cyclical increases in pricing and changes in terms and conditions that are significantly more favorable for reinsurers. During periods of dislocation, insurers may not be able to identify or locate reinsurers that are willing or able to reinsure their underwriting risks. Our reinsurance contracts bound in 2006 provide coverage of casualty clash, homeowners’, property catastrophe and marine risks. We anticipate that we, will see attractive opportunities in casualty clash, homeowners’, medical malpractice, workers’ compensation, property catastrophe and marine lines in 2007. We believe that these lines of business will present us with opportunities for the following reasons:

•  a limited number of reinsurers underwrite casualty clash reinsurance;
•  in certain states, a number of insurers are reducing their homeowners’ writings, creating opportunity for the remaining insurers that will require more reinsurance;
•  legislation in certain states, including tort reform and workers’ compensation regulation, has resulted in attractive opportunities for medical malpractice and workers’ compensation reinsurance; and
•  there is significant demand for property and catastrophe and marine reinsurance.

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We may also underwrite other lines of business, such as commercial auto and general liability, although we do not believe that we will see many attractive opportunities in these lines as there are many reinsurers currently competing for this type of business.

We intend to continue to monitor market conditions so as to be positioned to participate in future underserved or capacity constrained markets as they arise and offer products that we believe will generate favorable returns on equity over the long term.

Our Competitive Strengths

We believe we distinguish ourselves as follows:

•  Focus on Customized Products.     We focus on customized reinsurance solutions. In particular, we focus on business that is difficult for brokers to place, that is not already sold by brokers or that requires an innovative underwriting approach. We believe we differentiate ourselves by offering customized products at times and in markets where capacity and alternatives are limited. We may also participate in traditional reinsurance programs that we believe will provide us with favorable returns on equity over the long term.
•  Focus on Economic Results.     Our goal is to achieve attractive economic returns on every reinsurance contract we underwrite by focusing on our expected return on equity over the life of the contract, rather than focusing on current year combined ratios or other short-term considerations as we believe many of our competitors do. Our decision to underwrite a contract depends on our determination that the expected economic returns exceeds our targeted return on equity. Our targeted return on equity varies with the degree of risk assumed and generally is at least equal to the risk-free rate plus 5.0%. In pricing our contracts in 2006, and setting our targeted return on equity, we assumed a risk-free rate of 5.0%, rather than using our historical investment returns as a benchmark.
•  Non-traditional Investment Approach.      We employ a non-traditional investment approach that has the potential to generate a higher rate of return than traditional fixed-income investment strategies designed to produce a stable stream of investment income. We take long positions in perceived undervalued securities and short positions in perceived overvalued securities in an effort to maximize investment returns while minimizing the risk of capital loss in both up and down markets. The returns on our investment portfolio for the years ended December 31, 2006 and 2005 were 24.4% and 14.2%, respectively, compared to returns of 4.3% and 2.4% for the same periods on the Lehman U.S. Aggregate Bond Index, a diversified fixed-income index, that, we believe, is representative of the investment portfolios of many of our competitors.
•  Alignment of Management and Shareholder Interests.     Our management incentive compensation plans are designed to align management and employee interests with those of our shareholders over the long term. The majority of payments under our cash bonus plan are based on the ultimate underwriting returns, not on underwriting profitability in any single year or the returns generated by our investment portfolio. As a result, we expect most of the cash bonus plan payments each year will be deferred for multiple years to reflect actual underwriting results as they develop.
•  Experienced Management and Underwriting Team with Well-Established Market Relationships. Our management team has a broad range of relevant skills and experiences in the reinsurance industry. Our Chief Executive Officer, Leonard Goldberg, has more than 22 years of industry experience, including substantial time as a chief actuary and as president of the North American operations of a major reinsurer. Our President and Chief Underwriting Officer, Barton Hedges, is an actuary with 20 years of industry experience and was the president and chief operating officer of the Bermudian operations of a major reinsurer. Our underwriting team has knowledge, experience and relationships with many brokers in the United States, Europe and Bermuda.

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•  Financial Strength.     We currently have no debt in our capital structure. In August 2006, we received an A− (Excellent) financial strength rating with a stable outlook from A.M. Best, which is the fourth highest of 15 ratings A.M. Best issues. This rating reflects the rating agency’s opinion of our financial strength, operating performance and ability to meet obligations and is not an evaluation directed toward the protection of investors or a recommendation to buy, sell or hold our Class A Ordinary Shares. As we have only been writing reinsurance since April 2006, we have not experienced any issues of historic loss reserve adequacy. Our estimation of reserves, as a relatively new reinsurer, may be less reliable than reserve estimations of a reinsurer with a greater volume of business and an established loss history.

Our Strategy

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

•  Selectively Underwrite Reinsurance Risks .     With the use of actuarial models that we produce and the application of our underwriting guidelines, we employ a strict underwriting discipline to identify and select reinsurance opportunities with favorable returns on equity before we commit our capital. We intend to focus on property and casualty lines of business that we believe are underserved or are capacity constrained in an effort to take advantage of market dislocations when and where they occur. We plan to develop an underwriting portfolio of frequency and severity business where each transaction is important to both our client and us. By maintaining a focused and customized underwriting approach, we believe we will be able to understand our risks and exposures better than our competitors. Our underwriting strategy is driven by our goal to produce superior long-term growth in book value per share, rather than by pursuing short-term premium production targets.
•  Operate as a Lead Reinsurer on the Majority of the Business that We Underwrite.     Due to the customized nature of our business strategy, we anticipate that the majority of our reinsurance contracts will be sizeable and require significant interaction among clients, brokers and ourselves. As of December 31, 2006, we had bound nine reinsurance contracts with aggregate premiums written of $74.1 million. We have a strong preference to be the lead underwriter on our transactions, which we believe allows us to influence the pricing, terms and conditions of the business we write and, accordingly, better enables us to meet or exceed our targeted return on equity. We were the lead underwriter for all of our contracts bound in 2006. Although we seek to be the lead underwriter for the majority of the aggregate premium that we underwrite, we may participate in non-lead positions when we believe the opportunity offers compelling returns on equity.
•  Manage Capital Prudently.      We seek to generate underwriting profits and investment returns while managing our capital prudently. We model, analyze and monitor our underwriting activities, which are subject to written underwriting guidelines and regularly reviewed by the underwriting committee of our Board of Directors. DME Advisors manages our investment portfolio subject to our investment guidelines in an attempt to maximize returns while minimizing the risk of capital loss. Occasionally, we may purchase reinsurance for the liabilities we reinsure, or retrocessional coverage, in order to mitigate the effect of a potential concentration of losses upon our financial condition. We currently employ no debt in our capital structure and plan to maintain our A− (Excellent) rating from A.M. Best.

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•  Employ a Differentiated Investment Approach.     We manage our investment portfolio pursuant to a value-oriented philosophy and invest primarily in long and short positions in publicly-traded securities. This approach is intended to provide us with greater flexibility in managing our reinsurance business and the ability to maximize the returns on our investment portfolio. We believe we will achieve higher rates of return over the long term than more traditional fixed-income investment strategies followed by most reinsurers.
•  Maintain a Centralized Operating Structure.     We believe that our centralized management structure allows us to identify and quickly respond to market opportunities and should allow us to capitalize on attractive opportunities more efficiently than our competitors and provide superior client service.

Risks Relating to Our Business and this Offering

Investing in our Class A Ordinary Shares involves substantial risk. In addition, the maintenance of our competitive strengths, the implementation of our business strategy and our future results of operations and financial condition are subject to a number of risks and uncertainties. We discuss the factors that could adversely affect our actual results and performance, as well as the successful implementation of our business strategy, under the heading ‘‘Risk Factors’’ beginning on page 11. Before you invest in our Class A Ordinary Shares, you should carefully consider all of the information in this prospectus, including matters set forth under the heading ‘‘Risk Factors,’’ including:

•  Our Operating Results will Fluctuate from Period to Period.     Due to the nature of our reinsurance operations and our investment strategy, our operating results will fluctuate from period to period. In addition, our opportunistic nature and focus on long-term growth in book value per share will result in fluctuations in the total premiums written over certain periods as we focus on underwriting contracts that we believe will generate better long-term results. Accordingly, our short-term results of operations may not be indicative of our long-term prospects.
•  We Have a Limited Operating History.     Our future performance is difficult to predict because we have limited operating history.
•  There is Uncertainty With Respect to the Establishment of Reserves.     As a relatively new reinsurer with a focus on being the lead underwriter of sizeable transactions, our estimation of reserves may be less reliable than the reserve estimations of a reinsurer with a greater volume of business of smaller transactions and an established loss history. Actual losses and loss adjustment expenses paid may deviate substantially from the estimates of our loss reserves contained in our financial statements.
•  Cyclicality of the Reinsurance Market May Affect the Industry’s and Our Profitability.     The property and casualty reinsurance industry is cyclical and subject to unpredictable developments which may affect the industry’s and our profitability. These include trends of courts granting increasingly larger awards for certain damages, natural disasters, fluctuations in interest rates, changes in laws, changes in the investment environment that affect market prices of investments, inflationary pressures and other events that affect the size of premiums or losses companies and primary insurers experience.

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•  Loss of Key Personnel Could Delay or Prevent Us from Implementing Our Strategy.     The loss of the services of one or more of the members of our senior management or other key personnel, or our inability to hire and retain other key personnel, could delay or prevent us from fully implementing our business strategy. In addition, the diminution or loss of the services of DME Advisors’ principals could have a material adverse effect on our business.
•  We Are Dependent upon Letter of Credit Facilities.     Certain of our clients require us to obtain letters of credit or provide other collateral through funds withheld or trust arrangements as the jurisdictions in which they are incorporated will not permit them to take credit on their statutory financial statements without us posting a letter of credit or providing other collateral. The inability to maintain or increase our letter of credit facility will significantly limit the amount of reinsurance we can write and may require us to modify our investment strategy. If we fail to renew or increase our letter of credit facilities, our ability to implement our business strategy could be significantly and negatively affected. We have established a $200.0 million letter of credit facility. As of December 31, 2006, $89.2 million in letters of credit were issued.
•  Our A.M. Best Rating Potentially is Subject to Downgrade.     Our rating is subject to periodic review by A.M. Best and may be revised downward or revoked at its sole discretion. If A.M. Best downgrades or withdraws our A− (Excellent) rating we could be severely limited or prevented from writing any new reinsurance contracts, which would significantly and negatively affect our ability to implement our business strategy. None of our reinsurance contracts written on or before December  31, 2006 provide the client with the right to terminate the agreement if our A.M. Best rating is downgraded, although we anticipate that some of our future contracts will contain such termination provisions and we may not be able to renew our 2006 contracts if our rating were downgraded.
•  Exposure to Natural and Man-made Disasters May Expose Us to Significant Claims.     Our reinsurance operations expose us to claims arising out of unpredictable catastrophic events, such as hurricanes, hailstorms, tornados, windstorms, severe winter weather, earthquakes, floods, fires, explosions, volcanic eruptions and other natural and man-made disasters. Claims from catastrophic events could cause substantial volatility in our financial results and could have a material adverse effect on our financial condition and results of operations.
•  We May Not Qualify for an Exemption from the Investment Company Act.     We rely upon an exception under the Investment Company Act for a company organized and regulated as a foreign insurance company primarily and predominantly engaged in the reinsurance business. If this exception were deemed inapplicable, we would have to register under the Investment Company Act as an investment company, and as a result we likely would not be permitted to operate our business in the manner in which we currently operate.
•  Our Investment Strategy May Contain Greater Risks than Our Competitors’.     We derive a significant portion of our income from our investment portfolio. As a result, our operating results depend on the performance of our investment portfolio. The risks associated with our investment strategy, including greater volatility, may be substantially greater than the risks associated with traditional fixed-income investments followed by most of our competitors.
•  We May be Deemed to be a Passive Foreign Investment Company.     Significant adverse tax consequences could result to our shareholders if either Greenlight Re or Greenlight Reinsurance, Ltd. is characterized as a passive foreign investment company, or PFIC. The determination is factual in nature and conducted annually, and we cannot assure you that we will not currently or in the future be characterized as a PFIC. We believe that we were a PFIC in 2006, 2005 and 2004. We do not believe, although we cannot assure you, that we will be a PFIC for 2007 or any future taxable year.

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The Offering

Issuer Greenlight Capital Re, Ltd.
Class A Ordinary Shares offered                     shares
Underwriters’ option to purchase
    additional shares
                    shares
Number of Class A Ordinary Shares to
    be outstanding after this offering
                    Class A Ordinary Shares
Class B Ordinary Shares to be sold in
    the concurrent private placement

                    Class B Ordinary Shares
Listing Nasdaq Global Select Market
Trading symbol GLRE
Use of proceeds We estimate net proceeds to us from this offering to be approximately $             million, based upon an assumed initial offering price of $             per Class A Ordinary Share, representing the midpoint of the offering range set forth on the cover of this prospectus, and after deducting the underwriting discounts and commissions. Additionally, we will receive $50 million of proceeds from the sale of Class B Ordinary Shares in the concurrent private placement at a price per share equal to the initial public offering price. We presently intend to contribute substantially all of the net proceeds of this offering and the concurrent private placement to Greenlight Reinsurance, Ltd. to increase the underwriting capacity of its reinsurance operations. See ‘‘Use of Proceeds.’’
Dividend policy We currently do not expect to pay any dividends on our Ordinary Shares. See ‘‘Dividend Policy.’’
Voting rights Except as described herein with regard to adjustments of the aggregate votes conferred by the Ordinary Shares of shareholders holding 9.9% or more of the total voting power of our Ordinary Shares, holders of our Class A Ordinary Shares have one vote for each Class A Ordinary Share held by them and are entitled to vote on a noncumulative basis at all meetings of shareholders. Holders of our Class B Ordinary Shares are entitled to ten votes for each Class B Ordinary Share held by them, subject to the adjustments described above and a limitation on the maximum voting power of the Class B Ordinary Shares of 9.5%. See ‘‘Description of Share Capital— Ordinary Shares—Voting General’’ and ‘‘Risk Factors— Provisions of our Articles may reallocate the voting power of our Class A Ordinary Shares and subject holders of Class A Ordinary Shares to SEC Compliance.’’

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Except as otherwise indicated, all information contained in this prospectus:

•  assumes the underwriters do not exercise their option to purchase additional Class A Ordinary Shares;
•  excludes              of our Class A Ordinary Shares issuable upon the exercise of options outstanding as of             , 2007, at a weighted average exercise price of $            per share issued under our 2004 stock incentive plan or stock incentive plan; and
•  excludes 400,000 of our Class A Ordinary Shares issuable upon the exercise of share purchase options granted to First International Securities Ltd., or First International, a service provider, outstanding as of December 31, 2006, at an exercise price of $10.00 per share.

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Summary Financial Data

The following table sets forth our summary financial data for the fiscal years ended December 31, 2006 and 2005 and the period from inception on July 13, 2004 to December 31, 2004. We were capitalized in August 2004 and commenced underwriting operations in April 2006. We derived the financial data from our audited financial statements included elsewhere in this prospectus, which we have prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. These historical results are not necessarily indicative of future results and the interim results are not necessarily indicative of our full-year performance. You should read the following summary financial data together with our audited financial statements and related notes included elsewhere in this prospectus and the information under ‘‘Selected Consolidated Financial Data’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’


      
Year Ended December 31, 		Period from
July 13, 2004 to
December 31,
2004
  2006 2005
  ($ in thousands, except share, per share data and ratios)
Summary Statement of Income Data:  
 
 
Premiums written $ 74,151
$ —
$ —
Premiums earned 26,605
—
—
Net investment income 58,509
27,934
9,636
Interest income on related party promissory note receivable 1,034
1,323
516
Total revenues 86,148
29,257
10,152
Loss and loss adjustment expenses incurred 9,671
—
—
Acquisition costs 10,415
—
—
General and administrative expenses 9,063
2,992
3,377
Total expenses 29,149
2,992
3,377
Net income $  56,999
$ 26,265
$ 6,775
Earnings Per Share Data (1) :  
 
 
Basic $ 2.67
$  1.24
$ 0.32
Diluted 2.66
1.24
0.32
Weighted average number of Ordinary Shares  
 
 
Basic 21,366,140
21,266,868
21,225,000
Diluted 21,457,443
21,265,801
21,234,350
Selected Ratios (based on U.S. GAAP Statement of Income data):  
 
 
Loss ratio (2) 36.4
%
—
—
Acquisition cost ratio (3) 39.1
%
—
—
Internal expense ratio (4) 34.1
%
—
—
Combined ratio (5) 109.6
%
—
—
(1) Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding for the year.
(2) The loss ratio is calculated by dividing loss and loss adjustment expenses incurred by premiums earned.
(3) The acquisition cost ratio is calculated by dividing acquisition costs by premiums earned.
(4) The internal expense ratio is calculated by dividing the general and administrative expenses by premiums earned.
(5) The combined ratio is the sum of the loss ratio, acquisition cost ratio and the internal expense ratio.

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  As of December 31,
  2006 2005
  ($ in thousands, except share and per share data)
Summary Balance Sheet Data:  
 
Fixed maturities, trading at fair value $ —
$ 238
Equity investments, trading at fair value 238,799
216,702
Other investments, at estimated fair value 4,723
2,271
Total investments in securities 243,522
219,211
Cash and cash equivalents 82,704
7,218
Restricted cash and cash equivalents 154,720
99,719
Total assets 518,608
327,935
   
 
Loss and loss adjustment expense reserves 4,977
—
Unearned premium reserves 47,546
—
Total liabilities 206,441
96,113
Total shareholders’ equity 312,167
231,822
   
 
Adjusted book value (1) $ 312,167
$ 248,034
Ordinary shares outstanding  
 
Basic 21,557,228
21,231,666
Diluted 23,094,900
22,175,000
Per Share Data:  
 
Basic adjusted book value per share (2) $ 14.48
$ 11.68
Diluted adjusted book value per share (3) 14.27
11.63
(1) Adjusted book value equals total shareholders’ equity plus the aggregate principal outstanding on a promissory note from Greenlight Capital Investors, LLC, or GCI, issued in partial payment for 5,050,000 Class B Ordinary Shares, pursuant to the Securities Purchase Agreement dated August 11, 2004 between us and GCI. GCI repaid the outstanding principal amount of the promissory note on December 6, 2006.
(2) Basic adjusted book value per share is calculated by dividing adjusted book value by the number of shares issued and outstanding at year end.
(3) Diluted adjusted book value per share is calculated by dividing the aggregate of adjusted book value and the proceeds from the exercise of options by the number of shares and share equivalents outstanding at the end of the period.

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RISK FACTORS

Investing in our Class A Ordinary Shares involves significant risks, including the potential loss of all or part of your investment. These risks could materially affect our business, financial condition and results of operations and cause a decline in the market price of our Class A Ordinary Shares. You should carefully consider all of the risks described in this prospectus, in addition to the other information contained in this prospectus, before you make an investment in our Class A Ordinary Shares.

Risks Relating to Our Business

Our results of operations will fluctuate from period to period and may not be indicative of our long-term prospects.

The performance of our reinsurance operations and our investment portfolio will fluctuate from period to period. Fluctuations will result from a variety of factors, including:

•  reinsurance contract pricing;
•  our assessment of the quality of available reinsurance opportunities;
•  the volume and mix of reinsurance products we underwrite;
•  loss experience on our reinsurance liabilities;
•  our ability to assess and integrate our risk management strategy properly; and
•  the performance of our investment portfolio.

In particular, we seek to underwrite products and make investments to achieve favorable return on equity over the long term. Our investment strategy is to invest primarily in long and short positions in publicly-traded equity and corporate debt securities, is subject to market volatility and is likely to be more volatile than traditional fixed-income portfolios that are comprised primarily of investment grade bonds. In addition, our opportunistic nature and focus on long-term growth in book value will result in fluctuations in total premiums written from period to period as we concentrate on underwriting contracts that we believe will generate better long-term, rather than short-term, results. Accordingly, our short-term results of operations may not be indicative of our long-term prospects.

We are a start-up operation and there is limited historical information available for investors to evaluate our performance or a potential investment in our Class A Ordinary Shares.

We have limited operating history. We were formed in July 2004 but we did not begin underwriting reinsurance transactions until April 2006. As a result, there is limited historical information available to help prospective investors evaluate our performance or an investment in our Class A Ordinary Shares. In addition, in light of our limited operating history, our historical financial statements are not necessarily meaningful for evaluating an investment in our Class A Ordinary Shares.

In general, reinsurance and insurance companies in their initial stages of development present substantial business and financial risks and may suffer significant losses. They must develop business relationships, establish operating procedures, hire staff, install information technology systems, implement management processes and complete other tasks appropriate for the conduct of their intended business activities. In particular, our ability to implement our strategy to penetrate the reinsurance market depends on, among other things:

•  our ability to attract clients;
•  our ability to attract and retain personnel with underwriting, actuarial and accounting and finance expertise;
•  our ability to maintain at least an A- (Excellent) rating from A.M. Best or a similar financial strength rating from one or more other ratings agencies;
•  our ability to evaluate the risks we assume under reinsurance contracts that we write;

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•  the risk of being deemed a passive foreign investment company or an investment company if we are unable to implement our business plan and are deemed to not be in the active conduct of an insurance business or to not be predominantly engaged in an insurance business. See ‘‘Certain U.S. Tax Considerations – Passive Foreign Investment Companies’’ and ‘‘Risk Factors – We are subject to the risk of becoming an investment company under U.S. federal securities law’’.

We cannot assure you that there will be sufficient demand for the reinsurance products we plan to write to support our planned level of operations, or that we will accomplish the tasks necessary to implement our business strategy. In addition, the business we have written to date is still not mature and may be subject to greater losses than we have anticipated. To date, only $4.7 million of losses have been paid on claims.

Established competitors with greater resources may make it difficult for us to effectively market our products or offer our products at a profit.

The reinsurance industry is highly competitive. We compete with major reinsurers, many of which have substantially greater financial, marketing and management resources than we do. Competition in the types of business that we underwrite is based on many factors, including:

•  premium charges;
•  the general reputation and perceived financial strength of the reinsurer;
•  relationships with reinsurance brokers;
•  terms and conditions of products offered;
•  ratings assigned by independent rating agencies;
•  speed of claims payment and reputation; and
•  the experience and reputation of the members of our underwriting team in the particular lines of reinsurance we seek to underwrite.

Additionally, although the members of our underwriting team have general experience across many property and casualty lines, they may not have the requisite experience or expertise to compete for all transactions that fall within our strategy of offering customized frequency and severity contracts at times and in markets where capacity and alternatives may be limited.

Our competitors include ACE Limited, General Re Corporation, Hannover Re Group, Munich Reinsurance Company, PartnerRe Ltd., Swiss Reinsurance Company, Transatlantic Reinsurance Company, and XL Capital Ltd.

We cannot assure you that we will be able to compete successfully in the reinsurance market. Our failure to compete effectively would significantly and negatively affect our financial condition and results of operations and may increase the likelihood that we may be deemed to be a passive foreign investment company or an investment company. See ‘‘Certain U.S. Tax Considerations – Passive Foreign Investment Companies’’ and ‘‘ – We are subject to the risk of possibly becoming an investment company under U.S. federal securities law.’’

Our losses may exceed our loss reserves, which could significantly and negatively affect our business.

Our results of operations and financial condition depend upon our ability to assess accurately the potential losses associated with the risks we reinsure. Reserves are estimates at a given time of claims an insurer ultimately expects to pay, based upon facts and circumstances then known, predictions of future events, estimates of future trends in claim severity and other variable factors. The inherent uncertainties of estimating loss reserves generally are greater for reinsurance companies as compared to primary insurers, primarily due to:

•  the lapse of time from the occurrence of an event to the reporting of the claim and the ultimate resolution or settlement of the claim;

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•  the diversity of development patterns among different types of reinsurance treaties; and
•  the necessary reliance on the client for information regarding claims.

Our estimation of reserves, as a relatively new reinsurer with a focus on being the lead underwriter of sizeable transactions, may be less reliable than the reserve estimations of a reinsurer with a greater volume of business of smaller transactions and an established loss history. Actual losses and loss adjustment expenses paid may deviate substantially from the estimates of our loss reserves contained in our financial statements, to our detriment. If we determine our loss reserves to be inadequate, we will increase our loss reserves with a corresponding reduction in our net income in the period in which we identify the deficiency and such a reduction would negatively affect our results of operations. If our losses exceed our loss reserves, our financial condition may be significantly and negatively affected. As of December 31, 2006, our loss reserves totaled $5.0 million from three contracts.

The property and casualty reinsurance market may be affected by cyclical trends.

We write reinsurance in the property and casualty markets. The property and casualty reinsurance industry is cyclical. Primary insurers’ underwriting results, prevailing general economic and market conditions, liability retention decisions of companies and primary insurers and reinsurance premium rates influence the demand for property and casualty reinsurance. Prevailing prices and available surplus to support assumed business influence reinsurance supply. Supply may fluctuate in response to changes in rates of return on investments realized in the reinsurance industry, the frequency and severity of losses and prevailing general economic and market conditions.

Continued increases in the supply of reinsurance may have consequences for the reinsurance industry generally and for us, including lower premium rates, increased expenses for customer acquisition and retention and less favorable policy terms and conditions.

Our reinsurance contracts bound in 2006 provide coverage of casualty clash, homeowners’, property catastrophe and marine risks. We anticipate that we will see attractive opportunities in selected casualty clash, homeowners’, medical malpractice, workers’ compensation, property catastrophe and marine lines in 2007. We believe that these lines of business will present us with opportunities for the following reasons:

•  a limited number of reinsurers underwrite casualty clash reinsurance;
•  in certain states, a number of insurers are reducing their homeowners’ writings and creating opportunity for the remaining insurers that will require more reinsurance;
•  legislation in certain states, including tort reform and workers’ compensation regulation, has resulted in attractive opportunities for medical malpractice and workers’ compensation reinsurance; and
•  there is significant demand for property and catastrophe and marine reinsurance.

We also may offer other lines of business, such as commercial auto and general liability, although we do not believe that we will see many attractive opportunities in these lines as there are many reinsurers currently competing for this type of business.

Unpredictable developments, including courts granting increasingly larger awards for certain damages, natural disasters (such as catastrophic hurricanes, windstorms, tornados, earthquakes and floods), fluctuations in interest rates, changes in the investment environment that affect market prices of investments and inflationary pressures, affect the industry’s profitability. The effects of cyclicality could significantly and negatively affect our financial condition and results of operations.

A downgrade or withdrawal of our A.M. Best rating would significantly and negatively affect our ability to implement our business strategy successfully.

Companies, insurers and reinsurance brokers use ratings from independent ratings agencies as an important means of assessing the financial strength and quality of reinsurers. A.M. Best has assigned

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us a financial strength rating of A− (Excellent), which is the fourth highest of 15 ratings that A.M. Best issues. This rating reflects the rating agency’s opinion of our financial strength, operating performance and ability to meet obligations. It is not an evaluation directed toward the protection of investors or a recommendation to buy, sell or hold our Class A Ordinary Shares. A.M. Best periodically reviews our rating, and may revise it downward or revoke it at its sole discretion based primarily on its analysis of our balance sheet strength, operating performance and business profile. Factors which may affect such an analysis include:

•  if we change our business practices from our organizational business plan in a manner that no longer supports A.M. Best’s initial rating;
•  if unfavorable financial or market trends impact us;
•  if our losses exceed our loss reserves;
•  if we are unable to retain our senior management and other key personnel; or
•  if our investment portfolio incurs significant losses.

If A.M. Best downgrades or withdraws our rating, we could be severely limited or prevented from writing any new reinsurance contracts which would significantly and negatively affect our ability to implement our business strategy.

While none of our reinsurance contracts written on or before December 31, 2006 provide the client with the right to terminate the agreement or require us to transfer premiums on a funds withheld basis if our A- (Excellent) A.M. Best rating is downgraded, we anticipate that some of our future contracts will contain such termination provisions and we may not be able to renew our 2006 contracts if our rating were downgraded.

If we lose or are unable to retain our senior management and other key personnel and are unable to attract qualified personnel, our ability to implement our business strategy could be delayed or hindered, which, in turn, could significantly and negatively affect our business.

Our future success depends to a significant extent on the efforts of our senior management and other key personnel to implement our business strategy. We believe there are only a limited number of available, qualified executives with substantial experience in our industry. In addition, we will need to add personnel, including underwriters, to implement our business strategy. We could face challenges attracting personnel to the Cayman Islands. Accordingly, the loss of the services of one or more of the members of our senior management or other key personnel, or our inability to hire and retain other key personnel, could delay or prevent us from fully implementing our business strategy and, consequently, significantly and negatively affect our business.

We do not currently maintain key man life insurance with respect to any of our senior management, including our Chief Executive Officer, Chief Financial Officer or Chief Underwriting Officer. If any member of senior management dies or becomes incapacitated, or leaves the company to pursue employment opportunities elsewhere, we would be solely responsible for locating an adequate replacement for such senior management and for bearing any related cost. To the extent that we are unable to locate an adequate replacement or are unable to do so within a reasonable period of time, our business may be significantly and negatively affected.

Our failure to maintain sufficient letter of credit facilities or to increase our letter of credit capacity on commercially acceptable terms as we grow could significantly and negatively affect our ability to implement our business strategy.

We are not licensed or admitted as a reinsurer in any jurisdiction other than the Cayman Islands. Certain jurisdictions, including the United States, 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 measures are implemented. Consequently, certain clients will require us to obtain a letter of credit or provide other collateral through funds withheld or trust arrangements. When we obtain a letter of credit facility, we are customarily required to provide collateral to the letter of credit provider in order to secure our obligations under the facility. Our ability to provide collateral, and the costs at which we provide collateral, are primarily dependent on the composition of our investment portfolio.

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Typically, letters of credit are collateralized with fixed-income securities. Banks may be willing to accept our investment portfolio as collateral, but on terms that may be less favorable to us than reinsurance companies that invest solely or predominantly in fixed-income securities. The inability to maintain or obtain letters of credit collateralized by our investment portfolio may significantly limit the amount of reinsurance we can write or require us to modify our investment strategy.

As of December 31, 2006, we had a letter of credit facility, valid until October 11, 2007, from Citibank, N.A. in a maximum amount of $200 million of which $89.2 million had been issued. Citibank, N.A. has accepted our investment portfolio as collateral. In the event of a decline in the market value of our investment portfolio that results in a collateral shortfall, as defined in the letter of credit facility, we have the right, at our option, to reduce the outstanding obligations under the letter of credit facility, to deposit additional collateral or to change the collateral composition in order to cure the shortfall. The time that we have to cure a collateral shortfall varies depending on the severity of the shortfall. The time frame in which we must cure a shortfall varies from two hours to five days, depending on the applicable formula, as laid out in the hypothecation agreement of the letter of credit. Additionally, if the shortfall is not cured within the prescribed time period an event of default will immediately occur. We will be prohibited from issuing additional letters of credit until any shortfall is cured.

We may need additional letter of credit capacity as we grow, and if we are unable to renew or increase our letter of credit facility or are unable to do so on commercially acceptable terms we may need to liquidate all or a portion of our investment portfolio and invest in a fixed-income portfolio or other forms of investment acceptable to our clients and banks as collateral, which could significantly and negatively affect our ability to implement our business strategy.

The inability to obtain business provided from brokers could adversely affect our business strategy and results of operations.

A substantial portion of our business is primarily placed through brokered transactions, which involve a limited number of reinsurance brokers. Since we began underwriting operations in April 2006, we have placed all of our gross premiums written through brokers. To lose or fail to expand all or a substantial portion of the brokered business provided through one or more of these brokers, many of whom may not be familiar with our Cayman Islands jurisdiction, could significantly and negatively affect our business and results of operations.

We may need additional capital in the future in order to operate our business, and such capital may not be available to us or may not be available to us on favorable terms. Furthermore, our raising additional capital could dilute your ownership interest in our company and may cause the market price of the Class A Ordinary Shares to decline.

We may need to raise additional capital in the future through public or private equity or debt offerings or otherwise in order to:

•  fund liquidity needs caused by underwriting or investment losses;
•  replace capital lost in the event of significant reinsurance losses or adverse reserve developments;
•  satisfy letters of credit or guarantee bond requirements that may be imposed by our clients or by regulators;
•  meet applicable statutory jurisdiction requirements;
•  meet rating agency capital requirements; or
•  respond to competitive pressures.

Additional capital may not be available on terms favorable to us, or at all. Further, any additional capital raised through the sale of equity could dilute your ownership interest in our company and may cause the market price of our Class A Ordinary Shares to decline. Additional capital raised through

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the issuance of debt may result in creditors having rights, preferences and privileges senior or otherwise superior to those of our Class A Ordinary Shares.

Our property and property catastrophe reinsurance operations may make us vulnerable to losses from catastrophes and may cause our results of operations to vary significantly from period to period.

Our reinsurance operations expose us to claims arising out of unpredictable catastrophic events, such as hurricanes, hailstorms, tornados, windstorms, severe winter weather, earthquakes, floods, fires, explosions, volcanic eruptions and other natural or man-made disasters. The incidence and severity of catastrophes are inherently unpredictable but the loss experience of property catastrophe reinsurers has been generally characterized as low frequency and high severity. Claims from catastrophic events could reduce our earnings and cause substantial volatility in our results of operations for any fiscal quarter or year and adversely affect our financial condition. Corresponding reductions in our surplus levels could impact our ability to write new reinsurance policies.

Catastrophic losses are a function of the insured exposure in the affected area and the severity of the event. Because accounting regulations do not permit reinsurers to reserve for catastrophic events until they occur, claims from catastrophic events could cause substantial volatility in our financial results for any fiscal quarter or year and could significantly and negatively affect our financial condition and results of operations.

We depend on our clients’ evaluations of the risks associated with their insurance underwriting, which may subject us to reinsurance losses.

In some of our reinsurance business under proportional insurance in which we assume an agreed percentage of each underlying insurance contract being reinsured, or quota share contracts, we do not expect to separately evaluate each of the original individual risks assumed under these reinsurance contracts. Therefore, we will be largely dependent on the original underwriting decisions made by ceding companies. We will be subject to the risk that the clients may not have adequately evaluated the insured risks and that the premiums ceded may not adequately compensate us for the risks we assume. We also do not expect to separately evaluate each of the individual claims made on the underlying insurance contracts under quota-share. Therefore, we will be dependent on the original claims decisions made by our clients. To date, we have entered into one quota share contract. Our aggregate maximum possible loss under this contract is equal to 127.5% of earned premiums, or approximately $12.0 million as of December 31, 2006. We are subject to the risk that the client may pay invalid claims, which could result in reinsurance losses for us.

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 have exposure to large, unexpected losses resulting from man-made catastrophic events, such as acts of war, acts of terrorism and political instability. These risks are inherently unpredictable and recent events may indicate an increased frequency and severity of losses. It is difficult to predict the timing of these events or to estimate the amount of loss that any given occurrence will generate. To the extent that losses from these risks occur, our financial condition and results of operations could be significantly and negatively affected.

The involvement of 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, remit these amounts to the ceding companies 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 client for the deficiency notwithstanding the broker’s obligation to make such payment. Conversely, in certain jurisdictions, when the client pays premiums for policies to reinsurance brokers for payment to us, these premiums are considered to have been paid and the client will no longer be liable to us for these premiums, whether or not we have actually received them. Consequently, we assume a degree of credit risk associated with brokers around the world.

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We may be unable to purchase reinsurance for the liabilities we reinsure, and if we successfully purchase such reinsurance, we may be unable to collect, which could adversely affect our business, financial condition and results of operations.

As of December 31, 2006, we had not purchased reinsurance for any of the liabilities we reinsure, which we refer to as retrocessional coverage. However, we may purchase retrocessional coverage for our own account in order to mitigate the effect of a potential concentration of losses upon our financial condition. The insolvency or inability or refusal of a reinsurer of reinsurance to make payments under the terms of its agreement with us could have an adverse effect on us because we remain liable to our client. From time to time, market conditions have limited, and in some cases have prevented, reinsurers from obtaining the types and amounts of retrocession that they consider adequate for their business needs. Accordingly, we may not be able to obtain our desired amounts of retrocessional coverage or negotiate terms that we deem appropriate or acceptable or obtain retrocession from entities with satisfactory creditworthiness. Our failure to establish adequate retrocessional arrangements, if we deem them necessary, or the failure of our retrocessional arrangements, if any, to protect us from overly concentrated risk exposure could significantly and negatively affect our business, financial condition and results of operations.

Currency fluctuations could result in exchange rate losses and negatively impact our business.

Our functional currency is the U.S. dollar. However, we expect that we will write a portion of our business and receive premiums in currencies other than the U.S. dollar. In addition, DME Advisors may invest a portion of our portfolio in assets denominated in currencies other than the U.S. dollar. Consequently, we may experience exchange rate losses to the extent our foreign currency exposure is not hedged or is not sufficiently hedged, which could significantly and negatively affect our business. If we do seek to hedge our foreign currency exposure through the use of forward foreign currency exchange contracts or currency swaps, we will be subject to the risk that our counterparties to the arrangements fail to perform.

Our ability to implement our business strategy could be delayed or adversely affected by Cayman Islands employment restrictions.

Under Cayman Islands law, persons who are not Caymanian, do not possess Caymanian status, or are not otherwise entitled to reside and work in the Cayman Islands pursuant to provisions of the Immigration Law (2006 Revision) of the Cayman Islands, which we refer to as the Immigration Law, may not engage in any gainful occupation in the Cayman Islands without an appropriate governmental work permit. Such a work permit may be granted or extended on a continuous basis for a maximum period of seven years (unless the employee is deemed to be exempted from such requirement in accordance with the provisions of the Immigration Law, in which case such period may be extended to nine years and the employee given the opportunity to apply for permanent residence) upon showing that, after proper public advertisement, no Caymanian or person of Caymanian status, or other person legally and ordinarily resident in the Cayman Islands who meets the minimum standards for the advertised position is available. The failure of these work permits to be granted or extended could delay us from fully implementing our business strategy.

There are differences under Cayman Islands corporate law and Delaware corporate law with respect to interested party transactions which may benefit certain of our shareholders at the expense of other shareholders.

Under Cayman Islands corporate law, a director may vote on a contract or transaction where the director has an interest as a shareholder, director, officer or employee provided such interest is disclosed. None of our contracts will be deemed to be void because any director is an interested party in such transaction and interested parties will not be held liable for monies owed to the company.

Under Delaware law, interested party transactions are voidable.

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Risks Relating to Insurance and Other Regulations

Any suspension or revocation of our reinsurance license would materially impact our ability to do business and implement our business strategy.

We are licensed as a reinsurer only in the Cayman Islands and do not plan to be licensed in any other jurisdiction. The suspension or revocation of our license to do business as a reinsurance company in the Cayman Islands for any reason would mean that we would not be able to enter into any new reinsurance contracts until the suspension ended or we became licensed in another jurisdiction. Any such suspension or revocation of our license would negatively impact our reputation in the reinsurance marketplace and could have a material adverse effect on our results of operations.

CIMA may take a number of actions, including suspending or revoking a reinsurance license whenever CIMA believes that a licensee is or may become unable to meet its obligations, is carrying on business in a manner likely to be detrimental to the public interest or to the interest of its creditors or policyholders, has contravened the terms of the Law, or has otherwise behaved in such a manner so as to cause CIMA to call into question the licensee’s fitness.

Further CIMA may revoke our license if:

•  we cease to carry on reinsurance business;
•  the direction and management of our reinsurance business has not been conducted in a fit and proper manner;
•  a person holding a position as a director, manager or officer is not a fit and proper person to hold the respective position; or
•  we become bankrupt or go into liquidation or we are wound up or otherwise dissolved.

In addition, CIMA could revoke or suspend our license if we are deemed to be a PFIC or an investment company under the Investment Company Act of 1940. Similarly, if CIMA suspended or revoked our license we could lose our exception under the Investment Company Act of 1940, as amended, or the Investment Company Act. See ‘‘—We are subject to the risk of possibly becoming an investment company under U.S. federal securities law.’’

We are subject to the risk of possibly becoming an investment company under U.S. federal securities law.

The Investment Company Act regulates certain companies that invest in or trade securities. We rely on an exception under the Investment Company Act for a company organized and regulated as a foreign insurance company which is engaged primarily and predominantly in the reinsurance of risks on insurance agreements. The law in this area is subjective and there is a lack of guidance as to the meaning of ‘‘primarily and predominantly’’ under the relevant exception to the Investment Company Act. For example, there is no standard for the amount of premiums that need be written relative to the level of a company’s capital in order to qualify for the exception. If this exception were deemed inapplicable, we would have to register under the Investment Company Act as an investment company. Registered investment companies are subject to extensive, restrictive and potentially adverse regulation relating to, among other things, operating methods, management, capital structure, leverage, dividends and transactions with affiliates. Registered investment companies are not permitted to operate their business in the manner in which we operate our business, nor are registered investment companies permitted to have many of the relationships that we have with our affiliated companies. Accordingly, we likely would not be permitted to engage DME Advisors as our investment advisor, unless we obtained board and shareholder approvals under the Investment Company Act. If DME Advisors were not our investment advisor, DME Advisors would liquidate our investment portfolio and we would seek to identify and retain another investment advisor with a value-oriented investment philosophy. If we could not identify or retain such an advisor, we would be required to make substantial modifications to our investment strategy. Any such changes to our investment strategy could significantly and negatively impact our investment results, financial condition and our ability to implement our business strategy.

If at anytime it were established that we had been operating as an investment company in violation of the registration requirements of the Investment Company Act, there would be a risk,

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among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, that we would be unable to enforce contracts with third parties or that third parties could seek to obtain recission of transactions with us undertaken during the period in which it was established that we were an unregistered investment company.

To the extent that the laws and regulations change in the future so that contracts we write are deemed not to be reinsurance contracts, we will be at greater risk of not qualifying for the Investment Company Act exception. Additionally, it is possible that our classification as an investment company would result in the suspension or revocation of our reinsurance license.

Insurance regulators in the United States or elsewhere may review our activities and claim that we are subject to that jurisdiction’s licensing requirements.

We do not presently expect that we will be admitted to do business in any jurisdiction other than the Cayman Islands. In general, the Cayman Islands insurance statutes, regulations and the policies of CIMA are less restrictive than United States state insurance statutes and regulations. We cannot assure you, however, that insurance regulators in the United States, the United Kingdom or elsewhere will not review our activities and claim that we are subject to such jurisdiction’s licensing requirements. In addition, we are subject to indirect regulatory requirements imposed by jurisdictions that may limit our ability to provide reinsurance. For example, our ability to write reinsurance may be subject, in certain cases, to arrangements satisfactory to applicable regulatory bodies and proposed legislation and regulations may have the effect of imposing additional requirements upon, or restricting the market for, non U.S. reinsurers such as us with whom domestic companies may place business. We do not know of any such proposed legislation pending at this time.

If in the future we were to become subject to the laws or regulations of any state in the United States or to the laws of the United States, the United Kingdom or of any other country, we may consider various alternatives to our operations. If we choose to attempt to become licensed in another jurisdiction, for instance, we may not be able to do so and the modification of the conduct of our business or the non-compliance with insurance statutes and regulations could significantly and negatively affect our business.

Current legal and regulatory activities relating to certain insurance products could affect our business, results of operations and financial condition

The sale and purchase of products that may be structured in such a way so as to not contain sufficient risk transfer to meet the requirement of SFAS 113 to be accounted for as reinsurance, or loss mitigation insurance products, have become the focus of investigations by the Securities and Exchange Commission, or the SEC, and numerous state Attorneys General. Although we seek to use structured contractual features in our product offerings, we conduct both internal and external accounting analyses with respect to risk transfer and believe that to date all of our contracts contain sufficient risk transfer under SFAS 113 to be accounted for as reinsurance and should not become a focus of these investigations. However, we cannot predict at this time what effect the current investigations, litigation and regulatory activity will have on the reinsurance industry or our business or what, if any, changes may be made to laws and regulations regarding the industry and financial reporting.  It is possible that these investigations or related regulatory developments will mandate changes in industry practices that will negatively impact our ability to operate our business. Any reclassification of our reinsurance contracts as deposit liabilities rather than reinsurance contacts could call into question our exception under the Investment Company Act. Any of the foregoing could significantly and negatively affect our business, results of operations and financial condition, and our ability to implement our business strategy.

The outcome of recent industry investigations and regulatory proposals could adversely affect our financial condition and results of operations and cause the price of our shares to be volatile.

The insurance industry has attracted increased scrutiny by regulatory and law enforcement authorities relating to allegations of improper special payments, price-fixing, bid-rigging, improper

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accounting practices and other alleged misconduct. Formal and informal inquiries have been made of a large segment of the industry, and a number of companies in the insurance industry have received subpoenas, requests for information from regulatory agencies or other inquiries relating to these and similar matters. These efforts have resulted in both enforcement actions and proposals for new regulation. Although some of these enforcement actions have been settled and we are not subject to the United States regulatory regime, we cannot predict the outcome of this increased regulatory scrutiny or whether it will expand into other areas, whether activities and practices currently thought to be lawful will be characterized as unlawful, what form new regulations will have when finally adopted or the impact, if any, of increased regulatory and law enforcement action on our business and results of operations.

New Florida legislation could adversely affect the market for Florida-specific programs and, if replicated by other jurisdictions, could adversely affect the U.S. reinsurance market and our business.

On January 26, 2007, the Florida governor signed a law which, among other things, substantially increases the amount of reinsurance available to primary insurers from the Florida Hurricane Catastrophe Fund. The law also allows insurers to purchase reinsurance from the state’s catastrophe fund at a discounted rate. In addition, an emergency rule issued by the governor of Florida froze insurance rates and placed a moratorium on non-renewals and cancellations in the state. Accordingly, these laws are expected to result in a reduction of the amount of private market reinsurance required by primary insurers and may reduce overall primary insurance coverage due to the expansion of a state-sponsored primary insurer. To the extent that such legislation serves to shift reinsurance purchases from the private reinsurance market to that state’s catastrophe fund or mandates certain pricing for reinsurance, our revenues may be severely impacted. Additionally, similar laws may be enacted in other jurisdictions, which could have an adverse impact on the U.S. reinsurance market and could negatively affect our business.

Risks Relating to Our Investment Strategy and Our Investment Advisor

We have limited control as to how our investment portfolio is allocated and its performance depends on the ability of DME Advisors to select and manage appropriate investments.

We have engaged DME Advisors to act as our exclusive investment advisor for our investment portfolio and to recommend appropriate investment opportunities. Although DME Advisors is contractually obligated to follow our investment guidelines, we cannot assure shareholders as to how assets will be allocated to different investment opportunities, including long and short positions and derivatives trading, which could increase the level of risk to which our investment portfolio will be exposed. In addition, DME Advisors can outsource to subadvisors without our consent or approval.

The performance of our investment portfolio depends to a great extent on the ability of DME Advisors to select and manage appropriate investments. The advisory agreement terminates on December 31, 2009, unless extended, and we have limited ability to terminate the advisory agreement earlier. We cannot assure you that DME Advisors will be successful in meeting our investment objectives or that the advisory agreement with DME Advisors will be renewed. The failure of DME Advisors to perform adequately could significantly and negatively affect our business, results of operations and financial condition.

Our investment performance may suffer as a result of adverse capital market developments or other factors and impact our liquidity, which could in turn adversely affect our financial condition and results of operations.

We derive a significant portion of our income from our investment portfolio. As a result, our operating results depend in part on the performance of our investment portfolio. For the year ended December 31, 2006, our investment income from our investment portfolio was $58.5 million, or 68%, of total revenue. We strive to structure our investments in a manner that recognizes our liquidity needs for future liabilities. We cannot assure you that DME Advisors will successfully structure our

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investments in relation to our anticipated liabilities. Failure to do so could force us to liquidate investments at a significant loss or at prices that are not optimal, which could significantly and adversely affect our financial results. The returns on our investment portfolio for the years ended December 31, 2006 and 2005 were 24.4% and 14.2%, respectively, compared to returns on the Lehman U.S. Aggregate Bond Index, a diversified fixed-income index, which is comprised of fixed income securities, of 4.3% and 2.4% for the same periods.

The risks associated with DME Advisors’ value-oriented investment strategy may be substantially greater than the risks associated with traditional fixed-income investment strategies. Consequently, the market price of the Class A Ordinary Shares may be volatile and the risk of loss may be greater when compared with other reinsurance companies. The success of our investment strategy may also be affected by general economic conditions. Unexpected market volatility and illiquidity associated with our investments could significantly and negatively affect our investment portfolio results.

Potential conflicts of interest with DME Advisors may exist that could adversely affect us.

None of DME Advisors and its principals, including David Einhorn, Chairman of our Board of Directors, and the president of Greenlight Capital, Inc., are obligated to devote any specific amount of time to the affairs of our company. Affiliates of DME Advisors, including Greenlight Capital, Inc., manage and expect to continue to manage other client accounts, some of which have objectives similar to ours, including collective investment vehicles managed by DME Advisors’ affiliates and in which DME Advisors or its affiliates may have an equity interest. Pursuant to our advisory agreement with DME Advisors, DME Advisors has the exclusive right to manage our investment portfolio and is required to follow our investment guidelines and act in a manner that is fair and equitable in allocating investment opportunities to us, but the agreement does not otherwise impose any specific obligations or requirements concerning allocation of time, effort or investment opportunities to us or any restriction on the nature or timing of investments for our account and for DME Advisors’ own account or other accounts that DME Advisors or its affiliates may manage. If we compete for any investment opportunity with another entity that DME Advisors or its affiliates manage, DME Advisors is not required to afford us any exclusivity or priority. DME Advisors’ interest and the interests of its affiliates, including Greenlight Capital, Inc., may at times conflict, possibly to DME Advisors’ detriment, which may potentially adversely affect our investment opportunities and returns.

Although Mr. Einhorn recused himself from the vote approving and adopting our investment guidelines, as the Chairman of our Board of Directors, he is not, under Cayman Islands law, legally restricted from participating in making decisions with respect to our investment guidelines. Accordingly, his involvement as a member of our board of directors may lead to a conflict of interest.

DME Advisors and its affiliates may also manage accounts whose advisory fee schedules, investment objectives and policies differ from ours, which may cause DME Advisors and its affiliates to effect trading in one account that may have an adverse effect on another account, including ours. We are not entitled to inspect the trading records of DME Advisors, or its principals, that are not related to our company.

Our investment portfolio may be concentrated in a few large positions which could result in large losses.

Our investment guidelines provide that DME Advisors may commit up to 20% of our assets under management to any one investment. Accordingly, from time to time we may hold a few, relatively large securities positions in relation to our capital. As of December 31, 2006, we were invested in fewer than 100 equity securities, the top five long and short positions in equity securities comprised an aggregate of 38% and 21%, respectively, of our investment portfolio. Approximately 10.3% of our investment portfolio was invested in one long equity position in Lanxess AG. No other investment comprised more than 10% of our invested capital. Since our investment portfolio may not be widely diversified, it may be subject to more rapid changes in value than would be the case if the investment portfolio were required to maintain a wide diversification among companies, securities and types of securities.

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DME Advisors may trade on margin and use other forms of financial leverage, which could potentially adversely affect our revenues.

Our investment guidelines provide DME Advisors with the ability to trade on margin and use other forms of financial leverage. Fluctuations in the market value of our investment portfolio can have a disproportionately large effect in relation to our capital. Any event which may adversely affect the value of positions we hold could significantly negatively affect the net asset value of our investment portfolio and thus our results of operations.

DME Advisors may effectuate short sales that subject us to unlimited loss potential.

DME Advisors may enter into transactions in which it sells a security it does not own, which we refer to as a short sale, in anticipation of a decline in the market value of the security. Short sales for our account theoretically will involve unlimited loss potential since the market price of securities sold short may continuously increase. Under adverse market conditions, DME Advisors might have difficulty purchasing securities to meet short sale delivery obligations, and may have to cover shorts sales at suboptimal prices.

The loss by DME Advisors of key employees could materially adversely affect our investment results.

DME Advisors, and consequently our investment portfolio, is dependent on the talents, efforts and leadership of DME Advisors’ principals. The diminution or loss of the services of DME Advisors’ principals, or diminution or loss of their reputation and integrity, or any negative market or industry perception arising from that diminution or loss, could have a material adverse effect on our business. Our advisory agreement with DME Advisors does not allow us to terminate the agreement in the event that DME Advisors loses any or all of its principals.

DME Advisors may transact in derivative instruments which may increase the risk of our investment portfolio.

Derivative instruments, or derivatives, include futures, options, swaps, structured securities and other instruments and contracts that derive their value from one or more underlying securities, financial benchmarks, currencies, commodities or indices. There are a number of risks associated with derivatives trading. Because many derivatives are leveraged, and thus provide significantly more market exposure than the money paid or deposited when the transaction is entered into, a relatively small adverse market movement may result in the loss of a substantial portion of or the entire investment, and may potentially expose us to a loss exceeding the original amount invested. Derivatives may also expose us to liquidity and counterparty risk. There may not be a liquid market within which to close or dispose of outstanding derivatives contracts. In the event of the counterparty’s default, we will generally only rank as an unsecured creditor and risk the loss of all or a portion of the amounts we are contractually entitled to receive.

The compensation arrangements of DME Advisors may create an incentive to effect transactions that are risky or speculative.

DME Advisors is entitled to two forms of compensation under the advisory agreement:

•  a management fee of 1.5% annually, charged monthly, based on net assets under management; and
•  performance compensation based on the appreciation, including unrealized appreciation, in the value of our investment portfolio equal to 20% of net profits, subject to a loss carryforward provision.

While the performance compensation arrangement provides that losses will be carried forward as an offset against net profits in subsequent periods, DME Advisors generally will not otherwise be penalized for realized losses or decreases in the value of our portfolio. These performance compensation arrangements may create an incentive for DME Advisors to engage in transactions that focus on the potential for short-term gains rather than long-term growth or that are particularly risky or speculative.

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DME Advisors may serve on boards and committees.

DME Advisors may from time to time place its or its affiliates’ representatives on creditors committees and/or boards of certain companies in which we have invested. While such representation may enable DME Advisors to enhance the sale value of our investments, it may also prevent us from freely disposing of our investments and may subject us to additional liability. The advisory agreement provides for the indemnification of DME Advisors or any other person designated by DME Advisors for claims arising from such board representation.

The ability to use ‘‘soft dollars’’ may provide DME Advisors with an incentive to select certain brokers that may take into account benefits to be received by DME Advisors.

DME Advisors is entitled to use so-called ‘‘soft dollars’’ generated by commissions paid in connection with transactions for our investment portfolio to pay for certain of DME Advisors’ operating and overhead costs, including the payment of all or a portion of its costs and expenses of operation. ‘‘Soft dollars’’ are a means of paying brokerage firms for their services through commission revenue, rather than through direct payments. DME Advisors’ right to use soft dollars may give DME Advisors an incentive to select brokers or dealers for our transactions, or to negotiate commission rates or other execution terms, in a manner that takes into account the soft dollar benefits received by DME Advisors rather than giving exclusive consideration to the interests of our investment portfolio and, accordingly, may create a conflict.

The Advisory Agreement has limited termination provisions.

The advisory agreement has limited termination provisions which restrict our ability to manage our investment portfolio outside of DME Advisors. Because the advisory agreement contains exclusivity and limited termination provisions, we are unable to use investment managers other than DME Advisors for so long as the agreement is in effect. The advisory agreement term is January 1, 2007 through December 31, 2009 and will automatically renew for successive three year terms unless we or DME Advisors notify the other party at least 90 days prior to the end of the current term of its desire to terminate. We may terminate the advisory agreement prior to the expiration of its term only ‘‘for cause,’’ which is defined as:

•  a material violation of applicable law relating to DME Advisors’ advisory business;
•  DME Advisors’ gross negligence, willful misconduct or reckless disregard of its obligations under the advisory agreement;
•  a material breach by DME Advisors of our investment guidelines that is not cured within a 15-day period; or
•  a material breach by DME Advisors’ of its obligations to return and deliver assets as we may request.

If we become dissatisfied with the results of the investment performance of DME Advisors, we will be unable to hire new investment managers until the advisory agreement expires by its terms or is terminated for cause.

Certain of our investments may have limited liquidity and lack valuation data, which could create a conflict of interest.

Our investment guidelines provide DME Advisors with the flexibility to invest in certain securities with limited liquidity or no public market. This lack of liquidity may adversely affect the ability of DME Advisors to execute trade orders at desired prices, and may impact our ability to fulfill our payment obligations. To the extent that DME Advisors invests in securities or instruments for which market quotations are not readily available, under the terms of the advisory agreement the valuation of such securities and instruments for purposes of compensation to DME Advisors will be determined by DME Advisors, whose determination, subject to audit verification, will be conclusive and binding in the absence of bad faith or manifest error. Because the advisory agreement gives DME Advisors the power to determine the value of securities with no readily discernable market value, and because the calculation of DME Advisors’ fee is based on the value of the investment account, a conflict may exist or arise.

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Increased regulation or scrutiny of alternative investment strategies may affect our investment portfolio or our business reputation.

Non-traditional investment strategies, including strategies that involve the shorting of securities and the use of derivatives and leverage to enhance returns, which we refer to as alternative investment strategies, have recently come under increased scrutiny by regulatory officials and have been the subject of proposals for new regulation and oversight. Although we do not believe increased regulation of alternative investment strategies would directly impact our agreement with DME Advisors, it is possible that increased regulation of alternative investment managers could adversely impact DME Advisors’ ability to manage our investment portfolio or its ability to manage our portfolio pursuant to our existing investment strategy, which could cause us to alter our existing investment strategy and could significantly and negatively affect our business and results of operations. In addition, adverse publicity regarding alternative investment strategies generally, or DME Advisors or its affiliates specifically, could negatively affect our business reputation and attractiveness as a counterparty to brokers and clients.

We may invest in securities based outside the United States which may be riskier than securities of United States issuers.

Under our investment guidelines, DME Advisors may invest in securities of issuers organized or based outside the United States. These investments may be subject to a variety of risks and other special considerations not affecting securities of U.S. issuers. Many foreign securities markets are not as developed or efficient as those in the United States. Securities of some foreign issuers are less liquid and more volatile than securities of comparable U.S. issuers. Similarly, volume and liquidity in many foreign securities markets are less than in the United States and, at times, price volatility can be greater than in the United States. Non-U.S. issuers may be subject to less stringent financial reporting and informational disclosure standards, practices and requirements than those applicable to U.S. issuers.

Risks Relating to our Class A Ordinary Shares

A shareholder may be required to sell its Class A Ordinary Shares.

Our Articles provide that we have the option, but not the obligation, to require a shareholder to sell its Class A Ordinary Shares for their fair market value to us, to other shareholders or to third parties if our Board of Directors determines that ownership of our Class A Ordinary Shares by such shareholder may result in adverse tax, regulatory or legal consequences to us, any of our subsidiaries or any of our shareholders and that such sale is necessary to avoid or cure such adverse consequences.

Provisions of our Articles, the Companies Law of the Cayman Islands and our corporate structure may each impede a takeover, which could adversely affect the value of our Class A Ordinary Shares.

Our Articles contain certain provisions that could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders. Our Articles provide that a director may only be removed for ‘‘Cause’’ as defined in the Articles, upon the affirmative vote of not less than 50% of our issued and outstanding Ordinary Shares.

Our Articles permit our Board of Directors to issue preferred shares from time to time, with such rights and preferences as they consider appropriate. Our Board of Directors may authorize the issuance of preferred shares with terms and conditions and under circumstances that could have an effect of discouraging a takeover or other transaction, deny shareholders the receipt of a premium on their Class A Ordinary Shares in the event of a tender or other offer for Class A Ordinary Shares and have a depressive effect on the market price of the Class A Ordinary Shares.

Unlike many jurisdictions in the United States, Cayman Islands law does not provide for mergers as that term is understood under corporate law in the United States. Cayman Islands law does have statutory provisions that provide for the reconstruction and amalgamation of companies, which are commonly referred to in the Cayman Islands as ‘‘schemes of arrangement.’’ The procedural and legal requirements necessary to consummate these transactions are more rigorous and take longer to

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complete than the procedures typically required to consummate a merger in the United States. Under Cayman Islands law and practice, a scheme of arrangement in relation to a Cayman Islands company must be approved at a shareholders’ meeting by each class of shareholders, in each case, by a majority of the number of holders of each class of a company’s shares that are present and voting, either in person or by proxy, at such a meeting, which holders must also represent 75% in value of such class issued that are present and voting, either in person or by proxy, at such meeting, excluding the shares owned by the parties to the scheme of arrangement.

The convening of these meetings and the terms of the amalgamation must also be sanctioned by the Grand Court of the Cayman Islands. Although there is no requirement to seek the consent of the creditors of the parties involved in the scheme of arrangement, the Grand Court typically seeks to ensure that the creditors have consented to the transfer of their liabilities to the surviving entity or that the scheme of arrangement does not otherwise materially adversely affect the creditors’ interests. Furthermore, the Grand Court will only approve a scheme of arrangement if it is satisfied that:

•  the statutory provisions as to majority vote have been complied with;
•  the shareholders have been fairly represented at the meeting in question;
•  the scheme of arrangement is such as a businessman would reasonably approve; and
•  the scheme of arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.

In addition, David Einhorn owns all of the outstanding Class B Ordinary Shares. As a result, we will not be able to enter into a scheme of arrangement without the approval of David Einhorn as the holder of our Class B Ordinary Shares.

Holders of Class A Ordinary Shares may have difficulty obtaining or enforcing a judgment against us, and they may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.

Because we are a Cayman Islands company, there is uncertainty as to whether the Grand Court of the Cayman Islands would recognize or enforce judgments of United States courts obtained against us predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in the Cayman Islands against us predicated upon the securities laws of the United States or any state thereof.

We are incorporated as an exempted company limited by shares under the Companies Law. A significant amount of our assets are located outside of the United States. As a result, it may be difficult for persons purchasing the Class A Ordinary Shares to effect service of process within the United States upon us or to enforce judgments against us or judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States or any state of the United States.

Turner & Roulstone, our Cayman Islands counsel, has advised us that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will, based on the principle that a judgment by a competent foreign court will impose upon the judgment debtor an obligation to pay the sum for which judgment has been given, recognize and enforce a foreign judgment of a court of competent jurisdiction if such judgment is final, for a liquidated sum, not in respect of taxes or a fine or penalty if not inconsistent with a Cayman Islands judgment in respect of the same matters, and was not obtained in a manner, and is not of a kind, the enforcement of which is contrary to the public policy of the Cayman Islands. There is doubt, however, as to whether the courts of the Cayman Islands will, in an original action in the Cayman Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United States or any state of the United States on the grounds that such provisions are penal in nature.

A Cayman Islands court may stay proceedings if concurrent proceedings are being brought elsewhere.

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Unlike many jurisdictions in the United States, Cayman Islands law does not specifically provide for shareholder appraisal rights on a merger or consolidation of a company. This may make it more difficult for shareholders to assess the value of any consideration they may receive in a merger or consolidation or to require that the offeror give a shareholder additional consideration if he believes the consideration offered is insufficient.

Shareholders of Cayman Islands exempted companies such as ours have no general rights under Cayman Islands law to inspect corporate records and accounts. Our directors have discretion under our Articles to determine whether or not, and under what conditions, the corporate records may be inspected by shareholders, but are not obligated to make them available to shareholders. This fact may make it more difficult for shareholders to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Subject to limited exceptions, under Cayman Islands law, a minority shareholder may not bring a derivative action against our Board of Directors.

Provisions of our Articles may reallocate the voting power of our Class A Ordinary Shares and subject holders of Class A Ordinary Shares to SEC compliance.

In certain circumstances, the total voting power of our Ordinary Shares held by any one person will be reduced to less than 9.9% and the total voting power of the Class B Ordinary Shares will be reduced to 9.5% of the total voting power of the total issued and outstanding Ordinary Shares. In the event a holder of our Ordinary Shares acquires shares representing 9.9% or more of the total voting power of our Ordinary Shares or the Class B Ordinary Shares represent more than 9.5% of the total voting power of our outstanding shares, there will be an effective reallocation of the voting power of the Class A Ordinary Shares or Class B Ordinary Shares which may cause a shareholder to acquire 5% or more of the voting power of the Ordinary Shares.

Such a shareholder may become subject to the reporting and disclosure requirements of Sections 13(d) and (g) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such a reallocation also may result in an obligation to amend previous filings made under Section 13(d) or (g) of the Exchange Act. Under our Articles, we have no obligation to notify shareholders of any adjustments to their voting power. Shareholders should consult their own legal counsel regarding the possible reporting requirements under Section 13 of the Exchange Act. After giving effect to the offering described herein and the concurrent private placement of Class B Ordinary Shares to David Einhorn, Mr. Einhorn will own     % of the issued and outstanding Ordinary Shares, assuming that the price of the Class A Ordinary Shares is at the mid-point of the offering, causing him to exceed the 9.5% limitation imposed on the total voting power of the Class B Ordinary Shares. Thus, the remaining     % of the voting power held by the Class B Ordinary Shares that is in excess of the 9.5% limitation will be reallocated to holders of Class A Ordinary Shares, such that each Class A Ordinary Share will be effectively entitled to more than one vote per share. Any reallocation of voting power to Class A Ordinary Shares remains subject to the provisions of our Articles that reduce the aggregate votes conferred by any shareholder to less than 9.9% of the total voting power of the total issued and outstanding Ordinary Shares.

Risks Relating to Taxation

In addition to the risk factors discussed below, we advise you to read ‘‘Certain Cayman Islands Tax Considerations’’ described on page 96 and ‘‘Certain United States Tax Considerations’’ beginning on page 96 and to consult your own tax advisor regarding the tax consequences to your investment in our Class A Ordinary Shares.

We may become subject to taxation in the Cayman Islands which would negatively affect our results.

Under current Cayman Islands law, we are not obligated to pay any taxes in the Cayman Islands on either income or capital gains. The Governor-in-Cabinet of Cayman Islands has granted us an exemption from the imposition of any such tax on us for twenty years from February 1, 2005. We

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cannot be assured that after such date we would not be subject to any such tax. If we were to become subject to taxation in the Cayman Islands, our financial condition and results of operations could be significantly and negatively affected. See ‘‘Certain Cayman Islands Tax Considerations.’’

We may be subject to United States federal income taxation.

We are incorporated under the laws of the Cayman Islands and intend to operate in a manner that will not cause us to be treated as engaging in a United States trade or business and will not cause us to be subject to current United States federal income taxation on our net income. However, because there are no definitive standards provided by the Internal Revenue Code, regulations or court decisions as to the specific activities that constitute being engaged in the conduct of a trade or business within the United States, and as any such determination is essentially factual in nature, we cannot assure you that the United States Internal Revenue Service, or the IRS, will not successfully assert that we are engaged in a trade or business in the United States and thus are subject to current United States federal income taxation.

United States persons who own Class A Ordinary Shares may be subject to United States federal income taxation on our undistributed earnings and may recognize ordinary income upon disposition of Class A Ordinary Shares.

Passive Foreign Investment Company.     Significant potential adverse United States federal income tax consequences generally apply to any United States person who owns shares in a PFIC. We believe that each of Greenlight Re and Greenlight Reinsurance, Ltd. were PFICs in 2006, 2005 and 2004. We further believe, although no assurance can be given, that neither Greenlight Re nor Greenlight Reinsurance, Ltd. will be a PFIC for 2007 or any future taxable year.

In general, either of Greenlight Re or Greenlight Reinsurance Ltd. would be a PFIC for a taxable year if 75% or more of its income constitutes ‘‘passive income’’ or 50% or more of its assets produce ‘‘passive income’’. Passive income generally includes interest, dividends and other investment income but does not include income derived in the active conduct of an insurance business by a corporation predominantly engaged in an insurance business. This exception for insurance companies is intended to ensure that a bona fide insurance company’s income is not treated as passive income, except to the extent such income is attributable to financial reserves in excess of the reasonable needs of the insurance business. We are currently operating and intend to continue operating our business with financial reserves at a level that should not cause us to be deemed PFICs, although we cannot assure you the IRS will not successfully challenge this conclusion.

In addition, sufficient risk must be transferred under an insurance company’s contracts with its insureds in order to qualify for the insurance exception. Whether our insurance contracts possess adequate risk transfer for purposes of determining whether income under our contracts is insurance income, and whether we are predominantly engaged in the insurance business, are subjective in nature and there is very little authority on these issues. However, because we are and may continue to be engaged in certain structured risk and other non-traditional reinsurance markets, we cannot assure you that the IRS will not successfully challenge the level of risk transfer under our reinsurance contracts for purposes of the insurance company exception. The IRS has notified taxpayers in IRS Notice 2003-34 that it intends to scrutinize the activities of certain insurance companies located outside of the United States, including reinsurance companies that invest a significant portion of their assets in alternative investment strategies, to determine whether such companies qualify for the active insurance company exception in the PFIC rules. We cannot assure you that the IRS will not successfully challenge our interpretation of the scope of the active insurance company exception and our qualification for the exception. Further, the IRS may issue regulatory or other guidance that causes us to fail to qualify for the active insurance company exception on a prospective or retroactive basis. Therefore, we cannot assure you that we will satisfy the exception for insurance companies and will not be treated as PFICs currently or in the future.

The consequences of Greenlight Re and/or Greenlight Reinsurance, Ltd. being treated as a PFIC and certain elections designed to mitigate such consequences are discussed in more detail under the

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heading ‘‘Certain United States Tax Considerations’’ beginning on page 96. If you are a United States person, we advise you to consult your own tax advisor concerning the potential tax consequences to you under the PFIC rules.

Controlled Foreign Corporation.     United States persons who, directly or indirectly or through attribution rules, own 10% or more of our Class A Ordinary Shares, which we refer to as United States 10% shareholders, may be subject to the controlled foreign corporation, or CFC, rules. Under the controlled foreign corporation rules, each United States 10% shareholder must annually include his pro rata share of the controlled foreign corporation’s ‘‘subpart F income,’’ even if no distributions are made. In general, a foreign insurance company will be treated as a controlled foreign corporation only if United States 10% shareholders collectively own more than 25% of the total combined voting power or total value of the company’s shares for an uninterrupted period of 30 days or more during any year. We believe that the anticipated dispersion of our Class A Ordinary Shares among holders and the restrictions placed on transfer, issuance or repurchase of our Class A Ordinary Shares (including the ownership limitations described below), will generally prevent shareholders who acquire Class A Ordinary Shares from being United States 10% shareholders. In addition, because our Articles prevent any person from holding 9.9% or more of the total combined voting power of our shares (whether held directly, indirectly, or constructively), unless such provision is waived by the unanimous consent of our Board of Directors, we believe no persons holding Class A Ordinary Shares should be viewed as United States 10% shareholders of a CFC for purposes of the CFC rules. We cannot assure you, however, that these rules will not apply to you. If you are a United States person we strongly urge you to consult your own tax advisor concerning the controlled foreign corporation rules.

Related Person Insurance Income.     If:

•  our gross income attributable to insurance or reinsurance policies where the direct or indirect insureds are our direct or indirect United States shareholders or persons related to such United States shareholders equals or exceeds 20% of our gross insurance income in any taxable year; and
•  direct or indirect insureds and persons related to such insureds owned directly or indirectly 20% or more of the voting power or value of our stock,

a United States person who owns Class A Ordinary Shares directly or indirectly on the last day of the taxable year would most likely be required to include their pro rata share of our related person insurance income for the taxable year in their income. This amount would be determined as if such related person insurance income were distributed proportionally to United States person at that date. We do not expect that we will knowingly enter into reinsurance agreements in which, in the aggregate, the direct or indirect insureds are, or are related to, owners of 20% or more of the Class A Ordinary Shares. We do not believe that the 20% gross insurance income threshold will be met. However, we cannot assure you that this is or will continue to be the case. Consequently, we cannot assure you that a person who is a direct or indirect United States shareholder will not be required to include amounts in its income in respect of related person insurance income in any taxable year.

If a United States shareholder is treated as disposing of shares in a foreign insurance corporation that has related person insurance income and in which United States persons own 25% or more of the voting power or value of the company’s capital stock, any gain from the disposition will generally be treated as a dividend to the extent of the United States shareholder’s portion of the corporation’s undistributed earnings and profits that were accumulated during the period that the United States shareholder owned the shares. In addition, the shareholder will be required to comply with certain reporting requirements, regardless of the amount of shares owned by the direct or indirect United States shareholder. Although not free from doubt, we believe these rules should not apply to dispositions of Class A Ordinary Shares because Greenlight Re is not directly engaged in the insurance business and because proposed United States Treasury regulations applicable to this situation appear to apply only in the case of shares of corporations that are directly engaged in the insurance business. We cannot assure you, however, that the IRS will interpret the proposed

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regulations in this manner or that the proposed regulations will not be promulgated in final form in a manner that would cause these rules to apply to dispositions of Class A Ordinary Shares.

United States tax-exempt organizations who own Class A Ordinary Shares may recognize unrelated business taxable income.

If you are a United States tax-exempt organization you may recognize unrelated business taxable income if a portion of our subpart F insurance income is allocated to you. In general, subpart F insurance income will be allocated to you if we are a CFC as discussed above and you are a United States 10% shareholder or there is related person insurance income and certain exceptions do not apply. Although we do not believe that any United States persons will be allocated subpart F insurance income, we cannot assure you that this will be the case. If you are a United States tax-exempt organization, we advise you to consult your own tax advisor regarding the risk of recognizing unrelated business taxable income.

Change in United States tax laws may be retroactive and could subject us, and/or United States persons who own Class A Ordinary Shares to United States income taxation on our undistributed earnings.

The tax laws and interpretations regarding whether a company is engaged in a United States trade or business, is a CFC, has related party insurance income or is a PFIC are subject to change, possibly on a retroactive basis. There are currently no regulations regarding the application of the passive foreign investment company rules to an insurance company and the regulations regarding related party insurance income are still in proposed form. New regulations or pronouncements interpreting or clarifying such rules may be forthcoming from the IRS. We are not able to predict if, when or in what form such guidance will be provided and whether such guidance will have a retroactive effect.

The impact of the Cayman Islands’ letter of commitment or other concessions to the Organization for Economic Cooperation and Development to eliminate harmful tax practices is uncertain and could adversely affect our tax status in the Cayman Islands.

The Organization for Economic Cooperation and Development, or 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 2000 report, the Cayman Islands was not listed as a tax haven jurisdiction because it had previously committed itself to eliminate harmful tax practices 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 Relating to This Offering

There is no prior public market for our Class A Ordinary Shares and we cannot assure you that an active trading market or a specific share price will be established or maintained. The market price and trading volume of our Class A Ordinary Shares may be volatile, and you may not be able to resell your Class A Ordinary Shares at or above the initial public offering price.

We have applied for listing of our Class A Ordinary Shares on the Nasdaq Global Select Market under the symbol ‘‘GLRE.’’ Prior to the closing of this offering, there has been no public trading market of our Class A Ordinary Shares. If an active trading market does not develop and continue upon the closing of this offering, your investment may become less liquid and the market price of our Class A Ordinary Shares may decline below the initial public offering price. The initial public offering price per share will be determined by negotiation among us and the underwriters and may not be indicative of the market price of our Class A Ordinary Shares after completion of this offering. The price of our Class A Ordinary Shares after the closing of this offering may fluctuate widely, depending upon many factors, including:

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•  the perceived prospects for the reinsurance industry in general;
•  differences between our actual financial and operating results and those expected by investors;
•  changes in the share price of public companies with which we compete;
•  news about our industry and our competitors;
•  changes in general economic or market conditions including broad market fluctuations;
•  adverse regulatory actions; and
•  other factors listed in this section or otherwise.

Our Class A Ordinary Shares may trade at prices significantly below the initial public offering price in which case, holders of the Class A Ordinary Shares may experience difficulty in reselling, or an inability to sell, the Class A Ordinary Shares. In addition, when the market price of a company’s common equity drops significantly, shareholders often institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources away from the day-to-day operations of our business.

We will incur increased costs as a result of being a public company.

As a public company, we will incur increased legal, accounting and other costs not incurred as a private company. The Sarbanes-Oxley Act of 2002 and related rules and regulations of the SEC and the Nasdaq market regulate the corporate governance practices of public companies. We expect that compliance with these requirements will increase our expenses and make some activities more time consuming than they have been in the past when we were a private company. Such additional costs going forward could negatively impact our financial results.

Securities analysts may not initiate coverage of our Class A Ordinary Shares or may issue negative reports, which may adversely affect the trading price of the Class A Ordinary Shares.

We cannot assure you that securities analysts will cover our company after completion of this offering. If securities analysts do not cover our company, this lack of coverage may adversely affect the trading price of the Class A Ordinary Shares. The trading market for the Class A Ordinary Shares will rely in part on the research and reports that securities analysts publish about us and our business. If one or more of the analysts who cover our company downgrades the Class A Ordinary Shares, the trading price of the Class A Ordinary Shares may decline. If one or more of these analysts ceases to cover our company, we could lose visibility in the market, which, in turn, could also cause the trading price of the Class A Ordinary Shares to decline. Further, because of our small market capitalization, it may be difficult for us to attract securities analysts to cover our company, which could significantly and adversely affect the trading price of our Class A Ordinary Shares.

You will suffer immediate and substantial dilution as a result of investing in the Class A Ordinary Shares.

The initial public offering price per Class A Ordinary Share is higher than our net tangible book value per share. Accordingly, if you purchase Class A Ordinary Shares in this offering, you will suffer immediate and substantial dilution of your investment. Based upon the issuance and sale of Class A Ordinary Shares, you will incur immediate dilution of approximately $        in the net tangible book value per Class A Ordinary Share and, with the concurrent private placement of Class B Ordinary Shares, you will incur immediate dilution of approximately $         in the net tangible value per Ordinary Share. See ‘‘Dilution.’’

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Future sales of our Class A Ordinary Shares may affect their market price and the future exercise of share purchase options and the concurrent private placement may result in immediate and substantial dilution of the Class A Ordinary Shares.

Our Articles authorize our Board of Directors to issue one or more series of ordinary shares and preferred shares without shareholder approval. Specifically, our Board of Directors may issue up to 100,000,000 Class A Ordinary Shares, 25,000,000 Class B Ordinary Shares and 50,000,000 preferred shares, of which        Class A Ordinary Shares or        Class A Ordinary Shares if the underwriters exercise their option to purchase additional Class A Ordinary Shares in full (       of which the issuance will be registered under this offering),        Class B Ordinary Shares and no preferred shares will have been issued as of this offering. Our Board of Directors has the right to issue the remaining shares as provided by our Articles and without obtaining any approval from our shareholders, and to designate and issue up to 50,000,000 preferred shares in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series or designation of such series. Any issuance of our preferred shares could adversely affect the voting power of the holders of our Class A Ordinary Shares and could have the effect of delaying, deferring, or preventing the payment of any dividends, including any liquidating dividends, and any change in control of the company. While we have not issued any preferred shares and have no present plans to do so, we may do so in the future. If we issue any preferred shares, you should know that our Class A Ordinary Shares may be subordinate to our preferred shares and any series of preferred shares designated and issued by our Board of Directors. Additionally, if a significant number of shares are issued, it may cause the market price of our Class A Ordinary Shares to decline.

We, all of our Directors and Executive Officers, and shareholders have agreed that, subject to certain exceptions, without the prior written consent of each of Lehman Brothers Inc. and UBS Securities LLC, we and they will not directly or indirectly, among other things, offer for sale, sell, pledge, or otherwise dispose of any Ordinary Shares or securities convertible into or exercisable or exchangeable for Class A Ordinary Shares for a period of 180 days after the date of this prospectus. We cannot predict what effect, if any, future sales of our Ordinary Shares, or the availability of Ordinary Shares for future sale, will have on the market price of our Ordinary Shares, including after the expiration of the 180 day lock-up period. Sales of substantial amounts of our Ordinary Shares in the public market following our initial public offering, or the perception that such sales could occur, may adversely affect the market price of our Ordinary Shares and may make it more difficult for you to sell your Ordinary Shares at a time and price which you deem appropriate.

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INFORMATION REGARDING FORWARD LOOKING STATEMENTS

Certain information contained in this prospectus is forward-looking. All statements, other than statements of historical facts, included or referenced in this prospectus that address activities, events or developments which we expect or anticipate will or may occur in the future are forward-looking statements. 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.

These statements include forward-looking statements both with respect to us specifically and the reinsurance industry generally. These statements are based on certain assumptions and analyses made by us in light of our expertise and perception of historical trends, current conditions and expected future developments, as well as other factors believed to be appropriate in the circumstances. However, whether actual results and developments will conform to our expectations and conditions is subject to a number of risks and uncertainties that could cause actual results to differ materially from our expectations, including, but not limited to, the following:

•  The risks beginning on page 11 of this prospectus;
•  Our operating results will fluctuate from period from period;
•  We have a limited operating history;
•  There is uncertainty with respect to the establishment of our reserves;
•  The cyclicality of the reinsurance market may affect the industry’s and our profitability;
•  Loss of key personnel could delay or prevent us from implementing our strategy;
•  We are dependent upon letter of credit facilities;
•  Our A.M. Best rating potentially is subject to downgrade;
•  Exposure to natural and man-made disasters may expose us to significant claims;
•  We may not qualify for an exemption from the Investment Company Act;
•  Our investment strategy may contain greater risks than our competitors;
•  We may be deemed to be passive foreign investment company; and
•  Other factors may affect us, most of which are beyond our control.

Accordingly, all of the forward-looking statements made in this prospectus are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. 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 you make an investment decision.

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USE OF PROCEEDS

We estimate net proceeds to us from the sale of approximately            Class A Ordinary Shares in this offering, based upon an assumed initial offering price of $           per Class A Ordinary Share, representing the midpoint of the offering range set forth on the cover of this prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses, will be approximately $           million ($           million if the underwriters exercise in full their option to purchase additional Class A Ordinary Shares), assuming the shares are offered at $           per Class A Ordinary Share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus. Additionally, we will receive $50 million of proceeds from the sale of Class B Ordinary Shares in the concurrent private placement at a price per share equal to the initial public offering price. We presently intend to contribute substantially all of the net proceeds of this offering and the concurrent private placement to Greenlight Reinsurance, Ltd. to increase the underwriting capacity of its reinsurance operations.

We will pay specified fees and expenses related to this offering. The total fees and expenses, including underwriting discounts and commissions, to be paid by us are estimated to be $       million. A $1.00 increase (decrease) in the assumed initial public offering price of $       per common share would increase (decrease) the net proceeds to us from this offering by $     million, or $     million if the underwriters exercise their option to purchase additional shares in full, assuming no change in the number of Class A Ordinary Shares offered by us as set forth on the cover page of this prospectus and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

DIVIDEND POLICY

We have not paid any cash dividends on our Ordinary Shares.

We currently do not intend to declare and pay dividends on our Ordinary Shares. However, if we decide to pay dividends, we cannot assure you sufficient cash will be available to pay such dividends. In addition, our letter of credit facility prohibits us from paying dividends during an event of default as defined in the letter of credit agreement. Our future dividend policy will also depend on the requirements of any future financing agreements to which we may be a party and other factors considered relevant by our Board of Directors, such as our results of operations and cash flows, our financial position and capital requirements, general business conditions, rating agency guidelines, legal, tax, regulatory and any contractual restrictions on the payment of dividends. Further, any future declaration and payment of dividends is discretionary and our Board of Directors may at any time modify or revoke our dividend policy on our Class A Ordinary Shares. Finally, our ability to pay dividends also depends on the ability of our subsidiaries to pay dividends to us. Although Greenlight Capital Re, Ltd. is not subject to any significant legal prohibitions on the payment of dividends, Greenlight Reinsurance, Ltd. is subject to Cayman Islands regulatory constraints that affect its ability to pay dividends to us and include a minimum net worth requirement. Currently the minimum statutory net worth requirement for Greenlight Reinsurance, Ltd. is $120,000, but subject to the discretion of CIMA. As of December 31, 2006, Greenlight Reinsurance, Ltd. exceeded the minimum statutory capital requirement by $312.1 million. Any dividends we pay will be declared and paid in U.S. dollars.

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CAPITALIZATION

The table below sets forth our consolidated capitalization as of December 31, 2006:

•  on an actual basis; and
•  as adjusted to give effect to this offering of our Class A Ordinary Shares and the concurrent private placement of our Class B Ordinary Shares and the application of the net proceeds of both offerings.

This table should be read in conjunction with ‘‘Selected Consolidated Financial Data,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and our consolidated financial statements and related notes included elsewhere in this prospectus.


  As of
December 31,
2006 		As adjusted for
this offering
and the concurrent
private placement (3)
   
 
Debt: (1) $  —
$             —
Shareholders’ equity:  
 
Preferred share capital (par value $0.10; authorized; 50,000,000; none issued) —
—
Ordinary share capital (2) (Class A Ordinary Shares par value $0.10; authorized 100,000,000; issued and outstanding 16,507,288; Class B Ordinary Shares par value $0.10; authorized 25,000,000; issued and outstanding 5,050,000) 2,156
 
Additional paid-in capital 219,972
 
Less: Related party promissory note receivable —
 
Retained earnings 90,039
 
Total shareholders’ equity $ 312,167
$
(1) As of December 31, 2006, we had $111 million available under our $200 million letter of credit facility provided by Citibank, N.A.
(2) In January 2007, GCI transferred its 5,050,000 Class B Ordinary Shares to its underlying owners and ceased being a shareholder. Upon transfer, all of the Class B Ordinary Shares automatically converted to Class A Ordinary Shares, except for 3,623,370 shares that were transferred to David Einhorn, which remain Class B Ordinary Shares as he was deemed by our board of directors to be a ‘‘permitted transferee’’ under our Articles. In connection with the transfer, GCI assigned its registration rights under our shareholders’ agreement to David Einhorn. The Class B Ordinary Shares will automatically convert to Class A Ordinary Shares if transferred by Mr. Einhorn to someone other than a permitted transferee, as defined in our Articles.
(3) Reflects completion of this offering, net of underwriting discounts and commissions and estimated offering expenses of $            million (assuming no exercise of the underwriters’ option to purchase additional Class A Ordinary Shares) and the concurrent private placement of our Class B Ordinary Shares.

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DILUTION

The initial public offering price per Class A Ordinary Share is higher than our book value per Ordinary Share. Net book value per Ordinary Share represents the amount of assets less total liabilities, divided by the number of Ordinary Shares outstanding. Dilution in net book value per Ordinary Share represents the difference between (i) the amount per Class A Ordinary Share paid by purchasers of our Class A Ordinary Shares in this offering and (ii) the net book value per Ordinary Share immediately after this offering. As of December 31, 2006, our net book value was $312.2 million, or $14.48 per Class A Ordinary Share. After giving effect to the issuance in this initial public offering of of our Class A Ordinary Shares (after deducting estimated underwriting discounts and commissions and our estimated offering expenses and assuming that the underwriters’ option to purchase additional Class A Ordinary Shares is not exercised) and the concurrent private placement of Class B Ordinary Shares and the application of the estimated net proceeds therefrom, our net book value as of December 31, 2006 would have been $          million, or $          per Class A Ordinary Share. This amount represents an immediate increase of $      per Class A Ordinary Share to the existing shareholders and an immediate dilution of $       per Class A Ordinary Share issued to the new investors purchasing shares offered hereby at the assumed public offering price. The following table illustrates this per Ordinary Share dilution:


Initial public offering price per Class A Ordinary Share $
Net book value per Class A Ordinary Share as of December 31, 2006  
Increase attributable to the offering of Class A Ordinary Shares  
Increase attributable to the concurrent private placement offering of Class B Ordinary Shares  
Net book value per Ordinary Share after the offering of Class A Ordinary Shares and concurrent private placement of Class B Ordinary Shares  
Dilution per Ordinary Share to new investors (1) $                     
(1) If the underwriters’ option to purchase additional Class A Ordinary Shares is exercised in full, dilution per Ordinary Share to new shareholders will be $       .

The following table sets forth the number of our issued Class A Ordinary Shares, the total consideration paid and the average price per Ordinary Share paid by all of our existing shareholders and new investors, after giving effect to the issuance of Class A Ordinary Shares in this offering (before deducting estimated underwriting discounts and commissions and our estimated offering expenses).


  Class A Ordinary
Shares issued 		Class B Ordinary
Shares issued 		Total consideration  
  Number Percent Number Percent Amount Percent Average price
per Ordinary
Share
          ($ in thousands)  
Existing shareholders  
%
 
%
$
%
$     
New investors  
    
    
    
    
 
    
Total             
100.0
%
    
    
%
$              
100.0
%
$              

This table does not give effect to:

•  Class A Ordinary Shares that may be issued pursuant to the underwriters’ option to purchase additional Class A Ordinary Shares;
•  Class A Ordinary Shares that may be issued pursuant to options that have been granted as of                   , 2007 at a weighted average exercise price or $       per share pursuant to our stock incentive plan; or
•  400,000 Class A Ordinary Shares that may be issued pursuant to a share purchase option granted in September 2004 to First International in exchange for services rendered.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth our selected historical statement of income data for the fiscal years ended December 31, 2006 and 2005 and the period from inception on July 13, 2004 to December 31, 2004, as well as our selected balance sheet data as of December 31, 2006, 2005 and 2004. The statement of income data for the years ended December 31, 2006, 2005 and 2004 as well as the balance sheet information as of December 31, 2006, 2005 and 2004 are derived from our audited consolidated financial statements also included as part of this prospectus. The audited consolidated financial statements are prepared in accordance with U.S. GAAP and have been audited by BDO Seidman, LLP, an independent registered public accounting firm. Since we commenced underwriting business in April 2006 and did not write any reinsurance contracts in 2005 and 2004, comparisons to prior periods may not be meaningful.

These historic results are not necessarily indicative of results for any future period and the year to date results are not necessarily indicative of our full year performance. You should read the following selected financial data in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and the financial statements and related notes included elsewhere in this prospectus.


  Year Ended December 31, July 13, 2004 to
December 31,
2004 		 
  2006 2005  
  ($ in thousands, except for share and per share data)
Summary Statement of Income Data:  
 
 
 
Premiums written $ 74,151
$ —
$ —
 
Premiums earned 26,605
—
—
 
Net investment income 58,509
27,934
9,636
 
Interest income on related party promissory note receivable 1,034
1,323
516
 
Total revenues 86,148
29,257
10,152
 
Loss and loss adjustment expenses incurred 9,671
—
—
 
Acquisition costs 10,415
—
—
 
General and administrative expenses 9,063
2,992
3,377
 
Total expenses 29,149
2,992
3,377
 
Net income $  56,999
$ 26,265
$ 6,775
 
Earnings Per Share Data: (1)  
 
 
 
Basic $  2.67
$ 1.24
$ 0.32
 
Diluted 2.66
1.24
0.32
 
Weighted average number of Ordinary Shares:  
 
 
 
Basic 21,366,140
21,226,868
21,225,000
 
Diluted 21,457,443
21,265,801
21,234,350
 
Selected Ratios (based on U.S. GAAP
Statement of Income data): 		 
 
 
 
Loss ratio (2) 36.4
%
—
—
 
Acquisition cost ratio (3) 39.1
%
—
—
 
Internal expense ratio (4) 34.1
%
—
—
 
Combined ratio (5) 109.6
%
—
—
 

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  As of December 31,
  2006 2005 2004
  ($ in thousands, except for share and per share data)
Selected Balance Sheet Data:  
 
 
Fixed maturities, trading at fair value $ —
$ 238
$ 737
Equity investments, trading at fair value 238,799
216,702
156,342
Other investments, at estimated fair value 4,723
2,271
5,126
Total investments in securities 243,522
219,211
162,205
Cash and cash equivalents 82,704
7,218
30,664
Restricted cash and cash equivalents 154,720
99,719
96,791
Total assets 518,608
327,935
290,764
Loss and loss adjustment expense reserves 4,977
—
—
Unearned premium reserves 47,546
—
—
Total liabilities 206,441
96,113
94,240
Total shareholders’ equity 312,167
231,822
196,524
Adjusted book value (6) $ 312,167
$ 248,034
$ 221,024
Ordinary shares outstanding:  
 
 
Basic 21,557,228
21,231,666
21,225,000
Diluted 23,094,900
22,175,000
21,245,000
Adjusted book value per share:  
 
 
Basic (7) $ 14.48
$ 11.68
$ 10.41
Diluted (8) 14.27
11.63
10.40
(1) Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding for the year.
(2) The loss ratio is calculated by dividing loss and loss adjustment expenses incurred by premiums earned.
(3) The acquisition cost ratio is calculated by dividing acquisition costs by premiums earned.
(4) The internal expense ratio is calculated by dividing the general and administrative expenses by premiums earned.
(5) The combined ratio is the sum of the loss ratio, acquisition cost ratio and the internal expense ratio.
(6) Adjusted book value equals total shareholders’ equity plus the aggregate principal outstanding on the GCI promissory note pursuant to the Securities Purchase Agreement dated April 11, 2004 between us and GCI, which was fully repaid on December 6, 2006.
(7) Basic adjusted book value per share is calculated by dividing adjusted book value by the number of shares issued and outstanding at year end.
(8) Diluted adjusted book value per share is calculated by dividing the aggregate of adjusted book value and the proceeds from the exercise of options by the number of shares and share equivalents outstanding at the end of the period.

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

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes, which appear elsewhere in this prospectus.

Executive Overview

We are a Cayman Islands-based specialty property and casualty reinsurer with a reinsurance and investment strategy that we believe differentiates us from our competitors. Our goal is to build long-term shareholder value by selectively offering customized reinsurance solutions, in markets where capacity and alternatives are limited, that we believe will provide favorable long-term returns on equity. We manage our investment portfolio according to a value-oriented philosophy, in which we take long positions in perceived undervalued securities and short positions in perceived overvalued securities.

We manage our business on the basis of one operating segment, property and casualty reinsurance, in accordance with the qualitative and quantitative criteria established by SFAS 131, ‘‘Disclosure about Segments of an Enterprise and Related Information.’’  Within the property and casualty reinsurance segment, we analyze our underwriting operations using two categories:

•  frequency business; and
•  severity business.

Frequency business is characterized by contracts containing a potentially large number of smaller losses emanating from multiple events. Clients generally buy this protection to increase their own underwriting capacity and typically select a reinsurer based upon the reinsurer’s financial strength and expertise. We expect the results of frequency business to be less volatile than those of severity business from period to period due to its greater predictability. We also expect that over time the profit margins and return on equity for our frequency business will be lower than those of our severity business.

Severity business is typically characterized by contracts with the potential for significant losses emanating from one event. Clients generally buy this protection to remove volatility from their balance sheets and, accordingly, we expect the results of severity business to be volatile from period to period. However, over the long term, we also expect that our severity business will generate higher profit margins and return on equity than our frequency business.

We aim to complement our underwriting results with a non-traditional investment approach in order to achieve higher rates of return over the long-term than reinsurance companies that employ more traditional, fixed-income investment strategies.

Because we have a limited operating history, period-to-period comparisons of our underwriting results are not yet possible and may not be meaningful in the near future. In addition, due to the nature of our reinsurance and investment strategies, our operating results will likely fluctuate from period to period.

Revenues

We derive our revenues from two principal sources:

•  premiums from reinsurance on property and casualty business assumed; and
•  income from investments.

Premiums from reinsurance on property and casualty business assumed are directly related to the number, type and pricing of contracts we write. We earn premiums over the contract term, which is typically twelve months.

Income from our investments is primarily comprised of interest income, dividends and gains, net realized and unrealized gains on investment securities. We also derive interest income from money market funds.

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Expenses

Our expenses consist primarily of the following:

•  underwriting losses and loss adjustment expenses;
•  acquisition costs;
•  investment-related expenses; and
•  general and administrative expenses.

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 coverage. As described below, loss and loss adjustment expenses are based on an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Depending on the nature of the contract, loss and loss adjustment expenses may be paid over a period of years.

Acquisition costs consist primarily of brokerage fees, ceding commissions, premium taxes and other direct expenses that relate to our writing reinsurance contracts. We amortize deferred acquisition costs over the related contract term.

Investment-related expenses primarily consist of management and performance fees we pay to our investment advisor. We net these expenses against investment income in our financial statements.

General and administrative expenses consist primarily of salaries and benefits and related costs, including costs associated with our incentive compensation plan, stock option expenses, professional fees, travel and entertainment, letter of credit facility, information technology, rent and other general operating expenses.

For stock option expenses, we calculate compensation cost using the Black-Scholes option pricing model and expense stock options over their vesting period, which is typically three years.

Critical Accounting Policies

Our consolidated financial statements contain certain amounts that are inherently subjective in nature and have required management to make assumptions and best estimates to determine reported values. If certain factors, including those described in ‘‘Risk Factors,’’ cause actual events or results to differ materially from our underlying assumptions or estimates, there could be a material adverse effect on our results of operations, financial condition or liquidity. We believe that the following accounting policies affect the more significant estimates used in the preparation of our consolidated financial statements. The descriptions below are summarized and have been simplified for clarity. A more detailed description of our critical accounting policies is included in the notes to the consolidated financial statements.

Premium Revenues and Risk Transfer.     Our property and casualty reinsurance premiums are recorded as premiums written at the inception of each contract, based upon contract terms and information received from ceding companies and their brokers. For excess of loss reinsurance contracts, premiums are typically stated as a percentage of the subject premiums written by the client, subject to a minimum and deposit premium. The minimum and deposit premium is typically based on an estimate of subject premium expected to be written by the client during the contract term. The minimum and deposit premium is reported initially as premiums written and adjusted, if necessary, in subsequent periods once the actual subject premium is known.

For each quota-share or proportional property and casualty reinsurance contract we underwrite, our client estimates gross premiums written at inception of the contract. We generally account for such premiums using the client’s initial estimates, and then adjust the estimates as advised by our client. We believe that the client’s estimate of the volume of business it expects to cede to us represents the best estimate of gross premiums written at the beginning of the contract. As the contract progresses, we monitor actual premiums received in conjunction with correspondence from the client in order to refine our estimate. Variances from initial gross premiums written estimates can

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be greater for quota-share contracts than for excess of loss contracts. Premiums are earned on a pro rata basis over the coverage period. Unearned premiums consist of the unexpired portion of reinsurance provided.

We account for reinsurance contracts in accordance with SFAS No. 60, ‘‘Accounting and Reporting by Insurance Enterprises’’ and SFAS No. 113, ‘‘Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts.’’ Assessing whether or not a reinsurance contract meets the conditions for risk transfer requires judgment. The determination of risk transfer is critical to reporting gross premiums written and is based, in part, on the use of actuarial and pricing models and assumptions. If we determine that a reinsurance contract does not transfer sufficient risk, we must account for the contract as a deposit liability.

Investments.     We classify all investments as trading securities and record their values based on the last reported price on the balance sheet date as reported by a recognized exchange. If no such sale of such security was reported on that date, the market value will be the last reported bid price (in the case of securities held long), or last reported ask price (in the case of securities sold short). Securities for which recognized exchange quotations are not readily available are valued at management’s best estimate (utilizing the services of DME Advisors) of fair value based on prices received from market makers. Any realized and unrealized gains or losses are determined on the basis of the specific identification method (by reference to cost or amortized cost, as appropriate) and included in investment income in the statement of income.

Loss and Loss Adjustment Expense Reserves.     We establish reserves for contracts based on estimates of the ultimate cost of all losses including losses incurred but not reported, or IBNR. These estimated ultimate reserves are based on reports received from ceding companies, historical experience and actuarial estimates. These estimates are periodically reviewed and adjusted when necessary. Since reserves are estimates, the setting of appropriate reserves is an inherently uncertain process. Our estimates are based upon actuarial and statistical projections and on our assessment of currently available data, predictions of future developments and estimates of future trends and other factors. The final settlement of losses may vary, perhaps materially, from the reserves initially established and any adjustments to the estimates are recorded in the period in which they are determined. Under U.S. GAAP, we are not permitted to establish loss reserves, which include case reserves and IBNR, until the occurrence of an event which may give rise to a claim. As a result, only loss reserves applicable to losses incurred up to the reporting date are established, with no allowance for the establishment of loss reserves to account for expected future losses.

For natural catastrophe exposed business we establish loss reserves based on loss payments and case reserves reported by our clients. We then add to these case reserves our estimates for IBNR. To establish our IBNR loss estimates, in addition to the loss information and estimates communicated by ceding companies, we use industry information, knowledge of the business written by us and management’s judgment.

Reserves for losses and loss adjustment expenses as of December 31, 2006 were comprised of the following:


  Case
Reserves 		IBNR Total
  ($ in thousands)
Frequency $ 1,058
$ 2,985
$ 4,043
Severity —
934
934
Total $ 1,058
$ 3,919
$ 4,977

In each of the contracts we have written to date, our risk exposure is limited by the fact that the contracts have defined limits of liability. Once the loss limit for a contract has been reached, we have no further exposure to additional losses from that contract.

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For all non-natural catastrophe business, we initially reserve every individual contract to the expected loss and loss expense ratio in the pricing analysis. In our pricing analyses, we typically utilize a significant amount of information both from the individual client and from industry data. We complete our analyses for all contracts for all lines of business. The information may include many years of history. Depending on the type of business written, we are entitled to receive client and industry information on historical paid losses, incurred losses, number of open claims, number of closed claims, number of total claims, listings of individual large losses, earned premium, policy count, policy limits underwritten, exposure information and rate change information. We also may receive information by class or subclass of business. Where available, we receive relevant actuarial reports from the client. We supplement this information with subjective information on each client, which may include management biographies, competitor information, meetings with the client, and supplementary industry research and data. Generally, we obtain regular updates of premium and loss related information for the current period and historical periods, which we utilize to update our initial expected loss and loss expense ratio. There may be a time lag from when claims are reported to our client and when our client reports the claims to us. This time lag may impact our loss reserve estimates from period to period. Once we receive this updated information we use a variety of standard actuarial methods in our analysis each quarter. Such methods may include:

•  Paid Loss Development Method .     We estimate ultimate losses by calculating past paid loss development factors and applying them to exposure periods with further expected paid loss development. The paid loss development method assumes that losses are paid in a consistent pattern. It provides an objective test of reported loss projections because paid losses contain no reserve estimates. For many coverages, claim payments are made very slowly and it may take years for claims to be fully reported and settled.
•  Reported Loss Development Method.     We estimate ultimate losses by calculating past reported loss development factors and applying them to exposure periods with further expected reported loss development. Since reported losses include payments and case reserves, changes in both of these amounts are incorporated in this method. This approach provides a larger volume of data to estimate ultimate losses than paid loss methods. Thus, reported loss patterns may be less varied than paid loss patterns, especially for coverage that have historically been paid out over a long period of time but for which claims are reported relatively early and case loss reserve estimates established.
•  Expected Loss Ratio Method.     We estimate ultimate losses under the expected loss ratio method, by multiplying earned premiums by an expected loss ratio. We select the expected loss ratio using industry data, historical company data and our professional judgment. We use this method for lines of business and contracts where there are no historical losses or where past loss experience is not credible.
•  Bornheutter-Ferguson Paid Loss Method.     We estimate ultimate losses by modifying expected loss ratios to the extent paid losses experienced to date differ from what would have been expected to have been paid based upon the selected paid loss development pattern. This method avoids some of the distortions that could result from a large development factor being applied to a small base of paid losses to calculate ultimate losses. We use this method for lines of business and contracts where there are limited historical paid losses.
•  Bornheutter-Ferguson Reported Loss Method.     We estimate ultimate losses by modifying expected loss ratios to the extent reported losses experienced to date differ from what would have been expected to have been reported based upon the selected reported loss development pattern. This method avoids some of the distortions that could result from a large development factor being applied to a small base of reported losses to calculate ultimate losses. We use this method for lines of business and contracts where there are limited historical reported losses.

We perform a quarterly loss reserve analysis on each contract. This analysis may incorporate some or all of the information described above, using some or all of the methodologies described above. Each contract is analyzed every quarter regardless of line of business. We generally calculate

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IBNR reserves for each contract by estimating the ultimate incurred losses at any point in time and subtracting cumulative paid claims and case reserves, which incorporate specific exposures, loss payment and reporting patterns and other relevant factors. We also intend to have our loss reserves reviewed, on an annual basis, by an independent outside actuary who will test and review the work done by our actuaries to ensure that reserves we report are being established consistently and appropriately.

Acquisition Costs.     We capitalize brokerage fees, ceding commissions, premium taxes and other direct expenses that relate directly to and vary with the writing of reinsurance contracts. Acquisition costs are deferred subject to ultimate recoverability and amortized over the same period as premiums are earned. Acquisition costs also include profit commissions.

Share-Based Payments.     We have established a stock option plan, for which we account under SFAS 123R, ‘‘Share Based Payments.’’ SFAS 123R requires us to recognize share-based compensation transactions using the fair value at the grant date of the award. Determining the fair value of share based awards at the grant date requires judgment. We use an option-pricing model (Black-Scholes pricing model) to assist in the calculation of fair value. Due to our limited operating history, we also use the ‘‘calculated value method,’’ which relies on historical industry volatility and uses the full life of the option, ten years, as the estimated term of the option. Additionally, we have assumed that dividends will not be paid. If actual results differ significantly from these estimates and assumptions, share based compensation expense could be materially impacted.

Additionally, in September 2004 we granted 400,000 share purchase options with a 10-year expiration to a service provider in exchange for services rendered, for which we have applied SFAS 123R, ‘‘Share Based Payments.’’ The share purchase options granted to the service provider were expensed based on a fair value of $2.0 million and are included in general and administrative expenses in our consolidated financial statements for the year ended December 31, 2004, the year in which the services were provided.

Results of Operations

Comparison of Year Ended December 31, 2006 and 2005

Premiums Written

For the year ended December 31, 2006, we wrote $74.2 million of premiums from nine different reinsurance contracts compared to no reinsurance contracts in the prior comparable period. We did not purchase any retrocessional coverage during the period and as such, premiums written for the period equal gross premiums written. The premiums written were comprised of $58.1 million of frequency business and $16.1 million of severity business. There were no premiums written in the prior comparable period.

Premiums Earned

We earned premiums of $26.6 million for the year ended December 31, 2006, comprised of $15.6 million of frequency business and $11.0 million of severity business. There were no premiums earned in the prior comparable period. Premiums earned reflects the pro rata inclusion into income of premiums written over the life of the reinsurance contract.

Losses Incurred    

Losses incurred include losses and changes in loss reserves, including IBNR reserves. We incurred losses of $9.7 million for the year ended December 31, 2006, comprised of $8.7 million of frequency business and $1.0 million of severity business. There were no losses in the prior comparable periods.

We have benefited from benign natural catastrophe experience during the year ended December 31, 2006. As such the dollar losses incurred during the year are likely to be lower than we expect to experience in the future as our underwriting portfolio develops.

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Acquisition Costs

Acquisition costs for the period ended December 31, 2006 totaled $10.4 million and are comprised of $6.4 million of frequency business and $4.0 million of severity business. These acquisition costs represent the amortization of the commission and brokerage expenses incurred on contracts written. Deferred acquisition costs are limited to the amount expected to be recovered from future earned premiums and anticipated investment income. There were no acquisition costs in the prior comparable period.

General and Administrative Expenses

Our general and administrative expenses for the years ended December 31, 2006 and 2005 were $9.1 million and $3.0 million, respectively. The increase in general and administrative expenses of $6.1 million in 2006 from 2005 reflects the cost of commencing underwriting operations, including hiring staff, leasing office space, and other related expenses. These expenses for the year ended December 31, 2006 include $2.9 million for the accrual of the fair value of stock options granted to employees and directors as compared to $0.7 million for the year ended December 31, 2005.

We expect our general and administrative expenses to increase once we become subject to reporting requirements applicable to public companies.

Net Investment Income

A summary of our consolidated net investment income is as follows ($ in thousands):


  Year ended
December 31,
  2006 2005
Investment income $ 79,635
$ 38,815
Investment expenses (2,434
)
(698
)
Investment advisor fees (18,692
)
(10,183
)
Net investment income $ 58,509
$ 27,934

For the year ended December 31, 2006, net investment income was $58.5 million dollars, a 109.5% increase from $27.9 million for the previous year.

Taxes

We are not obligated to pay any taxes in the Cayman Islands on either income or capital gains. We have been granted an exemption by the Governor In Cabinet from any taxes that may be imposed in the Cayman Islands for a period of 20 years, expiring on February 1, 2025.

Net Income

Our net income increased 117.0% to $57.0 million for the year ended December 31, 2006 from $26.3 million for the year ended December 31, 2005. The increase in net income of $30.7 million is due to the positive impact of underwriting activities and an increase in investment returns experienced during 2006 for the year ended December 31, 2006.

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Ratio Analysis    

As a result of the nature of our frequency and severity businesses, we expect to report different loss and expense ratios in these categories from period to period. For the year ended December 31, 2006, the following ratios are reported:


  Frequency Severity Total
Loss ratio 55.9
%
8.5
%
36.4
%
Acquisition cost ratio 40.8
%
36.8
%
39.1
%
Composite ratio 96.7
%
45.3
%
75.5
%
Internal expense ratio  
 
34.1
%
Combined ratio  
 
109.6
%

The loss ratio is calculated by dividing loss and loss adjustment expenses incurred by premiums earned. For the year ended December 31, 2006, our frequency business reported a loss ratio of 55.9%, as compared to the 8.5% reported by our severity business. Favorable loss experience due to benign natural catastrophe experience during the year allowed our severity business to report a lower loss ratio. However, we expect that the loss ratio will be volatile for our severity business and may exceed that of our frequency business in certain periods.

The acquisition cost ratio is calculated by dividing acquisition costs by premiums earned.

The composite ratio is the ratio of underwriting losses incurred, loss adjustment expenses and acquisition costs, excluding general and administrative expenses, to premiums earned. This ratio demonstrates the higher acquisition costs incurred for frequency business than for severity business. Similar to the loss ratio, we expect that this ratio will be volatile for our severity business depending on loss activity in any particular period.

The internal expense ratio is the ratio of all general and administrative expenses to premiums earned. We expect our internal expense ratio to decrease significantly as we write more business.

The combined ratio is the ratio of the sum of the composite ratio and the internal expense ratio. It measures the total profitability of our underwriting operations. This ratio does not take investment income into account. The reported combined ratio of 109.6% is due to the start-up nature of our reinsurance operations. A combined ratio of 109.6% signifies a loss of $0.096 per dollar of premium earned. We expect our general and administrative expenses as a percentage of premiums earned to decrease significantly as we write more business.

There are no applicable ratios for the prior comparable period, since we did not begin underwriting operations until April 2006.

Comparison of Year Ended December 31, 2005 and Period From July 13, 2004 (date of incorporation) to December 31, 2004

During the period from July 13, 2004 through the end of 2005, we were in the process building our infrastructure, retaining our management team and procuring office space. No reinsurance contracts were bound prior to April 2006 and thus there was no underwriting activity to report prior to January 1, 2006.

Premiums Written

There were no premiums written for the year ended December 31, 2005 or the prior comparable period since we did not begin underwriting operations until April 2006.

Premiums Earned    

There were no premiums earned for the year ended December 31, 2005 or the prior comparable period since we did not begin underwriting operations until April 2006.

Losses Incurred    

There were no losses incurred for the year ended December 31, 2005 or the prior comparable period since we did not begin underwriting operations until April 2006.

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Acquisition Costs

There were no acquisition costs for the year ended December 31, 2005 or the prior comparable period since we did not begin underwriting operations until April 2006.

General and Administrative Expenses

Our general and administrative expenses for the periods ended December 31, 2005 and 2004 were $3.0 million and $3.4 million, respectively. During 2005, expenses of approximately $2.2 million were incurred as a result of the initial hiring of staff, professional fees and other administrative expenses. Additionally, approximately $0.7 million was incurred as a result of stock option expenses granted to new employees.

The expenses for the period ended December 31, 2004 were primarily due to the expensing of $2.0 million of share purchase options that were granted to a service provider as well as $1.0 million in legal expenses both of which were incurred in connection with our formation and capitalization.

Net Investment Income

A summary of our consolidated net investment income for the year ended December 31, 2005 and the period from July 13, 2004 to December 31, 2004 is as follows:


  Year ended
December 31, 2005 		Period Ended
July 13, 2004 —
December 31, 2004
  ($ in thousands)
Investment income $ 38,815
$ 13,314
Investment expenses (698
)
(161
)
Investment advisor fees (10,183
)
(3,517
)
Net investment income $ 27,934
$ 9,636

Taxes

We are not obligated to pay any taxes in the Cayman Islands on either income or capital gains. We have been granted an exemption by the Governor In Cabinet from any taxes that may be imposed in the Cayman Islands for a period of 20 years, expiring on February 1, 2025.

Net Income

Net income for the year ended December 31, 2005 was $26.3 million. As there were no contracts underwritten during 2005, net income was the total of net investment income of $27.9 million plus interest income on related party note of $1.3 million less operating expenses of $3.0 million. The increase over net income of $6.8 million in 2004 is primarily due to the commencement of operations in July 2004.

Ratio Analysis    

There is no ratio analysis for the year ended December 31, 2005 or the prior comparable period since we did not begin underwriting operations until April 2006.

Liquidity and Capital Resources

General

We are organized as a holding company with no operations of our own. All of our operations are conducted through our sole reinsurance subsidiary, Greenlight Reinsurance, Ltd., which underwrites risks associated with our property and casualty reinsurance programs. We have minimal continuing cash needs which are principally related to the payment of administrative expenses. There are

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restrictions on Greenlight Reinsurance, Ltd.’s ability to pay dividends which are described in more detail below. It is our initial policy to retain earnings to support the growth of our business. We currently do not expect to pay dividends on our Ordinary Shares.

Sources and Uses of Funds

Our sources of funds primarily consist of premium receipts (net of brokerage and ceding commissions) and investment income, including realized gains. We use cash to pay losses and loss adjustment expenses, profit commissions and general and administrative expenses. Substantially all of our surplus funds, net of funds required for cash liquidity purposes, are invested with our investment advisor to invest in accordance with our investment guidelines. Our investment portfolio is primarily comprised of publicly-traded securities, which we classify as trading securities and can be liquidated to meet current liabilities. We believe that we have sufficient flexibility to liquidate the long securities that we own in a rising market to generate liquidity. Similarly, we can generate liquidity in a declining market from our short portfolio by covering securities and by freeing up restricted cash no longer required for collateral.

For the period ended December 31, 2006, we generated net cash flow from operations of $54.7 million, relating, in part, to the receipt of reinsurance premiums (net of acquisition expenses and loss payments) of $27.8 million. For the year ended December 31, 2006, cash flow from financing was $21.0 million. During the year ended December 31, 2006, we raised an aggregate of $4.3 million from the private placements of an aggregate 318,900 Class A Ordinary Shares to employees and directors. Additionally, we received $16.2 million from principal payments on the related party promissory note, as described below.

On August 11, 2004, we raised $212.2 million from the private placements of 16,175,000 Class A Ordinary Shares and 5,050,000 Class B Ordinary Shares. In connection with the August 11, 2004 private placement of the Class B Ordinary Shares, we lent $24.5 million to GCI, as evidenced by the GCI promissory note. GCI used cash and the proceeds of the GCI promissory note to purchase the Class B Ordinary Shares. Under the terms of the GCI promissory note, GCI paid us interest annually at a rate of LIBOR plus 3% per annum. During the year ended December 31, 2006 and 2005, principal repayments totaled $16.2 million and $8.3 million. On December 6, 2006, GCI repaid in full the principal and interest on the GCI promissory note.

As of December 31, 2006, we believe we had sufficient cash flow from operations to meet our liquidity requirements. We expect that our operational needs for liquidity will be met by cash, funds generated from underwriting activities and investment income, including realized gains, together with the net proceeds of this offering and the concurrent private placement of Class B Ordinary Shares. We have no plans to issue debt and expect to fund our operations for the foreseeable future from operating cash flow, this offering and the private placement of Class B Ordinary Shares. However, we cannot provide assurances that in the future we will not incur indebtedness to implement our business strategy, pay claims or make acquisitions.

Although Greenlight Capital Re, Ltd. is not subject to any significant legal prohibitions on the payment of dividends, Greenlight Reinsurance, Ltd. is subject to Cayman Islands regulatory constraints that affect its ability to pay dividends to us and include a minimum net worth requirement. Currently the minimum net worth requirement for Greenlight Reinsurance, Ltd. is $120,000. As of December 31, 2006, Greenlight Reinsurance, Ltd. exceeded the minimum required by $312.1 million. By law, Greenlight Reinsurance, Ltd. is restricted from paying a dividend if such a dividend would cause its net worth to drop to less than the required minimum.

Greenlight Reinsurance, Ltd. is not licensed or admitted as a reinsurer in any jurisdiction other than the Cayman Islands. Because many jurisdictions do not permit domestic insurance companies to take credit on their statutory financial statements unless appropriate measures are in place from reinsurance obtained from unlicensed or non-admitted insurers we anticipate that all of our U.S. clients and some of our non-U.S. clients will require us to provide collateral through funds withheld, trust arrangements, letters of credit or a combination thereof. Accordingly, we have established a $200 million letter of credit facility with Citibank, N.A., which we believe is sufficient to support

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expected collateral needs during 2007. We may seek to increase this facility or obtain an additional letter of credit facility. As of December 31, 2006, $89.2 million in letters of credit were issued. Under the letter of credit facility, we provide collateral that may consist of equity securities. The letter of credit facility agreement contains various covenants that, in part, restrict Greenlight Reinsurance, Ltd.’s ability to place a lien or charge on the pledged assets and further restricts Greenlight Reinsurance, Ltd.’s ability to issue any debt without the consent of the letter of credit provider. Additionally, if an event of default exists, as defined in the credit agreement, Greenlight Reinsurance, Ltd. will be prohibited from paying dividends to us.

Capital

As of December 31, 2006, total shareholders’ equity was $312.2 million compared to $231.8 million at December 31, 2005. This increase in total shareholders’ equity is principally due to net income of $57.0 million during the year ended December 31, 2006.

Our capital structure currently consists entirely of equity issued in two separate classes of Ordinary Shares. We expect that the proceeds of this offering and the concurrent private placement of Class B Ordinary Shares, together with the existing capital base and internally generated funds, will be sufficient to implement our business strategy. Consequently, we do not presently anticipate that we will incur any material indebtedness in the ordinary course of our business. However, we cannot provide assurances, that in the future we will not be required to incur indebtedness to implement our business strategy, pay claims or make acquisitions. We did not make any significant capital expenditures during the period from inception to December 31, 2006.

Contractual Obligations and Commitments

The following table shows our aggregate contractual obligations by time period remaining to due date as of December 31, 2006 ($ in thousands):


  Total Less
than
1 year 		1-3 years 3-5 years More than
5 years
  ($ in thousands)
Lease obligations $ 353
$ 90
$ 194
$ 69
$     —
Private equity investments (1) 6,788
6,788
—
—
—
Loss and loss adjustment expense
reserves (2) 		4,977
3,823
1,075
79
—
  $ 12,118
$ 10,701
$ 1,269
$ 148
$ —
(1) We have made total commitments of $10.5 million to two separate private equity vehicles. As of December 31, 2006, we have invested $3.7 million of this amount, and our remaining commitments to these vehicles total $6.8 million. Given the nature of the private equity vehicles, we are unable to determine with any degree of accuracy on when the commitments will be called. As such, for the purposes of the above table, we have assumed that all commitments will be made within one year. Under our investment guidelines, in effect as of the date hereof, no more than 10% of the assets in the investment portfolio may be held in private equity securities.
(2) Due to the nature of our reinsurance operations, the amount and timing of the cash flows associated with our reinsurance contractual liabilities will fluctuate, perhaps materially, and, therefore, are highly uncertain.

As of September 1, 2005, we entered into a five-year lease agreement for office premises in the Cayman Islands. The lease repayment schedule is provided in the accompanying financial statements. As described above, we have entered into a letter of credit facility which can be terminated by either party with effect from any October 11 th , the anniversary date, by providing written notification to the other party at least 120 days before the anniversary date. The earliest possible termination date of this agreement is October 11, 2007.

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Effective January 1, 2007, we entered into a new advisory agreement with DME Advisors that grants DME Advisors an exclusive right to manage our investment portfolio in accordance with the investment guidelines as approved by the Board of Directors. The agreement expires on December 31, 2009, and will be renewed for successive three-year periods unless either we or DME Advisors gives 90 days notice of its desire to terminate the agreement. The fees under the new advisory agreement are the same as the prior agreement we had with DME Advisors.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, other than those derivatives in our investment portfolio and disclosed in the financial statements, which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

Quantitative and Qualitative Disclosures about Market Risk

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

•  equity price risk;
•  foreign currency risk;
•  interest rate risk;
•  credit risk; and
•  effects of inflation.

Equity Price Risk.     As of December 31, 2006, our investment portfolio consisted primarily of long and short equity securities, along with certain equity-based derivative instruments, the carrying values of which are primarily based on quoted market prices. Generally, market prices of common equity securities are subject to fluctuation, which could cause the amount to be realized upon the closing of the position to differ significantly from the current reported value. This risk is partly mitigated by the presence of both long and short equity securities. As of December 31, 2006, a 10% decline in the price of each of these equity securities and equity-based derivative instruments would result in a $12.6 million, or 3.8%, decline in the fair value of the total investment portfolio.

Foreign Currency Risk.     Certain of our reinsurance contracts provide that ultimate losses may be payable in foreign currencies depending on the country of original loss. Foreign currency exchange rate risk exists to the extent that there is an increase in the exchange rate of the foreign currency in which losses are ultimately owed. As of December 31, 2006, there are no known or estimated losses payable in foreign currencies.

While we do not seek to specifically match our liabilities under reinsurance policies that are payable in foreign currencies with investments denominated in such currencies, we continually monitor our exposure to potential foreign currency losses and will consider the use of forward foreign currency exchange contracts in an effort to hedge against adverse foreign currency movements.

Through investments in securities denominated in foreign currencies, we are exposed to foreign (non-U.S.) currency risk. Foreign currency exchange rate risk is the potential for loss in the U.S. dollar value of investments due to a decline in the exchange rate of the foreign currency in which the investments are denominated. As of December 31, 2006, our total exposure to foreign denominated securities was approximately $115.9 million, or 35.1%, of our investment portfolio including cash and cash equivalents. As of December 31, 2006, a 5% increase in the value of the United States dollar against select foreign currencies would result in a $5.8 million decline in the value of the investment portfolio. A summary of our total net exposure to foreign denominated securities is as follows ($ in thousands):

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Original Currency US$ Equivalent
Fair Value
EUR $ 101,265
GBP 9,647
Other 4,950
  $ 115,862

Interest Rate Risk.     Our investment portfolio has historically held a very small portion of fixed-income securities, which we classify as trading securities but may in the future include significant exposure to corporate debt securities, including debt securities of distressed companies. The primary market risk exposure for any fixed-income security is interest rate risk. As interest rates rise, the market value of our fixed-income portfolio falls, and the converse is also true.

Credit Risk.     We are exposed to credit risk primarily from the possibility that counterparties may default on their obligations to us. The amount of the maximum exposure to credit risk is indicated by the carrying value of our financial assets. In addition, we hold the securities of our investment portfolio with several prime brokers and have credit risk from the possibility that one or more of them may default in their obligations to us. Other than our investment in derivative contracts and corporate debt, if any, and the fact that our investments are held by prime brokers on our behalf, we have no significant concentrations of credit risk.

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

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BUSINESS

Company Overview

We are a Cayman Islands-based specialty property and casualty reinsurer with a reinsurance and investment strategy that we believe differentiates us from our competitors. Our goal is to build long-term shareholder value by selectively offering customized reinsurance solutions, in markets where capacity and alternatives are limited, that we believe will provide favorable long-term return on equity. We manage our investment portfolio according to a value-oriented philosophy, in which we take long positions in perceived undervalued securities and short positions in perceived overvalued securities.

Our reinsurance strategy is to build a portfolio of contracts that contain either a potentially large number of small losses from multiple events, which we refer to as frequency contracts, and contracts that contain the potential for significant losses from one event, which we refer to as severity contracts. We intend to focus on offering frequency and severity contracts customized to meet client needs that are not being met in the traditional reinsurance marketplace. We have established a senior team of generalist underwriters and actuaries to operate our reinsurance business. We believe that our generalist underwriting capabilities, together with our customized underwriting approach:

•  allow us to deploy our capital opportunistically in a variety of property and casualty lines of business;
•  enable us to be the lead underwriter on a majority of the premium we write;
•  allow us to structure many of our contracts so that our clients participate in the loss experience of the underlying risks, which should align their interests with ours; and
•  allow us to better understand our risks and exposures.

In addition to underwriting customized contracts, we may also, from time to time, participate in traditional reinsurance programs that we believe will provide us with favorable return on equity. We intend to underwrite contracts only where we believe we can model, analyze and monitor our risks effectively. Our underwriters are responsible for contracts from origination until final disposition, including underwriting, pricing, servicing, monitoring and claims processing. We anticipate that this integrated approach will translate to superior contract management, better client service and superior economic returns over the long term.

Our investment strategy, like our reinsurance strategy, is designed to maximize returns over the long term while minimizing the risk of capital loss. Unlike the investment strategy of many of our competitors, which invest in long and short positions primarily in fixed-income securities, our investment strategy is to invest primarily in publicly-traded equity and corporate debt securities. As of December 31, 2006, 98.1% of our investments in securities was invested in publicly-traded equity securities primarily in North America and Western Europe. Our investment portfolio is managed exclusively by an outside advisor, DME Advisors. DME Advisors, a value-oriented investment advisor, analyzes companies’ available financial data, business strategies and prospects in an effort to identify undervalued and overvalued securities. DME Advisors is controlled by David Einhorn, the Chairman of our Board of Directors and the president of Greenlight Capital, Inc. Although DME Advisors is required to follow our investment guidelines and to act in a manner that is fair and equitable in allocating investment opportunities to us, it has the exclusive right to manage our investment portfolio and is not otherwise restricted with respect to the nature or timing of making investments for our account. The returns on our investment portfolio for the years ended December 31, 2006 and 2005 were 24.4% and 14.2%, respectively. We note that past performance is not necessarily indicative of future results.

We measure our success by long-term growth in book value per share, which we believe is the most comprehensive gauge of the performance of our business. Accordingly, our incentive compensation plans are designed to align employee and shareholder interests. Compensation under our cash bonus plan is based on the ultimate underwriting returns of our business measured over a

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multi-year period, rather than premium targets or estimated underwriting profitability for the year in which we initially underwrote the business.

We began underwriting business in April 2006, once our senior underwriting team and infrastructure were in place. In August 2006, we received an A− (Excellent) financial strength rating with a stable outlook from A.M. Best & Co. Inc., or A.M. Best, which is the fourth highest of 15 ratings A.M. Best issues. This rating reflects the rating agency’s opinion of our financial strength, operating performance and ability to meet obligations and it is not an evaluation directed toward the protection of investors or a recommendation to buy, sell or hold our Class A Ordinary Shares.

Reinsurance Risks to Be Written

We intend to underwrite reinsurance contracts with favorable long-term returns on equity as opportunities arise. We will attempt to select the most economically attractive opportunities across a variety of all property and casualty lines of business.

Reinsurance is an arrangement under which an insurance company or reinsurer agrees to indemnify or assume the obligations of another insurance company, or client, for all or a portion of the insurance risks underwritten by the client. It is standard industry practice for primary insurers to reinsure portions of their insurance risks with other insurance companies under reinsurance agreements or contracts. This permits primary insurers to underwrite policies in amounts larger than the risks they are willing to retain. Reinsurance is generally designed to:

•  reduce the client’s net liability on individual risks, thereby assisting it in increasing its capacity to underwrite business as well as increasing the limit to which it can underwrite on a single risk;
•  assist the client in meeting applicable regulatory and rating agency capital requirements;
•  assist the client in reducing the short-term financial impact of sales and other acquisition costs; and
•  enhance the client’s financial strength and statutory capital.

We characterize the reinsurance risks we assume as frequency or severity and aim to balance the risks and opportunities of our underwriting activities by creating a diversified portfolio of both types of businesses.

Frequency business is characterized by contracts containing a potentially large number of smaller losses emanating from multiple events. Clients generally buy this protection to increase their own underwriting capacity and typically select a reinsurer based upon the reinsurer’s financial strength and expertise. We expect the results of frequency business to be less volatile than those of severity business from period to period due to its greater predictability. We also expect that over time the profit margins and return on equity for our frequency business will be lower than those of our severity business.

Severity business is typically characterized by contracts with the potential for significant losses emanating from one event. Clients generally buy this protection to remove volatility from their balance sheets and, accordingly, we expect the results of severity business to be volatile from period to period. However, over the long term, we also expect that our severity business will generate higher profit margins and return on equity than our frequency business.

We expect to act as lead underwriter for the majority of total premium we underwrite. Our goal is to work closely with our clients to provide customized reinsurance solutions that often contain non-standard provisions to allow us to offer a tailored approach to underwriting. As a result, most contracts we underwrite uniquely focus on particular client needs while maintaining an attractive return on equity for us.

In addition, some of the risks we intend to underwrite will reflect traditional opportunities in reinsurance where we will participate in a larger underwriting syndicate, where we believe the return on equity over the long term will exceed our internal targeted return on equity.

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Our targeted return on equity varies with the degree of risk assumed on the contract underwritten, but is equal to at least the sum of an assumed risk-free rate plus 5.0%. In pricing our contracts in 2006, and setting our targeted return on equity, we assumed investment returns would equal a risk-free rate of 5.0%, rather than using our historical investment returns as a benchmark.

Products

Our experienced underwriting team allows us to offer a range of property and casualty reinsurance products, including casualty and liability risks, casualty clash, homeowners’ medical malpractice, damage, professional liability, property catastrophe, surety and fidelity and workers’ compensation.

Our reinsurance contracts bound in 2006 provide coverage of homeowners’, property catastrophe, casualty clash and marine risks, which accounted for 78.3%, 13.3%, 5.9% and 2.5%, respectively, of our premiums written.

While we expect to establish a diversified portfolio, our allocation of risk will vary based on our perception of the opportunities available in each line of business. Moreover, our focus on certain lines will fluctuate based upon market conditions and we may only offer or underwrite a limited number of lines in any given period. We intend to:

•  target markets where capacity and alternatives are underserved or capacity constrained;
•  employ strict underwriting discipline;
•  select reinsurance opportunities with favorable returns on equity over the life of the contract; and
•  potentially offer lines that are not identified in this prospectus.

Global Reinsurance — Gross Premiums Written by Geographic Area


  2006
U.S. 86.9
%
Europe 4.8
Worldwide (1) 5.9
Caribbean 0.6
Japan 1.8
Total 100.0
%
(1) ‘‘Worldwide’’ risk comprise individual policies that insure risks on a worldwide basis.

Marketing and Distribution

We expect that the majority of our business will be sourced through reinsurance brokers. Brokerage distribution channels provide us with access to an efficient, variable cost, and global distribution system without the significant time and expense that would be incurred in creating a wholly-owned distribution network. We believe that our financial strength rating, unencumbered balance sheet and superior client service are essential for creating long-term relationships with clients and brokers.

We intend to build long-term relationships with global reinsurance brokers and captive insurance companies located in the Cayman Islands. Our management team has significant relationships with most of the primary and specialty broker intermediaries in the reinsurance marketplace. We believe that by maintaining close relationships with brokers we will be able to continue to obtain access to a broad range of reinsurance clients and opportunities.

We intend to focus on the quality and financial strength of any brokerage firm with which we do business. Brokers do not have the authority to bind us to any reinsurance contract. We review and

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approve all contract submissions in our corporate offices located in the Cayman Islands. From time to time, we may also enter into relationships with managing general agents who could bind us to reinsurance contracts based on narrowly defined underwriting guidelines.

Reinsurance brokers receive a brokerage commission that is usually a percentage of gross premiums. We seek to become the first choice of brokers and clients by providing:

•  customized solutions that address the specific business needs of our clients;
•  rapid and substantive responses to proposal and pricing quote requests;
•  timely payment of claims;
•  financial security; and
•  clear indication of risks we will and will not underwrite.

Our objective is to build long-term relationships with key reinsurance brokers, such as Access Reinsurance, Inc., Aon Re Worldwide, Inc., Benfield Group Limited, Guy Carpenter & Company, Inc., and Willis Group Holdings, Ltd., and with our clients. We believe that we have established good relationships with these brokers.

The following table sets forth our gross premiums written by brokers as of the year ended December 31, 2006:


Name of Broker Gross premiums
written 		Percentage
of total
  ($ in thousands)
Access Reinsurance, Inc. $ 4,000
5.4
%
Aon Ltd. (London) 5,375
7.2
Frontline Insurance Managers, Inc. (1) 58,063
78.3
Other 6,713
9.1
Total $ 74,151
100.0
%
(1) Frontline Insurance Managers, Inc. is a related party of First Protective Insurance Company, the counterparty to our largest contract bound in 2006, which contract constituted $58.1 million, or 78.3%, of our premiums written.

We believe that by maintaining close relationships with brokers, we are able to obtain access to a broad range of potential clients. We meet frequently in the Cayman Islands and elsewhere with brokers and senior representatives of clients and prospective clients. All contract submissions are approved in our executive offices in the Cayman Islands.

In addition, we expect the large number of captive insurance companies located in the Cayman Islands to be an important source of business for us in the future. We expect to develop relationships with potential clients when we believe they have a need for reinsurance, based on our industry knowledge and market trends. We believe that diversity in our sources of business will help reduce any potential adverse effects arising out of the termination of any one of our business relationships.

Underwriting and Risk Management

We have established a senior team of generalist underwriters and actuaries to operate our reinsurance business. We believe that their experience, coupled with our approach to underwriting, will allow us to deploy our capital in a variety of lines of business and to capitalize on opportunities that we believe offer favorable returns on equity over the long term. Our underwriters and actuaries have expertise in a number of lines of business and we will also look to outside consultants on a fee-for-service basis, to help us with niche areas of expertise when we deem it appropriate. We generally apply the following underwriting and risk management principles:

Economics of Results

Our primary goal is to build a reinsurance portfolio that has attractive economic results. We may underwrite a reinsurance contract that may not demonstrate immediate short-term benefits if we

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believe it will provide favorable return on equity over the life of the contract. In pricing our products, we assume investment returns equal to the risk-free rate, which we intend to review and adjust, if necessary, on an annual basis. As of the date hereof, we assume a risk-free rate of 5.0%.

Team Approach

Each transaction typically is assigned to an underwriter and an actuary to evaluate underwriting, structuring and pricing. Prior to committing capital to any transaction, the evaluation team creates a deal analysis memorandum that highlights the key components of the proposed transaction and presents the proposed transaction to a senior group of staff, including underwriting, actuarial and finance. This group, including our Chief Underwriting Officer, must agree that the transaction meets or exceeds our return on equity requirements before we submit a firm proposal. Our Chief Underwriting Officer maintains the exclusive ultimate authority to bind contracts.

Actuarially Based Pricing

We have developed proprietary actuarial models and also use several commercially available tools to price our business. Our models not only consider conventional underwriting metrics, but also incorporate a component for risk aversion that places greater weight on scenarios that result in greater losses. The actuary working on the transaction must agree that the transaction meets or exceeds our return on equity requirements before we commit capital. We price each transaction based on the merits and structure of the transaction.

Act as Lead Underwriter

Typically, one reinsurer acts as the lead in negotiating principal policy terms and pricing of reinsurance contracts. We plan to act as the lead underwriter for the majority of the aggregate premium that we underwrite. We believe that lead underwriting is an important factor in achieving long-term success, as lead underwriters have greater influence in negotiating pricing, terms and conditions. In addition, we believe that reinsurers that lead policies are generally solicited for a broader range of business and have greater access to attractive risks.

Alignment of Company and Client’s Interests

We seek to ensure every contract we underwrite aligns our interests with our client’s interest. Specifically, we may seek to:

•  pay our clients a commission based upon a predetermined percentage of the profit we realize on the business, which we refer to as a profit commission;
•  allow the client to perform all claims adjusting and audits, as well as the funding and paying of claims, which we refer to as self insured retentions;
•  provide that the client pays a predetermined proportion of all losses above a pre-determined amount, which we refer to as co-participation; and/or
•  charge the client a premium for reinstatement of the amount of reinsurance coverage to the full amount reduced as a result of a reinsurance loss payment, which we refer to as a reinstatement premium.

We believe that through profit commissions, self-insured retentions, co-participation, reinstatement premiums or other terms within the contract, our clients are provided with an incentive to manage our interests. We believe that aligning our interests with our client’s interests promotes accurate reporting of information, timely settling and management of claims and limits the potential for disputes.

During the year ended December 31, 2006, profit commission expenses totaled $3.3 million and were reported in the income statement under the caption acquisition costs. During the year ended December 31, 2006, losses and loss adjustment expenses incurred totaled $9.7 million. Typically, the amount of profit commission expense is not significant when compared to losses incurred in any given

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year. However, as of December 31, 2006, profit commissions payable are high relative to our reserves in part due to low property catastrophe losses, as all of our property catastrophe contracts have profit commissions. Also, as a new reinsurer, we have not yet built up our loss reserves. Additionally, the losses incurred during 2006 are very small due to the start up nature of our underwriting operations and the fact that 2006 was a benign year for natural catastrophe losses. We do not expect profit commissions to be as material when compared to losses incurred in future periods.

Integrated Underwriting Operations

We have implemented a ‘‘cradle to grave’’ service philosophy where the same individual underwrites and administers the reinsurance contracts. We believe this method enables us to best understand the risks and likelihood of loss for any particular contract and to provide superior client service.

Detailed Contract Diligence

We are highly selective in the contracts we choose to underwrite and spend a significant amount of time with our clients and brokers to understand the risks and appropriately structure the contracts. We usually obtain significant amounts of data from our clients to conduct a thorough actuarial modeling analysis. As part of our pricing and underwriting process, we assess among other factors:

•  the client’s and industry historical loss data;
•  the expected duration for claims to fully develop;
•  the client’s pricing and underwriting strategies;
•  the geographic areas in which the client is doing business and its market share;
•  the reputation and financial strength of the client;
•  the reputation and expertise of the broker;
•  the likelihood of establishing a long-term relationship with the client and the broker; and
•  reports provided by independent industry specialists.

Underwriting Authorities

We use actuarial models that we produce and apply our underwriting guidelines to analyze each reinsurance opportunity before we commit capital. The Underwriting Committee of our Board of Directors has set parameters for zonal and aggregate property catastrophic caps and limits for maximum loss potential under any individual contract. The Underwriting Committee may approve exceptions to the established limits. Our approach to risk control imposes an absolute loss limit on our natural catastrophic exposures rather than an estimate of probable maximum losses and we have established zonal and aggregate limits. We manage all non-catastrophic exposures and other risks by analyzing our maximum loss potential on a contract-by-contract basis. Maximum authorities will likely change over time to be consistent with our capital base.

Retrocessional Coverage

We do not plan to purchase retrocessional coverage. However, we may do so to manage our overall exposure and to balance our portfolio. We have not yet purchased retrocessional coverage but expect that, if we do, we will only purchase uncollateralized retrocessional coverage from a reinsurer with a minimum financial strength rating of A− from either A.M. Best or Standard & Poors.

Capital Allocation

We expect to allocate capital to each contract that we bind. Our capital allocation methodology uses the probability and magnitude of potential for economic loss. We allocate capital for the period until the risk is resolved. We have developed a proprietary return on equity capital allocation model

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to evaluate and price each reinsurance contract that we underwrite. We use different return on equity thresholds depending on the type and risk characteristics of the business we underwrite, although we will use a standard risk-free interest rate. As of the date hereof, we assume a risk-free rate of 5.0%.

Claims Management

We have not experienced a high volume of claims to date. Our claims management process initiates upon receipt of reports from our clients.

We have implemented a ‘‘cradle to grave’’ service philosophy where the same individual underwrites and administers the reinsurance contracts.

Underwriters review claims submissions for authorization prior to entry and settlement. We believe this ensures we pay claims consistently with the terms and conditions of each contract. Our Chief Financial Officer must also approve all cash disbursements.

Where necessary, we will conduct or contract for on-site audits, particularly for large accounts and for those whose performance differs from our expectations. Through these audits, we will evaluate ceding companies’ claims-handling practices, including the organization of their claims departments, their fact-finding and investigation techniques, their loss notifications, the adequacy of their reserves, their negotiation and settlement practices and their adherence to claims-handling guidelines.

We recognize that fair interpretation of our reinsurance agreements with our clients and timely payment of covered claims is a valuable service to our clients.

Reserves

Our reserving philosophy is to reserve to our best estimates of the actual results of the risks underwritten. Our actuaries and underwriters provide reserving estimates on a quarterly basis calculated to meet our estimated future obligations. We reserve on a transaction by transaction basis. Starting in 2007, outside actuaries will review these estimates at least once a year. Due to the use of different assumptions, accounting treatment and loss experience, the amount we establish as reserves with respect to individual risks, transactions or classes of business may be greater or less than those established by clients or ceding companies. Reserves may also include unearned premiums, premium deposits, profit sharing earned but not yet paid, claims reported but not yet paid, claims incurred but not reported, and claims in the process of settlement.

Reserves do not represent an exact calculation of liability. Rather, reserves represent our estimate of the expected cost of the ultimate settlement and administration of the claim. Although the methods for establishing reserves are well-tested, some of the major assumptions about anticipated loss emergence patterns are subject to unanticipated fluctuation. We base these estimates on our assessment of facts and circumstances then known, as well as estimates of future trends in claim severity and frequency, judicial theories of liability and other factors, including the actions of third parties, which are beyond our control.

Collateral Arrangements/Letter of Credit Facility

We are not licensed or admitted as an insurer in any jurisdiction other than the Cayman Islands. Many jurisdictions such as the United States do not permit clients to take credit for reinsurance on their statutory financial statements if such reinsurance is obtained from unlicensed or non-admitted insurers without appropriate collateral. As a result, we anticipate that all of our U.S. clients and a portion of our non-U.S. clients will require us to provide collateral for the contracts we bind with them. We expect this collateral to take the form of funds withheld, trust arrangements or letters of credit. We have obtained a letter of credit facility from Citibank, N.A. in a maximum amount of $200 million. As of December 31, 2006, we have issued letters of credit totaling $89.2 million to clients. The failure to maintain, replace or increase our letter of credit facility on commercially acceptable terms may significantly and negatively affect our ability to implement our business strategy. See ‘‘Risk Factors – Our failure to maintain sufficient letter of credit facilities or to increase our letter of credit capacity on commercially acceptable terms as we grow could significantly and negatively affect our ability to implement our business strategy.’’

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Competition

The reinsurance industry is highly competitive. We expect to compete with major reinsurers, most of which are well established, have significant operating histories and strong financial strength ratings and have developed long-standing client relationships.

Our competitors are ACE Limited, General Re Corporation, Hannover Re Group, Munich Reinsurance Company, PartnerRe Ltd., Swiss Reinsurance Company, Transatlantic Reinsurance Company and XL Capital Ltd.

While we have a limited operating history, we believe that our unique approach to underwriting will allow us to be successful in underwriting transactions against more established competitors. Also, as the first global market reinsurer in the Cayman Islands to provide third party reinsurance coverage, as opposed to captive reinsurance arrangements, we believe we have a competitive advantage when competing for business of Cayman-based captive insurance companies.

Ratings

We currently have an A− (Excellent) financial strength rating with a stable outlook from A.M. Best, which is the fourth highest of 15 ratings. We believe that a strong rating is an important factor in the marketing of reinsurance products to clients and brokers. This rating reflects the rating agency’s opinion of our financial strength, operating performance and ability to meet obligations. It is not an evaluation directed toward the protection of investors or a recommendation to buy, sell or hold our Class A Ordinary Shares.

Advisory Agreement

We have entered into the advisory agreement with DME Advisors. Pursuant to the terms of the advisory agreement, DME Advisors has the exclusive right to manage our investments, subject to the investment guidelines adopted by our Board of Directors for so long as the agreement is in effect.

DME Advisors receives two forms of compensation:

•  a 1.5% annual fee payable monthly based on the net asset value of our investment account, excluding assets, held in trusts used to collateralize our reinsurance obligations, which we refer to as Regulation 114 Trusts; and
•  performance compensation based on the appreciation in the value of our investment account equal to 20% of net profits calculated per annum, subject to a loss carryforward provision. The loss carryforward provision allows DME Advisors to earn a reduced incentive fee of 10% in any year after our investments managed by the investment advisor incur a loss, until all the losses are recouped and an additional amount equal to 150% of the loss is earned.

The advisory agreement requires that DME Advisors follow our investment guidelines and act in a manner that it considers fair and equitable in allocating investment opportunities to us, but does not otherwise impose any specific obligations or requirements concerning the allocation of time, effort or investment opportunities to us or any restrictions on the nature or timing of investments for our account and for DME Advisors’ own account or other accounts that DME Advisors or its affiliates may manage. In addition, DME Advisors can outsource to subadvisors without our consent or approval. In the event that DME Advisors and any of its affiliates attempt to simultaneously invest in the same opportunity, the opportunity will be allocated pro rata as reasonably determined by DME Advisors and its affiliates. Affiliates of DME Advisors presently serve as general partner or investment advisor of Greenlight Capital, L.P., Greenlight Capital Qualified, L.P., Greenlight Capital Offshore, Ltd., Greenlight Masters, L.P., Greenlight Masters Qualified, L.P., Greenlight Masters Offshore, Ltd. and Greenlight Masters Offshore I, Ltd., which we refer to as the Greenlight Funds. Each of the Greenlight Funds utilizes an investment strategy that may compete with our investment strategy.

The advisory agreement provides that DME Advisors and its principals, employees or agents are not liable to us or our shareholders for any acts or omissions in the performance of their services in the absence of:

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•  willful misconduct, gross negligence, reckless disregard of any of their obligations under the advisory agreement. Additionally, the advisory agreement contains provisions for the indemnification of DME Advisors by us against certain liabilities to third parties arising in connection with the performance of its services to us;
•  breaches of our investment guidelines that are not cured within 15 days of the day on which DME Advisors becomes aware of the breach; or
•  the failure by DME Advisors to timely return or deliver assets to us if so requested.

We have agreed to use commercially reasonable efforts to cause all of our respective future subsidiaries to enter into substantially similar advisory agreements, provided that any such agreement shall be terminable on the same date that the advisory agreement is terminable. In addition, we have agreed that we will, at the written request of DME Advisors 90 days prior to any January 1 during the term of the advisory agreement, amend the advisory agreement so as to transform this agreement into a joint venture or partnership between us and DME Advisors so long as the creation of a joint venture or partnership does not, in the opinion of our legal counsel, create any material adverse tax, legal or regulatory consequences to us.

The advisory agreement term is January 1, 2007 through December 31, 2009 and will automatically renew for successive three year terms unless we or DME notify the other party at least 90 days prior to the end of the three-year term of its desire to terminate. We may terminate the advisory agreement prior to the expiration of its term only ‘‘for cause,’’ which is defined as:

•  a material violation of applicable law relating to DME Advisors’ advisory business;
•  DME Advisors’ gross negligence, willful misconduct or reckless disregard of its obligations under the advisory agreement;
•  a material breach by DME Advisors of our investment guidelines that is not cured within a 15-day period; or
•  a material breach by DME Advisors’ of its obligations to return and deliver assets as we may request.

Investment Strategy

Our investment portfolio is managed by DME Advisors. DME Advisors is an investment advisor that implements a value-oriented investment strategy by taking long positions in perceived undervalued securities and short positions in perceived overvalued securities. DME Advisors aims to achieve high absolute rates of return while minimizing the risk of capital loss. DME Advisors attempts to determine the risk/return characteristics of potential investments by analyzing factors such as the risk that expected cash flows will not be obtained, the volatility of the cash flows, the leverage of the underlying business and the security’s liquidity, among others.

Our Board of Directors conducts reviews of our investment portfolio activities and oversees our investment guidelines to meet our investment objectives. We believe, while less predictable than traditional fixed-income portfolios, our investment approach complements our reinsurance business and will achieve higher rates of return over the long term. Our investment guidelines are designed to maintain adequate liquidity to fund our reinsurance operations and to protect against unexpected events.

Under the advisory agreement, DME Advisors, which is contractually obligated to adhere to our investment guidelines, makes investment decisions on our behalf, which include buying public or private corporate equities and current-pay debt securities, selling securities short, and investing in trade claims, debt securities of distressed issuers, arbitrages, bank loan participations, derivatives (including options, warrants and swaps), leases, break-ups, consolidations, reorganizations, limited partnerships and similar securities of foreign issuers.

David Einhorn manages DME Advisors, as well as Greenlight Capital, Inc. and its affiliates, a value-oriented investment advisor founded in 1996 with over $4 billion under management as of

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December 31, 2006. Our investment guidelines, which DME Advisors is contractually obligated to follow, may diverge significantly from those guidelines historically followed by Greenlight Capital, Inc.

Investment Guidelines

The investment guidelines adopted by our Board of Directors, which may be amended from time to time as our Board of Directors deems appropriate, take into account restrictions imposed on us by regulators, our liability mix, requirements to maintain an appropriate claims paying rating by ratings agencies and requirements of lenders. As of the date hereof, the investment guidelines currently state:

•  Quality Investments.     At least 80% of the assets in the investment portfolio are to be held in debt or equity securities (including swaps) of publicly-traded companies and governments of the Organization of Economic Co-operation and Development, or the OECD, high income countries and cash, cash equivalent or United States government obligations.
•  Concentration of Investments:     Other than cash, cash equivalents and United States government obligations, no single investment in the investment portfolio may constitute more than 20% of the portfolio. No more than 10% of the assets in the investment portfolio will be held in private equity securities.
•  Liquidity:     Assets will be invested in such fashion that we have a reasonable expectation that we can meet any of our liabilities as they become due. We periodically review with the investment advisor the liquidity of the portfolio.
•  Monitoring:     We require our investment advisor to re-evaluate each position in the investment portfolio and to monitor changes in intrinsic value and trading value and provide monthly reports on the investment portfolio to us as we may reasonably determine.
•  Leverage:     The investment portfolio may not employ greater than 5% indebtedness for borrowed money, including net margin balances, for extended time periods. The investment advisor may use, in the normal course of business an aggregate of 20% margin leverage for periods of less than 30 days.

Investment Results

Composition

Our investment portfolio managed by DME Advisors contains investments in securities, cash and funds held with brokers, swaps and securities sold, not yet purchased. The following table represents the total long positions as reported in the financial statements as of December 31, 2006 and 2005:


  Fair value as of
December 31, 2006 		Fair value as of
December 31, 2005
  $ in thousands % of total $ in thousands % of total
Fixed income $ —
—
%
$ 238
0.1
%
Equities – listed 238,799
69.3
216,702
97.8
Equities – unlisted 4,004
1.2
1,777
0.8
Options 719
0.2
494
0.2
Investments in securities $ 243,522
70.7
%
$ 219,211
98.9
%
Cash and funds held with brokers 109,633
31.8
3,094
1.4
Swaps (8,640
)
(2.5
)
(722
)
(0.3
)
Total long investments $ 344,515
100.0
%
$ 221,583
100.0
%

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The following table represents the securities sold, not yet purchased as reported in the financial statements as of December 31, 2006 and 2005:


  Fair value as of
December 31, 2006 		Fair value as of
December 31, 2005
  $ in thousands % of total $ in thousands % of total
Equities – listed $ 124,043
100.0
%
$ 87,075
99.5
%
Derivatives and other 1
—
443
0.5
Total securities sold, not yet purchased $ 124,044
100.0
%
$ 87,518
100.0
%

DME Advisors also reports the composition of our total managed portfolio on a notional exposure basis, which it believes is the appropriate manner in which to assess the exposure and profile of investments and is the way in which it manages the portfolio. Under this methodology, the exposure for swaps and futures contracts are reported at their full notional amount. The notional amount of a derivative contract is the underlying value upon which payment obligations are computed and we believe best represents the risk exposure. For an equity total return swap, for example, the notional amount is the number of shares underlying the swap multiplied by the market price of those shares. Options are reported at their delta adjusted basis. The delta of an equity option is the sensitivity of the option price to the underlying stock price. The delta adjusted basis is the number of shares underlying the option multiplied by the delta and the underlying stock price. The following table represents the composition of our investment portfolio based on the holdings in our investment account managed by DME Advisors as of December 31, 2006 and December 31, 2005:


  As of
December 31, 2006 		As of
December 31, 2005
  Long % Short % Long % Short %
Fixed income 0.0
%
0.0
%
0.1
%
0.0
%
Equities & related derivatives 82.4
(41.5
)
99.1
(46.8
)
Equity – unlisted 1.2
0.0
0.0
0.0
Other investments 1.1
0.0
0.0
0.0
Total 84.7
%
(41.5
)%
99.2
%
(46.8
)%

Investment Returns

A summary of our consolidated net investment income for the years ended December 31, 2006 and 2005 and the period from July 13, 2004 to December 31, 2004 is as follows ($ in thousands):


  Year ended
December 31, 		Period Ended
July 13, 2004 –
December 31,
  2006 2005 2004
Investment income $ 79,635
$ 38,815
$ 13,314
  (2,434
)
(698
)
(161
)
Investment advisor fees (18,692
)
(10,183
)
(3,517
)
Net investment income $ 58,509
$ 27,934
$ 9,636

The investment return reported by DME Advisors is based on the total assets in our investment account, which includes the majority of our equity capital and collected premiums. Investment returns net of all fees and expenses for the years ended December 31, 2006 and 2005 and the period from July 13, 2004 to December 31, 2004 were 24.4%, 14.2% and 5.2%, respectively. The investment returns by quarter since inception are as follows: (1)


Quarter 2006 2005 2004
1 st 7.5
%
2.2
%
—
%
2 nd 2.9
5.4
—
3 rd 6.2
3.0
1.3
4 th 5.9
2.9
%
3.9
Full Year 24.4
%
14.2
%
5.2
% (2)
(1) Past performance is not necessarily indicative of future results.
(2) Represents the return for the period from July 13, 2004 (date of incorporation) to December 31, 2004.

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Internal Risk Management

Our Board of Directors reviews our investment portfolio together with our reinsurance operations on a periodic basis. With the assistance of DME Advisors, we periodically produce risk reports for review by our Board of Directors, analyzing both our assets and liabilities. The reports focus on numerous components of risk in our portfolio, including concentration risk and liquidity risk.

Information Technology

Our information technology infrastructure is currently housed in our corporate offices in Grand Cayman, Cayman Islands. We have implemented backup procedures to ensure that data is backed up on a daily basis and can be quickly restored as needed. Backup information is stored off-site in order to minimize the risk of a loss of data in the event of a disaster.

We have a disaster recovery plan with respect to our information technology infrastructure that includes arrangements with an offshore data center in Jersey, Channel Islands. We can access our systems from this offshore facility in the event that our primary systems are unavailable due to a disaster or otherwise.

Legal Proceedings

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

Properties

We currently lease office space in Grand Cayman, under an operating lease which expires on August 31, 2010. We believe that for the foreseeable future this office space will be sufficient for us to conduct our operations.

Employees

As of December 31, 2006, we had nine employees, all of whom were based in Grand Cayman. We believe that our employee relations are good. None of our employees are subject to collective bargaining agreements, and we are not aware of any current efforts to implement such agreements.

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REGULATION

Greenlight Reinsurance, Ltd. holds an Unrestricted Class B Insurer’s License issued in accordance with the terms of the Insurance Law (as revised) of the Cayman Islands, or the Law, and is subject to regulation by the Cayman Islands Monetary Authority, or CIMA, in terms of the Law.

As the holder of an Unrestricted Class B Insurers’ License, Greenlight Reinsurance, Ltd. is permitted to undertake insurance business from the Cayman Islands, but, other than with the prior written approval of CIMA, may not engage in any Cayman Islands domestic business except to the extent that such business forms a minor part of the international risk of a policyholder whose main activities are in territories outside the Cayman Islands.

Greenlight Reinsurance, Ltd. is required to comply with the following principal requirements under the Law:

•  the maintenance of a net worth (defined in the Law as the excess of assets, including any contingent or reserve fund secured to the satisfaction of CIMA, over liabilities other than liabilities to partners or shareholders) of at least 100,000 Cayman Islands dollars (which is equal to approximately US$120,000), subject to increase by CIMA depending on the type of business undertaken;
•  to carry on its insurance business in accordance with the terms of the license application submitted to CIMA, to seek the prior approval of CIMA to any proposed change thereto, and annually to file a certificate of compliance with this requirement, in the prescribed form, signed by an independent auditor, or other party approved by CIMA;
•  to prepare annual accounts in accordance with generally accepted accounting principles, audited by an independent auditor approved by CIMA;
•  to seek the prior approval of CIMA in respect of the appointment of directors and officers and to provide CIMA with information in connection therewith and notification of any changes thereto;
•  to notify CIMA as soon as reasonably practicable of any change of control of Greenlight Reinsurance, Ltd., the acquisition by any person or group of persons of shares representing more than ten percent of Greenlight Reinsurance, Ltd.’s issued share capital or total voting rights and to provide such information as CIMA may require for the purpose of enabling an assessment as to whether the persons acquiring control or ownership are fit and proper persons to acquire such control or ownership;
•  to maintain appropriate business records in the Cayman Islands; and
•  to pay an annual license fee.

The Law requires that the holder of an Unrestricted Class B Insurance License engage a licensed insurance manager operating in the Cayman Islands to provide insurance expertise and oversight, unless exempted by CIMA. Greenlight Reinsurance, Ltd. has been exempted from this requirement.

It is the duty of the CIMA:

•  to maintain a general review of insurance practice in the Cayman Islands;
•  to examine the affairs or business of any licensee or other person carrying on, or who has carried on, insurance business in order to ensure that the Law has been complied with and that and the licensee is in a sound financial position and is carrying on its business in a satisfactory manner;
•  to examine and report on the annual returns delivered to CIMA in terms of the Law; and
•  to examine and make recommendations with respect to, among other things, proposals for the revocation of licenses and cases of suspected insolvency of licensed entities.

Where CIMA believes that a licensee is committing, or is about to commit or pursue, an act that is an unsafe or unsound business practice, CIMA may request that the licensee cease or refrain from

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committing the act or pursuing the offending course of conduct. Failures to comply with CIMA regulation may be punishable by a fine of up to one hundred thousand Cayman Islands dollars (US$121,951 based on the Cayman Islands’ pegged exchange rate of CI$0.82 per US$1.00), and an additional ten thousand Cayman Islands dollars (US$12,195 based on the Cayman Islands’ pegged exchange rate of CI$0.82 per US$1.00) for every day after conviction that the breach continues.

Whenever CIMA believes that a licensee is or may become unable to meet its obligations as they fall due, is carrying on business in a manner likely to be detrimental to the public interest or to the interest of its creditors or policyholders, has contravened the terms of the Law, or has otherwise behaved in such a manner so as to CIMA to call into question the licensee’s fitness, CIMA may take one of a number of steps, including requiring the licensee to take steps to rectify the matter, suspending the license of the licensee, revoking the license imposing conditions upon the license and amending or revoking any such condition, requiring the substitution of any director, manager or officer of the licensee, at the expense of the licensee, appointing a person to advise the licensee on the proper conduct of its affairs and to report to CIMA thereon, at the expense of the licensee, appointing a person to assume control of the licensee’s affairs or otherwise requiring such action to be taken by the licensee as CIMA considers necessary.

Other Regulations in the Cayman Islands

As a Cayman Islands exempted company, we may not carry on business or trade locally in the Cayman Islands except in furtherance of our business outside the Cayman Islands and we are prohibited from soliciting the public of the Cayman Islands to subscribe for any of our securities or debt. We are further required to file a return with the Registrar of Companies in January of each year and to pay an annual registration fee at that time.

The Cayman Islands has no exchange controls restricting dealings in currencies or securities.

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MANAGEMENT


Name Age Position
Leonard Goldberg 44
Chief Executive Officer and Director
Tim Courtis 45
Chief Financial Officer
Barton Hedges 41
President and Chief Underwriting Officer of
Greenlight Reinsurance, Ltd.
David Einhorn 38
Director and Chairman of the Board
Alan Brooks 60
Director
Frank D. Lackner 38
Director
Joseph Platt, Jr. 59
Director
Jerome Simon 47
Director
Daniel Roitman 37
Alternate Director

Executive Officers

Our senior management includes the following individuals:

Leonard Goldberg has served as our Chief Executive Officer and a director since August 2005. Mr. Goldberg has more than 20 years of insurance and reinsurance experience. He worked with the Alea Group, a reinsurance company, from August 2000 to August 2004, including serving as Chief Executive Officer of Alea North America Insurance Company and Alea North America Specialty Insurance Company from March 2002 to August 2004. Prior to working with the Alea Group, Mr. Goldberg served as chief actuary and senior vice president—Financial Products of Custom Risk Solutions, a managing general agency company, from April 1999 to August 2000. From May 1995 to December 1998, Mr. Goldberg provided various actuarial services to Zurich Group, a reinsurance company, including acting as chief actuary of Zurich Re London. Mr. Goldberg received his B.A. in Mathematics from Rutgers University in 1984 and MBA, Finance Concentration, from Rutgers Executive MBA program in 1993 and is a Fellow of the Casualty Actuarial Society and a member of the American Academy of Actuaries.

Tim Courtis has served as our Chief Financial Officer since May 2006. Mr. Courtis has 18 years experience in the property and casualty reinsurance, captive and insurance industry. Most recently Mr. Courtis was President and Chief Financial Officer of European International Reinsurance Company Ltd., a subsidiary of Swiss Re, from August 1994 until April 2006, where he was responsible for the management and financial analysis of Swiss Re’s Barbados based entities. Prior to joining Swiss Re in 1994, Mr. Courtis also worked for Continental Insurance in Barbados and International Risk Management Company in Bermuda where he performed duties as senior account manager to various captive insurance companies. Mr. Courtis is a Canadian Chartered Accountant and has a MBA from York University, Toronto and a Bachelor of Business from Wilfrid Laurier University, Waterloo.

Barton Hedges has served as President and Chief Underwriting Officer of Greenlight Reinsurance, Ltd. since January 2006. Mr. Hedges has 20 years experience in the property and casualty insurance and reinsurance industry and is a Fellow of the Casualty Actuarial Society and a member of the American Academy of Actuaries. Prior to joining Greenlight Reinsurance, Ltd., Mr. Hedges served as President and Chief Operating Officer of Platinum Underwriters Bermuda, Ltd., a property, casualty and finite risk reinsurer from July 2002 until December 2005, where he was responsible for the initial start-up of the company and managed the company’s day-to-day operations. Mr. Hedges previous experience includes serving as executive vice president and Chief Operating Officer of Bermuda-based Scandinavian Re, actuarial consultant at Tillinghast—Towers Perrin, Senior Manager at Deloitte & Touche LLP and actuarial manager at United States Fidelity and Guaranty Company, where he began his career in 1987. Mr. Hedges has a B.A. in Mathematics from Towson State University.

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Directors

In addition to Mr. Goldberg, our board of directors includes the following individuals:

David Einhorn has been a director since July 2004, and Chairman of the Board since August 6, 2004. Mr. Einhorn is president of Greenlight Capital, Inc. which he co-founded in January 1996, and senior managing member of DME Advisors. Greenlight Capital, Inc. and DME Advisors are our affiliates. Mr. Einhorn graduated summa cum laude with distinction from Cornell University in 1991 where he earned a BA from the College of Arts and Sciences.

Alan Brooks has been a director since July 2004. Mr. Brooks was the insurance practice partner at KPMG in the Cayman Islands from 1984 to 1999 and was then engaged as a consultant by KPMG from February 2001 until July 2003, at which point he retired. During the past 20 years, Mr. Brooks has specialized in providing audit and liquidation services to the offshore insurance industry. Mr. Brooks has been the audit partner to over 150 licensed insurance companies in the Cayman Islands, ranging from companies writing property and casualty, life and credit as well as special purpose vehicles formed to insure catastrophe risks. Mr. Brooks has significant experience in the preparation of financial statements in accordance with United States, United Kingdom, Canadian and International GAAP. On a consulting basis, Mr. Brooks has been and continues to provide services as a voluntary liquidator to numerous offshore property and casualty insurance companies, and has assisted in the formation of offshore catastrophe insurance companies. Prior to qualifying as a Chartered Accountant, Mr. Brooks received a Diploma of Education from the North Buckinghamshire College of Education in 1968. Mr. Brooks has been a Fellow of the Institute of Chartered Accountants of England & Wales since 1979.

Frank D. Lackner has been a director since July 2004. Mr. Lackner served as a managing director of Torsiello Securities Inc., an investment banking and financial advisory services company to the global insurance and financial services industry, and its predecessor firm from October 2001 until October 2006. From January 1998 to October 2001, Mr. Lackner was a founder and Chief Executive Officer of RiskContinuum, Inc., an online reinsurance trading exchange. During such time, Mr. Lackner also provided consulting services to First International Capital LLC and to other clients in the insurance industry. From September 1993 to December 1997, Mr. Lackner was a vice president with Insurance Partner Advisors, L.P., a private equity investment partnership formed by the Centre Reinsurance Companies, Chase Manhattan Bank and the Robert Bass Group, which made equity investments in insurance, reinsurance and healthcare companies worldwide. From 1992 to 1993, Mr. Lackner was a finite risk reinsurance underwriter at the Centre Reinsurance Companies, where he worked on both corporate development projects and structuring and pricing finite risk insurance and reinsurance products. From 1990 to 1992, Mr. Lackner was an investment banker at Donaldson, Lufkin & Jenrette Securities Corp., where he advised both property/casualty and life insurance companies on strategic acquisitions, divestitures and capital markets-related activities, including IPOs, debt offerings and restructurings. Mr. Lackner received his BBA in Banking and Finance from Hofstra University in 1989. Mr. Lackner also serves as a director of American Safety Insurance Holdings, Ltd. (NYSE:ASI).

Joseph Platt, Jr. has been a director since July 2004. Currently, Mr. Platt is a partner at Amarna Corporation, LLC, a private investment company that he founded in September 2002. In 1971, Mr. Platt joined Johnson and Higgins, or J&H. In 1990, Mr. Platt was appointed a director of J&H. Mr. Platt’s career at J&H spanned 26 years until the sale of J&H to Marsh & McLennan Companies in March 1997. While at J&H, Mr. Platt’s responsibilities ranged from trainee to executive vice president responsible for United States and Canada and the firm’s marketing and sales activities throughout the world. He was a member of the Executive and Operating Committees of J&H. Mr. Platt received his BA from Manhattan College in 1968 and his JD from Fordham University Law School in 1971. Mr. Platt also attended Harvard Business School’s Advanced Management Program in 1983. Mr. Platt is active in the community and has served as Trustee to a number of organizations. He serves as chairman of the Board of Directors of Restaurant Insurance Holdings, Inc. He is on the Board of Jones Brown, a private Canadian insurance broker, and has served as an independent Trustee of the BlackRock Liquidity Funds since 1999. He is a member of the New York State Bar Association.

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Jerome Simon has been a director since March 2007. Mr. Simon is the managing member of Lonestar Capital Management LLC, the management company of Lonestar Partners LP, a private investment partnership that he founded in July 1995. Mr. Simon received an MBA from the Stanford Graduate School of Business in 1990 and graduated with a B.A. in Economics from Claremont McKenna College in 1982.

Daniel Roitman is an alternate Director appointed by Mr. Einhorn and has been an alternate Director since September 2004. Mr. Roitman has served as Chief Operating Officer of Greenlight Capital, Inc. since January 2003 and is a partner. From 1996 through 2002 Mr. Roitman worked at Goldman Sachs. Before joining Goldman Sachs, Mr. Roitman was employed as a member of the New York technology practice at Andersen Consulting, now Accenture. Mr. Roitman earned a B.S. with distinction in electrical engineering from Cornell University in 1991 and a M.Eng. in 1992. Mr. Roitman graduated with distinction from the New York University Stern School of Business in 2002, earning an MBA in Finance.

As an alternate Director Mr. Roitman is entitled to receive notice of all meetings of Directors and of all meetings of Committees of the Board of which his appointer is a member, to attend and vote at every such meeting at which the Director appointing him is not personally present, and generally to perform all the functions of his appointer as a Director in his absence. An alternate Director ceases to be an alternate Director if written notice to that effect is given to the Company by his appointer. Our Articles provide that an alternate Director shall be deemed for all purposes to be a Director and shall alone be responsible for his own acts and defaults and shall not be deemed to be the agent of the Director appointing him.

Composition of the Board of Directors

Our Board of Directors is currently comprised of six directors, one of whom has appointed an alternate director.

Our Board of Directors reviewed the materiality of any relationship each our six directors has or had with our company either directly or indirectly through another organization. The criteria applied included the director independence requirements set forth under the Nasdaq Stock Market Rules and with respect to the Audit Committee, the SEC’s independence rules. Based on this review, our Board of Directors has determined that Messrs. Brooks, Lackner, Platt and Simon are independent directors and that Messrs. Goldberg and Einhorn, as well as Mr. Roitman are not independent directors.

Board Committees

There are currently five committees of our Board of Directors: the Audit Committee, the Compensation Committee, the Finance Committee, the Nominating and Governance Committee and the Underwriting Committee.

Audit Committee

Our Audit Committee is composed of Messrs. Brooks, Lackner and Simon. Upon pricing of this offering, all members of the Audit Committee will be ‘‘independent’’ as defined under The NASDAQ Stock Market and SEC rules. Each member of the Audit Committee is financially literate. In addition, Mr. Brooks will serve as chairman of the Audit Committee and the ‘‘financial expert’’ within the meaning of Item 401(h) of Regulation S-K of the Securities Act and has the financial sophistication under The NASDAQ Stock Market Rules. Our Audit Committee will approve in advance all audit services to be provided to us and all permissible non-audit services, other than de minimus non-audit services, to be provided to us by our independent auditors.

Compensation Committee

The Compensation Committee is composed of Messrs. Brooks, Platt and Simon. All of these members of our Compensation Committee are ‘‘independent’’ as defined under The NASDAQ Stock Market rules. The purpose of our Compensation Committee is to discharge the responsibilities of our

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Board of Directors relating to compensation of our executive Officers. Our Board of Directors has adopted a charter for our Compensation Committee. Our Compensation Committee, among other things, assists our Board of Directors in ensuring that a proper system of compensation is in place to provide performance-oriented incentives to management, and makes recommendations to the Board with respect to incentive-compensation plans and equity-based plans.

Finance Committee

The Finance Committee is composed of Messrs. Einhorn, Goldberg and Lackner. The Finance Committee, among other things, provides advice and assistance to our Board of Directors concerning proposed issuances of equity, debt or other securities and proposed credit and similar facilities, including an initial public offering in the United States of America or any other appropriate jurisdiction, reviews the adequacy of existing financing facilities, and reviews short-term and long-term financing plans.

Nominating and Governance Committee

The Nominating and Governance Committee is composed of Messrs. Platt, Lackner and Simon. The Nominating and Governance Committee has responsibility for identifying individuals qualified to become board members consistent with the criteria established by the Board of Directors from time to time, recommending director nominees to the Board of Directors, recommending corporate governance guidelines to the Board of Directors and overseeing the evaluation of the Board of Directors and our management.

Underwriting Committee

The Underwriting Committee is composed of Messrs. Brooks, Einhorn, Goldberg, Lackner and Platt. The Underwriting Committee, among other things, advises our Board of Directors and management concerning the establishment and review of our underwriting policies and guidelines, oversees our underwriting process and procedures, monitors our underwriting performance and oversees our underwriting risk management exposure.

Code of Ethics

We have adopted a written code of ethics applicable to our directors, officers and employees in accordance with the rules of The NASDAQ Stock Market and SEC. Our code of ethics will be designed to deter wrongdoing and to promote ethical conduct. The code of ethics is published on our corporate website at www.greenlightre.ky .

Compensation Discussion and Analysis

Our performance-driven compensation policy consists of the following three components:

•  base salary;
•  bonuses; and
•  stock incentive plan awards.

We use short-term compensation comprised of base salary and annual cash bonuses and long-term compensation comprised of deferred bonuses, stock options and restricted stock in an effort to align our employees’ and executives’ interests with those of our shareholders and to increase long-term growth in book value per share. We compensate our current executive officers, Messrs. Goldberg, Hedges and Courtis, whom we refer to as Named Executive Officers, according to the terms of their employment agreements.

Our Compensation Committee reviews all recommendations made with respect to discretionary compensation and approves all discretionary compensation decisions for our Named Executive Officers. No member of our Compensation Committee has ever been one of our officers or employees.

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Base Salary.     We use base salary to recognize the experience, skills, knowledge, roles and responsibilities of our employees and executive officers. When establishing the 2006 base salaries of our Named Executive Officers, our Compensation Committee considered a number of factors including:

•  the individual’s years of underwriting and actuarial experience;
•  the functional role of the position;
•  the level of the individual’s responsibility;
•  our ability to replace the individual; and
•  the limited number of well-qualified candidates available in or willing to relocate to the Cayman Islands.

Base salaries, which may include a living allowance, are reviewed by the Compensation Committee for possible increases at least every three years.

Bonuses.     We use bonuses to reward individual and company performance. We expect our bonuses to be highly variable from year to year. Our Compensation Committee determines each Named Executive Officer’s target bonus, expressed as a percentage of his base salary. As an inducement for our Named Executive Officers to relocate to the Cayman Islands and to join our company, we agreed to pay guaranteed and special one-time bonuses for 2006.

Mr. Goldberg’s employment agreement specifies a target bonus of 100% of base salary. Mr. Hedges’ employment agreement specifies a target bonus of 100% of base salary which was guaranteed for 2006. Mr. Hedges also received a signing bonus of $50,000 in January 2006. Mr. Courtis’ employment agreement specifies a target bonus of 50% of base salary with a guaranteed minimum bonus for 2006 of $83,333. Actual bonuses paid for 2006 were $600,000 to Mr. Goldberg, $520,000 to Mr. Hedges and $103,333 to Mr. Courtis. None of the Named Executive Officers has a guaranteed minimum bonus for 2007.

Our Compensation Committee approved a bonus program effective for 2007 in which our Named Executive Officers will participate. Under this bonus program, each employee’s target bonus consists of two components:

•  a quantitative component based on return on deployed equity; and
•  a discretionary component based on a qualitative assessment of each employee’s performance.

Compensation under our 2007 bonus program is based on the ultimate underwriting returns of our business measured over a multi-year period rather than premium targets or estimated underwriting profitability for the year in which we initially underwrote the business.

Each employee will be assigned a quantitative bonus participation percentage that may be adjusted annually and will be based on return on deployed equity compared to target return on deployed equity for all contracts bound by us during a particular year or underwriting year. The remaining portion of the target bonus will be determined based on a qualitative assessment of the employee’s performance in relation to certain pre-established performance goals.

An employee must be employed by us or one of our subsidiaries on the last day of the year in order to receive the discretionary component of his or her bonus for the year. All discretionary bonuses will be paid no later than March 15 th of the following year.

The Compensation Committee has the discretion to reduce or increase any employee’s bonus award based on his or her individual performance.

Stock Incentive Plan Awards.     In 2004, we adopted a stock incentive plan. We have historically granted stock options to our employees including our Named Executive Officers, at employment inception that vest ratably over three years. Pursuant to the terms of his employment agreement, Mr. Goldberg also receives annual option grants. On October 5, 2006, our Board of Directors granted Mr. Goldberg an additional 10,000 options that were not contemplated by his employment agreement.

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The Compensation Committee determined to grant these additional options to Mr. Goldberg after his 2006 option grant was delayed, and the fair market value of the Class A Ordinary Shares, and thus Mr. Goldberg’s exercise price, increased. The additional option award was thus intended to compensate Mr. Goldberg for the diminution in value of his 2006 option grant and to recognize and reward his extraordinary performance throughout the year.

The Compensation Committee has decided that over the long term, restricted stock will be the preferred form of equity compensation as it better aligns management with long-term shareholder value creation. The Compensation Committee has established the target value of restricted stock grants that each Named Executive Officer may receive. The actual value of restricted stock grants will depend upon each Named Executive Officer’s performance, as determined by the Compensation Committee and may be less than or greater than the target value. The restricted stock will be subject to three-year cliff vesting. Unvested restricted shares will be forfeited if a Named Executive Officer terminates employment for any reason.

Compensation Mix and Other Compensation

We compensate our Named Executive Officers in the following ways:

•  base salary including living expenses;
•  bonuses, a portion of which will be deferred beginning in 2007; and
•  stock incentive awards, including stock options and restricted stock.

In general, we seek to pay salaries and living expenses that are commensurate with the salaries and living expenses paid by other reinsurance companies to executives in similar positions. However, as we are the first global reinsurer in the Cayman Islands, no direct comparisons may be made. In addition, our Named Executive Officers receive bonus awards. Beginning in 2007, a significant part of each Named Executive Officer’s bonus will be deferred until the underwriting results of our reinsurance business are more fully developed. In addition, we anticipate granting awards of restricted stock subject to three year cliff vesting in order to retain our Named Executive Officers and align their interests with those of our shareholders.  We expect long-term compensation or the deferred portion of our bonus program and stock incentive plan awards to represent the majority of each Named Executive Officer’s compensation.

Our Named Executive Officers are currently parties to employment agreements that will continue in effect following this offering. We do not contemplate amending those agreements. In addition, we intend to continue to maintain our current benefits and perquisites for our executive officers. However, the Compensation Committee may revise, amend or add to these benefit programs at its discretion.

Because we are not a U.S. taxpayer, our compensation program has not been designed to comply with Section 162(m) of the Code.

Ordinary Share Ownership Guidelines

We believe that broad-based share ownership by our employees, including our Named Executive Officers, is the most effective method to deliver superior shareholder returns by increasing the alignment between the interests of our employees and our shareholders. We do not, however, have a formal requirement for share ownership by any group of employees.

Change in Control and Severance

Upon termination of employment or a change in control, the Named Executive Officers may receive accelerated vesting of awards granted under our stock incentive plan and severance payments under their employment agreements.

Under our stock incentive plan, the Compensation Committee generally has the discretion to vest unvested awards upon a change in control as described in ‘‘—The Stock Incentive Plan’’. This

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discretion allows the Compensation Committee to determine at the time of the change in control whether, and the extent to which, additional vesting is warranted. In addition, Mr. Goldberg’s option agreement provides for accelerated vesting upon his termination of employment under certain circumstances, including in connection with a change in control. For more details on these termination provisions, see ‘‘Potential Payments upon Termination or Change in Control.’’

Upon termination of employment, our Named Executive Officers are eligible for severance payments which, depending upon the circumstances surrounding termination, may include:

•  a cash payment equal to one year’s annual salary and bonus;
•  a pro-rated target bonus for the year of termination; and
•  one year of continued health benefits.

The amount of our severance obligations is designed to be competitive with the amounts payable to executives in similar positions at similar companies. Severance payments are made monthly and are contingent upon the Named Executive Officer’s continued compliance with the restrictive covenants in his employment agreement. Mr. Goldberg’s agreement contains a special provision whereby he may terminate his employment and receive severance benefits in the event of a change in control. We agreed to this provision in consideration of the risk Mr. Goldberg took by joining us in our formation stages and our recognition of his willingness to take the risk and his confidence in both our overall strategy and the strength of our Board of Directors.

Summary Compensation Table

The following Summary Compensation Table summarizes the total compensation awarded to our Named Executive Officers in 2006.


Name and
Principal Position 		Year Salary
($) 		Bonus
($) 		Stock
Awards
($) (2) 		Option
Awards
($) (3) 		Non-Equity
Incentive Plan
Compensation
($) 		Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) 		All Other
Compensation
($) (4) 		Total
($)
Leonard Goldberg, CEO 2006
500,000
600,000
—
1,469,246
—
—
124,268
(5 )
2,693,514
Barton Hedges, CUO 2006
450,000
570,000
(1 )
—
898,264
—
—
76,268
(6 )
1,994,532
Tim Courtis, CFO 2006
166,667
103,333
—
208,712
—
—
77,268
(7 )
553,980
(1) Includes a signing bonus of $50,000 which Mr. Hedges received in accordance with the terms of his employment agreement.
(2) We did not grant any stock awards to our Named Executive Officers for performance related to 2006.
(3) All stock options were granted under our stock incentive plan at fair value on the date of grant. We account for the stock incentive plan under SFAS No. 123R, ‘‘Share Based Payments.’’ The value reported above under Option Awards is the amount we expensed during 2006 for each Named Executive Officer’s stock option award.
(4) The amounts shown in this column include the amounts we contributed to our defined contribution pension plan on behalf of each Named Executive Officer.
(5) Includes a $120,000 housing allowance and $4,268 that we contributed to our defined contribution pension plan on behalf of Mr. Goldberg.
(6) Includes a $72,000 housing allowance and $4,268 that we contributed to our defined contribution pension plan on behalf of Mr. Hedges.
(7) Includes a $25,000 relocation allowance, a $48,000 living allowance and $4,268 that we contributed to our defined contribution pension plan on behalf of Mr. Courtis.

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Grants of Plan Based Awards

The Compensation Committee, or our Board of Directors acting as the Compensation Committee, granted stock option awards under our stock incentive plan to our Named Executive Officers in 2006. We did not grant any restricted stock awards to any of our Named Executive Officers in 2006. Set forth below is information regarding stock option awards granted in 2006.


      Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards 		Estimated Future Payouts
Under Equity Incentive
Plan Awards 		All other
Stock
Awards:
Number of
Shares
of Stock
or Units (#) 		All other
Option
Awards:
Number of
Securities
Underlying
Options (#) 		Exercise
or Base
Price of
Option
Awards
($ / Sh) 		Grant
Date Fair
Value of
Stock and
Option
Awards
Name Grant
Date 		Approval
Date 		Threshold
($) 		Target
($) 		Maximum
($) 		Threshold
(#) 		Target
(#) 		Maximum
(#)
Leonard Goldberg Oct. 5, 2006 Oct. 5, 2006 —
—
—
—
—
—
—
110,000
13.48
761,200
Barton Hedges Jan. 2, 2006 Dec. 28, 2005 —
—
—
—
—
—
—
250,000
11.63
1,462,500
Tim Courtis May 1, 2006 March 22, 2006 —
—
—
—
—
—
—
75,000
12.72
504,000

Outstanding Equity Awards at Fiscal Year-End


  Option Awards Stock Awards
Name Number of
Securities
Underlying
Unexercised
Options
(#)
Exerciseable 		Number of
Securities
Underlying
Unexercised
Options
(#)
Unexerciseable 		Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) 		Option
Exercise
Price
($) 		Option
Expiration
Date 		Number of
Shares or
Units of
Stock That
Have Not
Vested
(#) 		Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) 		Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#) 		Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)
Leonard Goldberg 166,667
333,333
(1 )
—
11.10
Aug. 15, 2015 —
—
—
—
Leonard Goldberg —
110,000
(2,5 )
—
13.48
Oct. 5, 2016 —
—
—
—
Barton Hedges —
250,000
(3,5 )
—
11.63
Jan. 2, 2016 —
—
—
—
Tim Courtis —
75,000
(4,5 )
—
12.72
May 1, 2016 —
—
—
—
(1) 166,667 of the Class A Ordinary Shares become exercisable on August 15, 2007 and the remaining 166,666 shares become exercisable on August 15, 2008.
(2) Mr. Goldberg was granted an option to purchase 110,000 Class A Ordinary Shares, 100,000 of which were granted in accordance with the terms of his employment agreement and another 10,000 of which were granted at the discretion of the Compensation Committee. The option becomes exercisable with respect to 36,667 shares on October 5, 2007, another 36,667 shares on October 5, 2008 and the remaining 36,666 shares on October 5, 2009.
(3) The option becomes exercisable with respect to 83,334 Class A Ordinary Shares on January 2, 2007, and with respect to an additional 83,333 shares on each of January 2, 2008 and January 2, 2009.
(4) The option becomes exercisable with respect to 25,000 Class A Ordinary Shares on each of May 1, 2007, May 1, 2008 and May 1, 2009.
(5) The options reported in this column have also been reported in the Summary Compensation Table under the ‘‘Option Awards’’ column.

Option Exercises and Stock Vested

No stock options were exercised during 2006. To date, no Named Executive Officer has received a restricted stock award.

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Equity Compensation Plan Information


Plan Category Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights
(a) 		Weighted-average
exercise price of
outstanding options,
warrants and rights
(b) 		Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
Equity compensation plans approved by securityholders —
—
—
Equity compensation plans not approved by securityholders 1,537,668
$ 11.31
135.332
Total 1,537,668
$ 11.31
135.332

Pension Benefits

None of our Named Executive Officers participates in a qualified or non-qualified defined benefit pension plan sponsored by us. In accordance with the National Pensions Law (2000 Revision) of the Cayman Islands, all Cayman Islands-based employers are required to make a contribution to a pension plan for each person they employ. As of June 1, 2006, we adopted a defined contribution pension plan. The amounts contributed to this plan on behalf of the Named Executive Officers are set forth in the table below.

Nonqualified Deferred Compensation


Name Executive
Contributions in Last
Fiscal Year
($) 		Registrant
Contributions in Last
Fiscal Year
($) (1) 		Aggregate
Earnings in
Last Fiscal Year
($) (2) 		Aggregate
Withdrawals
/Distributions
($) 		Aggregate Balance at
Last Fiscal Year-End
($) (2)
Leonard Goldberg —
4,268
$ 112
  4,380
Barton Hedges —
4,268
125
  4,393
Tim Courtis —
4,268
94
  4,362
(1) The amounts provided in this column represent the amount of the contributions we made on behalf of each Named Executive Officer to our defined contribution pension plan. These amounts are also reported as compensation in the Summary Compensation Table under the ‘‘All Other Compensation’’ column.
(2) Earnings are measured based on the Named Executive Officer’s individual investment selections. The aggregate earnings and aggregate balance data for each Named Executive Officer under the defined contribution pension plan is reported net of any pension plan expenses.

Employment Agreements

The following paragraphs summarize the employment agreements of our Named Executive Officers.

Chief Executive Officer

Leonard Goldberg.     We have entered into an employment agreement with Leonard Goldberg under which he serves as our Chief Executive Officer for a term beginning on August 15, 2005 and ending on August 15, 2008. Under the terms of his employment agreement, Mr. Goldberg is entitled to receive an annual salary of not less than $500,000, subject to increase as determined by our Board of Directors, and an annual performance-based bonus with a target equal to 100% of base salary which, in 2007 and subsequent years, will be under the bonus program described above. For 2006, Mr. Goldberg received a bonus of $600,000. Mr. Goldberg receives a Cayman Islands housing allowance of $10,000 per month and is entitled to participate in our employee benefit plans and insurance programs. Mr. Goldberg is also reimbursed for certain tax preparation expenses. Under the terms of his employment agreement, on August 15, 2005, Mr. Goldberg was granted an option to acquire 500,000 Class A Ordinary Shares. On October 5, 2006, Mr. Goldberg was granted an

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additional option to acquire 110,000 Class A Ordinary Shares, 100,000 of which were granted pursuant to the terms of his employment agreement and a further 10,000 of which were granted at the discretion of the Compensation Committee. Commencing in 2007, on each August 15 on which Mr. Goldberg is employed by us, he will be granted an additional option to acquire 50,000 Class A Ordinary Shares. All shares subject to an option must have an exercise price equal to the fair market value per share on the date of grant.

Mr. Goldberg is subject to a six-month post-termination non-competition restriction and a one-year post-termination non-solicitation restriction in addition to perpetual confidentiality and non-disparagement requirements. The non-competition restriction does not apply if Mr. Goldberg’s employment terminates at the end of its term under circumstances that do not entitle him to receive severance payments.

Executive Officers

Barton Hedges.     We have entered into an employment agreement effective January 10, 2006 with Barton Hedges under which he serves as our President and Chief Underwriting Officer. The employment agreement does not have a fixed term. Under the terms of his employment agreement, Mr. Hedges is entitled to receive an annual salary of not less than $450,000, subject to increase as determined by our Board of Directors, and an annual performance-based bonus with a target equal to 100% of base salary which, in 2007 and subsequent years, will be under the bonus program described above. For 2006, Mr. Hedges received a bonus of $520,000. Mr. Hedges receives a Cayman Islands housing allowance of $6,000 per month and is entitled to participate in our employee benefit plans and insurance programs. Mr. Hedges is also reimbursed for certain tax preparation expenses. Under the terms of his employment agreement, on January 2, 2006, Mr. Hedges received an option to acquire 250,000 Class A Ordinary Shares with an exercise price equal to the fair market value per share on the date of grant. In January 2006, Mr. Hedges received a signing bonus of $50,000.

Tim Courtis.     We have entered into an employment agreement effective May 1, 2006 with Tim Courtis under which he serves as our Chief Financial Officer. The employment agreement does not have a fixed term. Mr. Courtis receives an annual base salary of not less than $250,000, subject to increase as determined by our Board of Directors, and an annual performance-based bonus with a target equal to 50% of base salary which, in 2007 and subsequent years, will be under the bonus program described above. Effective March 1, 2007, Mr. Courtis’ annual base salary was increased to $300,000. For 2006, Mr. Courtis received a bonus of $103,333. Mr. Courtis receives a Cayman Islands housing allowance of $6,000 per month and is entitled to participate in our employee benefit plans and insurance programs. Upon commencement of his employment, Mr. Courtis received a relocation allowance of $25,000. Under the terms of his employment agreement, on May 1, 2006, Mr. Courtis received an option to acquire 75,000 Class A Ordinary Shares with an exercise price equal to the fair market value per share on the date of grant.

Mr. Hedges and Mr. Courtis are also subject to a six-month post-termination non-competition restriction and a one-year post-termination non-solicitation restriction in addition to perpetual confidentiality and non-disparagement requirements. The non-competition and non-solicitation restrictions in Mr. Hedges’ agreement are not applicable if there is a dissolution of Greenlight Reinsurance, Ltd.

The Stock Incentive Plan

General

On August 11, 2004, we adopted the Greenlight Capital Re, Ltd. 2004 stock incentive plan, which was amended and restated for the first time on August 15, 2005, and amended and restated again on February 14, 2007, which we refer to as the stock incentive plan. The general purpose of the stock incentive plan is to enable us and our affiliates to retain the services of eligible employees, directors and consultants through the grant of stock options, stock bonuses and rights to acquire restricted stock (collectively referred to as the awards).

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Subject to adjustment in accordance with the terms of the stock incentive plan, 1,273,000 Class A Ordinary Shares are available for the grant of awards under the stock incentive plan. The maximum number of Class A Ordinary Shares with respect to which options may be granted to any participant during any calendar year is 500,000 Class A Ordinary Shares. As of December 31, 2006, 1,137,668 options have been granted under the stock incentive plan. On January 8, 2007, our Board of Directors approved an increase in the stock incentive plan’s share reserve from 1,273,000 Class A Ordinary Shares to 2,000,000 Class A Ordinary Shares. The record date for the extraordinary meeting of shareholders was established as January 8, 2007. The meeting was held on February 14, 2007 and the increase was approved by our shareholders.

Administration

The Compensation Committee administers the stock incentive plan and has broad discretion, subject to the terms of the stock incentive plan, to determine which eligible participants will be granted awards, prescribe the terms and conditions of awards, establish rules and regulations for the interpretation and administration of the stock incentive plan and adopt any modifications, procedures or sub-plans that may be necessary or desirable to comply with the laws of foreign countries in which we or our affiliates operate to assure the viability of awards granted under the stock incentive plan.

Options

Options are subject to such terms and conditions as the Compensation Committee deems appropriate. The Compensation Committee determines the per share exercise price of options which will not be less than 100% of the fair market value of the Class A Ordinary Shares on the date of grant. Options expire ten years from the date of grant and vest and become exercisable as determined by the Compensation Committee on the date of grant.

Unless otherwise provided in an individual option agreement and subject to the stock incentive plan’s adjustment provision, a change in control of the Company will not affect any options granted under the stock incentive plan. For purposes of the stock incentive plan, a change in control generally means any person or group becomes the beneficial owner of 51% or more of the Class A Ordinary Shares, or the Company consolidates or merges with or into any other person or group or the Company sells or otherwise disposes of all or substantially all of its assets and the assets of its subsidiaries.

Restricted Stock Awards

Restricted stock awards are subject to such terms and conditions as the Compensation Committee deems appropriate as set forth in individual award agreements. Participants may be entitled to vote the restricted stock while it is held in our custody. The Compensation Committee determines the purchase price of restricted Class A Ordinary Shares, which will not be less than the par value per Class A Ordinary Share ($0.10).

Stock Bonus Awards

Stock bonus awards are subject to such terms and conditions as the Compensation Committee deems appropriate. To the extent permitted so that the Class A Ordinary Shares awarded will be treated as fully paid, a stock bonus may be awarded in consideration for past services rendered.

Adjustments

The Compensation Committee will determine the appropriate adjustments to be made in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available with respect to an award upon the occurrence of certain events affecting our capitalization such as a dividend or other distribution, recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, spin-off or sale, transfer or disposition of all or substantially all of our assets or stock. For example, the Compensation Committee may adjust the number of Class A Ordinary Shares subject to outstanding awards and the exercise price of outstanding options.

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Amendment/Termination

Our Board of Directors may amend the stock incentive plan at any time. Except as provided in the stock incentive plan, no amendment will be effective unless approved by our shareholders to the extent shareholder approval is necessary to satisfy any applicable law or any national securities exchange listing requirements and no amendment will be made that would adversely affect rights under an award previously granted under the stock incentive plan without the consent of the affected participants. The Compensation Committee may suspend or terminate the stock incentive plan at any time.

Unless sooner terminated, the stock incentive plan will terminate on August 10, 2014.

Withholding

We have the right to require any participant to pay to us any amount of taxes which we or one of our affiliates will be required to withhold with respect to any award.

Section 409A

To the extent applicable, we intend for the stock incentive plan to comply with Section 409A of the Code, and we will interpret and administer it accordingly.

Potential Payments Upon Termination or Change in Control

Employment Agreements

In the event that we terminate Mr. Goldberg’s employment without cause (as defined below), Mr. Goldberg terminates for good reason (as defined below) or his employment terminates at the end of the term of his employment agreement without an offer from us of continued employment on substantially similar terms, we will pay Mr. Goldberg a lump sum payment as soon as practicable following termination equal to accrued but unpaid base salary, bonus, and vacation pay; and a pro-rated portion of the target bonus that would have been paid for the year in which his employment terminated assuming targets had been achieved. In addition, we will pay him as severance in twelve monthly installments the sum of his annual base salary and target bonus provided that he does not breach the restrictive covenants in his employment agreement. These payments will be delayed for six months if the Board of Directors determines that Mr. Goldberg is a ‘‘specified employee’’ within the meaning of Section 409A of the Code.

If Mr. Goldberg’s employment terminates as a result of his death or permanent retirement from the reinsurance industry, Mr. Goldberg and/or his beneficiary, legal representatives or estate are entitled to accrued but unpaid base salary, bonus, and vacation pay; and a pro-rated portion of the target bonus that would have been paid for the year in which his employment terminated assuming targets had been achieved, as soon as practicable following termination. In addition, if Mr. Goldberg’s employment terminates as a result of his death, his spouse and dependents are entitled to receive health benefits for one year. We may terminate Mr. Goldberg’s employment agreement upon thirty days’ prior written notice if he becomes disabled. If Mr. Goldberg’s employment terminates because of disability (as defined below), in addition to the accrued but unpaid compensation discussed above and pro-rated bonus, Mr. Goldberg is entitled to receive base salary and continued health benefits for the lesser of one year or until Mr. Goldberg is eligible to receive long-term disability benefits under any long-term disability plan that we may establish. Continued base salary payments will be paid in accordance with our regular payroll schedule. If we are not able to provide Mr. Goldberg, his spouse, or dependents with continued participation in our health plan, we will pay Mr. Goldberg for the cost of such benefits which does not exceed the amount which we would have paid if they had been entitled to participate. The cost of such benefits will be paid in accordance with the procedures we establish.

We may require that Mr. Goldberg execute a release of claims against us as a condition for compensation or benefits payable upon any termination of employment.

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In the event that we terminate Mr. Courtis’ or Mr. Hedges’ employment without cause (as defined below), or either Named Executive Officer terminates his employment for good reason, (as defined below), we will pay him accrued but unpaid base salary, bonus, and vacation pay; and a pro-rated portion of the target bonus that would have been paid for the year in which he was terminated assuming targets had been achieved, as soon as practicable following termination. In addition, we will pay him severance in twelve monthly installments equal to the sum of his annual base salary and target bonus assuming targets had been achieved, provided that he does not breach the restrictive covenants in his employment agreement. Because he would need to relocate upon his termination from the Company, Mr. Courtis is also entitled to receive an additional $25,000 lump sum payment at the same time he receives his first monthly severance payment. Payments will be delayed for six months if the Board of Directors determines that Mr. Courtis or Mr. Hedges is a ‘‘specified employee’’ within the meaning of Section 409A of the Code.

If either Mr. Courtis’ or Mr. Hedges’ employment terminates as a result of his death, his beneficiary, legal representatives or estate are entitled to accrued but unpaid base salary, bonus, and vacation pay; and a pro-rated portion of the target bonus that would have been paid for the year in which his employment terminated assuming targets had been achieved, as soon as practicable following termination. In addition, his spouse and dependents are entitled to receive health benefits for one year. We may terminate Mr. Courtis’ or Mr. Hedges’ employment agreement upon thirty days’ prior written notice if he becomes disabled. If Mr. Courtis’ or Mr. Hedges’ employment terminates because of disability, he is entitled to accrued but unpaid base salary, bonus, and vacation pay; a pro-rated portion of the target bonus that would have been paid for the year in which his employment was terminated assuming targets had been achieved, as soon as practicable following termination; and base salary and continued health benefits for the lesser of one year or until he is eligible to receive long-term disability benefits under any long-term disability plan that we may establish. Continued base salary payments will be paid in accordance with our regular payroll schedule. If we are not able to provide either Mr. Courtis or Mr. Hedges, their spouses, or dependents with continued participation in our health plan, we will pay for the cost of such benefits which does not exceed the amount which we would have paid if they have been entitled to participate. The cost of such benefits will be paid in accordance with the procedures we establish. If Mr. Hedges’ employment is terminated without cause in connection with a dissolution of Greenlight Reinsurance, Ltd. which occurs prior to January 10, 2009, he is entitled to receive accrued but unpaid base salary, bonus, and vacation pay; and a pro-rated portion of the target bonus that would have been paid for the year in which his employment terminated assuming targets had been achieved, as soon as practicable following termination. In addition, under such circumstances, Mr. Hedges will receive a lump sum cash payment on the same date severance would otherwise be payable equal to the greater of the sum of his annual base salary and target bonus for the year of termination or the aggregate sum of base salary which Mr. Hedges would have received from the date of termination through January 10, 2009.

We may require that Mr. Courtis or Mr. Hedges execute a release of claims against us as a condition for compensation or benefits payable upon any termination of employment.

For purposes of the employment agreements, cause generally means:

•  the Named Executive Officer’s drug or alcohol use which impairs his ability to perform his duties;
•  conviction by a court, or plea of ‘‘no contest’’ or guilty to a criminal offense;
•  engaging in fraud, embezzlement or any other illegal conduct with respect to us and/or any of our affiliates;
•  willful violation of the restrictive covenants set forth in his employment agreement;
•  willful failure or refusal to perform the duties under his employment agreement; or
•  breach of any material provision of his employment agreement or any of our or any of our affiliate’s policies related to conduct which is not cured, if curable, within ten days after written notice is given.

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For purposes of the employment agreements, good reason generally means any of the following events which is not cured, if curable, within 30 days after the Named Executive Officer has given notice thereof:

•  any material and adverse change to the Named Executive Officer’s duties or authority which are inconsistent with his title and position;
•  a reduction of the Named Executive Officer’s base salary; or
•  a failure by us to comply with any other material provisions of the employment agreement.

In addition to the above provisions, the definition of ‘‘good reason’’ in Mr. Goldberg’s employment agreement also includes a diminution of his title or position; or a change in control (change in control has the same definition as in the stock incentive plan discussed above).

For purposes of the employment agreements, disability generally means if, as a result of incapacity due to physical or mental illness, the Named Executive Officer is substantially unable to perform his duties for an entire period of at least 90 consecutive days or 180 non-consecutive days within any 365-day period.

Stock Incentive Plan and Options Awarded Thereunder

Under the terms of the stock incentive plan, unless an option award provides otherwise, upon termination other than for cause death or disability (as defined below), all unvested options terminate and the participant may exercise his or her vested options within the period ending upon the earlier of three months following termination or ten years from the date of grant of the option (i.e., the option’s expiration date). Unless an option award provides otherwise, upon termination for cause, all vested and unvested options will terminate. Unless an option award provides otherwise, upon termination for death or disability, all unvested options will terminate, and the vested portion of the option may be exercised for the period ending upon the earlier of twelve months following termination or the option’s expiration date.

Under the terms of the option grants which Mr. Goldberg received in 2005 and 2006, any unvested portion of each option award vests upon our termination of his employment without cause, (as defined in his employment agreement, see description above), or Mr. Goldberg’s termination of employment for good reason (as defined in his employment agreement, see description above), or when his employment period expires if we do not offer Mr. Goldberg continued employment on substantially similar terms, and the option will remain exercisable until the expiration date. Upon Mr. Goldberg’s termination for death or disability (as defined in his employment agreement, see description above), any unvested portion of the option will terminate and any vested portion of the option will remain exercisable until the expiration date. If we terminate Mr. Goldberg’s employment due to his permanent retirement from the reinsurance industry, any unvested portion of the option will terminate, and the vested portion will remain exercisable until the tenth anniversary of the date of grant, unless Mr. Goldberg becomes employed by an entity which competes with any aspect of our or our affiliate’s business, in which case, the option will immediately terminate. If we terminate Mr. Goldberg’s employment for cause, all vested and unvested portions of the option will terminate. If Mr. Goldberg’s employment terminates under any other circumstances, the unvested portion of the option will terminate and the vested portion will remain exercisable for ninety days, but no later than the expiration date.

Under the terms of the option grants awarded to Mr. Courtis and Mr. Hedges, upon termination of employment, the awards remain exercisable in accordance with the terms of the stock incentive plan, except that upon termination other than for cause, death, or disability each as defined below, all vested options remain exercisable for the period ending upon the earlier of ninety days or the expiration date.

Upon a change in control (as defined in the stock incentive plan, see description above), the Compensation Committee has the discretion to vest unvested awards. In the tables below, it is assumed that the Compensation Committee exercised this discretion.

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For purposes of the stock incentive plan, ‘‘cause’’ generally means: if the participant is a party to an employment agreement or other agreement with us or an affiliate and such agreement provides for a definition of cause, the definition contained in the agreement, or, if no such agreement or definition exists, cause means a participant’s:

•  material breach of his employment or other agreement;
•  continued failure to satisfactorily perform assigned job responsibilities or to follow the reasonable instructions of his superiors, including, without limitation, the Board of Directors;
•  commission of a crime constituting a criminal offense or felony (or its equivalent) or other crime involving moral turpitude; or
•  material violation of any material law or regulation or any policy or code of conduct adopted by the Company or engaging in any other form of misconduct which, if it were made public, could reasonably be expected to adversely affect our or an affiliate’s business reputation or affairs.

For purposes of the stock incentive plan, ‘‘disability’’ generally means, if the participant is a party to an employment agreement or other agreement with us or an affiliate and the agreement provides for a definition of disability, the definition contained in the agreement, or, if no such agreement or definition exists, disability will mean the failure of the participant to perform his duties due to physical or mental incapacity as determined by the Compensation Committee.

Assuming Mr. Goldberg’s employment terminates under each of the circumstances described above on December 31, 2006, such payments and benefits have an estimated value of:


Event Pro-
Rated
Bonus 		Total
Cash
Severance 		Value of
Medical
Continuation 		Value of
Accelerated
Equity (3)
Termination without Cause, for Good Reason, or upon expiration of the Agreement without similar offer of employment $ 500,000
$ 1,000,000
(1 )
N/A
 
Death $ 500,000
N/A
$ 9,891
N/A
Permanent Resignation from the Reinsurance Industry $ 500,000
N/A
N/A
N/A
Disability $ 500,000
$ 500,000
(2 )
$ 9,891
N/A
Change in Control N/A
N/A
N/A
 
(1) Calculated as the sum of base salary ($500,000) and target bonus ($500,000).
(2) Calculated as one times base salary.
(3) Calculated as the spread value of the options subject to accelerated vesting if a change in control occurred on December 31, 2006 but using the mid-point range in the offering.

Assuming Mr. Hedges’ employment terminates under each of the circumstances described above on December 31, 2006, such payments and benefits have an estimated value of:

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Event Pro-
Rated
Bonus 		Total
Cash
Severance 		Value of
Medical
Continuation 		Value of
Accelerated
Equity (3)
Termination without Cause or for Good Reason $ 450,000
$ 900,000
(1 )
N/A
N/A
Death $ 450,000
N/A
$ 7,381
N/A
Disability $ 450,000
$ 450,000
(2 )
$ 7,381
N/A
Change in Control N/A
N/A
N/A
 
Termination without Cause in Connection with Dissolution of Greenlight Reinsurance, Ltd. $ 450,000
$ 912,329
(4 )
N/A
N/A
(1) Calculated as the sum of base salary ($450,000) and target bonus ($450,000).
(2) Calculated as one times base salary.
(3) Calculated as the spread value of the options subject to accelerated vesting if a change in control occurred on December 31, 2006 but using the mid-point range in the offering.
(4) Calculated as the aggregate base salary that would have been paid from January 1, 2007 through January 10, 2009.

Assuming Mr. Courtis’ employment terminates under each of the circumstances described above on December 31, 2006, such payments and benefits have an estimated value of:


Event Pro-
Rated
Bonus 		Total
Cash
Severance 		Value of
Medical
Continuation 		Value of
Accelerated
Equity (3)
Termination without Cause or for Good Reason $ 83,904
$ 400,000
(1 )
N/A
N/A
Death $ 83,904
N/A
$ 9,891
N/A
Disability $ 83,904
$ 250,000
(2 )
$ 9,891
N/A
Change in Control N/A
N/A
N/A
 
(1) Calculated as the sum of base salary ($250,000) and target bonus ($125,000) plus an additional $25,000.
(2) Calculated as one times base salary.
(3) Calculated as the spread value of the options subject to accelerated vesting if a change in control occurred on December 31, 2006 but using the mid-point range in the offering.

Director Compensation

We currently have four independent directors that qualify for compensation. Under our Articles, our directors may receive such compensation for their services as may be determined by the Board of Directors. Neither Mr. Einhorn nor Mr. Goldberg is eligible for compensation as a member of the Board of Directors. Prior to this offering, we paid our directors, excluding Mr. Einhorn and Mr. Goldberg, an annual retainer of $10,000, a per meeting fee of $2,000, and a per committee meeting fee of $1,000. A Board member who attends a meeting telephonically receives one-half of the scheduled fee. We reimburse directors for usual and customary expenses while on company business.

In addition to cash compensation, our directors received an initial grant of restricted stock when they joined the Board of Directors, and may receive additional equity grants at the discretion of the Board of Directors.

After becoming a public company, we expect to increase the compensation of our directors in order to provide them with compensation comparable to directors of publicly-traded companies of similar size.

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Director Compensation Table

The following Director Compensation Table summarizes the compensation paid to our directors in 2006.


Name Fees
Earned or
Paid in
Cash ($) 		Stock
Awards ($) (1) 		Option
Awards
($) (2) 		Non-Equity
Incentive Plan
Compensation ($) 		Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($) 		All Other
Compensation ($) 		Total ($)
Alan Brooks 27,500
16,666
6,410
—
—
—
50,576
Ian Isaacs (3) 29,000
16,666
6,410
—
—
—
52,076
Frank Lackner 26,500
16,666
6,410
—
—
—
49,576
Joseph Platt 30,000
16,666
6,410
—
—
—
53,076
(1) The aggregate number of stock awards held by each director on December 31, 2006 was 5,000. All awards were granted under our stock incentive plan. We account for the stock incentive plan under SFAS No. 123R, ‘‘Share-Based Payments.’’ The value reported above in the ‘‘Stock Awards’’ column is the amount we expensed during 2006 for each director’s stock award.
(2) The aggregate number of option awards held by each director on December 31, 2006 was 2,000. All awards were granted under our stock incentive plan. The full grant date fair value of the options computed in accordance with FAS No. 123R is $12,340 per director listed in this table. We account for the stock incentive plan under SFAS No. 123R, ‘‘Share-Based Payments.’’ The value reported above in the ‘‘Option Awards’’ column is the amount we expensed during 2006 for each director’s option award.
(3) Mr. Isaacs resigned from our Board of Directors on February 16, 2007 as his employer has a policy that prohibits employees from serving on boards of publicly-traded companies.

For 2007, our directors will receive a retainer of $50,000 payable quarterly in cash or restricted Class A Ordinary Shares at each director’s option, as well as 2,000 restricted Class A Ordinary Shares which will vest on March 15, 2008. The chairman of our Audit Committee will receive an additional retainer of $20,000 payable quarterly. Directors will not be entitled to individual meeting fees.

Directors’ Option Exercises and Stock Vested

On September 20, 2004, we granted restricted stock awards to four directors, Messrs. Platt, Lackner, Isaacs and Brooks, in respect of 5,000 Class A Ordinary Shares each under our stock incentive plan. The restricted stock awards vest one third on each of September 20, 2005, September 20, 2006 and September 20, 2007, subject to the director’s continued service. All of the shares subject to the restricted stock award will vest upon the director’s death or disability or upon a change in control (each as defined in the stock incentive plan, see description above). If the director’s service terminates for any other reason prior to the vesting dates, the unvested shares subject to the restricted stock award will be repurchased by us at par value and cancelled.

On February 28, 2006, we granted options to four directors, Messrs. Platt, Lackner, Isaacs and Brooks, to acquire 2,000 Class A Ordinary Shares with a per share exercise price of $12.05. Each of the options vests and becomes exercisable with respect to 666 shares on each of February 28, 2007, February 28, 2008 and February 28, 2009, subject to the director’s continued service with us.

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The following table summarizes the options exercised and the Class A Ordinary Shares vested during 2006.


  Option Awards Stock Awards
Name Number of Shares
Acquired on
Exercise (#) 		Value Realized on
Exercise ($) 		Number of Shares
Acquired on
Vesting (#) 		Value Realized on
Vesting ($) (1)
Alan Brooks —
—
1,666
21,158
Ian Isaacs (2) —
—
1,666
21,158
Frank Lackner —
—
1,666
21,158
Joseph Platt —
—
1,666
21,158
(1) The value realized on vesting represents the number of Class A Ordinary Shares vested multiplied by the adjusted book value of the shares on the month-end prior to the vesting date.
(2) Mr. Isaacs resigned from our board of directors on February 16, 2007 as his employer has a policy that prohibits employees from serving on boards of publicly-traded companies.

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PRINCIPAL SHAREHOLDERS

The following table shows information known to us with respect to the beneficial ownership of our Ordinary Shares as of March 7, 2007, and as adjusted to reflect the sale of Class A Ordinary Shares offered in the public offering under this prospectus and the concurrent private placement of Class B Ordinary Shares for:

•  each person or group who beneficially owns more than 5% of our Ordinary Shares;
•  each of our named Executive Officers;
•  each of our directors; and
•  all of our directors and Executive Officers as a group.

Beneficial ownership of shares is determined under the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Except as indicated by footnote, and subject to applicable community property laws, each person identified in the table possesses sole voting and investment power with respect to all Ordinary Shares held by them. Class A Ordinary Shares subject to options and warrants currently exercisable or exercisable within 60 days of March 7, 2007, and not subject to repurchase as of that date, are deemed to be outstanding for calculating the percentage of outstanding shares of the person holding these options, but are not deemed to be outstanding for calculating the percentage of any other person. Applicable percentage ownership in the following table is based on 21,563,900 Ordinary Shares outstanding as of March 7, 2007. Unless otherwise indicated, the address of each of the named individuals is c/o 802 West Bay Road, The Grand Pavilion, P.O. Box 31110, Grand Cayman, KY1-1205, Cayman Islands.


    Beneficial ownership of principal shareholders after this
offering and the concurrent private placement offering
Name and address
of beneficial owner 		Beneficial ownership of principal
shareholders prior to the offering
and the concurrent private placement 		Excluding Exercise of
Underwriters’ Option 		Including Exercise of
Underwriters’ Option
  Number % Number
of Shares 		% Number
of Shares 		%
David Einhorn (1) 3,623,370
16.80
%
       
Montpellier International LDC (2) 2,000,000
9.27
%
       
Keren Ohr Lanoar ‘‘B’’ (3) 1,500,000
6.96
%
       
United Congregation Mesorah (4) 1,500,000
6.96
%
       
Seneca Capital International Ltd. (5) 1,250,000
5.80
%
       
Scoggin International Fund, Ltd. (6) 1,100,000
5.10
%
       
Leonard Goldberg (7) 246,667
*
       
Daniel Roitman 145,670
*
       
Barton Hedges (8) 114,133
*
       
Joseph Platt (9) 75,667
*
       
Frank D. Lackner (10) 68,667
*
       
Alan Brooks (11) 61,667
*
       
Tim Courtis (12) 75,000
*
       
Jerome Simon —
*
       
All directors and Executive Officers as a
group (9 persons) 		4,410,841
20.34
%
       
* Represents less than 1% of the outstanding Ordinary Shares.
(1) Prior to this offering, David Einhorn owns 3,623,370 Class B Ordinary Shares. Generally, each Class B Ordinary Share is entitled to ten votes per share. However, Mr. Einhorn, together with his affiliates, is limited to voting the number of Class B Ordinary Shares equal to 9.5% of the total voting power of the total issued and outstanding Ordinary Shares.

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(2) Montpellier International LDC, Q&H Corporate Services, Ltd. P.O. Box 1348GT, Grand Cayman, Cayman Islands.
(3) 6 Belilus Street, Jerusalem 94704, Israel
(4) One State Street Plaza, 29 th Floor, New York, NY 10004
(5) 950 Third Avenue, 29 th Floor, New York, NY 10022
(6) 109 Shirley Street, P.O. Box EE-17758, Nassau, Bahamas
(7) Includes 166,667 shares subject to options held by Mr. Goldberg.
(8) Includes 83,333 shares subject to options held by Mr. Hedges.
(9) Includes 667 shares subject to options held by Mr. Platt and 70,000 shares held by a partnership of which Mr. Platt is the general partner.
(10) Includes 667 shares subject to options held by Mr. Lackner.
(11) Includes 667 shares subject to options held by Mr. Brooks.
(12) Includes 25,000 shares subject to options held by Mr. Courtis.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Audit Committee Charter

Our audit committee charter, which was approved and adopted in February 2007, provides that the audit committee will review and approve all related-party transactions.

Advisory Agreement

We have entered into the advisory agreement with DME Advisors. Pursuant to the terms of the advisory agreement, DME Advisors has the exclusive right to manage our investments, subject to the investment guidelines adopted by our Board of Directors for so long as the agreement is in effect.

DME Advisors receives two forms of compensation:

•  a 1.5% annual fee payable monthly based on net assets value of our investment account, excluding assets used to collateralize Regulation 114 Trusts; and
•  performance compensation based on the appreciation in the value of our investment account equal to 20% of net profits calculated per annum, subject to a loss carryforward provision. The loss carryforward provision allows DME Advisors to earn a reduced incentive fee of 10% in any year after our investments managed by the investment advisor incur a loss, until all the losses are recouped and an additional amount equal to 150% of the loss is earned.

The advisory agreement requires that DME Advisors follow our investment guidelines and act in a manner that it considers fair and equitable in allocating investment opportunities to us, but does not otherwise impose any specific obligations or requirements concerning the allocation of time, effort or investment opportunities to us or any restrictions on the nature or timing of investments for our account and for DME Advisors’ own account or other accounts which DME Advisors or its affiliates may manage. In addition, DME Advisors can outsource to subadvisors without our consent or approval. In the event that DME Advisors and any of its affiliates attempt to simultaneously invest in the same opportunity, the opportunity will be allocated pro rata as reasonably determined by DME Advisors and its affiliates. Affiliates of DME Advisors presently serve as general partner or investment advisor of the Greenlight Funds. Each of the Greenlight Funds utilizes an investment strategy that may compete with our investment strategy. David Einhorn is the chairman of our Board of Directors and holds more than 10% of our outstanding ordinary shares, although pursuant to our Articles his voting percentage will be reduced to 9.5% of the total outstanding vote. He is a controlling person of DME Advisors, our investment advisor, as well as a controlling person of each of the Greenlight Funds. Although Mr. Einhorn is an affiliate of ours, we are not directly affiliated with any of the Greenlight Funds.

The advisory agreement provides that DME Advisors and its principals, employees or agents are not liable to us or our shareholders for any acts or omissions in the performance of their services in the absence of:

•  willful misconduct, gross negligence, reckless disregard of any of its obligations under the advisory agreement. Additionally, the advisory agreement contains provisions for the indemnification of DME Advisors by us against certain liabilities to third parties arising in connection with the performance of its services to us;
•  breaches of our investment guidelines that are not cured within 15 days of the day on which DME Advisors became aware of the breach; or
•  the failure by DME Advisors to timely return or deliver assets to us if so requested.

We have agreed to use commercially reasonable efforts to cause all of our respective future subsidiaries to enter into substantially similar advisory agreements, provided that any such agreement shall be terminable on the same date that the advisory agreement is terminable. In addition, we have agreed that we will, at the written request of DME Advisors 90 days prior to any January 1 during the term of the advisory agreement, amend the advisory agreement so as to create a joint venture or partnership between us and DME Advisors so long as the creation of a joint venture or partnership does not, in the opinion of our legal counsel, create any material adverse tax, legal or regulatory consequences to us.

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The advisory agreement term is January 1, 2007 through December 31, 2009 and will automatically renew for successive three year terms unless we or DME notify the other party at least 90 days prior to the end of the three year term of its desire to terminate. We may terminate the advisory agreement prior to the expiration of its term only ‘‘for cause,’’ which is defined as:

•  a material violation of applicable law relating to DME Advisors’ advisory business;
•  DME Advisors’ gross negligence, willful misconduct or reckless disregard of its obligations under the advisory agreement;
•  a material breach by DME Advisors of our investment guidelines that is not cured within a fifteen day period; or
•  a material breach by DME Advisors’ of its obligations to return and deliver assets as may request.

For the years ended December 31, 2006 and 2005, we paid $4.1 million and $3.2 million, respectively in management fees and $14.6 million and $7.0 million in performance fees to DME Advisors. Management fees paid to DME Advisors during 2006 and 2005 were calculated in the same manner in which the fees are to be calculated under the advisory agreement we amended and restated with effect as of January 1, 2007.

Service Agreement

In February 2007, we entered into a service agreement with DME Advisors, pursuant to which DME Advisors will provide investor relation services to us for compensation of $5,000 per month (plus expenses). The agreement has an initial term of one year, and will continue for sequential one year periods until terminated by us or DME Advisors. Either party may terminate the agreement for any reason with thirty (30) days prior written notice to the other party.

Consulting Agreement

In August 2002, prior to our formation, Greenlight Capital, Inc., an affiliate of GCI, entered into a consulting agreement with First International. First International received a cash payment of $75,000 for the preparation and delivery of a feasibility study relating to the formation, capitalization, licensing and operation of the Company. Additionally, First International received 10-year share purchase options to purchase 400,000 Class A Ordinary Shares, upon consummation of the initial private placement of our Ordinary Shares. First International assigned the share purchase options to its successor First International Capital Holdings Ltd. on June 30, 2003. The share purchase options were granted on September 20, 2004 at an exercise price of $10.00 per share. The share purchase options expire on August 11, 2014 and are not transferable unless approved by our Board. The share purchase options are subject to the Shareholders’ Agreement dated as of August 11, 2004 by and among the Company and each of the other signatories thereto. As of December 31, 2006, Frank Lackner, one of our directors, owns share purchase options on 20,000 Class A Ordinary Shares because he was an independent contractor to First International.

Promissory Note

Pursuant to a Securities Purchase Agreement dated August 11, 2004, between us and GCI, an entity managed and controlled by David Einhorn, we issued to GCI 5,050,000 Class B Ordinary Shares for an aggregate consideration of $50.5 million composed of $26.0 million in cash and a $24.5 million aggregate principal amount promissory note. The promissory note provided that GCI pay interest to us annually at a rate of the 1-year London Interbank Offered Rate, or LIBOR, plus 3% per annum accrued daily. During the years ended December 31, 2006 and 2005, GCI repaid $16.2 million and $8.3 million of the principal amount of the promissory note, respectively. During the years ended December 31, 2006, 2005 and 2004, the interest on the promissory note equaled $1.0 million, $1.3 million and $0.5 million, respectively at a rate of approximately 8.5%, 7.3% and 5.3% for the corresponding years. The promissory note was fully repaid and cancelled on December 6, 2006.

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Shareholders’ Agreement

Pursuant to our Shareholders’ Agreement, GCI had the right to unlimited demand registration rights once we are eligible to use Form S-3 (or similar short form registration forms). GCI assigned its demand registration rights under the Shareholders’ Agreement, with our consent, to David Einhorn on January 3, 2007.

Concurrent Private Placement Stock Purchase Agreement

In connection with our concurrent private placement, we entered into a stock purchase agreement on January 11, 2007 with David Einhorn, the Chairman of our Board of Directors. Under the terms of the stock purchase agreement, we agreed to sell $50 million of our Class B Ordinary Shares to Mr. Einhorn at a price per share equal to the per share price of the Class A Ordinary Shares that we are offering under this prospectus. Mr. Einhorn is obligated to complete the concurrent private placement unless this offering has not been consummated on or before September 30, 2007. At the completion of the concurrent private placement, Mr. Einhorn will own all of the Class B Ordinary Shares. See ‘‘Description of Capital Stock—Class B Ordinary Shares.’’

Mr. Einhorn will have registration rights for all of his Class B Ordinary Shares, as contemplated under the Shareholders’ Agreement, including the Class B Ordinary Shares that he will acquire in connection with the concurrent private placement. See ‘‘—Shareholders’ Agreement.’’

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DESCRIPTION OF SHARE CAPITAL

The following description of our share capital summarizes certain provisions of our Articles which will be in effect upon the closing of this offering, assuming we receive the requisite shareholder approval. This is a summary and does not contain all of the information that may be important to prospective investors.

Ordinary Shares

Our authorized share capital consists of:

•  125,000,000 Ordinary Shares, par value $0.10 per share, of which              (subject to adjustment) will be issued following the consummation of this offering and the concurrent private placement of Class B Ordinary Shares; and
•  50,000,000 Preferred Shares, par value $0.10 per share, none of which will be issued following the consummation of this offering.

Our Board of Directors may create classes and series of shares and may increase or decrease the number of shares of any class or series as they see fit. They also may, subject to the provisions of the Companies Law and the Law and to any rights attaching to the issued and outstanding shares, cancel, redeem or purchase any shares and shares of any class or series and further terminate any class or series of shares.

Our Ordinary Shares are divided into 100,000,000 Class A Ordinary Shares,                of which will be issued and outstanding following the consummation of this offering, and 25,000,000 Class B Ordinary Shares,                of which will be issued and outstanding after the consummation of the concurrent private placement of Class B Ordinary Shares. Except as set forth in ‘‘Class B Ordinary Shares’’ below, the holders of all Ordinary Shares are entitled:

(i)  to share equally share for share in dividends (whether payable in cash, property or our securities) as our Board of Directors may from time to time declare in accordance with the provisions of our Articles and the Companies Law;
(ii)  in the event of our winding-up or dissolution, whether voluntary or involuntary or for the purpose of an amalgamation, reorganization or otherwise or upon any distribution of share capital and surplus, to share equally and ratably in our assets, if any, remaining after the payment of all of our debts and liabilities and the liquidation preference of any issued and outstanding Preferred Shares; and
(iii)  generally to enjoy all of the rights attaching to such shares.

Holders of Ordinary Shares have no pre-emptive, redemption, conversion or sinking fund rights.

Dividend Policy

Since inception, we have not paid any dividends and we expect we will not pay any dividends for the foreseeable future. Our ability to pay dividends depends on the ability of Greenlight Reinsurance, Ltd. to pay dividends to us. Greenlight Reinsurance, Ltd. is subject to the Cayman Islands regulatory constraints that affect its ability to pay dividends to us. Under the Law and related regulations, Greenlight Reinsurance, Ltd. must maintain a minimum net worth and may not declare or pay dividends that would result in non-compliance with such requirements. In addition, under the Companies Law, we or Greenlight Reinsurance, Ltd. may not pay or declare a dividend unless immediately following the date on which the dividend is proposed to be paid by us or Greenlight Reinsurance, Ltd., as the case may be, we are able to pay our debts as they fall due in the ordinary course of business. Finally, any future declaration and payment of dividends is discretionary and our Board of Directors may at any time modify or revoke our dividend policy on our Class A Ordinary Shares. Any determination to pay cash dividends will be dependent on any factors that our Board of Directors deems relevant, such as our results of operations and cash flows, our financial position and capital requirements, general business conditions, rating agency guidelines, legal, tax, regulatory and any contractual restrictions on the payment of dividends. Accordingly, we may not be able to declare or pay dividends on the Ordinary Shares.

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Holders of Ordinary Shares are entitled to receive dividends when, as and if declared by the Board of Directors in accordance with the provisions of our Articles and the Companies Law. In the event of a liquidation, dissolution or winding-up of the company, the holders of Ordinary Shares are entitled to share equally and ratably in our assets, if any remain after the payment of all of our debts and liabilities and the liquidation preference of any outstanding Preferred Shares.

Voting – General

All matters placed on the agenda of any general meeting of our shareholders generally require the affirmative vote of a majority of the votes cast at a meeting at which a quorum is present. The removal of a Director for cause requires the affirmative vote of not less than fifty percent (50%) of the total voting power entitled to vote at a meeting at which a quorum is present, and certain material actions to be taken by us require the affirmative vote of sixty-six and two thirds percent (66 2/3%) of the votes cast at a meeting at which a quorum is present. The quorum required for a general meeting of shareholders is two or more persons present in person and representing in person or by proxy more than 50% of the issued and outstanding Ordinary Shares.

Class A Ordinary Shares

Generally, each Class A Ordinary Share is entitled to one vote per share. However, except upon unanimous consent of the Board of Directors, no holder shall be permitted to acquire an amount of shares which would cause any person to own (directly, indirectly or constructively under applicable United States tax attribution and constructive ownership rules) 9.9% or more of the total voting power of the total issued and outstanding Ordinary Shares. Due to the voting limitations on our Class B Ordinary Shares described below, immediately after the offering and the concurrent private placement, each Class A Ordinary Share will be effectively entitled to more than one vote per share subject to the 9.9% restriction in this paragraph.

Class B Ordinary Shares  

Generally, each Class B Ordinary Share is entitled to ten votes per share. However, the total voting power of all Class B Ordinary Shares, as a class, shall not exceed 9.5% of the total voting power of the total issued and outstanding Ordinary Shares. The voting power of any Class A Ordinary Shares held by any holder of Class B Ordinary Shares (whether directly, or indirectly or constructively under applicable United States tax attribution and constructive ownership rules) shall be included for purposes of measuring the total voting power of the Class B Ordinary Shares.

In the event of a sale, transfer, exchange or other disposition, a transfer of any Class B Ordinary Shares by a holder thereof, other than a transfer to a permitted transferee, as defined in our Articles, the Class B Ordinary Shares shall be automatically converted into an equal number of Class A Ordinary Shares.

The one-for-one conversion ratio for the conversion of Class B Ordinary Shares into Class A Ordinary Shares will be equitably adjusted in the event of any recapitalization of the company by means of a share dividend on, or a share split or combination of, outstanding Class A Ordinary Shares or Class B Ordinary Shares, or in any amalgamation, or other reorganization of the company with another company.

We will reserve and keep available sufficient authorized but unissued Class A Ordinary Shares to effectuate the conversion of Class B Ordinary Shares into Class A Ordinary Shares. If any Class B Ordinary Shares are converted, the converted Class B Ordinary Shares will be cancelled.

Limitation on Share Ownership

Under our Articles, except upon unanimous consent by the Board of Directors:

•  no person shall be allowed to acquire Class A Ordinary Shares if such acquisition would cause any person to own (directly, indirectly or constructively under applicable United States tax attribution and constructive ownership rules) 9.9% or more of the issued and outstanding Ordinary Shares; and

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•  no person shall be allowed to acquire Class A Ordinary Shares if such acquisition would cause such person to own directly 9.9% or more of the issued and outstanding Ordinary Shares.

Under our Articles, our Board of Directors may send a repurchase notice in the event that it determines in its absolute discretion that:

•  a transfer would violate the ownership limitations described above; or
•  a transfer would result in an increased risk of adverse tax, regulatory or legal consequences to us. In the event the Board of Directors determines an ownership limitation has been violated, we have the option, but not the obligation, to purchase all or any part of the shares, to the extent we determine it is necessary or advisable to avoid or cure any adverse or potentially adverse consequences.

Preferred Shares

Pursuant to our Articles and Cayman Islands law, the Board of Directors may establish one or more series of preferred shares having such number of shares, designations, relative voting rights, dividend rates, liquidation and other rights, preferences, powers and limitations as may be fixed by the Board of Directors without any further shareholder approval. Any preferred shares issued will include restrictions on voting and transfer intended to avoid having us constitute a ‘‘controlled foreign corporation’’ for United States federal income tax purposes. Such rights, preferences, powers and limitations as may be established could have the effect of discouraging an attempt to obtain control of us. The issuance of preferred shares could also adversely affect the voting power of the holders of the Ordinary Shares, deny shareholders the receipt of a premium on their Ordinary Shares in the event of a tender or other offer for the Ordinary Shares and have a depressive effect on the market price of the Ordinary Shares. We have no present plan to issue any preferred shares.

Corporate Governance

Our Articles provide for the corporate governance of the Company, including the establishment of share rights, modification of such rights, issuance of share certificates, the transfer of shares, alterations to capital, the calling and conduct of general and special meetings, proxies, the appointment and removal of directors, conduct and powers of directors, the payment of dividends and the winding-up of the Company.

Our Articles provide that the Board of Directors will be elected annually. Shareholders may remove a director for cause as defined in the Articles prior to the expiration of such director’s term at a meeting of shareholders at which a quorum is present and more than 50% of the total voting power entitled to vote is cast in favor of such action. A general meeting of shareholders may be convened by the Chairman or any two directors or any director and the secretary of the Board of Directors.

Certain provisions of our Articles may only be amended upon the affirmative vote of sixty-six and two thirds percent of the votes cast at a meeting of shareholders where a quorum is present. A copy of our Articles will be sent to any prospective investor that requests a copy.

Subject to the provisions of our Articles, the directors, secretary and officers shall be held harmless for any acts or omissions in the performance of their duties in the absence of willful negligence, willful default, fraud or dishonesty. Our Articles contain provisions for the indemnification of directors, officers and the secretary against liabilities to third parties arising in connection with the performance of their services by us, to the extent approved by a majority of the disinterested members of the Board of Directors. Expenses may be advanced to indemnified parties if approved by a majority of the disinterested directors.

Registration Rights

The holders of our Ordinary Shares prior to this offering have certain registration rights pursuant to the Shareholders’ Agreement, dated August 11, 2004. Following the consummation of the offering described in the prospectus, these holders of Ordinary Shares are entitled to ‘‘piggyback’’ registration rights on certain of our registrations, including a registration pursuant to the exercise of the demand rights described below.

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Additionally, one hundred eighty days after the consummation of this offering, the holders of at least 50% of the Ordinary Shares, will have a one-time right to require us to register Ordinary Shares on Form S-1 (or other similar long form registration forms); provided that the aggregate offering proceeds from the registered Ordinary Shares is expected to exceed $30 million. David Einhorn, pursuant to an assignment, dated January 3, 2007, by GCI of its rights under the Shareholder’s Agreement, also has the right to unlimited demand registrations once we are eligible to use Form S-3 (or similar short form registration forms). We will not be required to effect more than two registrations pursuant to the demand rights in any 12 month period.

The registration rights described above can be modified on a pro rata basis if the managing underwriters for the registered offering believe modification is necessary due to market considerations. With the exception of David Einhorn, a shareholder will not be permitted to participate in any demand or piggyback registrations if such shareholder may freely trade its Ordinary Shares under the Securities Act and the rules promulgated thereunder. In general, persons who are not affiliates of an issuer may freely trade unregistered securities in the United States two years after the date such securities were initially acquired and paid for in full.

We are required to bear all expenses of all registration (exclusive of underwriting discounts and commissions, transfer taxes and fees and expenses of more than one counsel (and one local counsel, as reasonably required) for all selling shareholders).

Transfer Restrictions

Our Articles contain several provisions restricting the transferability of our Ordinary Shares. Our Articles provide that, if our Board of Directors determines in its sole and absolute discretion that:

•  any transfer of shares would violate the ownership limitations described above; or
•  the transfer would result in an increased risk of adverse tax, regulatory or legal consequences to us or any or our shareholders,

the transfer may not be registered on our share register and, if not registered, would be void and of no effect. Our Articles also provide that in the event that our Board of Directors determines that an ownership limitation has been violated as a result of any transfer, we shall have the option, but not the obligation, to purchase all or any part of the Ordinary Shares, to the extent we determine it is necessary or advisable to avoid or cure any adverse or potentially adverse consequences resulting from such transfer.

In connection with any transfer of Ordinary Shares, and in addition to the certification requirement described above, holders of Ordinary Shares will only be able to transfer their Ordinary Shares in compliance with the provisions of the Securities Act. Pursuant to the Shareholders’ Agreement, if a holder of Ordinary Shares desires to transfer its Ordinary Shares and they have not been registered under the Securities Act, the Company will be permitted to ask such holder to provide an opinion of counsel that the transfer may be effected without registration under the Securities Act. The transferee of such Ordinary Shares may be required to provide the Company with a representation letter that it is acquiring the Ordinary Shares for investment purposes only and not with a view to distribute the Ordinary Shares it purchases.

Differences in Corporate Law

The Companies Law, 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 Companies Law (including modifications adopted pursuant to our Articles) applicable to us which differ in certain respects from provisions of Delaware corporate law. Because the following statements are summaries, they do not purport to deal with all aspects of Cayman Islands law that may be relevant to us and our shareholders.

Interested Party Transactions

No one will be disqualified from being elected Director or appointed an alternate Director because he has contracted with us. Likewise, none of our contracts will be deemed void because any

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Director or alternate Director is an interested party in such transaction. We will not hold any interested party liable for monies owed to us under such contract or transaction. A Director (or his alternate Director in his absence) may participate in the vote in respect of the contract or transaction in which he is interested as long as he disclosed his interest before that matter is considered or voted upon.

A Director or alternate Director may vote on a contract or transaction where he has an interest as a shareholder, director, officer or employee provided he disclosed the interest.

Under Delaware law such a transaction would be voidable unless:

•  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;
•  such material facts are disclosed or are known to the stockholder 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, such interested director could be held liable for a transaction in which such director derived an improper personal benefit.

Mergers and Similar Arrangements

We may petition the Cayman Islands courts to allow us to enter into a scheme of arrangement whereby we amalgamate with another Cayman Islands company or with a body incorporated outside of the Cayman Islands if each class of shareholders representing 75% in value of each class of shareholder of the Company is present and voting at a general meeting of each class of shareholders’ vote in favor of the proposed scheme. Assuming that shareholder approval is obtained, we must request a court hearing sanctioning the scheme of arrangement. Any shareholder may attend and be heard at this hearing to argue that the scheme ought not to be sanctioned and the Cayman Islands court can take any matter into account when considering whether or not to sanction the scheme of arrangement. If the court sanctions such a scheme then it becomes binding on all the shareholders whether or not they voted for or voted against the scheme. If the scheme of arrangement receives sanction of the Cayman Islands court, the court order must be filed with the Cayman Islands Registrar of Companies in order to become effective. Thereafter, the provisions of the scheme of arrangement can be put into place.

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.

Shareholders’ Suits

Under Cayman Islands law the general principle is that a shareholder cannot bring an action in his own name against those in control of the company if the cause of action is vested in the company and relief is accordingly sought on behalf of the company.

The exceptions to this general principle are:

•  where the alleged wrong is illegal or ultra vires the company;
•  where the applicable transaction required, but did not receive, sanction by a special resolution or special majority of shareholders;
•  where what has been done amounts to a fraud on the minority shareholders and the wrongdoers are in control of the company as directors or majority shareholder (in this context, fraud has its wider equitable meaning); or

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•  where the act complained of infringes a personal right of the shareholder seeking to bring the action. In any of these situations, the Grand Court may grant permission for the aggrieved shareholder(s) to bring a derivative action for the benefit of the company against the wrongdoers. The court may order the legal costs of commencing and progressing the action to be paid by the company.

Class actions are generally not available to shareholders under the laws of the Cayman Islands, although there is power under the Grand Court rules to make a representation order pursuant to which one person is appointed to represent other persons who have the same interest in the proceedings. The Grand Court rules also provide a regime for the recovery of costs by a successful party in litigation against an unsuccessful party. Although an order for costs is at the discretion of the court, a winning party will usually be entitled to recover a portion of attorneys’ fees for the litigation.

An alternative remedy available to shareholders under Cayman Islands law is to petition the Grand Court for an order that it is just and equitable to wind up the company. If a winding up order is made, the company will go into liquidation.

Indemnification of Directors

We may indemnify our Directors or officers 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 willful negligence, willful default, breach of duty or breach of trust of which a Director or officer may be guilty in relation to us 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 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.

We will indemnify each of our Directors, agent’s and officers out of our assets against any liability incurred by them as a result of any act or failure to act in carrying out their functions other than such liability (if any) that they may incur by their own willful neglect or default. No such Director, agent or officer shall be liable to us for any loss or damage in carrying out his functions unless their liability arises through the willful neglect or default of such Director, agent or officer.

Inspection of Corporate Records

Members of the general public do not have the right to inspect our corporate or constitutive documents. A shareholder of a Cayman Islands company has the right to request the Company send him a copy of its memorandum and articles of association in force, on payment of a maximum sum of one Cayman Islands dollar for each copy. In addition, our Articles provide that our Board of Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations our accounts and books or any of them shall be open to the inspection of shareholders and no shareholder shall have any right of inspecting any of our accounts or books or documents except as conferred by statute, or authorized by our Board of Directors or by us in general meeting. Also, the Directors may from time to time cause to be prepared and to be laid before us in general meeting financial statements and such other reports and accounts as may be required by law. We are also required to keep a register of mortgages and charges, which is open to inspection by any creditor or shareholder at all reasonable times.

We are not required to, but may, maintain our share register in the Cayman Islands. We are required to keep at our registered office a register of our directors and officers, which is not open for inspection by members of the public. Our registered office is located at 802 West Bay Road, The Grand Pavilion, P.O. Box 31110 Grand Cayman, KY1-1205 , Cayman Islands.

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.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our Class A Ordinary Shares. Future sales of substantial amounts of our Class A Ordinary Shares in the public market could reduce prevailing market prices. Furthermore, since a substantial number of shares will be subject to contractual and legal restrictions on resale as described below, sales of substantial amounts of our Class A Ordinary Shares in the public market after these restrictions lapse could adversely affect the prevailing market price and our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding an aggregate of                Class A Ordinary Shares, assuming no exercise of the underwriters’ option to purchase additional Class A Ordinary Shares and no exercise of outstanding options and Class B Ordinary Shares, assuming the consummation of the concurrent private placement to David Einhorn. Of these shares, all of the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless these shares are purchased by affiliates. The remaining                Class A Ordinary Shares held by existing shareholders are restricted securities. No shareholder other than David Einhorn and certain permitted transferees may hold Class B Ordinary Shares following this offering. Restricted securities may be sold in the public market only if registered or if the transaction qualifies for an exemption from registration described below under Rules 144, 144(k) or 701 promulgated under the Securities Act.

As a result of the contractual restrictions described below and the provisions of Rules 144, 144(k) and 701, the restricted shares will be available for sale in the public market as follows:

•  shares will be eligible for sale upon completion of this offering;
•  shares will be eligible for sale upon the expiration of the lock-up agreements, described below, beginning 180 days after the date of this prospectus; and
•  shares will be eligible for sale upon the exercise of vested options 180 days after the date of this prospectus.

Lock-Up Agreements

We, all of our directors and executive officers, and shareholders holding an aggregate of approximately    % of our currently outstanding Class A Ordinary Shares (and    % of our currently outstanding Ordinary Shares) have agreed that, subject to certain exceptions, without the prior written consent of each of Lehman Brothers Inc. and UBS Securities LLC, we and they will not directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by an person at any time in the future of) any Ordinary Shares (including, without limitation, ordinary shares that may be deemed to beneficially owned by us or them in accordance with the rules and regulations of the SEC and Ordinary Shares that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Class A Ordinary Shares, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic consequences of ownership of the Class A Ordinary Shares, (3) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Class A Ordinary Shares or securities convertible, exercisable or exchangeable into Class A Ordinary Shares or any of our other securities or (4) publicly disclose the intention to do any of the foregoing for a period of 180 days after the date of this prospectus.

The 180-day restricted period described in the preceding paragraph will be extended if:

•  During the last 17 days of the 180-day restricted period we issue any earnings release or material news or a material event relating to us occurs; or
•  Prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period,

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 180-day period beginning on the issuance of the earnings release or the

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announcement of the material news or occurrence of a material event, unless such extension is waived in writing by Lehman Brothers Inc. and UBS Securities LLC.

Lehman Brothers Inc. and UBS Securities LLC, in their sole discretion, may release the Ordinary Shares and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release Class A Ordinary Shares and other securities from lock-up agreements, Lehman Brothers Inc. and UBS Securities LLC will consider, among other factors, the holder’s reasons for requesting the release, the number of Class A Ordinary Shares and other securities for which the release is being requested and market conditions at the time.

Any participants in the Directed Share Program will be subject to an 180-day lock-up with respect to any Ordinary Shares sold to them pursuant to the program. This lock-up will have similar terms and conditions as described above. Any Ordinary Shares sold in the Directed Share Program to our directors or officers shall be subject to the lock-up agreement described above.

Rule 144

In general, under Rule 144 as currently in effect, after the expiration of any applicable lock-up agreement, a person (or persons whose shares are aggregated) who has beneficially owned restricted securities for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

•  1% of the number of ordinary shares then outstanding, which will equal approximately shares immediately after this offering; or
•  the average weekly trading volume of our ordinary shares on Nasdaq Global Select Market during the four calendar weeks preceding the sale, so long as requirements concerning availability of public information, manner of sale and notice of sale are satisfied.

Sales under Rule 144 are also subject to requirements with respect to the manner of sale, notice and the availability of current public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell these shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Rule 701

Rule 701 of the Securities Act, as currently in effect, permits any of our employees, officers, directors or consultants who purchased or received shares from us pursuant to a written compensatory plan or contract to resell such shares in reliance upon Rule 144, but without compliance with certain restrictions. Subject to any applicable lock-up agreements, Rule 701 provides that affiliates may sell their Rule 701 shares under Rule 144 beginning 90 days after the date of this prospectus without complying with the holding period requirement of Rule 144 and that non-affiliates may sell such shares in reliance on Rule 144 beginning 90 days after the date of this prospectus without complying with the holding period, public information, volume limitation or notice requirements of Rule 144.

Registration Rights

Upon completion of this offering, the holders of an aggregate of      Ordinary Shares, or their transferees, will be entitled to rights with respect to the registration of their shares under the Securities Act. Holders of at least 50% of the Ordinary Shares outstanding prior to this offering can request to have their shares registered at any time 180 days after the consummation of this offering. Upon receipt of such a request for a demand registration, we must file a registration statement for these securities within the later of 90 days of the date of delivery to us of the demand request and 180

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days after the effectiveness of registration statement as defined in the Shareholders’ Agreement. After consummation of this offering, if we propose to file any registration statement under the Securities Act for the purposes of a public offering of our securities (except for on Forms S-4 or S-8), we must give prompt written notice to our initial shareholders of our intent to effect such a registration and shall include those who respond within 30 days. Registration of these shares under the Securities Act would result in these shares becoming freely tradeable without restriction under the Securities Act immediately upon the effectiveness of such registration. Pursuant to our Shareholders’ Agreement, GCI had the right to unlimited demand registration rights once we are eligible to use Form S-3 (or similar short form registration forms). GCI assigned its demand registration rights under the Shareholders’ Agreement, with our consent, to David Einhorn on January 3, 2007.

Transfer Agent and Registrar

The Bank of New York will serve as transfer agent and registrar for our Class A Ordinary Shares. Its principal executive office is located at 101 Barclay Street (11E), New York, NY 10286.

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CERTAIN CAYMAN ISLANDS TAX CONSIDERATIONS

The following discussion summarizes Cayman Islands income tax considerations currently in effect that are relevant to us and Cayman Islands income tax consequences of buying, holding or selling our Class A Ordinary Shares. It is not intended to be tax advice, does not consider any investor’s particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law. Prior to making an investment in our Class A Ordinary Shares, we advise you to consult with your own professional advisors on the possible tax consequences of buying, holding or selling our Class A Ordinary Shares under the laws of your country of citizenship, residence or domicile.

Cayman Islands Taxation of Greenlight Re

Under current Cayman Islands law, there is no Cayman Islands income tax, withholding tax, capital gains tax or capital transfer tax payable by us on our income. The Cayman Islands currently impose stamp duties on certain categories of documents; however, we do not anticipate that our operations will involve the payment of any material amount of stamp duties. The Cayman Islands currently impose an annual corporate fee upon all exempted companies. Our current annual corporate fee rate is approximately $10,000.

Cayman Islands Taxation of Shareholders

Under current Cayman Islands laws, payments of dividends on our Ordinary Shares will not be subject to taxation in the Cayman Islands. In addition, no withholding tax is required on the payment of dividends, nor are gains derived from the sale of Ordinary Shares subject to Cayman Islands income or corporation tax. The Cayman Islands currently has no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax. No stamp duty is payable with respect to the issue or transfer of our Ordinary Shares.

Tax Undertaking

We have an undertaking from the Governor-in-Cabinet of the Cayman Islands, pursuant to the provisions of the Tax Concessions Law, as amended, that, in the event that the Cayman Islands enacts any legislation that imposes tax on profits, income, gains or appreciations, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to us or our operations, or to our Ordinary Shares or obligations, for a period of 20 years from February 1, 2005.

We do not consider ourselves to be engaged in a trade or business in any other jurisdiction other than the Cayman Islands and, accordingly, do not expect to be subject to net income taxes of any other jurisdiction other than the Cayman Islands. If we are deemed to be engaged in trade or business in any jurisdiction, we could be subject to taxes in that jurisdiction.

CERTAIN UNITED STATES TAX CONSIDERATIONS

The following discussion summarizes the material United States federal income tax considerations that are relevant to us and the material United States federal income tax consequences of buying, holding and selling our Class A Ordinary Shares. Except for matters where it is explicitly stated that we will not receive an opinion of counsel, the statements as to United States federal income tax law set forth below are the opinion of Akin Gump Strauss Hauer & Feld LLP, our United States counsel, as to such tax laws (subject to the qualifications, assumptions and factual determinations set forth in such statements). Unless otherwise expressly provided herein, the tax consequences under United States state and local tax laws and foreign tax laws are not addressed. This summary is not a complete analysis of all of the tax considerations that may be relevant to you or your decision to acquire Class A Ordinary Shares.

Unless otherwise expressly stated herein, this summary only discusses United States federal income tax considerations relevant to United States persons who own our Class A Ordinary Shares as

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‘‘capital assets’’ within the meaning of Section 1221 of the Internal Revenue Code, which we refer to as the Code. Unless otherwise noted, this summary does not address aspects of United States federal income taxation that may be relevant to a shareholder that is subject to special rules such as:

•  an investor that is not a citizen or resident of the United States;
•  a financial institution or insurance company;
•  a mutual fund;
•  a tax-exempt organization;
•  a broker or dealer in securities or foreign currencies;
•  traders in securities that elect to apply a mark to market method of tax accounting;
•  a shareholder that holds our Class A Ordinary Shares as part of a hedge, appreciated financial position, straddle, conversion or other risk reduction transaction; or
•  United States persons who own 9.9% or more of the total combined voting power of all classes of our share capital (whether directly, indirectly or constructively under applicable United States tax attribution and constructive ownership rules).

In this summary, we refer to a United States person. We use this term to mean an investor who beneficially owns our Class A Ordinary Shares and who is:

•  an individual citizen or resident of the United States;
•  a corporation or other entity treated as a corporation for United States federal income tax purposes that was created or organized in the United States or under the laws of the United States or of any political subdivision thereof;
•  an estate whose income is includible in gross income for United States federal income tax purposes regardless of its source; or
•  any trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and (ii) one or more United States persons have the authority to control all substantial decisions of the trust.

If a partnership holds our Class A Ordinary Shares, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. If you are a partnership or a partner in a partnership, you should consult your own tax advisor regarding the particular consequences to you of owning our Class A Ordinary Shares.

This summary is based on the Code, applicable Treasury regulations promulgated under the Code, or Regulations, court decisions and administrative interpretations currently in effect. Court decisions and administrative interpretations are not necessarily binding on the IRS. We note that the Code, Regulations, administrative interpretations and court decisions are subject to change, possibly with retroactive effect. Future legislative, judicial or administrative changes could affect the information, beliefs and conclusions in this summary.

This discussion is not intended to be tax advice. Prior to making an investment in our Class A Ordinary Shares, we advise you to consult with your own tax advisors in order to understand fully the United States federal, state, local and foreign tax consequences of buying, holding or selling our Class A Ordinary Shares in your particular situation.

United States Federal Income Taxation of Greenlight Re and Greenlight Reinsurance, Ltd.

We do not believe we currently operate or will operate in the future in a manner that constitutes being engaged in the conduct of a trade or business in the United States. Because we believe we do not operate in a manner that constitutes being engaged in the conduct of a trade or business in the United States, we do not expect to be subject to United States federal income tax, except as described below.

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However, we cannot assure you that the IRS will not successfully assert that we are engaged in a trade or business in the United States because (i) the determination as to whether we are engaged in a United States trade or business is factual in nature and must be made annually, (ii) neither the Code nor the applicable Regulations provide a general definition of what constitutes being engaged in a trade or business within the United States, and (iii) the limited case law regarding what constitutes being engaged in a United States trade or business does not provide definitive guidance. The case law that exists generally provides that a foreign corporation will be treated as engaged in a United States trade or business if it regularly and continuously carries out business activities in the United States.

If we were deemed to be engaged in a trade or business in the United States, we generally would become subject to United States federal income tax on any taxable income treated as ‘‘effectively connected’’ to such trade or business and such income would be taxed at regular corporate rates. In addition, we would become subject to United States branch profits tax on our earnings and profits that are both ‘‘effectively connected’’ with our trade or business in the United States, with certain adjustments, and deemed repatriated out of the United States. The highest marginal United States federal income tax rates currently are 35% for a corporation’s effectively connected income and 30% for the ‘‘branch profits’’ tax. Our United States federal income tax liability would generally be computed in the same manner that applies to the income of a United States corporation, except that deductions and credits would generally only be available if we filed a United States income tax return.

If we were deemed to be engaged in a trade or business in the United States, we may be subject to penalties if we failed to file tax returns. We have timely filed, and intend to continue to timely file, protective United States tax returns in an attempt to mitigate this risk and to preserve our ability to claim tax deductions and credits in the event we are subsequently determined to be subject to United States federal income tax.

Even if we are not engaged in a trade or business in the United States, we are subject to United States federal income tax on certain fixed or determinable annual or periodical gains, profits and income, such as dividends and certain interest on investments, if any, from sources within the United States. Generally, this tax is imposed by withholding 30% of the payments, or deemed payments, to us that are subject to this tax, and is eliminated with respect to certain types of United States source income, such as interest on certain debt instruments. If we are treated as engaged in the conduct of a trade or business in the United States, the 30% withholding tax only applies to payments to us that are not effectively connected with such trade or business.

The United States also imposes an excise tax on insurance and reinsurance premiums paid to us with respect to insureds located in the United States at a rate of (i) 4% for direct casualty insurance and indemnity bond premiums and (ii) 1% for reinsurance premiums and for direct insurance premiums for life, sickness and accident policies and annuity contracts.

United States Federal Taxation of Holders

Taxation of Dividends

Subject to the discussion below regarding passive foreign investment companies, controlled foreign corporations and related person insurance income, cash distributions paid with respect to our Class A Ordinary Shares will constitute ordinary dividend income to you to the extent paid out of our current or accumulated earnings and profits, and you generally will be subject to United States federal income tax upon your receipt of such dividends. If you are not a corporation or an entity treated as a corporation under United States federal income tax law, dividends paid to you in taxable years beginning on or before December 31, 2010 generally will be taxable to you at a maximum rate of 15% if:

•  the dividends constitute ‘‘qualified dividend income;’’ and
•  you hold our Class A Ordinary Shares for more than 60 days out of the 121-day period that begins 60 days before the ex-dividend date and meet other holding period requirements.

Any dividends paid on our Class A Ordinary Shares generally will be ‘‘qualified dividend income,’’ provided that our Class A Ordinary Shares are readily tradable on an established securities

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market in the United States. Under current United States Treasury guidance, our Class A Ordinary Shares would be so treated if they are listed on the Nasdaq Global Select Market. Dividends paid on our Class A Ordinary Shares generally will not be eligible for the dividends received deduction.

To the extent we make distributions on our Class A Ordinary Shares that exceed our current and accumulated earnings and profits, you will be treated as having received a return of your tax basis in our Class A Ordinary Shares, and any amount we distribute in excess of your tax basis generally will be treated as gain from the sale of a capital asset.

We advise you to consult with your tax advisor regarding the taxation of any dividends on our Class A Ordinary Shares.

Passive Foreign Investment Companies

In general, a foreign corporation is deemed to be passive foreign investment company, or PFIC, if:

•  75% or more of its gross income constitutes ‘‘passive income;’’ or
•  50% or more of its assets produce, or are held for the production of, ‘‘passive income.’’

In determining whether Greenlight Re and/or Greenlight Reinsurance, Ltd. is a PFIC, each of Greenlight Re and Greenlight Reinsurance, Ltd. is treated as if it directly owned its proportionate share of the assets and received its proportionate share of the income of any other corporation of which it is a 25% or greater shareholder (by value). Under this look-through rule, Greenlight Re is deemed to own its proportionate share of the assets and to have received its proportionate share of the income of Greenlight Reinsurance, Ltd. As long as Greenlight Re does not hold assets other than the shares of Greenlight Reinsurance, Ltd., Greenlight Re is not considered a PFIC if Greenlight Reinsurance, Ltd. is not considered a PFIC.

For purposes of the PFIC tests, ‘‘passive income’’ generally includes interest, dividends, annuities and other investment income. The PFIC rules contain an express exception for income that is derived in the active conduct of an insurance business by a corporation predominantly engaged in an insurance business, which we refer to as the Insurance Company Exception.

The Insurance Company Exception is intended to ensure that income derived by a bona fide insurance company is not treated as passive income. However, there is very little authority as to what constitutes the active conduct of an insurance business or being predominantly engaged in such business. In particular, there is uncertainty as to what constitutes the appropriate levels of financial reserves and risk transfer with respect to an insurance contract. Therefore, our income could be considered passive income derived outside of the active conduct of our insurance business if it is earned from:

•  investments that are attributable to financial reserves in excess of the reasonable needs of our insurance business; or
•  non-traditional insurance activities that do not contain sufficient risk transfer.

We believe that our current financial reserves are and will be consistent with industry standards and are not and will not be in excess of the reasonable needs of our insurance business. We also believe that we are and will be engaged in insurance activities that involve sufficient transfer of risk. For these reasons, we do not expect to be treated as having passive income or holding assets for the production of passive income. However, because there is no definitive authority on how the Insurance Company Exception should be interpreted, we cannot assure you that the IRS will not disagree with our interpretation of the Insurance Company Exception and successfully challenge our position that we qualify for the exception in 2007 or any later years. In addition, the IRS may issue regulatory or other guidance that applies on either a prospective or retroactive basis under which we may fail to qualify for the Insurance Company Exception. The IRS announced in Notice 2003-34 that it intends to scrutinize the activities of purported insurance companies organized outside the United States, including insurance companies that invest a significant portion of their assets in alternative investment

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strategies, and will apply the PFIC rules where it determines a foreign corporation is not an insurance company for United States federal income tax purposes. You should consult your own tax advisor to assess your tolerance of this risk.

If we are PFICs, you may be able to mitigate certain of the negative tax consequences if you are able to make:

•  a timely qualified electing fund election with respect to our Class A Ordinary Shares, which we refer to as a QEF election;
•  a protective QEF election with respect to our Class A Ordinary Shares; or
•  a mark to market election with respect to the first taxable year in which we are considered PFICs during your holding period in our Class A Ordinary Shares.

As described below, the availability of these elections is uncertain as a matter of law and in certain cases requires that we provide certain information to our shareholders. We will notify you if we conclude in any year that we are likely to be treated as PFICs. In addition, we intend to provide you each year with the information required for you to make a QEF election or protective QEF election. However, because this information is complex and may not be readily available, we cannot assure you that we will be able to provide information necessary for you to make a QEF election with respect to certain lower-tier PFICs, which generally would be our direct and indirect subsidiaries that are also PFICs.

Timely QEF Election

If we are PFICs and you do not make a QEF election, you generally will be subject to a special tax and an interest charge at the time you:

•  sell our Class A Ordinary Shares; or
•  receive an ‘‘excess distribution’’ with respect to our Class A Ordinary Shares. You will be treated as if you received an ‘‘excess distribution’’ if the amount of the distributions that you receive are more than 125% of the average distributions with respect our Class A Ordinary Shares during the three preceding taxable years (or the period in which you held our Class A Ordinary Shares if shorter).

In addition, a portion of any gain you recognize upon sale of our Class A Ordinary Shares may be recharacterized as ordinary income. Further, any dividends you receive from us if we are PFICs will not constitute qualified dividend income and will not be eligible for the reduced 15% rate of tax. If you own our Class A Ordinary Shares during any taxable year in which we are PFICs, your Class A Ordinary Shares will generally be treated as stock in a PFIC for all subsequent years. In addition, if you hold our Class A Ordinary Shares during any period we are PFICs, you will be treated as owning a proportionate amount of any stock we own. Therefore, if we are PFICs, you would also be subject to the PFIC rules on a separate basis with respect to your indirect interests in any lower-tier PFICs we own.

Although we may conclude in any year that we reasonably believe that we are not PFICs, the application of the PFIC rules to us may be uncertain as discussed above, due to the lack of definitive authority on the application of the Insurance Company Exception. The IRS might ultimately conclude that we and our subsidiaries are PFICs in any such tax year, and if this conclusion is upheld it would create significant adverse tax consequences for you.

If we are PFICs and you make a QEF election, you will be currently taxable on your pro rata share of our ordinary earnings and net capital gain regardless of whether or not we make any distributions. Your basis in our Class A Ordinary Shares will be increased to reflect such taxed but undistributed income and any subsequent distributions of previously taxed income will reduce your basis and will not be taxed again as a distribution to you.

In general, you must annually file a separate Form 8621 for each PFIC in which you are a direct or indirect owner during the year with your United States federal income tax return. If you wish to

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make a QEF election, you must make such election on a timely filed Form 8621 for the first taxable year to which the election is to be effective. In certain circumstances, you may be able to make a retroactive QEF election at a later date. Unless you own, directly, indirectly or through attribution, less than 2% of the vote and value of each class of our shares for any taxable year, which we refer to as a 2% United States shareholder, a retroactive QEF election may not be available to you if you have not previously preserved your right to make a retroactive QEF election.

Protective QEF Election

You may preserve your right to make a retroactive QEF election by filing a protective statement signed under penalty of perjury with the IRS for the first taxable year in which you acquire our Class A Ordinary Shares and you reasonably believe that we are not PFICs for the taxable year. The protective statement must generally contain statements describing:

•  your basis (including application of the 75% income and 50% asset tests and other factors) for your reasonable belief that we were not PFICs for our taxable year ending with or within your first taxable year to which the protective statement applies;
•  your agreement extending the periods of limitations on the assessment of your PFIC related taxes for all taxable years to which the protective statement applies;
•  your name, address and certain identifying information with respect to you and us; and
•  information and representations regarding the highest percentage of shares of each class of our stock that you held directly or indirectly during your first taxable year to which the protective statement applies.

In general, filing the protective statement with respect to a taxable year by itself does not obligate you to include your pro rata share of our earnings into income for such taxable year if we are not PFICs for such taxable year. The filing simply preserves your ability to make a retroactive QEF election with respect to such taxable year and may protect you from some of the more severe penalties under the PFIC rules. If you make a valid retroactive QEF election with respect to our shares and we are treated as PFICs, you will be taxed on your cumulative annual pro rata share of our ordinary earnings and net capital gains (regardless of whether any distributions were received) as if you made such elections on a timely basis ( i.e., on a non-retroactive basis), plus an interest charge to eliminate the tax deferral arising from the retroactive election.

In general, if you are a 2% United States shareholder, you are not always required to file a protective statement in order to preserve your ability to make a retroactive QEF election with respect to such taxable year. If you are a 2% United States shareholder, you generally may make a retroactive QEF election with respect to Class A Ordinary Shares in a taxable year if we have indicated in a public document that, with respect to that taxable year:

•  we reasonably believe that we should not be PFICs; or
•  in certain circumstances, we are unable to conclude whether we are PFICs, but reasonably believe that, more likely than not, we ultimately will not be PFICs.

In light of the uncertainty and lack of guidance regarding the application of the PFIC rules to companies engaged in an insurance business, you may wish to consider filing a protective statement with respect to us for the first taxable year in which you hold our Class A Ordinary Shares in order to preserve your ability to make a retroactive QEF election, if otherwise eligible to make the such election. You are advised to consult with your own tax advisor regarding the mechanics and effects of filing a protective statement with respect to your ownership of our Class A Ordinary Shares and making a retroactive QEF election in the event it is subsequently determined that we are deemed to be PFICs in any particular year.

Mark to Market Election

If our Class A Ordinary Shares are treated as ‘‘marketable stock,’’ you may make a mark to market election. If you do so, you will not be subject to the PFIC rules described above. Instead, you

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will include as ordinary income or loss the difference between the fair market value of our Class A Ordinary Shares at the end of the taxable year and your adjusted basis. However, ordinary losses are limited by the net amount you previously included in income as a result of the mark to market election. Your basis in the Class A Ordinary Shares will be adjusted to reflect any such income or loss amounts.

The mark to market election is only available if our Class A Ordinary Shares are regularly traded on certain United States securities exchanges, including the Nasdaq Global Select Market, or other exchanges designated by the United States Treasury. Our Class A Ordinary Shares will be treated as regularly traded for a calendar year if they are traded for at least 15 days during each calendar year quarter. Because our Class A Ordinary Shares were not traded on the Nasdaq Global Select Market in the first quarter of 2007, and there is no authority directly on point regarding whether a company whose shares are not traded during one calendar quarter qualifies for a market to market election, it is unclear whether such election is available in 2007.

In addition, the benefit of a mark to market election may not be available at all. This is because there is no definitive guidance regarding whether the mark to market election is available to a publicly-traded holding company, which Greenlight Re will be when the offering is consummated, that becomes a PFIC because of its lower-tier PFIC subsidiaries. The Code and the Regulations currently do not allow a mark to market election with respect to the stock of lower-tier PFICs that are non-marketable. There is also no provision in the Code, Regulations or other published authority that specifically provides that a mark to market election with respect to the stock of a publicly-traded holding company effectively exempts the lower-tier PFICs from the negative tax consequences arising from the general PFIC rules. We believe that, because the fair market value of the stock of a holding company generally includes the fair market value of the stock of its subsidiaries, the better view is that a mark to market election made with respect to the stock of the holding company should apply to remove the lower-tier PFICs from the general PFIC rules. However, because authority on the issue is lacking, we cannot assure you that the IRS agrees with our position.

If:

•  we and our subsidiaries are PFICs during the first year after this offering;
•  the mark to market tax election is not available; and
•  you acquire our Class A Ordinary Shares during such first year,

you may be subject to special rules when making a mark to market election in the following year. If you have not made a proper QEF election in the first year but you make a mark to market election in the following year, then, with respect to that following year:

•  gain upon disposition of our Class A Ordinary Shares;
•  deemed gain under the mark to market regime; or
•  ‘‘excess distributions’’

generally will be subject to the special tax and interest charges of the PFIC rules.

We advise you to consult your own tax advisor to determine whether the mark to market tax election is available to you and the consequences resulting from such election.

Possible Classification of Greenlight Re and/or Greenlight Reinsurance, Ltd. as Controlled Foreign Corporations

In this section of the summary, we refer to ‘‘United States 10% shareholders’’ as United States persons who:

•  own, directly or indirectly through foreign entities 10% or more of the total combined voting power of all classes of stock of a foreign corporation; or
•  are considered to own, generally through attributions from family members, partnerships, estates, trusts or 10% controlled corporations, 10% or more of the total combined voting power of all classes of stock of a foreign corporation.

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Certain United States 10% shareholders that own, directly or indirectly through foreign entities, shares of a foreign corporation that is a ‘‘controlled foreign corporation,’’ or CFC, for an uninterrupted period of 30 days or more during any taxable year, are required to include in their gross income for United States federal income tax purposes their pro rata share of the CFC’s ‘‘subpart F income’’ for such year.

Subpart F income generally includes:

•  passive investment income, such as interest, dividends or certain rent or royalties; and
•  certain insurance income, including underwriting and investment income that is attributable to the issuing or reinsuring of any insurance or annuity contract, and that, absent an exception, generally would be taxed under the insurance company provisions of the Code if such income were the income of a United States insurance company.

We expect that all of our income will be subpart F income. Subpart F income inclusion generally is applicable to United States 10% shareholders that have a direct or indirect ownership interest in a CFC on the last day of the taxable year of the CFC. The subpart F income inclusion is required even if the subpart F income is not distributed. In addition, United States 10% shareholders of a CFC may be deemed to receive taxable distributions to the extent the CFC increases the amount of its earnings that are invested in certain specified types of United States property.

In general, a foreign corporation is treated as a CFC only if its United States 10% shareholders collectively own more than 50% of the total combined voting power or total value of the corporation’s stock. However, for purposes of taking into account subpart F insurance income, a foreign corporation such as Greenlight Reinsurance, Ltd., generally will be treated as a CFC if more than 25% of the total combined voting power or total value of its stock is owned by United States 10% shareholders.

Our Articles provide voting and ownership limitations designed to reduce the risk that we would be considered CFCs. With those limitations, we do not believe that we should be CFCs. However, because (i) the attribution rules contained in the Code are complex and (ii) there is no definitive authority on whether these voting and ownership limitations are effective for purposes of preventing a foreign corporation from being treated as a CFC, we cannot assure investors that this will be the case.

If you are a United States 10% shareholder and we are CFCs, the rules relating to PFICs generally would not apply to you. However, certain subpart F income may be taxable at higher rates than if such income were taxable under the PFIC regime where a valid QEF election has been made

We advise you to consult your own tax advisor to determine whether your ownership of our Class A Ordinary Shares will cause you to become a United States 10% shareholder and the impact of such a classification.

Related Person Insurance Income

A different definition of CFC is applicable in the case of a foreign corporation which earns related person insurance income, or RPII. RPII is subpart F insurance income attributable to insurance policies or reinsurance contracts where the person that is directly or indirectly insured or reinsured is a RPII shareholder or a related person to the RPII shareholder. A RPII shareholder is a United States person who owns, directly or indirectly through foreign entities, any amount of our Class A Ordinary Shares. Generally, for purposes of the RPII rules, a related person is someone who controls or is controlled by the RPII shareholder or someone who is controlled by the same person or persons which control the RPII shareholder. Control is measured by either more than 50% in value or more than 50% in voting power of stock after applying certain constructive ownership rules.

For purposes of taking into account RPII, and subject to the exceptions described below, Greenlight Reinsurance, Ltd. will be treated as a CFC if our RPII shareholders collectively own, indirectly, 25% or more of the total combined voting power or value of Greenlight Reinsurance, Ltd.’s stock on any day during a taxable year. If Greenlight Reinsurance, Ltd. is a CFC for an uninterrupted period of at least 30 days during any taxable year under the special RPII rules, and you are a United States person who owns Class A Ordinary Shares on the last day of any such taxable year, you must

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include in gross income for United States federal income tax purposes your allocable share of RPII of Greenlight Reinsurance, Ltd. for the entire taxable year, subject to certain modifications.

RPII Exceptions

The RPII rules do not apply if:

•  direct and indirect insureds and persons related to such insureds, whether or not United States persons, are treated at all times during the taxable year as owning, directly or indirectly through foreign entities, less than 20% of the voting power and less than 20% of the value of our shares;
•  Greenlight Reinsurance, Ltd.’s RPII, determined on a gross basis, is less than 20% of Greenlight Reinsurance, Ltd.’s gross insurance income for such taxable year; or
•  certain other exceptions apply.

We believe that Greenlight Reinsurance, Ltd. will fall within the RPII exceptions set forth above. However, if you own Class A Ordinary Shares on the last day of Greenlight Reinsurance, Ltd.’s taxable year on which it is a CFC for purposes of the RPII rules, and no exception to the RPII rules applies, you will be required to include your share of Greenlight Reinsurance, Ltd.’s RPII for the entire taxable year in your gross income for United States federal income tax purposes. The amount includible will be determined as if all such RPII were distributed proportionately only to United States persons at that date, but limited by Greenlight Reinsurance, Ltd.’s current-year earnings and profits and reduced by your share, if any, of prior-year deficits in earnings and profits.

Computation of RPII

In order to determine how much RPII Greenlight Reinsurance, Ltd. has earned in each taxable year, we intend to obtain and rely upon information from Greenlight Reinsurance, Ltd.’s insureds to determine whether any of the insureds or persons related to such insureds are direct or indirect United States shareholders. We likely will not be able to determine whether any of the underlying insureds of our clients are RPII shareholders or related persons to such shareholders. Accordingly, we may not be able to determine accurately:

•  whether Greenlight Reinsurance, Ltd. qualifies for any RPII exception; or
•  what the gross amount of RPII earned by Greenlight Reinsurance, Ltd. in a given taxable year would be.

We will take reasonable steps that we believe to be advisable to obtain the necessary information to determine the availability of the RPII exceptions and the amount of insurance income that is RPII. However, because these determinations are not entirely in our control and we must rely on information from Greenlight Reinsurance, Ltd.’s insureds to make these determinations, we cannot assure you that we will be able to obtain all necessary information to make the determinations.

Apportionment of RPII to United States Persons

If we determine that neither the RPII 20% ownership exception nor the RPII 20% gross income exception is applicable for any taxable year, we may seek information from our shareholders as to whether direct or indirect owners of Class A Ordinary Shares at the end of the year are United States persons. This information would allow us to determine and apportion RPII among the United States persons. In any such year, to the extent possible, we will inform you of the amount of RPII per share and you will be obligated to file a return reporting such amount. To the extent we are unable to determine whether a direct or indirect owner of Class A Ordinary Shares is a United States person, we may assume that such owner is not a United States person for the purpose of allocating RPII, and, accordingly, increase the amount of RPII per share for shareholders whom we believe are United States persons.

The amount of RPII includible in your income, as a United States person, would be based upon the net RPII for the year after deducting related expenses such as losses, loss reserves and operating expenses and determined by multiplying the net RPII for such taxable year by a fraction equal to:

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•  the total earnings and profits that would be distributed indirectly through Greenlight Re with respect to our Class A Ordinary Shares if all earnings and profits of Greenlight Reinsurance, Ltd. were distributed on the last day of that taxable year; over
•  the total earnings and profits of Greenlight Reinsurance, Ltd. for that taxable year that would be distributed with respect to all shares of Greenlight Reinsurance, Ltd. owned, directly or indirectly through Greenlight Re, by United States shareholders.

If Greenlight Reinsurance, Ltd. has RPII and Greenlight Re makes a distribution of RPII to you with respect to your Class A Ordinary Shares, the distribution will not be taxable to the extent such RPII has been allocated to and included in your gross income for the taxable year in which the distribution was paid or for any prior year.

Uncertainty as to Application of RPII

There is lack of definitive guidance interpreting the RPII provisions. There is no case law on point in which a court has interpreted the RPII provisions and there are not final Regulations interpreting the RPII provisions. Proposed Regulations have existed since 1991, but taxpayers cannot affirmatively rely on Regulations that remain in proposed form and we cannot tell you whether the IRS will adopt the proposed Regulations or what changes or clarifications might ultimately be made to the proposed Regulations. Additionally, we cannot predict whether any changes to the proposed Regulations, or any interpretation or application of RPII by the IRS, the courts or otherwise, might have retroactive effect. Accordingly, the meaning and application of the RPII provisions are uncertain. Finally, we cannot assure you that any amounts of RPII inclusions we report to you will not be subject to adjustment based upon subsequent IRS examination in which they interpret the RPII provisions differently. We advise you to consult your own tax advisor as to the effects of these uncertainties, and as to the effects that the RPII provisions may have on you and your investment in our Class A Ordinary Shares.

Basis Adjustments

Your tax basis in your Class A Ordinary Shares will be increased by the amount of any RPII that you include in income. Similarly, your tax basis in your shares will be reduced by the amount of distributions of RPII that are excluded from income.

Information Reporting

A United States person that owns, directly or by attribution, more than 50% of the total combined voting power of all classes of a foreign corporation’s voting stock or more than 50% of the total value of shares of all classes of a foreign corporation’s stock, for an uninterrupted period of 30 days or more during the corporation’s taxable year, must file a Form 5471 with its United States income tax return. In addition, under certain circumstances, United States 10% shareholders and RPII shareholders of a CFC that own shares directly or indirectly through a foreign entity may also be required to file a Form 5471. Furthermore, United States persons that directly or indirectly acquire 10% or more of the value of shares of a foreign corporation may be required to file Form 5471 in certain circumstances even if the entity is not a CFC.

In addition, if Greenlight Reinsurance, Ltd.’s gross RPII for a taxable year constitutes 20% or more of its gross insurance income for the period, and the 20% ownership exception described above does not apply, any United States person treated as owning, directly or indirectly, any of Greenlight Reinsurance, Ltd.’s ordinary shares on the last day of Greenlight Reinsurance, Ltd.’s taxable year, will be subject to the RPII rules and will be required to file a Form 5471. Further, if you own, directly or indirectly, more than 10% in value of our outstanding Ordinary Shares at any time during our taxable year, you will be required in certain circumstances to file a Form 5471 even we are not CFCs. If we determine that for any taxable year Greenlight Reinsurance, Ltd. does not meet either the RPII 20% gross income or the RPII 20% ownership exceptions described above, we intend to mail to all shareholders of record, and will make available at the transfer agent with respect to the Class A

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Ordinary Shares, Forms 5471, completed with the relevant information. However, our determination of the amount of Greenlight Reinsurance, Ltd.’s gross RPII for a given taxable year may not be accurate because of our inability to gather the information necessary to make such determination. Failure to file Form 5471 may result in penalties.

Tax-Exempt Shareholders

Under Section 512(b)(17) of the Code, a tax-exempt entity that owns, directly or indirectly through a non-U.S. entity or through attribution, any of our Class A Ordinary Shares is required to treat as unrelated business taxable income, or UBTI, the portion of any deemed distribution to such shareholder of subpart F insurance income if such insurance income would be treated as UBTI if derived directly by such tax-exempt shareholder. Exceptions are provided for income attributable to an insurance policy or reinsurance contract with respect to which the person, directly or indirectly, insured is:

•  the tax-exempt shareholder;
•  an affiliate of the tax-exempt shareholder which itself is exempt from tax under Section 501(a) of the Code; or
•  a director or officer of, or an individual who (directly or indirectly) performs services for, the tax-exempt shareholder or an exempt affiliate but only if the insurance covers primarily risks associated with the performance of services in connection with the tax-exempt shareholder or exempt affiliate.

Section 512(b)(17) of the Code applies to amounts included in gross income in any taxable year. If Greenlight Reinsurance, Ltd.’s gross RPII were to equal or exceed 20% of its gross insurance income and the 20% ownership exception for RPII did not apply, as discussed above under the heading ‘‘Related Person Insurance Income,’’ or if we were otherwise treated as a CFCs for a taxable year, then tax-exempt entities owning our Class A Ordinary Shares would be required to treat a portion of our subpart F income as UBTI. Additionally, a tax-exempt entity that is treated as a United States 10% shareholder or a RPII shareholder must file Form 5471 in the circumstances described above.

If you are a tax-exempt entity, we advise you to consult your own tax advisor as to the potential impact of Section 512(b)(17) of the Code and the UBTI provisions of the Code.

Dispositions of Class A Ordinary Shares

Generally, the difference between your basis in the Class A Ordinary Shares and the amount realized on the sale, exchange or other disposition of the Class A Ordinary Shares will be includible in gross income as capital gain or loss, subject to the relevant discussion in this summary relating to the potential application of the CFC and PFIC rules. If your holding period for the Class A Ordinary Shares is more than one year, any gain will be subject to United States federal income tax as long-term capital gain.

Under Section 1248 of the Code, any gain from the sale or exchange by a United States 10% shareholder of shares in a CFC may be treated as a dividend to the extent of the CFC’s earnings and profits during the period that the shareholder held the shares, subject to certain adjustments. If gain from the sale or exchange of our Class A Ordinary Shares is recharacterized as dividend income under Section 1248 of the Code, the gain generally should be treated as ‘‘qualified dividend income’’ to non-corporate taxpayers and eligible for a reduced 15% rate of taxation, subject to the holding period requirements and PFIC provisions discussed above. Section 953(c)(7) of the Code generally provides that Section 1248 also applies to the sale or exchange of shares by a United States person in a foreign corporation that earns RPII and is characterized as a CFC under the RPII rules if the foreign corporation would be taxed as an insurance company if it were a United States corporation. The dividend treatment applies to a United States person subject to the RPII rules regardless of whether the United States person is a United States 10% shareholder or whether the CFC meets either one of the first two RPII exceptions described above (i.e., the 20% ownership exception and the

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RPII 20% gross income exception). The proposed Regulations do not specifically address whether Section 1248 of the Code applies when a foreign corporation is not a CFC but the foreign corporation has an insurance company subsidiary that is a CFC for purposes of requiring United States persons to take into account RPII.

We believe that a strong argument exists that Section 1248 of the Code should not apply to dispositions of our Class A Ordinary Shares because Greenlight Re will not have any United States 10% shareholders and is not directly engaged in the insurance business. However, because (i) the Regulations under Section 953 remain proposed and taxpayers cannot affirmatively rely on Regulations in proposed form, (ii) authority on how Section 953 and the proposed Regulations should be interpreted is lacking, and (iii) the proposed Regulations are subject to amendment, we cannot assure you that the IRS will interpret the proposed Regulations under Section 953 of the Code in this manner or that the Treasury Department will not amend such Regulations, or issue other Regulations, to cause Section 1248 of the Code to apply to dispositions of our Class A Ordinary Shares

We advise you to consult your own tax advisor regarding the applications of these provisions to the disposition of our Class A Ordinary Shares.

Foreign Tax Credit

Because we anticipate that United States persons will own a majority of our Class A Ordinary Shares after this offering is consummated and because a substantial part of our business includes the reinsurance of United States risks, only a portion of the RPII and dividends we pay, if any, will be treated as foreign source income for purposes of computing your United States foreign tax credit limitation. This foreign source limitation also applies to any gain from your sale of our Class A Ordinary Shares that is treated as a dividend under Section 1248 of the Code. It is likely that substantially all of our RPII and dividends that are foreign source income will constitute ‘‘passive’’ income for foreign tax credit limitation purposes. Thus, it may not be possible for you to utilize excess foreign tax credits to reduce United States tax on such income.

Information Reporting and Backup Withholding

Paying agents and custodians located in the United States will be required to comply with certain IRS information reporting requirements with respect to payments of dividends, if any, on the Class A Ordinary Shares payable to you or to paying agents or custodians located in the United States. In addition, you may be subject to backup withholding at the rate of 28% with respect to dividends paid by such persons, unless you:

•  are a corporation or come within certain other exempt categories and, when required, demonstrate this fact; or
•  provide a taxpayer identification number, certify as to no loss of exemption from backup withholding and otherwise comply with applicable requirements of the backup withholding rules.

The backup withholding tax is not an additional tax and may be credited against your regular United States federal income tax liability.

Sales of Class A Ordinary Shares through brokers by certain United States holders also may be subject to backup withholding (subject to the exceptions described above). Sales by corporations, certain tax-exempt entities, individual retirement plans, real estate investment trusts, certain financial institutions, and other ‘‘exempt recipients’’ as defined in applicable Regulations currently are not subject to backup withholding.

We advise you to consult with your own tax advisor regarding the possible applicability of the backup withholding provisions to sales of Class A Ordinary Shares.

THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY. WE ADVISE YOU TO CONSULT YOUR OWN TAX ADVISOR CONCERNING THE UNITED STATES FEDERAL, STATE, AND LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF BUYING, HOLDING, AND SELLING OUR CLASS A ORDINARY SHARES.

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UNDERWRITING

Lehman Brothers Inc. and UBS Securities LLC are acting as joint book-running managers and are acting as representatives of the underwriters under this offering. Under the terms of an underwriting agreement, each of the underwriters named below has severally agreed to purchase from us the respective number of Class A Ordinary Shares shown opposite its name below:


Underwriters Number of
shares
Lehman Brothers Inc.  
UBS Securities LLC  
Citigroup Global Markets Inc.  
Dowling & Partners Securities, LLC  
Fox-Pitt, Kelton Incorporated                 
Total             

The underwriting agreement provides that the underwriters’ obligation to purchase Class A Ordinary Shares depends on the satisfaction of the conditions contained in the underwriting agreement, including:

•  the obligation to purchase all of the Class A Ordinary Shares offered hereby (other than those Class A Ordinary Shares covered by the underwriters’ option to purchase additional Class A Ordinary Shares as described below), if any of the Class A Ordinary Shares are purchased;
•  the representations and warranties made by us to the underwriters are true;
•  there is no material change in our business or the financial markets; and
•  we deliver customary closing documents to the underwriters.

Commissions and Expenses

The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to          additional Class A Ordinary Shares. The underwriting fee is the difference between the initial price to the public and the amount the underwriters pay to us for the Class A Ordinary Shares.


  No exercise Full exercise
Per Class A Ordinary Share $         
$         
Total $
$

The expenses of the offering that are payable by us are estimated to be $             (exclusive of underwriting discounts and commissions).

The representatives of the underwriters have advised us that the underwriters propose to offer the Class A Ordinary Shares directly to the public at the public offering price presented on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $             per Class A Ordinary Share. After the offering, the representatives may change the offering price and other selling terms.

The underwriters are not participating in the concurrent private placement of the Class B Ordinary Shares and will not receive any fees, discounts or commissions with respect to the private placement.

Option to Purchase Additional Class A Ordinary Shares

We have granted the underwriters an option exercisable for 30 days after the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of        Class A

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Ordinary Shares at the public offering price per share less underwriting discounts and commissions. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional Class A Ordinary Shares based on the underwriter’s percentage underwriting commitment in the offering as indicated in the table at the beginning of this Underwriting section.

Lock-Up Agreements

We, all of our directors and executive officers, and shareholders holding an aggregate of approximately       % of our currently outstanding Class A Ordinary Shares (and       % of our currently outstanding Ordinary Shares) have agreed that, subject to certain exceptions without the prior written consent of each of Lehman Brothers Inc. and UBS Securities LLC, we and they will not directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any Ordinary Shares (including, without limitation, ordinary shares that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the SEC and Ordinary Shares that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Class A Ordinary Shares, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic consequences of ownership of the Class A Ordinary Shares, (3) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Class A Ordinary Shares or securities convertible, exercisable or exchangeable into Class A Ordinary Shares or any of our other securities, or (4) publicly disclose the intention to do any of the foregoing for a period of 180 days after the date of this prospectus.

The 180-day restricted period described in the preceding paragraph will be extended if:

•  during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs; or
•  prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period,

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or occurrence of a material event, unless such extension is waived in writing by Lehman Brothers Inc. and UBS Securities LLC.

Lehman Brothers Inc. and UBS Securities LLC, in their sole discretion, may release the Ordinary Shares and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release Class A Ordinary Shares and other securities from lock-up agreements, Lehman Brothers Inc. and UBS Securities LLC will consider, among other factors, the holder’s reasons for requesting the release, the number of Class A Ordinary Shares and other securities for which the release is being requested and market conditions at the time.

Any participants in the Directed Share Program will be subject to an 180-day lock-up with respect to any Ordinary Shares sold to them pursuant to the program. This lock-up will have similar terms and conditions as described above. Any Ordinary Shares sold in the Directed Share Program to our directors or officers shall be subject to the lock-up agreement described above.

Offering Price Determination

Prior to this offering, there has been no public market for our Class A Ordinary Shares. The initial public offering price will be negotiated between the underwriters and us. In determining the initial public offering price of our Class A Ordinary Shares, the underwriters will consider:

•  the history and prospects for the industry in which we compete;

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•  our financial information;
•  the ability of our management and our business potential and earning prospects;
•  the prevailing securities markets at the time of this offering; and
•  the recent market prices of, and the demand for, publicly-traded shares of generally comparable companies.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities relating to the offering, including liabilities under the Securities Act and liabilities incurred in connection with the Directed Share Program referred to below, or to contribute to payments that the underwriters may be required to make for these liabilities.

Directed Share Program

At our request, the underwriters have reserved for sale at the initial public offering price up to five percent of the Class A Ordinary Shares offered hereby for officers, directors, employees and certain other persons associated with us and with whom we do business. The number of Class A Ordinary Shares available for sale to the general public will be reduced to the extent such persons purchase such reserved Class A Ordinary Shares. Any reserved Class A Ordinary Shares not so purchased will be offered by the underwriters to the general public on the same basis as the other Class A Ordinary Shares offered hereby. The participants in this program have entered into lock-up agreements. See ‘‘—Lock-Up Agreements.’’

Stabilization, Short Positions and Penalty Bids

The underwriters may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the Class A Ordinary Shares, in accordance with Regulation M under the Exchange Act:

•  Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
•  A short position involves a sale by the underwriters of ordinary shares in excess of the number of ordinary shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of ordinary shares involved in the sales made by the underwriters in excess of the number of ordinary shares they are obligated to purchase is not greater than the number of ordinary shares that they may purchase by exercising their option to purchase additional ordinary shares. In a naked short position, the number of ordinary shares involved is greater than the number of ordinary shares in their option to purchase additional ordinary shares. The underwriters may close out any short position by either exercising their option to purchase additional ordinary shares and/or purchasing ordinary shares in the open market. In determining the source of ordinary shares to close out the short position, the underwriters will consider, among other things, the price of ordinary shares available for purchase in the open market as compared to the price at which they may purchase ordinary shares through their option to purchase additional ordinary shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the ordinary shares in the open market after pricing that could adversely affect investors who purchase in the offering.
•  Syndicate covering transactions involve purchases of the ordinary shares in the open market after the distribution has been completed in order to cover syndicate short positions.
•  Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the ordinary shares originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

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These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our ordinary shares or preventing or retarding a decline in the market price of the ordinary shares. As a result, the price of the ordinary shares may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the Nasdaq Global Select Market or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the ordinary shares. In addition, neither we nor any of the underwriters make representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Electronic Distribution

A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

Nasdaq Global Select Market

We have applied to have our Class A Ordinary Shares listed for quotation on the Nasdaq Global Select Market under the symbol ‘‘GLRE.’’ In connection with that listing, the underwriters have undertaken to sell the minimum number of Class A Ordinary Shares to the minimum number of beneficial owners necessary to meet the Nasdaq listing requirements.

Discretionary Sales

The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of shares offered by them.

Stamp Taxes

If you purchase ordinary shares offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

Relationships/NASD Conduct Rules

Ian Isaacs, a senior vice president (Investments group) with UBS Financial Services and who, in his role as such, conducts market research for our affiliates, was one of our directors until his resignation on February 16, 2007. UBS Financial Services is an affiliate of UBS Securities LLC. We have established a $200 million letter of credit facility with Citibank, N.A. See ‘‘Business—Collateral Arrangements/Letter of Credit Facility.’’ Citibank, N.A. is an affiliate of Citigroup Global Markets Inc. UBS Financial Services, Citibank, N.A. and other predecessors and affiliates of the underwriters have, from time to time, provided, and may in the future continue to provide, various financial advisory and investment banking services for us or our affiliates, for which they received or will receive customary fees and commissions.

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Foreign Selling Restrictions

United Kingdom

Shares of our Class A Ordinary Shares may not be offered or sold and will not be offered or sold to any persons in the United Kingdom other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses and in compliance with all applicable provisions of the Financial Service and Markets Act 2000, or FSMA, with respect to anything done in relation to our Class A Ordinary Shares in, form or otherwise involving the United Kingdom. In addition, any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of shares of our common stock may only be communicated or caused to be communicated and will only communicated or caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to us. Without limitation to the other restrictions referred to herein, this prospectus is directed only at (1) persons outside the United Kingdom, (2) persons having professional experience in matters relating to investments who fall within the definition of ‘‘investment professionals’’ in Article 19(5) of the FSMA (Financial Promotion) Order 2005; or (3) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the FSMA (Financial Promotion) Order 2005. Without limitation to the other restrictions referred to herein, any investment or investment activity to which this prospectus relates is available only to, and will be engaged in only with, such persons, and persons within the United Kingdom who receive this communication (other than persons who fall within (2) or (3) above) should not rely or act upon this communication.

European Economic Area

With respect to each Member State of the European Economic Area which has implemented Prospectus Directive 2003/71/EC, including any applicable implementing measures, from and including the date on which the Prospectus Directive is implemented in that Member State, the offering of our Class A Ordinary Shares in this offer is only being made:

(a)    to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

(b)    to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than Euro 43,000,000 and (3) an annual net turnover of more than Euro 50,000,000, as shown in its last annual or consolidated accounts; or

(c)    in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

Switzerland

Our Class A Ordinary Shares may be offered in Switzerland only on the basis of a non-public offering. This prospectus does not constitute an issuance prospectus according to articles 652a or 1156 of the Swiss Federal Code of Obligations or a listing prospectus according to Article 32 of the Listing Rules of the Swiss exchange. Our Class A Ordinary Shares may not be offered or distributed on a professional basis in or from Switzerland and neither this prospectus nor any other offering material relating to our Class A Ordinary Shares may be publicly issued in connection with any such offer or distribution. The shares have not been and will not be approved by any Swiss regulatory authority. In particular, the shares are not and will not be registered with or supervised by the Swiss Federal Banking Commission, and investors may not claim protection under the Swiss Investment Fund Act.

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LEGAL MATTERS

Certain matters as to U.S. law in connection with this offering will be passed upon for us by Akin Gump Strauss Hauer & Feld LLP. Legal matters in connection with this offering will be passed upon for the underwriters by Simpson Thacher & Bartlett LLP as to U.S. law. The validity of the Class A Ordinary Shares under Cayman Islands law will be passed upon for us by Turner & Roulstone, Attorneys-at-Law, George Town, Grand Cayman.

EXPERTS

The consolidated financial statements and schedules for each of the periods listed in the index to the consolidated financial statements under the heading ‘‘Audited Consolidated Financial Statements’’ have been audited by BDO Seidman, LLP, an independent registered public accounting firm to the extent and for the periods set forth in their report appearing elsewhere, and are included in reliance upon such report given upon the authority of said firm as experts in accounting and auditing.

CHANGE IN AUDITOR

On December 12, 2006, our Audit Committee determined that our relationship with KPMG should cease due to certain continuing financial arrangements between KPMG and the chairman of our Audit Committee who was formerly a partner at KPMG which may have presented an issue with respect to KPMG’s independence upon consummation of this offering. To avoid this issue, we and KPMG mutually agreed to terminate the relationship. Accordingly, the Audit Committee appointed BDO Seidman, LLP as our independent auditors. During the fiscal years ended December 31, 2005 and December 31, 2004 and the interim period ending on December 12, 2006, there were no (i) disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused it to make reference to the subject matter of the disagreements in connection with its report or (ii) ‘‘reportable events’’ as such term is used in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934.

WHERE TO FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the issuance of our ordinary shares being offered hereby. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information with respect to us and our Class A Ordinary Shares, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete, and, where such contract or other document is an exhibit to the registration statement, each such statement is qualified by the provisions in such exhibit, to which reference is hereby made.

We are not currently subject to the informational requirements of the Exchange Act. As a result of this offering, we will become subject to the informational requirements of the Exchange Act and, in accordance therewith, will file reports and other information with the SEC. The registration statement, such reports and other information can be inspected and copied at the Public Reference Room of the SEC located at 100 F Street, N.E., Washington D.C. 20549. Copies of such materials, including copies of all or any portion of the registration statement, can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC’s home page on the Internet ( http://www.sec.gov ).

We intend to furnish our shareholders with annual reports containing financial statements audited by our independent registered public accounting firm and quarterly reports for the first three fiscal quarters of each fiscal year containing unaudited interim financial information. Our telephone number is (345) 745-4573.

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ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. FEDERAL
SECURITIES LAWS AND OTHER MATTERS

We are incorporated as an exempted company limited by shares under the laws of the Cayman Islands. In addition, some of our directors and officers reside outside the United States and a significant portion of their and our assets are located outside of the United States. As a result, it may be difficult for persons purchasing the Class A Ordinary Shares to effect service of process within the United States upon us or to enforce judgments against us or judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States or any state of the United States. 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 ordinary shares made hereby by serving Corporation Service Company, 1133 Avenue of the Americas, Suite 3100, New York, New York 10036-6710, our U.S. agent irrevocably appointed for that purpose.

Turner & Roulstone, our Cayman Islands counsel, has advised us that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign judgment of a court of competent jurisdiction if such judgment is final, for a liquidated sum, provided it is not in respect of taxes or a fine or penalty, is not inconsistent with a Cayman Islands judgment in respect of the same matters, and was not obtained in a manner which is contrary to the public policy of the Cayman Islands. It is doubtful the courts of the Cayman Islands will, in an original action in the Cayman Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United States or any state of the United States on the grounds that such provisions are penal in nature.

A Cayman Islands court may stay proceedings if concurrent proceedings are being brought elsewhere.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Audited Consolidated Financial Statements  
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets as of December 31, 2006 and 2005 F-3
Consolidated Statements of Income for the years ended December 31, 2006 and 2005 and for the period from July 13, 2004 (date of incorporation) to December 31, 2004 F-4
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2006 and 2005 and for the period from July 13, 2004 (date of incorporation) to December 31, 2004 F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2006 and 2005 and for the period from July 13, 2004 (date of incorporation) to December 31, 2004 F-6
Notes to the Consolidated Financial Statements F-7
Financial Statement Schedules  
Schedule I: Summary of Investments Other than Investments in Related Parties F-21
Schedule II: Condensed Financial Information of Registrant F-22

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 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

The Board of Directors and Shareholders
Greenlight Capital Re, Ltd. and its Subsidiary
Grand Cayman, Cayman Islands

We have audited the accompanying consolidated balance sheets of Greenlight Capital Re, Ltd. and its Subsidiary as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity and cash flows for the years ended December 31, 2006 and 2005 and for the period from July 13, 2004 (date of incorporation) through December 31, 2004. We have also audited the schedules listed in the accompanying index. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedules are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedules, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 5 to the consolidated financial statements, the net change in restricted cash and cash equivalents has been reclassified in the 2005 and 2004 consolidated statements of cash flows from an investing activity to an operating activity to more appropriately reflect the activity to which the restricted cash and cash equivalents relates.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Greenlight Capital Re, Ltd. and its Subsidiary as of December 31, 2006 and 2005, and the results of their operations and their cash flows for the years ended December 31, 2006 and 2005 and for the period from July 13, 2004 (date of incorporation) through December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the schedules present fairly, in all material respects, the information set forth therein.

/s/ BDO Seidman, LLP
Grand Rapids, Michigan

March 8, 2007

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GREENLIGHT CAPITAL RE, LTD.
CONSOLIDATED BALANCE SHEETS

December 31, 2006 and 2005
(expressed in thousands of U.S. dollars, except per share and share amounts)


  2006 2005
ASSETS  
 
Investments in securities  
 
Fixed maturities, trading at fair value $ —
$ 238
Equity investments, trading at fair value 238,799
216,702
Other investments, at estimated fair value 4,723
2,271
Total investments in securities 243,522
219,211
Cash and cash equivalents 82,704
7,218
Restricted cash and cash equivalents 154,720
99,719
Interest receivable on related party promissory note receivable —
479
Investment income receivable 454
850
Reinsurance premiums receivable 19,622
—
Deferred acquisition costs 16,282
—
Other assets 1,304
458
Total assets $ 518,608
$ 327,935
LIABILITIES AND SHAREHOLDERS’ EQUITY  
 
Liabilities  
 
Securities sold, not yet purchased, at fair value $ 124,044
$ 87,518
Dividends payable on securities sold, not yet purchased 354
101
Financial contracts payable, at fair value 8,640
722
Loss and loss adjustment expense reserves 4,977
—
Unearned premium reserves 47,546
—
Reinsurance balances payable 4,236
—
Accounts payable and accrued expenses 2,020
790
Performance fee payable to related party 14,624
6,982
Total liabilities 206,441
96,113
Shareholders’ equity  
 
Preferred share capital (par value $0.10; authorized, 50,000,000; none issued) —
—
Ordinary share capital (Class A: par value $0.10; authorized, 100,000,000; issued and outstanding, 16,507,228 (2005: 16,181,666): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding 5,050,000) 2,156
2,123
Additional paid-in capital 219,972
212,871
Less: Related party promissory note receivable —
(16,212
)
Retained earnings 90,039
33,040
Total shareholders’ equity 312,167
231,822
Total liabilities and shareholders’ equity $ 518,608
$ 327,935

The accompanying Notes to the Consolidated Financial Statements are an integral part of the Consolidated Financial Statements.

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GREENLIGHT CAPITAL RE, LTD.
CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2006 and 2005 and for the period from July 13, 2004 (date of incorporation) to December 31, 2004
(expressed in thousands of U.S. dollars, except share and per share data)


  2006 2005 2004
Revenues  
 
 
Premiums written $ 74,151
$ —
$ —
Change in unearned premiums reserves (47,546
)
—
—
Premiums earned 26,605
—
—
Net investment income 58,509
27,934
9,636
Interest income on related party promissory note receivable 1,034
1,323
516
Total revenues 86,148
29,257
10,152
Expenses  
 
 
Loss and loss adjustment expenses incurred 9,671
—
—
Acquisition costs 10,415
—
—
General and administrative expenses 9,063
2,992
3,377
Total expenses 29,149
2,992
3,377
Net income $ 56,999
$ 26,265
$ 6,775
Earnings per share  
 
 
Basic $ 2.67
$ 1.24
$ 0.32
Diluted 2.66
1.24
0.32
Weighted average number of ordinary shares used in the
determination of: 		 
 
 
Basic 21,366,140
21,226,868
21,225,000
Diluted 21,457,443
21,265,801
21,234,350

The accompanying Notes to the Consolidated Financial Statements are an integral part of the Consolidated Financial Statements.

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GREENLIGHT CAPITAL RE, LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years ended December 31, 2006 and 2005 and for the period from July 13, 2004 (date of incorporation) to December 31, 2004
(expressed in thousands of U.S. dollars, except share and per share data)


  Ordinary shares
issued 		Additional
paid-in
capital 		Related
party
promissory
note
receivable 		Retained
earnings 		Total
shareholders’
equity
  Number of
shares 		Share
capital
   
 
 
 
 
 
Balance at July 13, 2004 —
$ —
$ —
$ —
$ —
$ —
Issue of Class A Ordinary share capital 16,175,000
1,617
160,133
—
—
161,750
Issue of Class B Ordinary share capital 5,050,000
505
49,995
(24,500
)
—
26,000
Options and awards expense —
—
1,999
—
—
1,999
Net income —
—
—
—
6,775
6,775
Balance at December 31, 2004 21,225,000
2,122
212,127
(24,500
)
6,775
196,524
Issue of Class A Ordinary share capital 6,666
1
(1
)
—
—
—
Options and awards expense —
—
745
—
—
745
Principal repayments received —
—
—
8,288
—
8,288
Net income —
—
—
—
26,265
26,265
Balance at December 31, 2005 21,231,666
$ 2,123
$ 212,871
$ (16,212
)
$ 33,040
$ 231,822
Issue of Class A Ordinary share capital 325,562
33
4,237
—
—
4,270
Options and awards expense —
—
2,864
—
—
2,864
Principal repayments received —
—
—
16,212
—
16,212
Net income —
—
—
—
56,999
56,999
Balance at December 31, 2006 21,557,228
$ 2,156
$ 219,972
$ —
$ 90,039
$ 312,167

The accompanying Notes to the Consolidated Financial Statements are an integral part of the Consolidated Financial Statements.

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GREENLIGHT CAPITAL RE, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2006 and 2005 and for the period from July 13, 2004 (date of incorporation) to December 31, 2004
(expressed in thousands of U.S. dollars, except share and per share data)


    (Restated)
  2006 2005 2004
Cash provided by (used in):  
 
 
Operating activities  
 
 
Net income $ 56,999
$ 26,265
$ 6,775
Adjustments to reconcile net income to net cash provided by
operating activities 		 
 
 
Net change in unrealized gains on securities (12,499
)
(22,202
)
(15,438
)
Net realized (gains) losses on securities (65,692
)
(12,544
)
2,234
Stock options and stock awards expense 2,864
745
1,999
Depreciation 20
2
—
Purchase of securities (244,645
)
(174,138
)
(155,627
)
Proceeds on sale of securities 335,051
148,249
97,773
Change in:  
 
 
Restricted cash and cash equivalents (55,001
)
(2,928
)
(96,791
)
Investment income receivable 396
(702
)
(148
)
Reinsurance premiums receivable (19,622
)
—
—
Deferred acquisition costs (16,282
)
—
—
Other assets (704
)
20
(440
)
Dividends payable on securities sold, not yet purchased 253
23
78
Financial contracts payable at fair value 7,918
722
—
Loss and loss adjustment expense reserves 4,977
—
—
Unearned premium reserves 47,546
—
—
Reinsurance balances payable 4,236
—
—
Accounts payable and accrued expenses 1,230
662
128
Performance fee payable to related party 7,642
4,095
2,887
Net cash provided by (used in) operating activities 54,687
(31,731
)
(156,570
)
Investing activities  
 
 
Purchase of fixed assets (200
)
(40
)
—
Proceeds on disposal of fixed assets 38
—
—
Net cash used in investing activities (162
)
(40
)
—
Financing activities  
 
 
Proceeds from share issue 4,270
—
187,750
Collection of related party promissory note receivable 16,212
8,288
—
Net change in interest receivable on related party promissory note receivable 479
37
(516
)
Net cash provided by financing activities 20,961
8,325
187,234
Net increase (decrease) in cash and cash equivalents 75,486
(23,446
)
30,664
Cash and cash equivalents at beginning of the period 7,218
30,664
—
Cash and cash equivalents at end of the period $ 82,704
$ 7,218
$ 30,664
Supplementary information:  
 
 
Interest paid in cash $ 2,121
$ 518
$ 108
Interest received in cash 1,513
2,676
270

The accompanying Notes to the Consolidated Financial Statements are an integral part of the Consolidated Financial Statements.

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

1.  DESCRIPTION OF BUSINESS

Greenlight Capital Re, Ltd. (the ‘‘Company’’) was incorporated as an exempted company under the Companies Law of the Cayman Islands on July 13, 2004. The Company incorporated a wholly owned subsidiary, Greenlight Reinsurance, Ltd. (the ‘‘Subsidiary’’), to provide global property and casualty reinsurance. The Subsidiary has an unrestricted Class ‘‘B’’ insurance license under Section 4(2) of the Cayman Islands Insurance Law.

Effective August 11, 2004, the Company raised $212.2 million in a private placement, of which $24.5 million was paid for with a note receivable (see note 7). The Company invested a portion of the above noted proceeds into its Subsidiary. The Subsidiary commenced underwriting in April 2006.

2.  SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (‘‘U.S. GAAP’’). The significant accounting policies adopted by the Company are as follows:

Basis of Presentation

The consolidated financial statements include the accounts of the Company and the Subsidiary. All significant intercompany transactions are eliminated on consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the year. Actual results could differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and certain short-term, highly liquid investments with original maturity dates of three months or less.

Premium Revenue Recognition

The Company accounts for reinsurance contracts that it writes in accordance with SFAS No. 60, ‘‘Accounting and Reporting by Insurance Enterprises’’ and SFAS No. 113, ‘‘Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts.’’ In the event that a reinsurance contract does not transfer sufficient risk, deposit accounting will be used and the contract will be reported as a deposit liability.

Premiums are recorded when written and include an estimate for premiums receivable at period end. Changes in premium estimates are expected and may result in significant adjustments in any period. These estimates change over time as additional information regarding the underlying business volume of clients is obtained. Any subsequent differences arising on such estimates are recorded in the period they are determined.

Premiums written are generally recognized as revenue over the contract period in proportion to the period of protection. Unearned premiums consist of the unexpired portion of reinsurance provided.

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GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

2.  SIGNIFICANT ACCOUNTING POLICIES  (Continued)

Acquisition Costs

Policy acquisition costs, such as commission and brokerage costs, relate directly to and vary with the writing of reinsurance contracts. These costs are deferred and amortized over the same period as premiums earned, and are limited to their estimated realizable value based on the related unearned premium, anticipated claims expenses and investment income. Acquisition costs also include profit commissions.

Loss and Loss Adjustment Expense Reserves

The Company establishes reserves for contracts based on estimates of the ultimate cost of all losses including losses incurred but not reported. These estimated ultimate reserves are based on reports received from ceding companies, historical experience as well as the Company’s own actuarial estimates. These estimates are continually reviewed and adjusted when necessary. Since reserves are estimates, the final settlement of losses may vary from the reserves established and any adjustments to the estimates are recorded in the period they are determined.

Financial Instruments

Investments in Securities and Securities Sold, Not Yet Purchased

The Company’s investments in bonds and equities classified as ‘‘trading securities’’ are valued based on the last reported sales price on the balance sheet dates as reported by a recognized exchange. Securities for which recognized exchange quotations are not readily available (e.g., private equity) are reported as other investments and are valued at management’s best estimate (utilizing the services of an investment advisor) of the fair market value based on prices received from market makers when available.

Premiums and discounts on fixed income securities are amortized into net investment income over the life of the security.

For securities classified as trading securities, any realized and unrealized gains or losses are determined on the basis of the specific identification method (by reference to cost and amortized cost, as appropriate) and included in net investment income in the consolidated statements of income.

For securities for which exchange quotations are not readily available, any realized and unrealized gains or losses are determined on the basis of the specific identification method. Realized gains and losses are reported in net investment income in the consolidated statements of income. Unrealized gains and losses, if any, are included in accumulated other comprehensive income as a separate component of shareholder’s equity. A decline in market value of a security below cost that is deemed other than temporary is charged to earnings and results in the establishment of a new cost basis of the security.

Dividend income and expense are recorded on the ex-dividend date.

Interest income and interest expense are recorded on an accrual basis.

Investments in Options

Amounts invested in exchange traded call and put options are recorded as an asset or liability at inception. Subsequent to initial recognition, unexpired option contracts are recorded at fair market value which is based upon the last quoted prices of the call and put options. Realized and unrealized gains and losses are included in net investment income in the consolidated statements of income.

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GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

2.  SIGNIFICANT ACCOUNTING POLICIES  (Continued)

Investments in Total Return Swap Agreements

Total return swap agreements, included in financial contracts payable, are derivative financial instruments entered into whereby the Company is either entitled to receive or obligated to pay the product of a notional amount multiplied by the movement in an underlying security, which the Company does not own, over a specified time frame. In addition, the Company may also be obligated to pay or receive other payments based on either interest rate, dividend payments and receipts, or foreign exchange movements during a specified period. The Company measures its rights or obligations to the counterparty based on the fair market value movements of the underlying security together with any other payments due. These contracts are carried at estimated fair value, with the resultant unrealized gains and losses reflected in net investment income. Additionally, any changes in the value of amounts received or paid on swap contracts are reported as a gain or loss in net investment income.

Derivative Financial Instruments

Statement of Financial Accounting Standards (SFAS) No. 133, ‘‘Accounting for Derivative Instruments and Hedging Activities,’’ establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives in the balance sheet at fair value. It also requires that unrealized gains and losses resulting from changes in fair value be included in income or comprehensive income, depending on whether the instrument qualifies as a hedge transaction, and if so, the type of hedge transaction. Derivative financial instrument assets are generally included in investments in securities or financial contracts receivable. Derivative financial instrument liabilities are generally included in financial contracts payable. The Company’s derivatives do not constitute hedges for financial reporting purposes.

Share-Based Compensation

The Company has established a Stock Incentive Plan for directors, employees and consultants. In addition, the Company granted share purchase options in 2004 to a service provider in exchange for services received (see note 7).

In 2004, the Company adopted SFAS No. 123 (Revised 2004) (‘‘SFAS 123R’’), ‘‘Share-Based Payment,’’ to account for the Company’s Stock Incentive Plan. SFAS 123R requires the Company to recognize share-based compensation transactions using the fair value at the grant date of the award. Determining the fair value of share-based awards at the grant date requires judgment. The Company uses an option-pricing model (Black-Scholes pricing model) to assist in the calculation of fair value. Due to the limited history of the Company, the Company also uses the ‘‘calculated value method’’ which relies on historical industry volatility and uses the full life of the option, ten years, as the estimated term of the option. The Company uses a sample peer group of companies in the reinsurance industry to calculate the historical volatility. Additionally, the Company has assumed that dividends will not be paid. If actual results differ significantly from these estimates and assumptions, share-based compensation expense could be materially impacted, and would be reported in the period in which the estimates and assumptions are changed.

Service provider share purchase options issued in 2004 were expensed in the consolidated statements of income when services were rendered. For the employee Stock Incentive Plan, compensation cost is calculated and expensed over the vesting periods on a graded vesting basis (see note 7).

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

2.  SIGNIFICANT ACCOUNTING POLICIES  (Continued)

Director Stock Awards

In 2004, the Company granted certain directors a total of 20,000 Class A Ordinary shares which vest over a three-year period. The directors paid $0.10 per share and each share was valued at $10.00 per share. Director stock awards are expensed on a straight-line basis over the vesting period.

Foreign Exchange

The reporting currency of the Company is the U.S. dollar. Transactions in foreign currencies are recorded in United States dollars at the exchange rates in effect on the transaction date. Monetary assets and liabilities in foreign currencies at the balance sheet date are translated at the exchange rate in effect at the balance sheet date and translation exchange gains and losses, if any, are included in the statement of income.

Other Assets

Other assets consist primarily of prepaid expenses and fixed assets. Fixed assets are recorded at cost and depreciated over the estimated useful life of the assets using the straight-line method.

Comprehensive Income

The Company has no comprehensive income other than the net income disclosed in the consolidated statements of income and, as applicable, unrealized gains and losses on other investments for which exchange quotations are not readily available.

Earnings Per Share

Basic earnings per share is based on weighted average ordinary shares outstanding and excludes dilutive effects of stock options and stock awards. Diluted earnings per share assumes the exercise of all dilutive stock options and stock awards using the treasury stock method.


  2006 2005 2004
Weighted average shares outstanding 21,366,140
21,226,868
21,225,000
Effect of dilutive service provider stock options 89,093
36,859
8,035
Effect of dilutive employee and director options and stock awards 2,210
2,074
1,315
  21,457,443
21,265,801
21,234,350

There were 1,131,000 and 530,000 anti-dilutive stock options outstanding as of December 31, 2006 and 2005, respectively.

Segment Information

Under SFAS No. 131, ‘‘Disclosures about Segments of an Enterprise and Related Information’’ (‘‘SFAS 131’’), operating segments are based on the internal organization management uses for allocating resources to and assessing performance as the source of the Company’s reportable segments.

The Company manages its business on the basis of one operating segment, Property and Casualty Reinsurance, in accordance with the qualitative and quantitative criteria established by SFAS 131.

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

2.  SIGNIFICANT ACCOUNTING POLICIES  (Continued)

Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157, ‘‘Fair Value Measurements.’’ The Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements, the Board having previously concluded in those accounting pronouncements that permit fair value as the relevant measurement attribute. This Statement does not require any new fair value measurements. This Statement is effective for the Company beginning January 1, 2008. Management has not completed its review of the new guidance; however, the effect of the Statement’s implementation is not expected to be material to the Company’s financial statements or results of operations.

In February 2007, the FASB issued SFAS No. 159, ‘‘The Fair Value Option for Financial Assets and Financial Liabilities.’’ The Statement permits entities to choose to measure eligible items at fair value at specified election dates. For items for which the fair value option has been elected, unrealized gains and losses are to be reported in earnings at each subsequent reporting date. The fair value option is irrevocable unless a new election date occurs, may be applied instrument by instrument, with a few exceptions, and applies only to entire instruments and not to portions of instruments. This Statement provides an opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting. SFAS No. 159 is effective for the Company beginning January 1, 2008 with early adoption permitted beginning January 1, 2007, subject to certain conditions. Management has not completed its review of the new guidance; however, the effect of the Statement’s implementation is not expected to be material to the Company’s results of operations or financial position.

3.   FINANCIAL INSTRUMENTS

In the normal course of its business, the Company purchases and sells various financial instruments which include listed and unlisted bonds, equities, put and call options and similar instruments sold, not yet purchased. These financial instruments may result in market and credit risks, the amounts of which are not apparent from the financial statements.

The Company is exposed to market risk including interest rate and foreign exchange fluctuations on financial instruments that are valued at market prices. Market movements can be volatile and difficult to predict. This may affect the ultimate gains or losses realized upon the sale of its holdings. Management utilizes the services of the Company’s investment advisor to monitor the Company’s positions to reduce the risk of potential loss due to changes in market values.

Purchases and sales of investments are disclosed in the consolidated statements of cash flows. Net realized gains on the sale of investments and investments sold, not yet purchased during the period were $65.7 million (2005; net realized gains of $12.5 million, 2004: net realized losses of $2.2 million). Gross realized gains were $77.2 million (2005: $29.8 million, 2004: $2.3 million) and gross realized losses were $11.5 million (2005: $17.3 million, 2004: $4.5 million).

At December 31, 2006 investments with a fair market value of $193.9 million have been pledged as security against letters of credit issued.

At December 31, 2006 and 2005, the Company’s only investment in excess of 10% of shareholders’ equity was an investment in Lanxess AG with a fair value of $34.0 million and $24.0 million, respectively.

F-11



Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

3.   FINANCIAL INSTRUMENTS  (Continued)

Investments in Securities

Investment in Bond and Equity Securities, Trading

At December 31, 2006 and 2005, included in investment securities, trading are the following long positions:


2006 Cost/
amortized cost 		Unrealized
gains 		Unrealized
losses 		Fair market
value
Equities—listed $ 173,597
$ 70,308
$ (5,106
)
$ 238,799

2005 Cost/
amortized cost 		Unrealized
gains 		Unrealized
losses 		Fair market
value
Non-U.S. corporate bonds $ 241
$ 3
$ (6
)
$ 238
Equities—listed 177,945
46,709
(7,952
)
216,702
  $ 178,186
$ 46,712
$ (7,958
)
$ 216,940

Other Investments

Other investments includes bonds and equities for which fair value is not readily determined as well as options. Options are derivative financial instruments that give the buyer, in exchange for a premium payment, the right, but not the obligation, to either purchase from (call option) or sell to (put option) the writer a specified underlying security at a specified price on or before a specified date. The Company enters into exchange traded option contracts to meet certain investment objectives. For these exchange traded option contracts, the exchange acts as the counterparty to specific transactions and therefore bears the risk of delivery to and from counterparties of specific positions.

At December 31, 2006, included in other investments are the following securities:


  Cost Unrealized
gains (losses) 		Fair market
value
Equities—unlisted $ 4,032
$ (28
)
$ 4,004
Call options 367
352
719
Put options  123
(123
)
—
  $ 4,522
$ 201
$ 4,723

At December 31, 2005, included in other investments are the following securities:


  Cost Unrealized
gain/(loss) 		Fair market
value
Equities—unlisted $ 1,777
—
$ 1,777
Call options 87
$ 365
452
Put options 123
(81
)
42
  $ 1,987
$ 284
$ 2,271

During the years ended December 31, 2006 and 2005, other-than-temporary impairment losses on unlisted equities of $1,454 and $1,453 respectively, was reported in net investment income.

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

3.   FINANCIAL INSTRUMENTS  (Continued)

Investments in Securities Sold, not yet purchased


  2006
Fair market value 		2005
Fair market value
Equities $ 124,043
$ 87,075
Options 1
443
  $ 124,044
$ 87,518

Securities sold, not yet purchased are securities sold that the Company does not own in anticipation of a decline in the market value of the security. The Company’s risk is that the value of the security will increase rather than decline. Consequently, the settlement amount of the liability for securities sold, not yet purchased may exceed the amount recorded in the consolidated balance sheet as the Company is obligated to purchase the securities sold, not yet purchased in the market at prevailing prices to settle its obligations. To sell a security, not yet purchased, the Company needs to borrow the security for delivery to the buyer. On each day the transaction is open, the liability for the obligation to replace the borrowed security is marked-to-market and an unrealized gain or loss is recorded. At the time the transaction is closed, the Company realizes a gain or loss equal to the difference between the price at which the security was sold and the cost of replacing the borrowed security. While the transaction is open, the Company will also incur an expense for any dividends or interest which will be paid to the lender of the securities.

At December 31, 2006 and 2005, the Company’s investment portfolio includes the following equities sold, not yet purchased:


2006 Proceeds Unrealized
gains 		Unrealized
losses 		Fair market
value
Equities—listed $ 111,635
$ (6,350
)
$ 18,758
$ 124,043

2005 Proceeds Unrealized
gains 		Unrealized
losses 		Fair market
value
Equities—listed $ 86,447
$ (5,351
)
$ 5,979
$ 87,075

At December 31, 2006, included in the securities sold, not yet purchased are the following call and put options written:


  Proceeds Unrealized
(gains) losses 		Fair market
value
Call options  $ —
$ —
$ —
Put options 53
(52
)
1
  $ 53
$ (52
)
$ 1

At December 31, 2005, included in the securities sold, not yet purchased are the following call and put options written:


  Proceeds Unrealized
gains (losses) 		Fair market
value
Call options  $ 103
$ 321
$ 424
Put options  53
(34
)
19
  $ 156
$ 287 
$ 443

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

3.   FINANCIAL INSTRUMENTS  (Continued)

Investment in Total Return Swap Contracts

During the periods, the Company entered into total return swap contracts with various financial institutions. Under the terms of each of these swap contacts, the Company is either entitled to receive or obligated to make payments which are based on the product of a formula contained within the contract that includes the change in the fair market value of the underlying security. Each total return swap contract relates to a specified security. The Company enters into total return swap contracts to meet certain investment objectives.

The fair value of total return swaps outstanding at December 31, 2006 is as follows:


Underlying security Position Listing
currency 		Fair market
value of
underlying 		Obligations
on swap
contracts
Equities—listed Long
USD
$ 30,904
$ 5,977
Non-U.S equities—listed Short
JPY
(10,285
)
1,909
Non-U.S equities—listed Short
SEK
(2,586
)
754
   
 
 
$ 8,640

The fair value of total return swaps outstanding at December 31, 2005 is as follows:


Underlying security Position Listing
currency 		Fair market
value of
underlying 		Obligations
on swap
contracts
Equities—listed Long
USD
$ 5,692
$ 76
Non-U.S Equities—listed Short
JPY
(14,179
)
332
Non-U.S Equities—listed Short
SEK
(2,900
)
314
   
 
 
$ 722

The Company is subject to market risk on the underlying security as the Company may incur an obligation if the market price of the security changes. Management utilizes the services of the Company’s investment advisor to monitor the Company’s positions to reduce the risk of potential loss.

4.  CASH AND CASH EQUIVALENTS

  2006 2005
Cash at banks $ 3,291
$ 4,124
Cash held with brokers 72,864
(49
)
Money market funds held with brokers 6,549
3,143
  $ 82,704
$ 7,218

Due to the short term nature of cash and cash equivalents, management believes the above noted carrying values approximate their fair market value.

5.  RESTRICTED CASH AND CASH EQUIVALENTS

The Company is required to maintain certain cash in segregated accounts with prime brokers and swap counterparties. The amount of restricted cash held by prime brokers is primarily used to support the liability created from securities sold, not yet purchased. The amount of cash encumbered varies

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

5.  RESTRICTED CASH AND CASH EQUIVALENTS  (Continued)

depending on the market value of the securities sold, not yet purchased. Swap counterparties require cash collateral to support the current value of any amounts that may be due to the counterparty based on the value of the underlying security.


  2006 2005
Cash held by prime brokers $ 126,275
$ 88,979
Cash held by swap counter-parties 28,445
10,740
  $ 154,720
$ 99,719

The net change in restricted cash and cash equivalents has been reclassified in the 2005 and 2004 consolidated statements of cash flows from an investing activity to an operating activity to more appropriately reflect the activity to which the restricted cash and cash equivalents relates.

6.  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

A summary of changes in outstanding loss and loss adjustment expense reserves is as follows:


  2006 2005
Gross balance at January 1 $ —
$     —
Incurred losses related to:  
 
Current year 9,671
—
Prior year —
—
Total incurred 9,671
—
Paid losses related to:  
 
Current year (4,694
)
—
Prior year —
—
Total paid (4,694
)
—
Gross balance at December 31 $ 4,977
$ —
7.  SHARE CAPITAL 

The holders of all ordinary shares are entitled to share equally in dividends declared by the board of directors. In the event of a winding-up or dissolution of the Company, the ordinary shareholders share equally and ratably in the assets of the Company, after payment of all debts and liabilities of the Company and after liquidation of any issued and outstanding preferred shares. At December 31, 2006, no preferred shares had been issued or outstanding. The board of directors is authorized to establish the rights and restrictions for preferred shares as they deem appropriate.

The Second Amended and Restated Memorandum and Articles of Association (the ‘‘Articles’’) provides that the holders of Class A Ordinary shares generally are entitled to one vote per share. However, except upon unanimous consent of the board of directors, no Class A shareholder is permitted to vote an amount of shares which would cause any United States person to own (directly, indirectly or constructively under applicable United States tax attribution and constructive ownership rules) 9.9% or more of the total voting power of all issued and outstanding ordinary shares. The Articles further provide that the holder of Class B Ordinary shares generally are entitled to ten votes per share. However, holders of Class B Ordinary shares, together with their affiliates, are limited to

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

7.  SHARE CAPITAL   (Continued)

voting that number of Class B Ordinary shares equal to 23.0% of the total voting power of the total issued and outstanding ordinary shares.

Subsequent to December 31, 2006, the Company’s shareholders approved amendments to the Articles. The amendments included a revision which limits the Class B Ordinary shares voting power to 9.5% of the total voting power of the issued and outstanding ordinary shares.

The holders of the Ordinary shares have certain registration rights pursuant to the Shareholders’ Agreement, dated August 11, 2004. Subject to certain conditions, the holders of at least 50% of the current outstanding shares may request at certain times to have all or part of their shares registered. The registration rights require the Company to use commercially reasonable best efforts to have the registration statement declared effective. The registration rights were not deemed to be liabilities; therefore, there has been no recognition in these financial statements of the registration rights.

Shares reserved for issuance is comprised of 400,000 Class A Ordinary shares in relation to share purchase options granted to a service provider and 1,273,000 Class A Ordinary shares reserved for the Company’s Stock Incentive Plan for eligible directors, employees and consultants. The Stock Incentive Plan is administered by the compensation committee of the board of directors.

During the year ended December 31, 2004, the Company issued 5,050,000 Class B Ordinary shares valued at $50.5 million to Greenlight Capital Investors, LLC (‘‘GCI’’), an affiliated company. The Company received $26.0 million in cash and the remaining balance of $24.5 million was secured by a promissory note receivable provided that GCI was to pay interest calculated as the one-year London Interbank Offered Rate (‘‘LIBOR’’) plus 3% per annum and accrued daily. Interest is to be paid annually on the anniversary date (August 11), and the principal is to be repaid no later than August 11, 2009. During the year ended December 31,  2006, GCI repaid the remaining principal balance of $16.2 million (2005: $8.3 million) and $1.5 million (2005: $1.4 million) of interest relating to the promissory note receivable.

During the year ended December 31, 2006, 318,900 Class A Ordinary shares were issued to certain directors and employees for a total cash consideration of $4.1 million. Additionally, the Company issued 6,662 (2005: 6,666) Class A Ordinary shares representing the vesting of directors’ stock awards.

Subsequent to December 31, 2006, 1,426,630 Class B Ordinary shares were transferred from GCI to its underlying owners and automatically converted into an equal number of Class A Ordinary shares on a one-for-one basis, upon transfer. The remaining 3,623,370 Class B Ordinary shares were transferred from GCI to Mr. David Einhorn and remained as Class B Ordinary shares.

The Subsidiary is subject to a minimum shareholder’s equity balance of $120 as determined by the Cayman Islands Monetary Authority.

Additional paid-in capital includes the premium per share paid by the subscribing shareholders for Class A and B Ordinary shares which have a par value of $0.10 each. It also includes stock options expense and stock awards earned not yet issued.

Service Provider Share Purchase Options

An affiliate of GCI entered into a consulting agreement (the ‘‘Consulting Agreement’’) with First International Securities Ltd. (‘‘First International’’) in August 2002. First International received a cash payment of $75 for the preparation and delivery of a feasibility study relating to the formation, capitalization, licensing and operation of the Company. Additionally, upon consummation of the initial

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

7.  SHARE CAPITAL   (Continued)

private offering, First International Capital Holdings Ltd., the successor to First International, received a 10-year share purchase option to purchase 400,000 Class A ordinary shares. These share purchase options were granted on September 20, 2004 and have an exercise price of $10 per share.

Employee and Director Stock Options

The Company has a Stock Incentive Plan for directors, employees and consultants. As of December 31, 2006, the Company had reserved for issuance 1,273,000 Class A Ordinary shares for eligible participants. During the year ended December 31, 2006, certain employees and directors were granted options to purchase a total of 601,000 (2005: 530,000) Class A Ordinary shares. These options vest over three years and expire 10 years from grant date. The Company uses the Black-Scholes option pricing model to determine the valuation of these options. Subsequent to December 31, 2006, the Company increased the Class A Ordinary shares reserved for issuance to 2,000,000.

The options have been valued at $5.57 - $7.18 (2005: $5.57) per share option using a risk free rate varying between 4.36% - 5.14% (2005: 4.36%), an estimated volatility of 30% and an expected term of 10 years.

At the present time, the board of directors does not anticipate any dividends will be declared during the expected term of the options. The Company uses graded vesting for expensing employee stock options. The total compensation cost expensed for the period ended December 31, 2006 under the Stock Incentive Plan was $2.9 million (2005: $0.7 million). At December 31, 2006, the total compensation cost related to non-vested options not yet recognized was $3.2 million (2005: $2.3 million) to be recognized over a weighted average period of 2.01 (2005: 2.63) years assuming the employees complete their service period for vesting of the options.

Employee stock option activity during periods was as follows:


  Number of
shares 		Weighted
average
exercise price 		Weighted
average
grant date
fair value
Balance at December 31, 2004 —
$ —
$ —
Granted 530,000
11.12
5.57
Exercised —
—
—
Forfeited —
—
—
Expired —
—
—
Balance at December 31, 2005 530,000
$ 11.12
$ 5.57
Granted 601,000
12.47
6.40
Exercised —
—
—
Forfeited —
—
—
Expired —
—
—
Balance at December 31, 2006 1,131,000
$ 11.83
$ 6.01

At December 31, 2006, the weighted-average remaining contractual term for options outstanding was 9.03 years.

At December 31, 2006, 176,667 stock options were exercisable. These options had a weighted-average exercise price of $11.12 and a weighted-average remaining contractual term of 8.63 years.

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

7.  SHARE CAPITAL   (Continued)

The aggregate intrinsic value for options outstanding and options exercisable at December 31, 2006 was $2,741 and $556, respectively. During the year ended December 31, 2006, 183,331 (2005: 6,664) options vested.

8.  NET INVESTMENT INCOME

  2006 2005 2004
Change in net unrealized gains $ 12,499
$ 22,202
$ 15,438
Net realized gains (losses) on securities 65,692
12,544
(2,234
)
Dividend and interest income, net of withholding taxes 12,213
6,842
912
Interest and other investment expenses (2,434
)
(698
)
(161
)
Change in financial contracts (7,918
)
(722
)
—
Dividends paid on securities sold, not yet purchased (2,851
)
(2,051
)
(802
)
Investment fees to a related party (see note 11) (18,692
)
(10,183
)
(3,517
)
  $ 58,509
$ 27,934
$ 9,636
9.  GENERAL AND ADMINISTRATIVE EXPENSES

  2006 2005 2004
General expenses $ 6,199
$ 2,247
$ 393
Stock compensation expense 2,864
745
1,999
Organizational costs —
—
985
  $ 9,063
$ 2,992
$ 3,377
10.  TAXATION

Under current Cayman Islands law, the Company is not obligated to pay any taxes in the Cayman Islands on either income or capital gains. The Company has an undertaking from the Governor-in-Cabinet of the Cayman Islands, pursuant to the provisions of the Tax Concessions Law, as amended, that, in the event that the Cayman Islands enacts any legislation that imposes tax on profits, income, gains or appreciations, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to the Company or its operations, or to the Class A or Class B Ordinary Shares or obligations, for a period of 20 years from February 1, 2005.

11.  RELATED PARTY TRANSACTIONS

Director Stock Awards

During the year ended December 31, 2004, certain directors received a stock award of 5,000 Class A Ordinary shares, vesting equally over three years. The directors each paid five hundred dollars to acquire the right to the stock award.

During the year ended December 31, 2006, 6,662 (2005: 6,666) shares vested and were issued to the directors and as a result, $67 (2005: $67, 2004: $17) has been expensed and added to shareholders’ equity.

Director Fees

During the year ended December 31, 2006, director fees of $113 (2005: $76, 2004: $116) were paid. The amount was split among the four non-employee directors not affiliated with GCI.

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

11.  RELATED PARTY TRANSACTIONS  (Continued)

Investment Advisory Agreement

The Company has entered into an Investment Advisory Agreement (the ‘‘Investment Agreement’’) with DME Advisors, LP (‘‘DME’’). DME is a related party and an affiliate of David Einhorn, the Chairman of the Company’s Board of Directors and a principal shareholder of the Company.

Pursuant to the Investment Agreement, a performance fee equal to 20% of the net income of the account managed by DME is payable, subject to a loss carryforward provision, to DME. Included in investment fees (see note 8) is a performance fee of $14.6 million (2005: $7.0 million, 2004: $2.4 million) all of which remains payable at December 31, 2006 and 2005.

Additionally, pursuant to the Investment Agreement, a monthly management fee equal to 0.125% (1.5% on an annual basis) of the account managed by DME is paid to DME. Included in investment fees (see note 8) are management fees of $4.1 million (2005: $3.2 million, 2004: $1.1 million). The investment fees have been fully paid as of December 31, 2006 and 2005.

Other Transactions

Included in the consolidated statements of income is interest income of $1.0 million (2005: $1.3 million, 2004: $0.5 million) relating to the related party promissory note issued by GCI in exchange for Class B Ordinary shares (see note 7). During 2006 this promissory note was fully repaid by GCI, including both principal and interest.

12.  COMMITMENTS AND CONTINGENCIES 

Operating Lease

Effective September 1, 2005, the Company entered into a five-year non-cancelable lease agreement to rent office space. The total rent expense charged for the year ended December 31, 2006 was $89 (2005: $49, 2004: $nil).

The following is a schedule of future minimum rental payments required under the operating lease for the next five years:


Year Total
2007 $             90
2008 95
2009 99
2010 69
2011 —
  $ 353

Private Equity

Periodically, the Company makes investments in private equity vehicles. As part of the Company’s participation in such private equity investments, the Company may make funding commitments. As of December 31, 2006, the Company had commitments to invest an additional $6.8 million in private equity investments.

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Table of Contents

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2006, 2005 and 2004
(expressed in thousands of U.S. dollars, except per share and share amounts)

12.  COMMITMENTS AND CONTINGENCIES  (Continued)

Letters of Credit

Effective October 15, 2005, the Company signed a letter of credit agreement with an S&P AA rated U.S. bank, for a facility of up to $200 million. At December 31, 2006, letters of credit totaling $8.9 million had been issued.

There were no letters of credit issued at December 31, 2005.

Litigation

In the normal course of business, the Company may become involved in various claims litigation and legal proceedings. As of December 31, 2006, the Company was not a party to any litigation or arbitration proceedings.

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Table of Contents

SCHEDULE I

GREENLIGHT CAPITAL RE, LTD.
 SUMMARY OF INVESTMENTS—OTHER THAN INVESTMENTS IN RELATED PARTIES  

 AS OF DECEMBER 31, 2006
(expressed in thousands of U.S. dollars)


Type of Investment Cost Fair Value Balance
Sheet Value
Equity investments, trading at fair value  
 
 
Common stocks, listed $ 173,597
$ 238,799
$ 238,799
Total investments, trading $ 173,597
$ 238,799
$ 238,799
Other investments; at estimated fair value  
 
 
Equities, unlisted 4,032
4,004
4,004
Call options 367
719
719
Put options 123
—
—
Total other investments 4,522
4,723
4,723
Total investments $ 178,119
$ 243,522
$ 243,522

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Table of Contents

SCHEDULE II

GREENLIGHT CAPITAL RE, LTD.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET—PARENT COMPANY ONLY

(expressed in thousands of U.S. dollars)


  December 31,
2006 		December 31,
2005
Assets  
 
Cash and cash equivalents $ 23
$ 186
Interest receivable on related party promissory note —
479
Investment in subsidiary 312,144
231,216
Total assets $ 312,167
$ 231,881
Liabilities and shareholders’ equity  
 
Liabilities  
 
Accounts payable $ —
$ 59
Shareholders’ equity  
 
Share capital 2,156
2,123
Additional paid in capital 219,972
212,871
Less: Related party promissory note receivable —
(16,212
)
Retained earnings 90,039
33,040
  312,167
231,822
Total liabilities and shareholders’ equity $ 312,167
$ 231,881

GREENLIGHT CAPITAL RE, LTD.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF INCOME—PARENT COMPANY ONLY

(expressed in thousands of U.S. dollars)


  Year Ended
December 31, 2006 		Year Ended
December 31, 2005 		Period from July 13,
2004
(date of incorporation)
to
December 31, 2004
Revenue  
 
 
Investment income $ 1,050
$ 1,326
$ 532
Expenses  
 
 
General and administrative expenses 3,007
1,949
3,335
Net loss before equity in earnings of consolidated subsidiary (1,957
)
(623
)
(2,803
)
Equity in earnings of consolidated subsidiary 58,956
26,888
9,578
Consolidated net income $ 56,999
$ 26,265
$ 6,775

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Table of Contents

SCHEDULE II (continued)

CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF CASH FLOWS—PARENT COMPANY ONLY

(expressed in thousands of U.S. dollars)


  Year Ended
December 31,
2006 		Year Ended
December 31,
2005 		Period from July 13,
2004 (date of
incorporation) to
December 31, 2004
Operating activities  
 
 
Net income $ 56,999 
$ 26,265
$ 6,775
Adjustments to reconcile net income to cash  
 
 
provided by (used in) operating activities  
 
 
Equity in earnings of consolidated subsidiary (58,956
)
(26,888
)
(9,578
)
Stock options and stock awards expense 2,864
745
1,999 
Change in other assets —
440 
(440
)
Change in accounts payable and accrued expenses (59
)
14 
45
  848
576 
(1,199
)
Investing activity  
 
 
Contributed surplus to subsidiary (21,972
)
(9,550
)
(185,200
)
Financing activities  
 
 
Proceeds from share issue 4,270
—
187,750
Collection of related party promissory note receivable 16,212
8,288 
—
Change in interest receivable on related party promissory note receivable 479
37
(516
)
  20,961 
8,325
187,234
Net (decrease) increase in cash and cash equivalents (163
)
(649
)
835 
Cash and cash equivalents at beginning of the period 186
835
—
Cash and cash equivalents at end of the period $ 23
$ 186
$ 835 

F-23



Table of Contents

GLOSSARY OF SELECTED REINSURANCE TERMS

Acquisition costs Ceding commission, brokerage fees, premium taxes and other direct expenses relating directly to the production of premiums.
Acquisition cost ratio A ratio calculated by dividing the acquisition expenses by the net premiums earned.
Actuary A person professionally trained in the mathematical and technical aspects of insurance and related fields particularly in the calculation of premiums, actuarial liabilities and other values.
Alien reinsurer A reinsurance company formed under the laws of a jurisdiction other than a state of the United States. A reinsurance company formed under the laws of a state in the United States that transacts reinsurance in countries other than the United States is also an alien reinsurer.
Broker An intermediary who negotiates contracts of insurance or reinsurance, receiving a commission for placement and other services rendered, between (1) a policyholder and a primary insurer, on behalf of the policyholder, (2) a primary insurer and a reinsurer, on behalf of the primary insurer, or (3) a reinsurer and a retrocessionaire, on behalf of the reinsurer.
Capacity Capacity is the percentage of surplus, that an insurer or reinsurer is willing or able to place at risk or the dollar amount of exposure it is willing to assume. Capacity may apply to a single risk, a program, a line of business or an entire book of business. Capacity may be constrained by legal restrictions, corporate restrictions, or indirect financial restrictions such as capital adequacy requirements.
Casualty clash Casualty clash primarily covers a single third party event that can affect multiple casualty policies. For example, a collapse of a building could give rise to a multiple claims under Engineering Errors and Omissions, Architect’s Errors and Omissions, and General Liability policies. The combined losses for all affected policies could give rise to a casualty clash loss.
Casualty reinsurance Casualty reinsurance is primarily concerned with the losses caused by injuries to third persons (persons other than the policyholder) and the legal liability imposed on the policyholder resulting therefrom. This includes, but is not limited to workers’ compensation, automobile liability, and general liability. A greater degree of unpredictability is generally associated with casualty risks known as ‘‘long-tail risks,’’ where losses take time to become known and a claim may be separated from the circumstances that caused it by several years. An example of a long-tail casualty risk

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includes the use of certain drugs that may cause cancer or birth defects. There tends to be greater delay in the reporting and settlement of casualty reinsurance claims due to the long-tail nature of the underlying casualty risks and their greater potential for litigation.
Catastrophe A severe loss, typically involving multiple claimants. Common perils include earthquakes, hurricanes, tsunamis, hailstorms, tornados, severe winter weather, floods, fires, explosions, volcanic eruptions and other natural or man-made disasters. Catastrophe losses may also arise from acts of war, acts of terrorism and political instability.
Cede When a party reinsures its liability to another party, it ‘‘cedes’’ business to the reinsurer and is referred to as the ‘‘client.’’
Claim Request by an insured or reinsured for indemnification by an insurance or reinsurance company for loss incurred from an insured peril or event.
Client A party whose liability is reinsured by a reinsurer. Also known as a cedent.
Combined ratio The ratio of underwriting losses and loss adjustment expenses, acquisition expenses and general and administrative expenses to net premiums earned, or equivalently, the sum of the loss ratio, acquisition cost ratio, and expense ratio. The combined ratio of an insurance company is generally viewed as an indication of underwriting profitability of that insurance company, but does not take into account the effect of investing activities on net income.
Composite ratio The sum of the underwriting losses incurred and acquisition costs divided by the net premiums earned or equivalently, the sum of the loss ratio and acquisition cost ratio.
Co-participation The payment by the insured of a predetermined proportion of all losses above the predetermined amount.
Credit insurance Credit insurance is associated with a specific loan or line of credit which pays back some or all of any monies owed should certain events happen to the borrower, such as death, disability, or unemployment of the borrower.
Development The difference between the amount of reserves for losses and loss adjustment expenses initially estimated by an insurer or reinsurer and the amount re-estimated in an evaluation at a later date.
Directors and officers liability Insurance that covers liability for corporate directors and officers for wrongful acts, subject to applicable exclusions, terms and conditions of the policy.

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Table of Contents
Excess of loss reinsurance Reinsurance that indemnifies the reinsured against all or a specified portion of losses in excess of a specified dollar or percentage loss ratio amount.
Financial strength rating The opinion of rating agencies regarding the financial ability of an insurance or reinsurance company to meet its financial obligations under its policies.
Frequency business Insurance/reinsurance that is characterized by contracts containing a potential large number of smaller losses emanating from multiple events.
Gross premiums written Total premiums for assumed reinsurance during a given period.
Incurred but not reported (IBNR) Reserves for estimated loss and loss adjustment expenses that have been incurred by insureds and reinsureds but not yet reported to the insurer or reinsurer, including unknown future developments on loss and loss adjustment expenses which are known to the insurer or reinsurer.
Internal expense ratio A ratio calculated by dividing general and administrative expenses by premiums earned.
Loss adjustment expenses 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 A ratio calculated by dividing underwriting losses incurred and loss adjustment expenses by premiums earned.
Loss reserves and loss adjustment
expense 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 contracts it has written. Reserves are established for losses and for loss adjustment expenses, and consist of reserves established with respect to individual reported claims and incurred but not reported losses.
Medical malpractice insurance Medical malpractice insurance provides an indemnity to physicians and their employees for losses related to patient injuries arising from medical advice rendered or procedures performed.
Non-admitted insurers An insurer not licensed to do business in the jurisdiction in question. Also known as an unauthorized insurer and unlicensed insurer.

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Premiums; written, earned and unearned Premiums represent the cost of insurance that is paid by the cedent or insurer to the insurer or reinsurer. Written represents the complete amount of premiums received, and earned represents the amount recognized as income over a period of time. Unearned is the difference between written and earned premiums.
Probable maximum loss The maximum amount of loss that one would expect under ordinary circumstances based on computer or actuarial modeling techniques.
Professional liability insurance Professional liability insurance protects a company and its representatives against legal claims arising from error or misconduct in providing or failing to provide professional services. This type of coverage includes errors and/or omissions policies, directors and officers coverage and specialty coverage like employment practices liability insurance.
Profit commission A commission paid by a reinsurer to a ceding insurer based on a predetermined percentage of the profit realized by the reinsurer on the ceded business.
Property insurance Property insurance covers a business’s building and its contents—money and securities, records, inventory, furniture, machinery, supplies and even intangible assets such as trademarks—when damage, theft or loss occurs. Peril reinsurance is a subset of property reinsurance.
Property catastrophe reinsurance Property catastrophe reinsurance contracts are typically ‘‘all risk’’ in nature, meaning that they protect against losses from natural and man-made catastrophes. Losses on these contracts typically stem from direct property damage and business interruption.
Proportional reinsurance All forms of reinsurance in which the reinsurer shares a proportional part of the original premiums and losses of the reinsured. In proportional reinsurance, the reinsurer generally pays the client a ceding commission. The ceding commission generally is based on the client’s cost of acquiring the business being reinsured (including commissions, premium taxes, assessments and miscellaneous administrative expenses) and also may include a profit component. Frequently referred to as quota-share reinsurance.
Quota-share reinsurance A form of proportional reinsurance in which the reinsurer assumes an agreed percentage of each underlying insurance contract being reinsured.

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Regulation 114 trusts A three way investment trust agreement involving a cedent or client, a financial institution and a non-admitted reinsurer governed by Regulation 114 of the Official Compilation of Codes, Rules and Regulations (11 NYCRR4) of the New York State Insurance Department. Regulation 114 Trusts, also known as Reg 114 Trusts, must be maintained in the United States in an approved financial institution. Securities used to collateralize the trust are limited to cash and cash equivalents, U.S. Treasury securities, and fixed income securities rated ‘‘A’’ or higher.
Reinstatement premium A Premium charged for the reinstatement of the amount of reinsurance coverage to its full amount reduced as a result of a reinsurance loss payment.
Reinsurance An arrangement in which a reinsurer agrees to indemnify an insurance company, the client, against all or a portion of the insurance risks underwritten by the client under one or more policies. Reinsurance can provide a client with several benefits, including a reduction in net liability on individual risks and catastrophe protection from large or multiple losses. Reinsurance also provides a client with additional underwriting capacity by permitting it to accept larger risks and write more business than would be possible without a related increase in capital and surplus, and facilitates the maintenance of acceptable financial ratios by the client. Reinsurance does not legally discharge the client from its liability with respect to its obligations to the insured.
Reinsurer An insurance company that assumes part of the risk in exchange for part of the premium to a primary insurer.
Retrocession; retrocessional coverage A transaction whereby a reinsurer cedes to another reinsurer, commonly referred to as 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.
Risk-free rate The interest rate on a riskless, or safe, asset, usually taken to be a short-term U.S. government security.
Risk transfer The shifting of all or a part of a risk to another party.
Self-insured retention A potential loss retained by an organization, i.e. not insured. The self-insured retention (SIR) differs from a deductible because the insured performs all the functions normally undertaken by an insurance company for losses within the SIR, including claims adjusting and audits, funding and paying claims, and complying with applicable state and federal laws and regulations.

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Severity business Insurance/reinsurance that is characterized by contracts containing the potential for significant losses emanating from one event.
Structured reinsurance Structured reinsurance is also known as alternative risk transfer reinsurance. Structured reinsurance products contain several features that differ from traditional reinsurance products. These features require the client to share in its own loss results and include: (1) premium refunds if losses incurred by the reinsurer are more favorable than those projected at the time of execution of the reinsurance contract; (2) loss sharing contract provisions that may require a client to share in a portion of the losses resulting from ceded risks; (3) additional premium amounts if the reinsurer incurs losses that are less favorable than those projected at the time of execution of the reinsurance contract; and (4) underwriting terms that limit the reinsurer’s exposure to high volatility in underwriting results. Structured reinsurance products may also contain payment triggers that require the reinsurer to pay losses upon the occurrence of certain specified events.
Surety and fidelity insurance Surety and fidelity includes (1) insurance guaranteeing the fidelity of persons holding positions of public or private trust; (2) insurance guaranteeing the performance of contracts, other than insurance policies, and guaranteeing and executing bonds, undertakings and contracts of suretyship; and (3) insurance indemnifying banks, bankers, brokers, financial or moneyed corporations or associations against loss.
Total aggregate limits Maximum amount of coverage that the cedent or client has under the reinsurance contract for a specific period of time, usually the contract period, no matter how many separate accidents may occur.
Underwriter An employee of an insurance or reinsurance company who examines, accepts or rejects risks and classifies risks in order to charge an appropriate premium for each accepted risk.
Underwriting The process of evaluating, defining, and pricing reinsurance risks including, where appropriate, the rejection of such risks, and the acceptance of the obligation to pay the reinsured under the terms of the contract.
Whole book of business The portfolio of business that a broker has placed with an insurer or reinsurer.
Workers’ compensation insurance Workers’ compensation insurance provides medical, disability and lost-wage benefits to employees for injuries and illness sustained in the course of their employment.

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             shares

Class A Ordinary Shares

  PROSPECTUS  

                , 2007

L EHMAN B ROTHERS UBS I NVESTMENT B ANK

C ITIGROUP DOWLING & PARTNERS SECURITIES FOX-PITT, KELTON



Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than the underwriting discounts and commissions payable by us, in connection with the sale of Class A Ordinary Shares being registered. All amounts are estimates except the SEC registration fee, the NASD filing fee and the Nasdaq Global Select Market listing fee.


SEC Registration Fee $ 18,725
NASD filing fee 18,000
Nasdaq Global Select Market listing fee *
Blue sky fees and expenses *
Transfer agent and registrar fees *
Accounting fees and expenses *
Legal fees and expenses *
Printing and engraving costs *
Miscellaneous expenses            *
Total $            
* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article 33 of our Third Amended and Restated Memorandum and Articles of Association provides, among other things, that: our directors, officers, secretary, any person appointed to a committee by the Board of Directors, and employees and agents and our liquidator or trustees (if any) who have acted in relation to any of the affairs of our company and their heirs, executors and administrators, shall be indemnified and secured harmless out of the assets of the Company 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 (actual or alleged) 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 moneys or effects belonging to us 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 us 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 willful negligence, willful default, fraud or dishonesty which may attach to such persons.

Article 3 of the Deed of Indemnity by and between us and each indemnitee provides contractual indemnification for such indemnitee meant to supplement that indemnification found in the Articles. The Deed of Indemnity provides that we will indemnify and hold harmless any Indemnitee to the fullest extent permitted by law, against any and all expenses and losses, and any local or foreign stamp duties or taxes imposed as a result of the actual or deemed receipt of any payments under this Deed, that are paid or incurred by the indemnitee in connection with such proceeding. We will indemnify and hold harmless any indemnitee for all expenses paid or incurred by indemnitee in connection with each successfully resolved claim, issue or matter on which indemnitee was successful. The Deed of Indemnity further provides that we will not provide indemnification for any proceeding initiated or brought voluntarily by the indemnitee against us or our directors, officers or employees, or for any accounting of profits made from the purchase and sale by the indemnitee of our securities.

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Article 4 provides that we will advance, to the fullest extent permitted by law, to the indemnitee any and all expenses paid or incurred by indemnitee in connection with any proceeding (whether prior to or after its final disposition), provided that the indemnitee is otherwise entitled to indemnification under the Deed.

Article 5 of the Deed of Indemnity provides that to the fullest extent permitted by law, if the indemnification provided for in the Deed is unavailable to the indemnitee for any reason whatsoever, we in lieu of indemnifying indemnity, will contribute the amount of expenses or losses incurred or paid by indemnitee in connection with any proceeding in proportion to the relative benefits received by us and all of our officers, directors, and employees of the Company other than the indemnitee who are or would be jointly liable with indemnitee, on the one hand, and indemnitee, on the other hand, from the transaction from which such proceeding arose; provided, however , that the proportion determined on the basis or relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative our fault and all of our officers, directors, and employees other than the indemnitee who are jointly liable with indemnitee, on the one hand, and indemnitee, on the other hand, in connection with the events that resulted in such expenses and losses, as well as any other equitable considerations which applicable law may require to be considered.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES 

Since inception, we have sold and issued the following unregistered securities:

(1)  On August 11, 2004, we sold 16,175,000 Class A ordinary shares to sixty-five accredited investors for an aggregate price of $161,750,000. Such sale was deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as a transaction not involving any public offering.
(2)  On August 11, 2004, we sold 5,050,000 Class B ordinary shares to one accredited investor for cash in the amount of $26,000,000 and a related party promissory note for an aggregate principal amount of $24,500,000 for total aggregate consideration of $50,500,000. Such sale was deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as a transaction not involving any public offering.
(3)  On March 30, 2006, we sold 91,800 Class A ordinary shares to four directors, officers, and employees for an aggregate price of $1,106,190. The sale of such securities was made in reliance on Regulation D.
(4)  On May 31, 2006, we sold 69,600 Class A ordinary shares to four directors, officers, and employees for an aggregate price of $885,312. The sale of such securities was made in reliance on Regulation D.
(5)  On October 31, 2006, we sold 97,200 Class A ordinary shares to five directors, officers, and employees for an aggregate price of $1,310,256. The sale of such securities was made in reliance on Regulation D.
(6)  On November 30, 2006, we sold 60,300 Class A ordinary shares to five directors, officers, and employees for an aggregate price of $835,155. The sale of such securities was made in reliance on Regulation D.

No underwriters were involved in the foregoing sales of securities. The issuance of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of such Securities Act as transactions by an issuer not involving any public offering, or, in the case of options to purchase Class A Ordinary Shares, Rule 701 of the Securities Act. The recipients of securities in each such transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and warrants issued in such transactions. All recipients had adequate access, through their relationships with us, to information about us.

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Table of Contents

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 

(a)  Exhibits.

A list of exhibits filed herewith is contained in the exhibit index that immediately precedes such exhibits and is incorporated herein by reference.

(b)  Financial Statement Schedules

Description of Financial Statement Schedules Schedule Number
Summary of Investments – other than Investments in Related
    Parties*** 		I
Condensed Financial Information of Registrant*** II
*** Included in the prospectus which is included in this registration statement starting on page F-21.

Other financial statement schedules have been omitted because the required information is either not applicable, not deemed material or is shown in the respective financial statements or in the notes thereto.

ITEM 17. UNDERTAKINGS 

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

Insofar as indemnification by the registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referenced in Item 14 of this registration statement or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange 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 hereunder, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The 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 a 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.

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Georgetown, Cayman Islands, on the 8 th day of March, 2007.

GREENLIGHT CAPITAL RE, LTD.
By:     /s/ Leonard Goldberg                
           Name: Leonard Goldberg
           Title: Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Leonard Goldberg and Tim Courtis, and each of them, his true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, (iii) act on and file any supplement to any prospectus included in this registration statement or any such amendment or any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended and (iv) take any and all actions which may be necessary or appropriate to be done, as fully for all intents and purposes as he or she might or could do in person, hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact or any of his substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature Title Date
/s/ Leonard Goldberg Chief Executive Officer (Principal Executive Officer) and Director March 8, 2007
Leonard Goldberg
/s/ Tim Courtis Chief Financial Officer (Principal
Financial and Accounting Officer) 		March 8, 2007
Tim Courtis
* Director and Chairman March 8, 2007
David Einhorn
* Director March 8, 2007
Alan Brooks
* Director March 8, 2007
Frank D. Lackner
* Director March 8, 2007
Joseph Platt, Jr.
/s/ Jerome Simon Director March 7, 2007
Jerome Simon
By: /s/ Leonard Goldberg Attorney-in-fact March 8, 2007
Leonard Goldberg


Table of Contents

EXHIBIT INDEX


Exhibit Number Description of Exhibit
1 .1*
Underwriting Agreement
3 .1**
Second Amended and Restated Memorandum and Articles of Association of Greenlight Capital Re, Ltd.
3 .2
Third Amended and Restated Memorandum and Articles of Association of Greenlight Capital Re, Ltd.
4 .1*
Form of Specimen Certificate of Class A Ordinary Shares
4 .2**
Share Purchase Option, dated August 11, 2004, by and between the Registrant and First International Capital Holdings, Ltd.
5 .1*
Opinion of Akin Gump Strauss Hauer & Feld LLP
5 .2*
Opinion of Turner & Roulstone
8 .1
Form of Opinion of Akin Gump Strauss Hauer & Feld LLP
10 .1**
$200,000,000 Letter of Credit Facility, dated October 12, 2005, by Citibank, N.A. to Greenlight Reinsurance, Ltd., as amended
10 .2**
Form of Securities Purchase Agreement for Class A Ordinary Shares by and between the Registrant and each of the subscribers thereto
10 .3**
Promissory Note, dated August 11, 2004, for $24,500,000 by and between the Registrant, as payee, and Greenlight Capital Investors, LLC, as maker
10 .4**
Second Amended and Restated Investment Advisory Agreement, dated January 1, 2007, by and between Greenlight Reinsurance, Ltd. and DME Advisors, LP
10 .5**
Greenlight Capital Re, Ltd. Amended and Restated 2004 Stock Incentive Plan
10 .6**
Form of Restricted Stock Award Agreement by and between the Registrant and the Grantee
10 .7**
Form of Stock Option Agreement
10 .8**
Form of Shareholders’ Agreement, dated August 11, 2004, by and among the Registrant and each of the subscribers
10 .9**
Administration Agreement, dated August 11, 2004, between the Registrant and HSBC Financial Services (Cayman) Limited
10 .10**
Administration Agreement, dated August 11, 2004, between Greenlight Reinsurance, Ltd. and HSBC Financial Services (Cayman) Limited
10 .11**
Form of Deed of Indemnity between the Registrant and each of its directors and certain of its officers
10 .12**
Amended and Restated Employment Agreement, dated January 10, 2007, by and among the Registrant, Greenlight Reinsurance, Ltd. and Leonard Goldberg
10 .13**
Employment Agreement, dated May 1, 2006, by and among the Registrant, Greenlight Reinsurance, Ltd. and Tim Courtis
10 .14**
Employment Agreement, dated December 12, 2005, by and between Greenlight Reinsurance, Ltd. and Barton Hedges


Table of Contents
Exhibit Number Description of Exhibit
10 .15**
Lease, dated August 25, 2005, by and between Greenlight Reinsurance, Ltd. and Grand Pavilion Ltd.
10 .16**
Concurrent Private Placement Stock Purchase Agreement for Class B Ordinary Shares, dated January 11, 2007, by and between the Registrant and David Einhorn
10 .17
Service Agreement, dated as of February 21, 2007 between DME Advisors, LP and Greenlight Capital Re, Ltd.
10 .18
Greenlight Capital Re, Ltd. Second Amended and Restated 2004 Stock Incentive Plan
14 .1*
Code of Ethics
16 .1
Letter from KPMG
21 .1**
Subsidiaries of the registrant
23 .1*
Consent of Akin Gump Strauss Hauer & Feld LLP (included in Exhibit 5.1)
23 .2*
Consent of Turner & Roulstone (included in Exhibit 5.2)
23 .3
Consent of BDO Seidman, LLP
24 .1
Power of Attorney (included as part of the signature page)
99 .1
Audit Committee Charter
99 .2
Compensation Committee Charter
99 .3
Finance Committee Charter
99 .4
Nominating and Governance Committee Charter
99 .5
Form F-N
* To be filed by amendment.
** Previously filed.


 
EXHIBIT 3.2


THE COMPANIES LAW (2004 REVISION)

OF THE CAYMAN ISLANDS

COMPANY LIMITED BY SHARES

 



THIRD AMENDED AND RESTATED

 
MEMORANDUM AND ARTICLES



OF



ASSOCIATION



OF

 

____________________________________


GREENLIGHT CAPITAL RE, LTD.

____________________________________



THE COMPANIES LAW (2004 REVISION)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES

THIRD AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
OF
GREENLIGHT CAPITAL RE, LTD.

1
The name of the Company is Greenlight Capital Re, Ltd.
 
2
The registered office for the time being of the Company shall be Greenlight Capital Re, Ltd., 802 West Bay Road, The Grand Pavilion, PO Box 31110, Grand Cayman, KY1-1205, Cayman Islands or at such other place as the Board may from time to time decide.
 
3
The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by the Companies Law (2004 Revision) or as the same may be revised from time to time, or any other law of the Cayman Islands.
 
4
The liability of each Member is limited to the amount from time to time unpaid on such Member’s Shares.
 
5
The share capital of the Company is 125,000,000 Ordinary Shares, par value US$0.10 divided into 100,000,000 Class A Ordinary Shares and 25,000,000 Class B Ordinary Shares and 50,000,000 Preferred Shares, par value of US$0.10 each.
 
6
The Company has power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.
 
7
Capitalised terms that are not defined in this Third Amended and Restated Memorandum of Association bear the same meaning as those given in the Articles of Association of the Company.
 


 
THE COMPANIES LAW (2004 REVISION)

OF THE CAYMAN ISLANDS

COMPANY LIMITED BY SHARES


THIRD AMENDED & RESTATED

ARTICLES OF ASSOCIATION

OF

GREENLIGHT CAPITAL RE, LTD.
 

 
TABLE OF CONTENTS

PAGE

1.
Interpretation
 
1
2.
Board of Directors
 
6
3.
Management of the Company
 
6
4.
Power to appoint managing director
 
6
5.
Power to appoint manager or chief executive officer
 
6
6.
Power to authorise specific actions
 
6
7.
Power to appoint attorney
 
7
8.
Power to delegate to a committee
 
7
9.
Power to appoint and dismiss employees
 
8
10.
Power to borrow and charge property
 
8
11.
Exercise of power to purchase Shares
 
8
12.
Election of Directors
 
9
13.
Defects in appointment of Directors
 
10
14.
Alternate Directors
 
10
15.
Removal of Directors
 
10
16.
Other vacancies on the Board
 
11
17.
Notice of meetings of the Board
 
11
18.
Quorum at meetings of the Board
 
11
19.
Meetings of the Board
 
12
20.
Unanimous written resolutions
 
12
21.
Presumption of assent
 
12
22.
Contracts and disclosure of Directors’ interests
 
12
23.
Remuneration of Directors
 
13
24.
Other interests of Directors
 
13
25.
No minimum shareholding
 
14
26.
Officers of the Company
 
14
27.
Appointment of Officers
 
14
28.
Remuneration of Officers
 
14
29.
Duties of Officers
 
14
30.
Chairman of meetings
 
14
31.
Register of Directors and Officers
 
14
32.
Obligations of Board to keep minutes
 
15
33.
Indemnification of Directors and Officers of the Company
 
15
34.
Notice of annual general meeting
 
16
35.
Notice of extraordinary general meeting
 
17
36.
Accidental omission of notice of general meeting; business to be conducted
 
17
37.
Short notice
 
17
38.
Quorum for general meeting
 
18
39.
Adjournment of meetings
 
18
40.
Attendance at meetings
 
18
41.
No action by consent of members in lieu of meeting
 
18
42.
Attendance of Directors
 
18
43.
Voting at meetings
 
18
i

44.
Voting list
 
19
45.
Inspectors of elections
 
20
46.
Voting on show of hands
 
20
47.
Decision of chairman
 
20
48.
Demand for a poll
 
20
49.
Seniority of joint holders voting
 
21
50.
Instrument of proxy
 
22
51.
Representation of corporations at meetings
 
23
52.
[Reserved]
 
23
53.
Rights of Shares
 
23
54.
Limitation on voting rights of Controlled Shares.
 
25
55.
Power to issue Shares
 
27
56.
Variation of rights and alteration of Share capital
 
28
57.
Registered holder of Shares
 
28
58.
Death of a joint holder
 
28
59.
Share certificates
 
29
60.
Calls on Shares
 
29
61.
Forfeiture of Shares
 
30
62.
Contents of Register of Members
 
31
63.
Determination of record dates
 
31
64.
Instrument of transfer
 
31
65.
Restrictions on transfer
 
32
66.
Transfers by joint holders
 
32
67.
Lien on Shares
 
32
68.
Representative of deceased Member
 
33
69.
Registration on death or bankruptcy
 
33
70.
Declaration of Dividends by the Board
 
34
71.
Deduction of amounts due to the Company
 
34
72.
Unclaimed Dividends
 
35
73.
Interest on Dividends
 
35
74.
Issue of Dividend Shares
 
35
75.
Records of account
 
35
76.
Financial year end
 
36
77.
Financial statements
 
36
78.
Appointment and remuneration of Auditor
 
36
79.
[Reserved]
 
36
80.
Access to books of the Company
 
36
81.
Report of the Auditor
 
36
82.
Notices to Members of the Company
 
37
83.
Service and delivery of notice
 
37
84.
Seal of the Company
 
37
85.
Benefits
 
38
86.
Insurance
 
38
87.
Limitation on accountability
 
38
88.
Sale of Shares
 
38
89.
Instrument of Transfer
 
39
ii

90.
Proceeds of Sale
 
39
91.
Determination to liquidate
 
39
92.
Winding up/distribution by liquidator
 
40
93.
The Company may by Ordinary Resolution:
 
40
94.
Subject to the provisions of the Statute and the provisions of these Articles as regards the matters to be dealt with by Ordinary Resolution, the Company may by Special Resolution:
 
40
95.
Subject to the provisions of the Statute, the Company may by resolution of the Directors change the location of the registered office for the time being of the Company.
 
41
96.
Voting of subsidiary shares
 
41
97.
Articles or Articles of Association of certain subsidiaries
 
41
98.
Continuation
 
41
       
       
 
SCHEDULE - FORM A (Article 61)
 
42
 
SCHEDULE - FORM B (Article 64)
 
43
 
SCHEDULE - FORM C (Article 69)
 
44
       
 
SCHEDULE A TO ARTICLES
 
45
iii


 
INTERPRETATION
 
1.
Interpretation
 
(1)   In these Articles Table A in the First Schedule to the Statute does not apply and, unless there is something in the subject or context inconsistent therewith:
 
(a)   “ 9.9% Member ” shall have the meaning as set forth in Article 54;
 
(b)   “ Affiliate ” means, with respect to any Person, any Immediate Family Member of such Person or any Person directly or indirectly controlling, controlled by or under common control with such Person, provided that no Member of the Company shall be deemed an Affiliate of another Member solely by reason of an investment in the Company. For purposes of this definition, the term “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities, by contract or otherwise;
 
(c)   “ Articles ” means these articles of association of the Company;
 
(d)   “ Attribution Percentages ” shall have the meaning as set forth in Article 54;
 
(e)   “ Auditor ” means the person for the time being performing the duties of auditor of the Company;
 
(f)   “ Audit Committee ” means the audit committee appointed by the Board in accordance with these Articles, provided that in the event that the Board shall not have appointed an Audit Committee, the Board shall constitute the Audit Committee;
 
(g)   “ Board ” means the board of Directors appointed or elected pursuant to these Articles and acting by resolution in accordance with the Statute and these Articles or the Directors present at a meeting of Directors at which there is a quorum;
 
(h)   “ Business Day ” means any day, other than a Saturday, a Sunday or any day on which banks in the Cayman Islands or New York, New York, United States, are authorised or obligated by law or executive or other order to close;  
 
(i)   “ Cause ” means (i) habitual drug or alcohol use which impairs the ability of the Director to perform his/her duties hereunder; (ii) Director’s conviction by a court of competent jurisdiction, or a pleading of “no contest” or guilty to a felony or the equivalent if outside the United States; (iii) Director’s engaging in fraud, embezzlement or any other illegal conduct with respect to the Company which acts are materially harmful to, either financially, or to the business reputation of, the Company; (iv) Director’s wilful failure or refusal to perform his duties as a Director, or (vi) the Director otherwise breaches any material written Company policy regarding the conduct of its Directors and such breach results in material economic or reputational harm to the Company;
 
(j)   “ Certificate of Designation ” shall have the meaning as set forth in Article 53(3).
 
(k)   “ Class A Ordinary Shares ” means the Class A Ordinary Shares of the Company, initially having a par value of $0.10 per Share, and includes a fraction of a Class A Ordinary Share;
 
1

(l)   “ Class B Ordinary Shares ” means the Class B Ordinary Shares of the Company, initially having a par value of $0.10 per Share, and includes a fraction of a Class B Ordinary Share;
 
(m)   “ Code ” means the United States Internal Revenue Code of 1986, as amended from time to time, or any Federal statute from time to time in effect that has replaced such statute, and any reference in these Articles to a provision of the Code or a Treasury regulation promulgated thereunder means such provision or regulation as amended from time to time or any provision of a Federal law or any Treasury regulation, from time to time in effect that has replaced such provision or regulation;
 
(n)   “ Company ” means the above named company;
 
(o)   “ Compensation Committee ” means the compensation committee appointed by the Board in accordance with these Articles, provided that in the event that the Board shall not have appointed a Compensation Committee, the Board shall constitute the Compensation Committee;  
 
(p)   “ Controlled Shares ” shall have the meaning as set forth in Article 54;
 
(q)   “ Designated Subsidiary ” shall have the meaning as set forth in Article 97;
 
(r)   “ Directors ” means the directors for the time being of the Company;
 
(s)   “ Dividend ” includes an interim dividend;
 
(t)   “ Electronic Record ” has the same meaning as in the Electronic Transactions Law (2003 Revision);
 
(u)   “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended from time to time, or any federal statute from time to time in effect that has replaced such statute, and any reference in these Articles to a provision of the Exchange Act or a rule or regulation promulgated thereunder means such provision, rule or regulation as amended from time to time or any provision of a federal law, or any federal rule or regulation, from time to time in effect that has replaced such provision, rule or regulation;
 
(v)   “ Fair Market Value ” means (i) if such shares are listed on a securities exchange (or quoted in a securities quotation system), the average closing sale price of the shares on the principal securities exchange (or quotation system) on which such shares are then traded, or, if such shares are not then listed on a securities exchange (or quotation system) but are traded in the over-the-counter market, the average of the latest bid and asked quotations for such shares in such market, in each case for the last five trading days immediately preceding the day on which notice of the repurchase of such shares is sent pursuant to the Memorandum and Articles of Association or (ii) if no such closing sales prices or quotations are available because such shares are not publicly traded or otherwise, the fair market value of such shares shall equal the book value as computed in accordance with United States GAAP less the transaction costs incurred in connection with such repurchase (including internal expenses and reasonable attorneys’ fees);
 
(w)   “ GAAP” means generally accepted accounting principles;
 
(x)   “ general meeting , ”   “ general meeting of the Company ” , “ Extraordinary general meeting ” and “ extraordinary general meeting of the Company ” each means a meeting of the Members of the Company having the right to attend and vote thereat;
 
2

(y)   “ Greenlight Reinsurance ” means Greenlight Reinsurance, Ltd., a Cayman Islands insurance company and wholly-owned subsidiary of the Company;
 
(z)   “ Immediate Family Member” means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or any person (other than a tenant or employee) with whom one shares the household;
 
(aa)   “ Member ” has the same meaning as in the Statute;
 
(bb)   “ Memorandum ” means this memorandum of association of the Company;
 
(cc)   “ Nominating and Governance Committee ” means the nominating and governance committee appointed by the Board in accordance with these Articles, provided that in the event that the Board shall not have appointed an Nominating and Governance Committee, the Board shall constitute the Nominating and Governance Committee;
 
(dd)   “ Officer ” means any Person appointed by the Board to hold an office in the Company;
 
(ee)   “ Ordinary Resolution ” means a resolution passed by a simple majority of the Members as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting, and includes a unanimous written resolution. In computing the majority when a poll is demanded, or on a show of hands, regard shall be had to the number of votes to which each Member is entitled by the Articles;
 
(ff)   “ Ordinary Shares ” means collectively, the Class A Ordinary Shares and the Class B Ordinary Shares and includes a fraction of an Ordinary Share;
 
(gg)   “Permitted Transferee” means any Affiliate of a Member of the Company which has been approved by the Board as a “Permitted Transferee” in writing prior to a Transfer, which approval shall be granted by the Board unless the Board determines, in its sole and absolute discretion, that the applicable Transfer would result in an increased risk of adverse tax, regulatory or legal consequences to the Company, any of its subsidiaries or any of its Members;
 
(hh)   “ Person ” means any individual, company, corporation, firm, partnership, trust or any other business, enterprise, entity or person, whether or not recognised as constituting a separate legal entity;
 
(ii)   “ Preferred Shares ” means the preferred Shares of the Company and includes a fraction of a Preferred Share;
 
(jj)   “ Register of Directors and Officers ” means the Register of Directors and Officers maintained in accordance with Statute and referred to in these Articles;
 
(kk)   “ Register of Members ” means the register maintained in accordance with the Statute and includes (except where otherwise stated) any duplicate Register of Members;
 
(ll)   “ Registrar of Companies ” refers to the Cayman Island government’s system of registering and maintaining a record of all companies registered in the Cayman Islands.
 
(mm)   “ Repurchase Notice ” shall have the meaning as set forth in Article 11(1)(d);
 
3

(nn)   “ Repurchase Price ” shall have the meaning as set forth in Article 11(1)(b);
 
(oo)   “ Secretary ” means the person appointed to perform any or all the duties of secretary of the Company and includes any deputy or assistant secretary;
 
(pp)   “ Securities Act ” means the United States Securities Act of 1933, as amended from time to time, or any federal statute from time to time in effect which has replaced such statute, and any reference in these Articles to a provision of the Securities Act or a rule or regulation promulgated thereunder means such provision, rule or regulation as amended from time to time or any provision of a federal law, or any federal rule or regulation, from time to time in effect that has replaced such provision, rule or regulation;
 
(qq)   “ Share ” means any share or any class or series of shares in the share capital of the Company, whether issued and outstanding or not, and includes a fraction of a share;
 
(rr)   “ Special Resolution ” has the same meaning as in the Statute, and includes a unanimous written resolution;
 
(ss)   “ Statute ” means the Companies Law (2004 Revision) of the Cayman Islands;
 
(tt)   “ Subsidiary ” , with respect to any Person, means a company, more than fifty percent (50%) (or, in the case of a wholly owned subsidiary, one hundred percent (100%)) of the outstanding Voting Shares of which are owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person, or any such Person and one or more other Subsidiaries;
 
(uu)   “ Tentative 9.9% Member ” shall have the meaning as set forth in Article 54;
 
(vv)   “ Total Voting Power ” means the total votes attributable to all shares of the Company issued and outstanding;
 
(ww)   “ Transfer ” means any direct or indirect sale, exchange, transfer (including, without limitation, any transfer by gift or operation of law, or any transfer of an economic interest in any derivative security of any security), assignment, distribution or other disposition, or issuance or creation of any option or any voting proxy, voting trust or other transfer of interest, in whole or in part, whether in a single transaction or a series of related transactions and whether voluntarily or involuntarily or by operation of law or at a judicial sale or otherwise;
 
(xx)   “ Transferee ” shall have the meaning as set forth in Schedule Form C for the purposes of that form only.
 
(yy)   “ Underwriting Committee ” means the underwriting committee appointed by the Board in accordance with these Articles, provided that in the event that the Board shall not have appointed an Underwriting Committee, the Board shall constitute the Underwriting Committee;
 
(zz)   “ United States ” and “ U.S. ” each means the United States of America and any territory and political subdivision thereof;
 
(aaa)   “ U.S. Person ” means a “ United States Person ” as defined in Section 7701(a)(30) of the Code;
 
4

(bbb)   “ Voting Share ” of any Person means any share in such Person conferring voting rights on the holder thereof (other than such voting rights as would exist solely in relation to a proposal to alter or vary the rights attaching to such shares solely upon the future occurrence of a contingency or voting rights attaching solely by virtue of the provisions of the Statute).
 
(2)   In these Articles, where not inconsistent with the context:
 
(a)   words denoting the plural number include the singular number and vice versa;
 
(b)   words denoting the masculine gender include the feminine gender;
 
(c)   words importing persons include companies, associations or bodies of persons whether corporate or not;
 
(d)   the word:
 
 
(i)
“may” shall be construed as permissive;
 
 
(ii)
“shall” shall be construed as imperative; and
 
(e)   unless otherwise provided herein words or expressions defined in the Statute shall bear the same meaning in these Articles.
 
(3)   Expressions referring to writing or written shall, unless the contrary intention appears, include facsimile, printing, lithography, photography, electronic mail and other modes of representing words including in the form of an Electronic Record in a visible form.
 
(4)   Headings used in these Articles are for convenience only and are not to be used or relied upon in the construction hereof.
 
(5)   References to provisions of any law or regulation shall be construed as references to those provisions as amended, modified, re-enacted or replaced from time to time.
 
(6)   Any phrase introduced by the terms “including”, “include”, “in particular” or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding those terms.
 
(7)   In these Articles, Section 8 of the Electronic Transactions Law shall not apply.
 
(8)   In these Articles, (i) powers of delegation shall not be restrictively construed but the widest interpretation shall be given thereto, (ii) the word “Board” in the context of the exercise of any power contained in these Articles includes any committee consisting of one or more individuals appointed by the Board, manager or agent of the Company to which or, as the case may be, to whom the power in question has been delegated in accordance with these Articles, (iii) no power of delegation shall be limited by the existence of any other power of delegation and (iv) except where expressly provided by the terms of delegation, the delegation of a power shall not exclude the concurrent exercise of that power by any Person who is for the time being authorised to exercise it under these Articles.
 
5

 
POWERS OF THE BOARD
 
2.
Board of Directors
 
(1)   Subject to the provisions of the Statute, the Memorandum and the Articles and to any directions given by resolution of the Company’s Members, the business of the Company shall be managed by the Board who may exercise all the powers of the Company. No alteration of the Memorandum or Articles and no such direction shall invalidate any prior act of the Board which would have been valid if that alteration had not been made or that direction had not been given. A duly convened meeting of the Board at which a quorum is present may exercise all powers exercisable by the Board.
 
(2)   All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for monies paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed as the case may be in such manner as the Board shall determine by resolution.
 
(3)   The Board on behalf of the Company may pay a gratuity or pension or allowance on retirement to any Director who has held any other salaried office or place of profit with the Company or to his widow or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.
 
3.
Management of the Company
 
(1)   In managing the business of the Company, the Board may exercise all such powers of the Company as are not, by Statute or by these Articles, required to be exercised by the Company in general meeting and the business and affairs of the Company shall be so controlled by the Board, subject, nevertheless, to these Articles, the provisions of any Statute and to such directions as may be prescribed by the Company in general meeting. The Board also may present any declaration in relation to a request to have the Company struck from the Cayman Islands register of companies pursuant to Section 175 of the Statute and make recommendations to the Company’s Members with respect to the winding up or liquidation of the Company.
 
(2)   The Board may procure that the Company pays all expenses incurred in promoting and incorporating the Company.
 
4.
Power to appoint managing director  
 
The Board may from time to time appoint one or more Directors to the office of managing director of the Company who shall, subject to the control of the Board, supervise and administer all of the general business and affairs of the Company.
 
5.
Power to appoint manager or chief executive officer
 
The Board may appoint a Person or a body of Persons to act as manager or chief executive officer of the Company’s day to day business and may entrust to and confer upon such manager such powers and duties as it deems appropriate for the transaction or conduct of such business.
 
6.
Power to authorise specific actions
 
The Board may from time to time and at any time authorise any Director or Officer, company, firm, Person or body of Persons to act on behalf of the Company for any specific purpose and in connection therewith to execute any agreement, document or instrument in the name and on behalf of the Company.
 
6

 
7.
Power to appoint attorney
 
The Board may from time to time and at any time by power of attorney appoint any company, firm, Person or body of Persons, whether nominated directly or indirectly by the Board, to be an attorney of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under these Articles and for such period (or for unspecified length of time)) and subject to such conditions as it may think fit and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board may think fit and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions so vested in the attorney.
 
8.
Power to delegate to a committee
 
The Board may delegate any of its powers, authorities and discretion to a committee, as it deems necessary, appointed by the Board (and the Board may appoint alternative committee members or authorise the committee members to appoint their own alternates), which shall consist of Directors and every such committee shall conform to such directions as the Board shall impose on them. Any such appointment may be made subject to any conditions the Board may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee of Directors shall be governed by the Articles regulating the proceedings of Directors, so far as they are capable of applying. The meetings and proceedings of any such committee shall be governed by the Articles, so far as the same are applicable and are not superseded by directions imposed by the Board. Without limiting the foregoing, such committees may include:
 
(a) an Audit Committee, which shall, among other things, have direct authority to: (i) appoint the independent Auditors of the Company and the Company’s Subsidiaries on behalf of the Board, subject to the powers of the Members; (ii) set compensation for, subject to Article 79, and oversee the work of independent Auditors of the Company and the Company’s Subsidiaries; (iii) adopt procedures for receiving accounting complaints and anonymous submissions from the employees of the Company or the Company’s Subsidiaries regarding questionable accounting practices; (iv) establish pre-approval procedures for all audit and non-audit services provided by the independent Auditors, or any of their Affiliates, to the Company or the Company’s Subsidiaries; and (v) establish an internal audit function of the Company and the Company’s Subsidiaries;
 
(b) a Compensation Committee, which shall, among other things, establish and review the compensation policies and procedures of the Company and the Company’s Subsidiaries and make recommendations to the Board with respect to compensation of Officers and Directors, and set the compensation of other employees subject to Article 9;
 
(c) an Underwriting Committee, which shall, among other things, establish, review and monitor the underwriting policies of the Company’s Subsidiaries or other companies associated with the Company, review underwriting decisions, monitor any appointed underwriting services provider, advise the Board with respect to actuarial services, review actuarial decisions, monitor any provider of actuarial services and otherwise monitor the risks insured or reinsured by the Company’s Subsidiaries or other companies associated with the Company; and
 
(d) a Nominating and Governance Committee, which shall, among other things, monitor and oversee matters of corporate governance, including the evaluation of Board performance and process
 
7

and the “independence” of Directors, as defined by the Nasdaq Stock Market Rules, and select, evaluate and recommend to the Board qualified candidates for election or appointment to the Board.
 
9.
Power to appoint and dismiss employees
 
The Board may appoint, suspend or remove any officer, manager, secretary, clerk, agent or employee of the Company and may fix their remuneration and determine their duties.
 
10.
Power to borrow and charge property
 
The Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and may issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or any third party.
 
11.
Exercise of power to purchase Shares
 
(1)   Purchase of Ordinary Shares
 
(a)   Subject to the provisions set forth below and the provision of the Statute, the Company shall have the power to purchase its Ordinary Shares (including any redeemable Shares) provided that the Members shall have approved the manner of purchase by Ordinary Resolution.
 
(b)   Notwithstanding (a) above, if the Board in its absolute and unfettered discretion, on behalf of the Company, determines that ownership of Class A Ordinary Shares of the Company by any Member (1) would violate the ownership limitations described in Article 11(1)(c) or (2) would result in an increased risk of adverse tax, regulatory or legal consequences to the Company , any of its Subsidiaries or any of the Members; the Company will have the option, but not the obligation, subject to Statute to purchase all or part of the Class A Ordinary Shares of the Company held by such Member (to the extent the Board, in the reasonable exercise of its discretion, determines it is necessary to avoid or cure such adverse consequences) with funds available therefor in an amount equal to the Fair Market Value of such Shares on the date the Company sends the Repurchase Notice referred to below (the “Repurchase Price”); provided, that the Board will use reasonable efforts to exercise this option equally among similarly situated Persons (to the extent possible under the circumstances). In that event, the Company will also be entitled to assign its purchase right to a third party or parties including one or more of the other Persons, with the consent of such assignee. Each Member shall be bound by the determination by the Company to purchase or assign its right to purchase such Member’s Shares and, if so required by the Company, shall sell the number of Shares of the Company that the Company requires it to sell. This authorisation is in accordance with Section 37(2) of the Statute. This Article authorises the purchase by the Company in accordance with the provisions of the Statute of such of its own Shares (including any redeemable Shares) in such manner as referred to in Section 37(d) of the Statute.
 
(c)   The ownership limitations described in this Article 11(1)(c) are as follows: except upon unanimous consent by the Board (i) no Person shall be allowed to acquire Class A Ordinary Shares if such acquisition would cause any Person to own (directly, indirectly or constructively under applicable U.S. tax attribution and constructive ownership rules) 9.9% or more of the issued and outstanding Ordinary Shares; and (ii) no Person shall be allowed to acquire Class A Ordinary Shares if such acquisition would cause such Person to own directly 9.9% or more of the issued and outstanding Ordinary Shares.
 
8

(d)   In the event that the Company or its assignee(s) determines to purchase any such Shares subject to this Article 11, the Company shall provide each Person concerned with written notice of such determination (a “Repurchase Notice”) at least seven (7) calendar days prior to such purchase or such shorter period as each such Person may authorise, specifying the date on which any such Shares are to be purchased and the Repurchase Price. The Company may revoke the Repurchase Notice at any time before it (or its assignee(s)) pays for the Shares. Neither the Company nor its assignee(s) shall be obliged to give general notice to the Members of any intention to purchase or the conclusion of any purchase of Shares of the Company. Payment of the Repurchase Price by the Company or its assignee(s) shall be by wire transfer or certified check and made at a closing to be held no less than seven (7) calendar days, unless such Person agrees to a shorter period, after receipt of the Repurchase Notice by the Member.
 
(2)   Subject to the provisions of the Statute and to this Article 11, the Company may issue Shares that are to be redeemed or are liable to be redeemed at the option of the Member or the Company. The redemption of such Shares shall be effected in such manner as the Company may, by Special Resolution, determine before the issue of the Shares.
 
(3)   The Company may make a payment in respect of the redemption or purchase of its own Shares in any manner permitted by the Statute, including out of capital.
 
12.
Election of Directors
 
(1)   The Board shall be elected annually for a term of appointment that shall end at the conclusion of the annual general meeting following the one at which they were appointed. The Board shall consist of not less than five (5) and not more than twenty-one (21) Directors, the exact number to be determined from time to time by resolution adopted by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the Directors then in   office; provided, however, that if no such resolution shall be in effect the number of Directors shall be five (5) Directors. Any increase in the size of the Board pursuant to this Article 12(1) shall be deemed to be a vacancy and may be filled in accordance with Article 16 hereof. Directors shall be elected, except in the case of a vacancy (as provided for in Article 15 or 16, as the case may be), by the Members in the manner set forth in paragraph   (2) of this Article 12 at an annual general meeting or any extraordinary general meeting called for the purpose .
 
(2)   Subject to the terms of any class or series of Shares issued by the Company, no Person shall, unless recommended by the Board or a committee thereof, be eligible for election as a Director at any general meeting unless not less than 120 days before the date appointed for the meeting there shall have been lodged at the Company notice in writing signed by not less than 10 Members holding Shares representing at least 50% of the voting rights attached to all of the issued and outstanding Shares entitled to vote at the meeting for which such notice is given of their intention   to propose such person for election and also notice in writing signed by the person to be proposed of his or her willingness to be elected. Each such notice shall also include (i) the names and addresses, as they appear in the Register of Members, of the Members who intend to make the nomination and of the person or persons to be nominated, (ii) a representation that the Members are holders of record of Shares entitled to vote at such meeting and intend to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (iii) the class and number of Shares which are beneficially owned by the Members, (iv) a description of all arrangements or understandings between the Members and each nominee and any other Person or Persons in respect of whom nominations are to be made by the Members and (v) such other information regarding each nominee proposed by such Members as would be required to be included in a proxy statement filed pursuant to Regulation 14A under the Exchange Act, whether or not the Company is then subject to such regulation. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a Director if elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.
 
9

 
(3)   For the avoidance of doubt, any Member participating in the election of directors shall be subject to the limitations on voting rights described in Article 54 and all votes referred to the Company’s Members pursuant to Article 96 shall be subject to this Article 12(3).
 

13.
Defects in appointment of Directors
 
All acts done bona fide by any meeting of the Board or by a committee of the Board or by any person acting as an alternate Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director.
 
14.
Alternate Directors
 
(1)   Any Director (other than an alternate Director) may by writing appoint any other Director, or any other person willing to act, to be an alternate Director and by writing may remove from office an alternate Director so appointed by him.
 
(2)   An alternate Director shall be entitled to receive notice of all meetings of Directors and of all meetings of committees of the Board of which his appointor is a member, to attend and vote at every such meeting at which the Director appointing him is not personally present, and generally to perform all the functions of his appointor as a Director in his absence.
 
(3)   An alternate Director shall cease to be an alternate Director if his appointor ceases to be a Director.
 
(4)   Any appointment or removal of an alternate Director shall be by notice to the Company signed by the Director making or revoking the appointment or in any other manner approved by the Board.
 
(5)   An alternate Director shall be deemed for all purposes to be a Director and shall alone be responsible for his own acts and defaults and shall not be deemed to be the agent of the Director appointing him.
 
15.
Removal of Directors
 
(1)   Subject to any provision to the contrary in these Articles, removal of a Director of the Company for Cause requires the affirmative vote of not less than 50% of the Total Voting Power cast at a meeting at which a quorum is present provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and be served on such Director not less than 60 days before the meeting and at such meeting such Director shall be entitled to be heard on the motion for such Director’s removal. Members shall not be entitled to remove a Director pursuant to this Article 15 (1) other than for Cause.
 
(2)   A vacancy on the Board created by the removal of a Director under the provisions of subparagraph (1) of this Article may be filled by a person nominated by Ordinary Resolution and, in the absence of such election or appointment, the Board may fill the vacancy in accordance with Article 16 . A
 
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Director so appointed shall hold office for the balance of the term of such vacant Board position,   or until such Director’s successor is elected or appointed or such Director’s office is otherwise vacated.
 
16.
Other vacancies on the Board
 
(1)   The Board shall have the power from time to time and at any time to appoint any person as a Director to fill a vacancy on the Board occurring as the result of an increase in the size of the Board pursuant to Article 12(1), the death, disability, disqualification, resignation or removal of any Director or if such Director’s office is otherwise vacated. A Director so appointed shall hold office for the balance of the term of such vacant Board position, or until such Director’s successor is elected or appointed or such Director’s office is otherwise vacated. The Board shall also have the power from time to time to fill any vacancy left unfulfilled at a general meeting.
 
(2)   The Board may act notwithstanding any vacancy in its number but, if and so long as its number is reduced below the number fixed by these Articles as the quorum necessary for the transaction of business at meetings of the Board, the continuing Directors or Director may, notwithstanding that the number of Directors is below the number fixed by or in accordance with these Articles as the quorum or that there is only one continuing Director, act for the purpose of (i) filling vacancies on the Board, (ii) summoning a general meeting of the Company or circulating a proposed written resolution of the Members and (iii) preserving the assets of the Company.
 
(3)   The office of Director shall be deemed to be vacated if the Director:
 
(a)   is removed from office pursuant to these Articles or is prohibited from being a Director by law;
 
(b)   is or becomes bankrupt or makes any arrangement or composition with his creditors generally;
 
(c)   is or becomes disqualified, of unsound mind or dies;
 
(d)   resigns his or her office by notice in writing to the Company.
 
17.
Notice of meetings of the Board
 
(1)   A Director may, and the Secretary on the requisition of a majority of the Directors shall, at any time summon a meeting of the Board. Notice of a meeting of the Board must be provided at least two (2) days in advance of such meeting, and must state the date, time, place (which shall not be in the United States) and the general nature of the business to be considered at the meeting unless the Directors unanimously agree to waive notice of such meeting (either at, before or after the meeting is held).
 
(2)   Notice of a meeting of the Board shall be deemed to be duly given to a Director if it is given to such Director verbally in person or by telephone or otherwise communicated or sent to such Director by post, electronic mail, facsimile or other mode of   representing words in a visible form at such Director’s last known address or any other address given by such Director to the Company for this purpose.
 
18.
Quorum at meetings of the Board
 
(1)   The quorum necessary for the transaction of business at a meeting of the Board shall be a majority of the Directors then in office, provided that at least two Directors are present in person or by
 
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teleconference. A person who holds office only as an alternate Director shall, if his appointor is not present, be counted in the quorum.
 
(2)   The continuing Directors may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors the continuing Directors or Director may act for the purpose of increasing the number of Directors to that number, summoning a general meeting of the Company and preserving the assets of the Company, but for no other purpose.
 
19.
Meetings of the Board
 
(1)   Subject to the provisions of these Articles, the Board may meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit.
 
(2)   Directors may participate in any meeting of the Board by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting; provided, however, that no Director may participate in any meeting of the Board while physically present in the United States or its territories.
 
(3)   A resolution put to the vote at a meeting of the Board shall be carried by the affirmative votes of a majority of the votes cast and in the case of an equality of votes the resolution shall fail.  
 
20.
Unanimous written resolutions
 
A resolution in writing signed by all the Directors which may be in counterparts, shall be as valid as if it had been passed at a meeting of the Board duly called and constituted, such resolution to be effective on the date on which the last Director signs the resolution, provided that no such resolution shall be valid unless the last signature of a Director is affixed outside the United States (but, notwithstanding Article 19(2), a Director who is not the last Director to sign may sign a resolution in writing even though he or she is in the United States). Such resolution shall be deemed to be adopted as an act of the Board, at the place where, and at the time when, the last signature of a Director is affixed thereto.
 
21.
Presumption of assent
 
A Director of the Company who is present at a meeting of the Board at which action on any Company matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent from such action with the person acting as the chairman or secretary of the meeting before the adjournment thereof or shall forward such dissent by registered post to such person immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favour of such action.
 
22.
Contracts and disclosure of Directors’ interests
 
(1)   Any Director, or any Person associated, related or affiliated with whom any Director is associated, may act in a professional capacity for the Company and such Director or such Person shall be entitled to remuneration for professional services as if such Director were not a Director, provided that nothing herein contained shall authorise a Director or Director’s firm, partner or such company to act as Auditor of the Company.
 
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(2)   A Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his office of Director for such period and on such terms as to remuneration and otherwise as the Board may determine.
 
(3)   A Director or alternate Director of the Company may be or become a director or other officer of or otherwise interested in any company promoted by the Company or in which the Company may be interested as Member or otherwise, and no such Director or alternate Director shall be accountable to the Company for any remuneration or other benefits received by him as a director or officer of, or from his interest in, such other company.
 
(4)   No person shall be disqualified from the office of Director or alternate Director or prevented by such office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any contract or transaction entered into by or on behalf of the Company in which any Director or alternate Director shall be in any way interested be or be liable to be avoided, nor shall any Director or alternate Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or transaction by reason of such Director holding office or of the fiduciary relation thereby established. A Director (or his alternate Director in his absence) shall be at liberty to vote in respect of any contract or transaction in which he is interested provided that the nature of the interest of any Director or alternate Director in any such contract or transaction shall be disclosed by him at or prior to its consideration and any vote thereon.
 
(5)   A general notice that a Director or alternate Director is a shareholder, director, officer or employee of any specified firm or company and is to be regarded as interested in any transaction with such firm or company shall be sufficient disclosure for the purposes of voting on a resolution in respect of a contract or transaction in which he has an interest, and after such general notice it shall not be necessary to give special notice relating to any particular transaction.
 
23.
Remuneration of Directors
 
(1)   The remuneration and benefits (if any) of the Directors, including without limitation, participation in any share option or incentive plan and loans shall be determined by the Board and shall be deemed to accrue from day to day. The Directors may also be paid all travel, hotel and other expenses properly incurred by them in attending and returning from meetings of the Board, any committee appointed by the Board, general meetings of the Company, or in connection with the business of the Company or their duties as Directors generally.
 
(2)   The Board may award special remuneration and benefits to any Director undertaking any special work or services for, or undertaking any special mission on behalf of, the Company other than his or her ordinary routine work as a Director. Any fees paid to a Director who is also counsel or attorney to the Company, or otherwise serves it in a professional capacity, shall be in addition to his or her remuneration as a Director.
 
24.
Other interests of Directors
 
A Director may be or become a director or other officer of or otherwise interested in any company or Person promoted by the Company or in which the Company may be interested as member or otherwise, and no such Director shall be accountable to the Company for any remuneration or other benefits received by him or her as a director or officer of, or from his or her interest in, such other company or Person.
 
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25.
No minimum shareholding
 
The Company in general meeting may fix a minimum shareholding required to be held by a Director, but unless and until such a shareholding qualification is fixed a Director is not required to hold Shares.
 
OFFICERS
 
26.
Officers of the Company
 
The Officers of the Company may consist of any of the following Officers: a chairman, a president and one or more vice presidents, a Secretary and such additional Officers, as the Board may from time to time determine all of whom shall be deemed to be Officers for the purposes of these Articles. Subject to compliance with any requirement of the Statute, the same individual may hold two (2) or more offices in the Company.
 
27.
Appointment of Officers
 
The Secretary and additional Officers, if any, shall be appointed by the Board from time to time.
 
28.
Remuneration of Officers
 
The Officers shall receive such remuneration and benefits as the Board may determine from time to time in accordance with their employment contracts or otherwise.
 
29.
Duties of Officers
 
The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board from time to time.
 
30.
Chairman of meetings
 
Unless otherwise agreed by a majority of those attending and entitled to attend and vote thereat, the chairman, if there be one, and if not, the president shall act as chairman at all meetings of the Members and of the Board at which such person is present. In their absence, the vice president, if present, shall act as chairman and in the absence of all of them a chairman shall be appointed or elected by those present at the meeting and entitled to vote.
 
31.
Register of Directors and Officers
 
The Company shall keep at the registered office for the time being of the Company a register containing the names and addresses of its Directors and Officers, and shall send to the Registrar of Companies in the Cayman Islands a copy of such register, and shall, within thirty days notify the Registrar of Companies of the Cayman Islands of any change which takes place in such Directors or Officers.
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MINUTES
 
32.
Obligations of Board to keep minutes
 
(1)   The Company shall cause minutes of all resolutions and proceedings of its Members, whether at general meetings or otherwise, and of its Directors or managers (where there are managers), whether at meetings or otherwise, to be duly kept in writing.
 
(2)   Any minutes of a general meeting of the Company or a meeting of the Directors or managers (if any), if purporting to be signed by the chairman of the meeting, or by the chairman of the next succeeding meeting, shall be received as evidence of the proceedings at that meeting; and until the contrary is proved, every general meeting of the Company or meeting of the Directors or managers in respect of the proceedings of which minutes have been so made, shall be deemed to have been duly held and convened and all resolutions passed thereat, or proceedings had, to have been duly passed and had, and all appointments of Directors, Officers, managers or liquidators shall be deemed to be valid, and all acts done by such Directors, Officers, managers and liquidators shall be valid, notwithstanding any defect that may afterwards be discovered in their appointments or qualifications.
 
INDEMNITY
 
33.
Indemnification of Directors and Officers of the Company
 
(1)   The Directors, Secretary and other Officers (such term to include, for the purposes of Article 33, any person appointed to any committee by the Board) and employees and agents of the Company who have acted or are acting in relation to any of the affairs of the Company and the liquidator or trustees (if any) who has acted or is acting in relation to any of the affairs of the Company, and every one of them, and their heirs, executors and administrators, shall be indemnified and secured harmless out of the assets of the Company 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 (actual or alleged) 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 Company 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 Company 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 willful negligence, willful default, fraud or dishonesty which may attach to any of said persons.
 
(2)   Any indemnification under this Article 33, unless ordered by a court, shall be made by the Company only as authorised in the specific case upon a determination that indemnification of such Person is proper in the circumstances because such Person has met the applicable standard of conduct set forth in paragraph (1) of this Article 33. Such determination shall be made (i) by the Board by a majority vote of disinterested Directors or (ii) if a majority of the disinterested Directors so directs, by independent legal counsel in a written opinion or (iii) by the Members. The Company may purchase and maintain insurance to protect itself and any Director, Officer or other Person entitled to indemnification pursuant to this Article 33, to the fullest extent permitted by law.
 
(3)   Expenses (including, without limitation, attorneys’ fees) actually and reasonably incurred by any Director, Secretary, other Officer or employee of the Company in defending any civil, criminal,
 
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administrative or investigative action, suit or proceeding or threat thereof for which indemnification is sought pursuant to paragraph (1) of this Article 33 shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt   of an undertaking by or on behalf of such Person to repay such amount if it shall be ultimately determined that such Person is not entitled to be indemnified by the Company as authorised in   these Articles or otherwise pursuant to applicable law; provided, that if it is determined by either (i) a majority vote of Directors who were not parties to such action, suit or proceeding or (ii) if a majority of the disinterested Directors so directs, by independent legal counsel in a written opinion, that there is no reasonable basis to believe that such Person is entitled to be indemnified by the Company as authorised in these Articles or otherwise pursuant to applicable law, then no expense shall be advanced in accordance with this paragraph (3) of this Article 33. Such expenses (including attorneys’ fees) incurred by agents of the Company may be paid upon the receipt of the aforesaid undertaking and such terms and conditions, if any, as the Board deems appropriate.
 
(4)   The indemnification and advancement of expenses provided in these Articles shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may now or hereafter be entitled under any statute, agreement, vote of Members or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office.
 
(5)   The indemnification and advancement of expenses provided by, or granted pursuant to, this Article 33 shall, unless otherwise provided when authorised or ratified, continue as to a Person who has ceased to hold the position for which such Person is entitled to be indemnified or advanced expenses and shall inure to the benefit of the heirs, executors and administrators of such a Person.
 
(6)   No amendment or repeal of any provision of this Article 33 shall alter, to the detriment of any Person, the right of such Person to the indemnification or advancement of expenses related to a claim based on an act or failure to act which took place prior to such amendment, repeal or termination.
 
MEETINGS
 
34.
Notice of annual general meeting
 
(1)   All general meetings other than annual general meetings shall be an extraordinary general meetings.
 
(2)   The Company shall hold an annual general meeting of its Members once every financial year.
 
(3)   Any annual general meeting of the Company shall be held at such time and place (which shall not be in the United States) as the president or the chairman or any two Directors or any Director and the Secretary or the Board shall decide. At least five (5) days’ notice of such meeting shall be given to each Member entitled to vote thereat as at the relevant record date determined pursuant to Article 63 stating the date, place (which shall not be in the United States) and time at which the meeting is to be held, that the election of Directors will take place thereat, and as far as practicable, the other business to be conducted at the meeting.
 
(4)   Notwithstanding any other provision of these Articles, in addition to any other applicable requirements, in order for a resolution to be properly moved by Members in accordance with the Statute and these Articles at an annual general meeting of Members where such business is not brought by or at the direction of the Board, such resolution may be introduced by such Members at such meeting only as long as such notice of a Member proposal is given by such Members to the Secretary of the Company at the Company’s registered office not later than the close of business on the 90th day nor earlier than the
 
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opening of business on the 120th day before the anniversary date of the immediately preceding annual general meeting; provided, however, that in the event that the annual meeting is called for a date that is not within 45 days before or after such anniversary date, notice by the Member to be timely must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting is first made by the Company setting forth as to each matter such Members propose to bring before the annual meeting: (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (b) the name and record address of such Member; (c) the class or series and the number of Shares of capital stock of the Company which are owned beneficially or of record by such shareholder; (d) a description of all arrangements and understandings between such Member and any other person (including his or her name and address) in connection with the proposal of such business by such Member and any material interest of such Member in such business; and (e) a representation that such Member intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. The chairman of an annual general meeting may, if the facts warrant, determine and declare that any business was not properly brought before the meeting and such business will not be transacted.
 
35.
Notice of extraordinary general meeting
 
The Board may convene an extraordinary general meeting of the Company whenever in their judgement such a meeting is necessary, upon not less than five (5) days’ notice to each Member entitled to vote thereat as at the relevant record date determined pursuant to Article 63 which shall state the date, time, place (which shall not be in the United States) and the general nature of the business to be considered at the meeting.
 
36.
Accidental omission of notice of general meeting; business to be conducted
 
(1)   The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a general meeting by, any Person entitled to receive notice shall not invalidate the proceedings at that meeting.
 
(2)   Business to be brought before a general meeting of the Company must be specified in the notice of the meeting. Only business that the Board has determined can be properly brought before a general meeting in accordance with these Articles and applicable law shall be conducted at any general meeting, and the chairman of the general meeting may refuse to permit any business to be brought before such meeting that has not been properly brought before it in accordance with these Articles and applicable law.
 
37.
Short notice
 
Subject to the terms of any class or series of Shares issued by the Company, a general meeting of the Company shall, notwithstanding that it is called by shorter notice than that specified in these Articles, be deemed to have been properly called if it is so agreed by (i) all the Members entitled to attend and vote thereat in the case of an annual general meeting; and (ii) by a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than 95% in par value of the Shares giving a right to attend and vote thereat in the case of an extraordinary general meeting.
 
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38.
Quorum for general meeting
 
At any general meeting of the Company two or more persons present in person and representing in person or by proxy in excess of 50% of the total issued and outstanding voting Shares in the Company as at the relevant record date determined pursuant to Article 63 throughout the meeting shall form a quorum for the transaction of business, provided, however, that if the Company shall at any time have only one Member, one Member present in person or by proxy shall form a quorum for the transaction of business at any general meeting of the Company held during such time. If within a half an hour from the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day one week later, at the same time and place or to such other day, time or place as the Secretary may determine. Unless the meeting is so adjourned to a specific date and time, fresh notice of the date, time and place for the resumption of the adjourned meeting shall be given to each Member in accordance with the provisions of these Articles. No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business and continues throughout the meeting, but the absence of a quorum shall not preclude the appointment, choice or election of a chairman of the meeting which shall not be treated as part of the business of the meeting.
 
39.
Adjournment of meetings
 
The chairman of a general meeting may, with the consent of 50% of the Members present in person or by proxy at any general meeting whether or not a quorum is present (and shall if so directed by the Meeting), adjourn the meeting. Unless the meeting is adjourned to a specific date and time, fresh notice of the date, time and place for the resumption of the adjourned meeting shall be given to each Member in accordance with the provisions of these Articles with respect to an extraordinary general meeting of the Company.
 
40.
Attendance at meetings
 
Members may participate in any meeting by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting, provided, however, that no Member may participate in any general meeting while that Member (or, if any Member is an entity, its representative) is physically present in the United States or its territories.
 
41.
No action by consent of members in lieu of meeting
 
Any action required or permitted to be taken by Members of the Company must be effected at a duly called annual or extraordinary general meeting of the Company and may not be effected by written consent in lieu of a meeting.
 
42.
Attendance of Directors
 
The Directors of the Company shall be entitled to receive notice of and to attend and be heard at any general meeting.
 
43.
Voting at meetings
 
(1)   Subject to the provisions of the Statute and these Articles, any question proposed for the consideration of the Members at any general meeting shall be decided by Ordinary Resolution in
 
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accordance with the provisions of these Articles and in the case of an equality of votes the resolution shall fail.
 
(2)   Subject to the adjustments provided in Article 53, each holder of Class A Ordinary Shares generally is entitled to one (1) vote per Class A Ordinary Share. However, except upon unanimous consent of the Board, in the event that a holder of Class A Ordinary Shares is a Tentative 9.9% Member, then the aggregate votes conferred by the Ordinary Shares held by such holder shall be reduced in accordance with Article 54(2).
 
(3)   Generally, each holder of Class B Ordinary Shares is entitled to ten (10) votes per Class B Ordinary Share. However, in the event that the aggregate number of votes conferred by all of the issued and outstanding Class B Ordinary Shares, voting as a class, exceeds 9.5% of the Total Voting Power, then the Total Voting Power of the class shall be reduced to 9.5% of the Total Voting Power. The voting power of any Class A Ordinary Shares held by any holder of Class B Ordinary Shares (whether directly, or indirectly or constructively under applicable attribution and constructive ownership rules contained in the Code) shall be included for purposes of measuring Total Voting Power in the immediately preceding sentence, except, and only to the extent, the right to vote such Class A Ordinary Shares has been limited pursuant to the Articles.
 
(4)   [Reserved]
 
(5)   Notwithstanding any other provisions of these Articles to the contrary, with respect to any matter required to be submitted to a vote of the shareholders of Greenlight Reinsurance, the Company shall be required to submit a proposal relating to such matters to the Members of the Company and shall vote all the shares of Greenlight Reinsurance owned by the Company in accordance with and proportional to such vote of the Company’s Members; provided, however, that the Board shall not be required to submit such a proposal contemplated by this Article 43(5) to the Members of the Company at such time as Greenlight Reinsurance shall no longer be a Subsidiary of the Company .
 
(6)   No Member shall be entitled to vote at any general meeting or at any separate meeting of the holders of a class of Shares unless such Member has paid all the calls on all Shares held by such Member .
 
44.
Voting list
 
The Secretary shall prepare, or shall cause the officer or agent who has charge of the Register of Members of the Company to prepare, at least 10 days before every annual general meeting of the Company, a complete list of the Members of record entitled to vote thereat arranged in alphabetical order and showing the address and the number of shares registered in the name of each Member. Nothing contained in this Article shall require the Company to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any Member, for any purpose germane to the meeting, during ordinary business hours for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Company. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to Members of the Company. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Member who is present. If a meeting is to be held solely by means of remote communication, the list shall be open to the examination of any Member during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of meeting. The Register of Members shall be the only evidence as
 
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to who are the Members entitled to examine the list required by this Article or to vote in person or by proxy at any general meeting.
 
45.
Inspectors of elections
 
The Board may appoint one or more persons as inspectors of election, who may be employees of the Company or otherwise serve the Company in other capacities, to act at any general meeting of the Company where a vote is taken by a poll pursuant to Article 48, or any other general meeting or adjournment thereof and to make a written report thereof. The Board may appoint one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspectors of election or alternates are appointed by the Board, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall ascertain and report the number of outstanding shares and the voting power of each by reference to the Register of Members as at the relevant record date determined pursuant to Article 63; determine the number of shares present in person or represented by proxy at the meeting; determine the existence of a quorum; determine the validity of proxies and ballots; count all votes and ballots and report the results; hear and determine and retain for a reasonable period a record of the disposition of any challenges arising in connection with the right to vote or made to any determination by the inspectors; and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. No person who is a candidate for an office at an election may serve as an inspector at such election. Each report of an inspector shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The determination and decision of the inspector shall be final and binding.
 
46.
Voting on show of hands
 
At any general meeting a resolution put to the vote of the meeting shall, in the first instance, be voted upon by a show of hands and, subject to any rights or restrictions for the time being lawfully attached to any class of Shares and subject to the provisions of these Articles, every Member present in person and every person holding a valid proxy at such meeting shall be entitled to that number of votes prescribed by the Ordinary Shares held by such Member and shall cast such votes by raising his or her hand.
 
47.
Decision of chairman
 
At any general meeting a declaration by the chairman of the meeting that a question proposed for consideration has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in a book containing the minutes of the proceedings of the Company shall, subject to the provisions of these Articles, be conclusive evidence of that fact.
 
48.
Demand for a poll
 
(1)   At any general meeting of the Company, in respect of any question proposed for the consideration of the Members (whether before or on the declaration of the result of a show of hands as provided for in these Articles), a poll may be demanded by any of the following persons:
 
(a)   the chairman of such meeting; or
 
(b)   any one Member present in person or represented by proxy.
 
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The demand for a poll may be withdrawn by such person that made the demand.
 
(2)   Where, in accordance with the provisions of subparagraph (1) of this Article, a poll is demanded, subject to the provisions of Articles 12(3), 43(2), 43(3) and 54(1)-(4) (as well as the additional restrictions and rights of the Class B Ordinary Shares set forth in Schedule A hereto), every person present at such meeting shall have the number of votes corresponding each for such Share of which   such person is the holder or for which such person holds a proxy and such vote shall be counted in the manner set out in subparagraph (4) of this Article or in the case of a general meeting at which one or more Members are present by telephone in such manner as the chairman of the   meeting may direct and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded and shall replace any previous resolution upon the same matter which has been the subject of a show of hands.
 
(3)   A poll demanded in accordance with the provisions of subparagraph (1) of this Article, for the purpose of electing a chairman of the meeting or on a question of adjournment, shall be taken forthwith and a poll demanded on any other question shall be taken in such manner and at such time and place as the chairman (or acting chairman) may direct and any business other than that upon which a poll has been demanded may be proceeded with pending the taking of the poll.
 
(4)   Where a vote is taken by poll, each Person present and entitled to vote shall be furnished with a ballot paper on which such person shall record his or her vote in such manner as shall be determined at the meeting having regard to the nature of the question on which the vote is taken, and each ballot paper shall be signed or initialled or otherwise marked so as to identify   the voter and the registered holder in the case of a proxy. The Board may appoint one or more inspectors to act at any general meeting where a vote is taken by a poll.
 
49.
Seniority of joint holders voting 
 
(1)   In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.
 
(2)   A Member of unsound mind, or in respect of whom an order has been made by any court, having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, receiver, curator bonis, or other person on such Member’s behalf appointed by that court, and any such committee, receiver, curator bonis or other person may vote by proxy.
 
(3)   No person shall be entitled to vote at any general meeting or at any separate meeting of the holders of a class of Shares unless he is registered as a Member on the record date for such meeting.
 
(4)   No objection shall be raised to the qualification of any voter except at the general meeting or adjourned general meeting at which the vote objected to is given or tendered and every vote not disallowed at the meeting shall be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and conclusive.
 
(5)   On a poll or on a show of hands votes may be cast either personally or by proxy. A Member may appoint more than one proxy or the same proxy under one or more instruments to attend and vote at a meeting. Where a Member appoints more than one proxy the instrument of proxy shall state which proxy is entitled to vote on a show of hands.
 
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(6)   A Member holding more than one Share need not cast the votes in respect of his Shares in the same way on any resolution and therefore may vote a Share or some or all such Shares either for or against a resolution and/or abstain from voting a Share or some or all of the Shares and, subject to the terms of the instrument appointing him, a proxy appointed under one or more instruments may vote a Share or some or all of the Shares in respect of which he is appointed either for or against a resolution and/or abstain from voting.
 
50.
Instrument of proxy
 
(1)   Every Member entitled to vote has the right to do so either in person or by one or more Persons authorised by a written proxy executed and delivered in accordance with these Articles. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his or her attorney authorised by him or her in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.
 
(2)   Any Member may appoint one or more Persons a standing proxy or (if a corporation) a standing representative by depositing at the registered office for the time being of the Company, or at such place or places as the Board may otherwise specify for the purpose, a proxy or (if a corporation) a written authorisation. Such proxy or authorisation shall be valid for all general meetings and   adjournments thereof or, resolutions in writing, as the case may be, until notice of revocation is received at the registered office for the time being of the Company, or at such place or places as the Board may otherwise specify for the purpose. Where a standing proxy or authorisation exists, its operation shall be deemed to have been suspended at any general meeting or adjournment thereof at which the Member is present or in respect to which the Member has specially appointed a proxy or representative. The Board may from time to time require such evidence as it shall deem necessary as to the due execution and continuing validity of any such standing proxy or authorisation and the operation of any such standing proxy or authorisation shall be deemed to be suspended until such time as the Board determines that it has received the requested evidence or other evidence satisfactory to it. A Person so authorised as a representative of a corporation shall be entitled to exercise the same power on behalf of the grantor of the authority as the grantor could exercise if it were an individual Member and the grantor shall for the purposes of these Articles be deemed to be present in person at any such meeting if the Person so authorised is present at the meeting.
 
(3)   Subject to paragraph (2) of this Article 50, the instrument appointing a proxy together with such other evidence as to its due execution as the Board may from time to time require shall be delivered at the registered office for the time being of the Company (or at such place or places as may be specified in the notice convening the meeting or in any notice of any adjournment or, in either case or the case of a written resolution, in any document sent therewith) not less than 24 hours or such other period as the Board may determine, prior to the holding of the relevant meeting or adjourned meeting at which the individual named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, before the time appointed for the taking of the poll and in default the instrument of proxy shall not be treated as valid.
 
(4)   Instruments of proxy shall be in any common form or other form as the Board may approve and the Board may, if it thinks fit, send out with the notice of any meeting forms of instruments of proxy for use at that meeting. The instrument of proxy shall be deemed to confer authority to demand or join in demanding a poll or amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall unless the contrary is stated therein be valid as well for any adjournment of the meeting as for the meeting to which it relates.
 
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(5)   A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or unsoundness of mind of the principal, or revocation of the   instrument of proxy or of the authority under which it was executed, provided, that no intimation in writing of such death, insanity or revocation shall have been received by the Company at the registered office for the time being of the Company (or such other place as may be specified for the delivery of instruments of proxy in the notice convening the meeting or other documents sent therewith) at least one hour before the commencement of the meeting or adjourned meeting, or the taking of the poll at which the instrument of proxy is used.
 
51.
Representation of corporations at meetings
 
A corporation which is a Member may, by written instrument, authorise one or more Persons as it thinks fit to act as its representative at any meeting of the Members and the Person or Persons so authorised shall be entitled to exercise the same powers on behalf of the corporation which such Person or Persons represent as that corporation could exercise if it were an individual Member. Such corporation shall for the purposes of these Articles be deemed to be present in person at any such meeting if a Person so authorised is present at the meeting. Notwithstanding the foregoing, the chairman of the meeting may accept such assurances as he or she thinks fit as to the right of any Person to attend and vote at general meetings on behalf of a corporation which is a Member.
 
52.
[Reserved] 
 
 
SHARE CAPITAL AND SHARES
 
53.
Rights of Shares
 
(1)   Upon adoption of these Articles, the share capital of the Company shall consist of 125,000,000 Ordinary Shares, par value US$0.10 divided into 100,000,000 Class A Ordinary Shares and 25,000,000 Class B Ordinary Shares and 50,000,000 Preferred Shares, par value of US$0.10 each.
 
(2)   Subject to the provisions of Articles 12(3), 43(2), 43(3) and 54(1)-(4) (as well as the additional restrictions and rights of the Class B Ordinary Shares set forth in Schedule A hereto), each Class A Ordinary Share shall be entitled to one vote per Class A Ordinary Share. The Class B Ordinary Shares rights and restrictions are set forth in Schedule A to these Articles, but otherwise the holders of all Ordinary Shares shall:
 
(a)   be entitled to share equally Share for Share in Dividends (whether payable in cash, property or securities of the Company) as the Board may from time to time declare;
 
(b)   in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of an amalgamation, reorganisation or otherwise or upon any distribution of share capital and surplus to share equally and ratably in the assets of the Company, if any, remaining after the payment of all debts and liabilities of the Company and the liquidation preference of any issued and outstanding Preferred Shares; and
 
(c)   generally to enjoy all of the rights attaching to Shares.
 
(3)   The Board is authorised, subject to limitations prescribed by law, to issue Preferred Shares in classes or series, to establish from time to time the number of Preferred   Shares to be included in each such class or series, and to fix the designation, powers, preferences redemption provisions, restrictions and
 
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rights to the   Preferred Shares of each such class or series and the qualifications, limitations or restrictions thereof. The terms of any class or series of Preferred Shares shall be set forth in a Certificate of Designation in the minutes of the Board authorising the issuance of such Preferred Shares and such Certificate of Designations shall be attached as an exhibit to these Articles, but shall not form part of these Articles, and may be examined by any Member on request. The rights attaching to any Ordinary Share or other Share shall be deemed not to be altered by the allotment of any Preferred Share even if such Preferred Share does or will rank in priority for payment of a Dividend or in respect of capital or surplus or which confer on the holder thereof voting rights more favourable than those conferred by such Ordinary Share and shall not otherwise be deemed to be altered by the creation or issue of further Shares ranking pari passu therewith.
 
Notwithstanding the foregoing provisions of this Article, the restrictions of this Article 55(3) shall not apply to the issuance of shares to a Person acting as an underwriter in the ordinary course of its business, Depositary Trust Company, Cede & Co., a brokerage firm holding shares on behalf of its client or any other entity performing a similar function.

(4)   The authority of the Board with respect to each class or series of Preferred Shares shall include, but not be limited to, determination of the following:
 
(a)   the number of Preferred Shares constituting that class or series and the distinctive designation of that class or series;
 
(b)   the rate of Dividend, and whether (and if so, on what terms and conditions) Dividends shall be cumulative (and if so, whether unpaid dividends shall compound or accrue interest) or shall be payable in preference or in any other relation to the Dividends payable on any other class or classes of Shares or any other class or series of the Preferred Shares;
 
(c)   whether that class or series shall have voting rights in addition to the voting rights provided by law and, if so, the terms and extent of such voting rights, provided that if the Preferred Shares shall have voting rights, such Preferred Shares shall be included in the number of Voting Shares of the Company held by any Person for the purposes of Article 53(2) hereof;
 
(d)   whether such Preferred Shares may be redeemed and, if so, the terms and conditions on which they may be redeemed (including, without limitation, the dates upon or after which they may be redeemed and the price or prices at which they may be redeemed, which price or prices may be different in different circumstances or at different redemption dates);
 
(e)   whether such Preferred Shares shall be issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange (including, without limitation the price or prices or the rate or rates of conversion or exchange or any terms for adjustment thereof);
 
(f)   the amounts, if any, payable upon such Preferred Shares in the event of voluntary liquidation, dissolution or winding up of the Company in preference of Shares of any other class or series and whether such Preferred Shares shall be entitled to participate generally in distributions on the Ordinary Shares under such circumstances; and
 
(g)   any other relative rights, preferences, limitations and powers of that class or series.
 
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(5)   The rights attaching to any Preferred Shares, or any class or series of Preferred Shares, shall be deemed not to be altered by the allotment of any other class or series of Preferred Shares even if such class or series does or will rank in priority for payment of a Dividend or in respect of capital or surplus or which confer on the holder thereof voting rights more favourable than those conferred by such existing Preferred Shares or class or series of Preferred Shares and shall not otherwise be deemed to be altered by the creation or issue of further Shares ranking pari passu therewith.
 
54.
Limitation on voting rights of Controlled Shares. 
 
(1)   General . Subject to the provisions of Articles 12(3), 43(2), 43(3), and 54(1)-(4) (as well as the additional restrictions and rights of the Class B Ordinary Shares set forth in Schedule A hereto), and subject to any rights and restrictions for the time being attached to any class or classes of Shares, every Member and every Person representing a Member by proxy shall have one vote for each Class A Ordinary Share carrying the right to vote on the matter in question of which such Member or such Person representing a Member by proxy is the holder. Notwithstanding any other provisions of these Articles, all determinations in these Articles that are made by or subject to a vote or approval of Members shall be based upon the voting power of such Members’ Shares as determined pursuant to Articles 12(3), 43(3), 54(1)-(4) (as well as the additional restrictions and rights of the Class B Ordinary Shares set forth in Schedule A hereto).
 
(2)   Adjustment of voting power . Except upon unanimous consent of the Board, the voting power of each Class A Ordinary Share and each Class B Ordinary Share is hereby adjusted (and shall be automatically adjusted in the future) to the extent necessary so that no Person is a 9.9% Member (as defined below). This Article 54 shall be applied prior to the application of Article 12(3). The Board shall implement the foregoing in the manner provided herein.
 
The Board shall from time to time, including prior to any time at which a vote of Members is taken, take all reasonable steps necessary to ascertain through communications with Members or otherwise, whether there exists, or will exist at the time any vote of Members is taken, a Tentative 9.9% Member (as defined below).
 
In the event that a Tentative 9.9% Member exists, the aggregate votes conferred by the Class A Ordinary Shares and/or Class B Ordinary Shares held by a Member and treated as Controlled Shares of that Tentative 9.9% Member shall be reduced to the extent necessary such that the Controlled Shares of the Tentative 9.9% Member will constitute less than 9.9% of the Total Voting Power. In applying the previous sentence where Class A Ordinary Shares and/or Class B Ordinary Shares held by more than one Member are treated as Controlled Shares of a Tentative 9.9% Member, the reduction in votes shall apply to such Members holding Class A Ordinary Shares in descending order according to their respective Attribution Percentages (as defined below) and then to such Members holding Class B Ordinary Shares, provided that, in the event of a tie, the reduction shall apply first to the Member whose Shares are Controlled Shares of the Tentative 9.9% Member by virtue of the Tentative 9.9% Member’s economic interest in (as opposed to voting control with respect to) such Ordinary Shares. The votes attributable to Class A Ordinary Shares and/or Class B Ordinary Shares of Members owning no Class A Ordinary Shares and/or Class B Ordinary Shares treated as Controlled Shares of any Tentative 9.9% Member shall, in the aggregate, be increased by the same number of votes subject to reduction as described above. Such increase shall apply to all such Members in proportion to their voting power at that time, provided that such increase shall be limited to the extent necessary to avoid causing any person to be a 9.9% Member. The adjustments of voting power described in this Article shall apply repeatedly until there would be no 9.9% Member. The Board may deviate from any of the principles described in this Article and determine that Class A Ordinary Shares and/or Class B Ordinary Shares held by a Member shall carry different voting rights as it determines appropriate (1) to avoid the existence of any 9.9% Member or (2) to avoid
 
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adverse tax, legal or regulatory consequences to the Company, any Subsidiary of the Company, or any other Member or its Affiliates. For the avoidance of doubt, in applying the provisions of Articles 12(3), 43(2), 43(3), and 54(1)-(4), a Class A Ordinary Share and/or Class B Ordinary Share may carry a fraction of a vote.
 
“Attribution Percentage” shall mean, with respect to a Member and a Tentative 9.9% Member, the percentage of the Member’s Shares that are treated as Controlled Shares of such Tentative 9.9% Member.
 
“Controlled Shares” in reference to any Person or Member means all Ordinary Shares of the Company owned by such Person or Member either (i) directly, (ii) by application of the attribution and constructive ownership rules under Section 958 of the Code, or (iii) beneficially within the meaning of Section 13(d)(3) of the Exchange Act, and the rules and regulations promulgated thereunder.
 
“9.9% Member” means a Person whose Controlled Shares constitute nine and nine-tenths percent (9.9%) or more of the voting power of all Ordinary Shares of the Company and who would be generally required to recognize income with respect to the Company under Section 951(a)(1) of the Code if the Company were a controlled foreign corporation as defined in Section 957 of the Code and if the ownership threshold under Section 951(b) of the Code were 9.9%.
 
“Tentative 9.9% Member” means a Person that, but for adjustments to the voting rights of Shares pursuant to Article 54(1)-(4), would be a 9.9% Member.
 
(3)   Other adjustments of voting power . In addition to the provisions of Article 54(1), any Class A Ordinary Shares and Class B Ordinary Shares shall not carry any right to vote to the extent that the Board determines, in its sole discretion, that it is necessary that such Class A Ordinary Shares or Class B Ordinary Shares should not carry the right to vote in order to avoid adverse tax, legal or regulatory consequences to the Company, any Subsidiary of the Company, or any Member, provided that no adjustment pursuant to this sentence shall cause any person to become a 9.9% Member.
 
(4)   Requirement to provide information and Notice .
 
(a)   The Board shall have the authority to request from any Member holding, directly or indirectly, Class A Ordinary Shares, and such Member shall provide, such information as the Board may request for the purpose of determining whether any Member’s voting rights are to be adjusted. If such Member fails to respond to such a request, or submits incomplete or inaccurate information in response to such a request, the Board may in its sole and absolute discretion determine that such Member’s Class A Ordinary Shares shall carry no voting rights in which case such Class A Ordinary Shares shall not carry any voting rights until otherwise determined by the Board in its sole and absolute discretion.
 
(b)   Any Member shall give notice to the Company within ten days following the date that such Member acquires actual knowledge that it is a Tentative 9.9% Member or that its Class A Ordinary Shares or Class B Ordinary Shares are Controlled Shares of a Tentative 9.9% Member.
 
(c)   Notwithstanding the foregoing, no Member shall be liable to any other Member or the Company for any losses or damages resulting from such Member’s failure to respond to, or submission of incomplete or inaccurate information in response to, a request under paragraph (4)(a) or from such Member’s failure to give notice under paragraph (4)(b) of this Article.
 
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(d)   The Board may rely on the information provided by a Member under this Article 54(4) in the satisfaction of its obligations under Article 12(3) and this Article 54.
 
(e)   The Company may, but shall have no obligation to provide notice to any Member of any adjustment to its voting power that may result from the application of Article 43(3), Article 12(3), and/or this Article 54.
 
(f)   One of the purposes of the voting limitation set forth in this Article is to seek to reduce the likelihood that there would be adverse tax consequences to U.S. Persons if the Company were to be characterized as a controlled foreign corporation as defined in the Code. Nevertheless, the Board will not be liable to the Company, its Members or any other Person whatsoever for any errors in judgment made by its interpreting or enforcing this Article or in granting any waiver or waivers to the foregoing restrictions in any case so long as the Board shall have acted in good faith.
 
55.
Power to issue Shares
 
(1)   Subject to the provisions of these Articles and to any rights attaching to issued and outstanding Shares, the unissued Shares (whether forming part of the original share capital or any increased share capital) shall be at the disposal of the Board, which may issue, offer, allot, grant options over, exchange or otherwise dispose of Shares or options warrants or other rights to purchase Shares or securities convertible into or exchangeable for Shares (including any employee benefit plan providing for the issuance of Shares or options, warrants or other rights in respect thereof), at such times, for such consideration and on such terms and conditions as it may determine (including, without limitation, such preferred or other special rights or restrictions with respect to Dividend, voting, liquidation or other rights of the Shares as may be determined by the Board). The Board may issue Shares as a new or existing class or series of Shares.
 
(2)   The Company shall not issue Shares to bearer.
 
(3)   At the discretion of the Board, the Company shall not issue any Shares in a manner that the Board believes would cause, by reason of such issuance, the total Ordinary Shares of any Person to equal or exceed nine and nine-tenths percent (9.9%) of the total of Ordinary Shares of the Company then issued and outstanding.  
 
Notwithstanding the foregoing provisions of this Article, the restrictions of this Article 55(3) shall not apply to any issuance of Shares to a person acting as an underwriter in the ordinary course of its business, purchasing such Shares pursuant to a purchase agreement to which the Company is a party, for resale.
 
(4)   The Board shall, in connection with the issue of any Share, have the power to pay such commission and brokerage as may be permitted by law.  
 
(5)   The Company may from time to time do any one or more of the following things:
 
(a)   issue partly paid Shares ;
 
(b)   accept from any Member the whole or a part of the amount remaining unpaid on any Shares held by such Member, although no part of that amount has been called up;
 
(c)   pay Dividends in proportion to the amount paid up on each Share; and
 
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(d)   issue Shares in fractional denominations and deal with such fractions to the same extent as its whole Shares and Shares in fractional denominations shall have in proportion to the respective fractions represented thereby all of the rights of whole Shares including (but without limiting the generality of the foregoing) the right to vote, to receive Dividends and distributions and to participate in a winding up.
 
56.
Variation of rights and alteration of Share capital
 
(1)   Subject to the provisions of the Statute any Preferred Shares may be issued or converted into Ordinary Shares that, at a determinable date or at the option of the Company, are able to be redeemed on such terms and in such manner as the Company before the issue or conversion may by resolution of the Members determine.
 
(2)   While the share capital is divided into different classes of Shares, the rights attached to any class (unless otherwise provided by the terms of issue of the Shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of three-fourths of the issued and outstanding Shares of that class or with the sanction of a Special Resolution cast at a separate general meeting of the holders of the Shares of that class. The rights conferred upon the holders of the Shares of any class issued with preferred or other rights shall not, unless otherwise expressly   provided by the terms of issue of the Shares of that class, be deemed to be varied by the creation or issue of further Shares ranking pari passu therewith.
 
(3)   The Company may from time to time by resolution of the Company in general meeting alter the conditions of its Memorandum and accordingly may change the currency denomination of, increase, alter or reduce its share capital in accordance with the   provisions of Section 13 of the Statute. Where, on any alteration of share capital, fractions of Shares or some other difficulty would arise, the Board may deal with or resolve the same in   such manner as it thinks fit including, without limiting the generality of the foregoing, the issue to Members, as appropriate, of fractions of Shares and/or arranging for the sale or Transfer of the fractions of Shares of Members.
 
57.
Registered holder of Shares
 
(1)   The Company shall be entitled to treat the registered holder of any Share as the absolute owner thereof and accordingly shall not be bound to recognise any equitable or other claim to, or interest in, such Share on the part of any other person.
 
(2)   Any Dividend, interest or other moneys payable in cash in respect of Shares may be paid by cheque or draft sent through the post directed to the Member at such Member’s address in the Register of Members or, in the case of joint holders, to such address of the holder first named in the Register of Members, or to such person and to such address as the holder or joint holders may in writing direct. If two or more persons are registered as joint holders of any Shares any one can give an effectual receipt for any Dividend paid in respect of such Shares.
 
58.
Death of a joint holder
 
(1)   Where two or more persons are registered as joint holders of a Share or Shares then in the event of the death of any joint holder or holders the remaining joint holder or holders shall be absolutely entitled to the said Share or Shares and the Company shall recognise no claim in respect of the estate of any joint holder except in the case of the last survivor of such joint holders.   
 
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(2)   The Company may, in so far as the Statute permits, pay a commission to any person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any Shares of the Company. Such commissions may be satisfied by the payment of cash and/or the issue of fully or partly paid-up Shares. The Company may also on any issue of Shares pay such brokerage as may be lawful.
 
59.
Share certificates
 
(1)   A Member shall only be entitled to a share certificate if the Board resolves that share certificates shall be issued. Share certificates representing Shares, if any, shall be in such form as the Board may determine. Share certificates shall be signed by one or more Directors or other person authorised by the Board. The Board may authorise certificates to be issued with the authorised signature(s) affixed by mechanical process. All certificates for Shares shall be consecutively numbered or otherwise identified and shall specify the Shares to which they relate. All certificates surrendered to the Company for Transfer shall be cancelled and subject to these Articles no new certificate shall be issued until the former certificate representing a like number of relevant Shares shall have been surrendered and cancelled.
 
(2)   The Company shall be under no obligation to complete and deliver a share certificate unless specifically called upon to do so by the person to whom such Shares have been allotted.
 
(3)   The Company shall not be bound to issue more than one certificate for Shares held jointly by more than one person and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them. If a share certificate is defaced, worn out, lost or destroyed, it may be renewed on such terms (if any) as to evidence and indemnity and on the payment of such expenses reasonably incurred by the Company in investigating evidence, as the Board may prescribe, and (in the case of defacement or wearing out) upon delivery of the old certificate.
 
60.
Calls on Shares
 
(1)   Subject to the terms of the allotment, with respect to any Shares which are not fully paid (whether in respect of par value or premium), the Board may from time to time make such calls as it thinks fit upon the Members in respect of any monies unpaid on the Shares allotted to or held by such Members and, if a call is not paid on or before the day appointed for payment thereof, the Member may at the discretion of the Board be liable to pay the Company interest on the amount of such call at such rate as the Board may determine, from the date when such call was payable up to the actual date of payment. The joint holders of any such Share shall be jointly and severally liable to pay all calls in respect thereof. A call may be revoked or postponed as the Directors may determine. A call may be required to be paid by instalments. A person upon whom a call is made shall remain liable for calls made upon him notwithstanding the subsequent Transfer of the Shares in respect of which the call was made.
 
(2)   A call shall be deemed to have been made at the time when the resolution of the Directors authorising such call was passed.
 
(3)   An amount payable in respect of a Share on allotment or at any fixed date, whether on account of the par value of the Share or premium or otherwise, shall be deemed to be a call and if it is not paid all the provisions of these Articles shall apply as if that amount had become due and payable by virtue of a call.
 
(4)   The Directors may issue Shares with different terms as to the amount and times of payment of calls, or the interest to be paid.
 
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(5)   The Directors may, if they think fit, receive an amount from any Member willing to advance all or any part of the monies uncalled and unpaid upon any Shares held by him, and may (until the amount would otherwise become payable) pay interest at such rate as may be agreed upon between the Directors and the Member paying such amount in advance.
 
(6)   No such amount paid in advance of calls shall entitle the Member paying such amount to any portion of a Dividend declared in respect of any period prior to the date upon which such amount would, but for such payment, become payable.
 
61.
Forfeiture of Shares
 
(1)   If any Member fails to pay, on the day appointed for payment thereof, any call in respect of any Share allotted to or held by such Member, the Board may, at any time thereafter during such time as the call remains unpaid, direct the Secretary to forward to such Member a notice in the form, or as near thereto as circumstances admit, of Form “A” in the Schedule hereto.
 
(2)   If the requirements of such notice are not complied with, any such Share may at any time thereafter before the payment of such call and the interest due in respect thereof be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all Dividends or other monies declared payable in respect of the forfeited Share and not paid before the forfeiture.
 
(3)   A forfeited Share may be sold, re-allotted or otherwise disposed of on such terms and in such manner as the Board thinks fit and at any time before a sale, re-allotment or disposition the forfeiture may be cancelled on such terms as the Board thinks fit. Where for the purposes of its disposal a forfeited Share is to be transferred to any person the Board may authorise some person to execute an instrument of transfer of the Share in favour of that person.
 
(4)   A person any of whose Shares have been forfeited shall cease to be a Member in respect of them and shall surrender to the Company for cancellation the certificate for the Shares forfeited and shall remain liable to pay to the Company all monies which at the date of forfeiture were payable by him to the Company in respect of those Shares together with interest, but his liability shall cease if and when the Company shall have received payment in full of all monies due and payable by him in respect of those Shares.
 
(5)   A certificate in writing under the hand of one Director or officer of the Company that a Share has been forfeited on a specified date shall be conclusive evidence of the fact as against all persons claiming to be entitled to the Share. The certificate shall (subject to the execution of an instrument of transfer) constitute a good title to the Share and the person to whom the Share is disposed of shall not be bound to see to the application of the purchase money, if any, nor shall his title to the Share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the Share.
 
(6)   The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a Share, becomes payable at a fixed time, whether on account of the par value of the Share or by way of premium as if it had been payable by virtue of a call duly made and notified.
 
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REGISTER OF MEMBERS
 
62.
Contents of Register of Members
 
The Board shall maintain or cause to maintain the Register of Members in accordance with Statute and in particular shall enter therein the following particulars:
 
(1)   the name and address of each Member, the number and, where appropriate, the class of Shares held by such Member;
 
(2)   the date on which each person was entered in the Register of Members; and
 
(3)   the date on which any person ceased to be a Member.
 
63.
Determination of record dates
 
Notwithstanding any other provision of these Articles, the Board may fix any date as the record date for:
 
(1)   determining the Members entitled to receive any Dividend;
 
(2)   determining the Members entitled to receive notice of and to vote at any general meeting of the Company (and the Board may determine a different record date for any adjournment or postponement thereof);
 
(3)   determining the Members entitled to execute a resolution in writing; and
 
(4)   determining the number of issued and outstanding Shares for or in connection with any purpose.
 
(5)   If the Register of Members is not so closed and no record date is fixed for the determination of Members entitled to notice of, or to vote at, a meeting of Members or Members entitled to receive payment of a Dividend, the date on which notice of the meeting is sent or the date on which the resolution of the Board declaring such Dividend is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this Article, such determination shall apply to any adjournment thereof.
 
TRANSFER OF SHARES
 
64.
Instrument of transfer
 
(1)   An instrument of transfer shall be in the form or as near thereto as circumstances admit of Form “B” in the Schedule hereto or in such other common form as the Board may accept. Such instrument of transfer shall be signed by or on behalf of the transferor and   transferee provided that, in the case of a fully paid Share, the Board may accept the instrument signed by or on behalf of the transferor alone. The transferor shall be deemed to remain the   holder of such Share until the same has been transferred to the transferee in the Register of Members.
 
(2)   Shares are freely transferable. However, if a lien exists on the Shares or if, according to the Board’s judgment, such Transfer would result in an increased risk of adverse tax, regulatory or legal consequences to the Company, a Subsidiary of the Company, or a Member of the Company, the Board may refuse to register a Transfer of Shares. If the Board refuses to register a Transfer it shall notify the
 
31

transferor and transferee within one month of such refusal. The Board may not refuse to register a transfer of Shares other than as described in this Article 65(3).
 
65.
Restrictions on transfer
 
(1)   Subject to the Statute, this Article 65 and such other of the restrictions contained in these Articles and elsewhere as may be applicable, and except, in the case of any Shares other than the Ordinary Shares, as may otherwise be provided by the terms of the issuance thereof, any Member may sell, assign, Transfer or otherwise dispose of Shares of the Company at the time   owned by it and, upon receipt of a duly executed form of transfer in writing, the Board shall, subject to this Article 65 procure the timely registration of the same.
 
(2)   In the event the Board determines that an ownership limitation described in Article 11(1)(c) has been violated as a result of such transfer, t he Company shall have the option, but not the obligation, to purchase all or any part of the Class A Ordinary Shares, to the extent the Company determines it is necessary or advisable to avoid or cure any adverse or potentially adverse consequences resulting from such transfer. If the Company exercises an option to purchase all or part of the Class A Ordinary Shares held by such Member, the Company shall repurchase the shares at an amount equal to the Fair Market Value of such Class A Ordinary Shares on the date the Company sends the Repurchase Notice.
 
(3)   The Board may, in its absolute and unfettered discretion, decline to register the Transfer of any Shares if the Board has reason to believe (i) that such Transfer may expose the   Company, any Subsidiary thereof, any Member or any Person ceding insurance to the Company (if so licensed) or any such Subsidiary (if so licensed) to adverse tax or regulatory treatment in any jurisdiction or (ii) that registration of such Transfer under the Securities Act or under any “blue sky” or other United States state securities laws or under the laws of any other jurisdiction is required and such registration has not been duly effected (provided, however, that in this case (ii) the Board shall be entitled to request and rely on an opinion of counsel to the transferor or the transferee, in form and substance satisfactory to the Board, that no such approval or consent is required and no such violation would occur, and the Board shall not be obligated to register any Transfer absent the receipt of such an opinion).
 
(4)   The registration of Transfers may be suspended at such time and for such periods as the Board may from time to time determine; provided , however , that such registration shall not be suspended for more than forty-five (45) days in any period of three hundred and sixty five (365) consecutive days.  
 
66.
Transfers by joint holders
 
The joint holders of any Share or Shares may Transfer such Share or Shares to one or more of such joint holders, and the surviving holder or holders of any Share or Shares previously held by them jointly with a deceased Member may Transfer any such Share to the executors or administ rators of such deceased Member.
 
67.
Lien on Shares
 
(1)   The Company shall have a first and paramount lien and charge on all Shares (whether fully paid-up or not or whether subject to a condition or contingency) registered in the name of a Member (whether solely or jointly with others) for all debts, liabilities or engagements to or with the Company (whether presently payable or not or whether subject to a condition or contingency) by such Member or his or her estate, either alone or jointly with any other Person,   whether a Member or not, but the Board may at any time declare any Share to be wholly or in part exempt from the provisions of this Article. The
 
32

registration of a Transfer of any such Share shall operate as a waiver of the Company’s lien (if any) thereon. The Company’s lien (if any) on a Share shall extend to all Dividends or other monies payable in respect thereof.
 
(2)   The Company may sell or purchase, in such manner and on such terms (including price) as the Board think fit, any Shares on which the Company has a lien, but no sale or purchase shall be made unless a sum in respect of which the lien exists is then presently payable, nor until the expiration of fourteen days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the relevant Member, or the Person, of which the Company has notice, entitled thereto by reason of such Member’s death or bankruptcy. Effective   upon such sale or purchase, any certificate representing such Shares prior to such sale shall become null and void, whether or not it was actually delivered to the Company.
 
(3)   To give effect to any such sale the Board may authorise any Person to Transfer the Shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the Shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his or her title to the Shares be affected by any irregularity or invalidity in the proceedings in reference to the Company’s power of sale under these Articles.
 
(4)   The proceeds of such sale or purchase shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the Shares before the sale) be paid to the relevant Member or the Person entitled to the Shares at the date of the sale.
 
TRANSMISSION OF SHARES
 
68.
Representative of deceased Member
 
In the case of the death of a Member, the survivor or survivors where the deceased Member was a joint holder, and the legal personal representatives of the deceased Member where the deceased Member was a sole holder, shall be the only persons recognised by the Company as having any title to the deceased Member’s interest in the Shares held by that deceased Member. Nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any Share which had been jointly held by such deceased Member with other persons. For the purpose of this Article, legal personal representative means the executor or administrator of a deceased Member or such other person as the Board may in its absolute discretion decide as being properly authorised to deal with the Shares of a deceased Member.
 
69.
Registration on death or bankruptcy
 
(1)   Any person becoming entitled to a Share in consequence of the death or bankruptcy of any Member may be registered as a Member upon such evidence as the Board may deem sufficient or may elect to nominate some person to be registered as a transferee of such Share, and in such case the person becoming entitled shall execute in favour of such nominee an instrument of Transfer in the form, or as near thereto as circumstances admit, of Form “C” in the Schedule hereto. On the presentation thereof to the Board, accompanied by such evidence as the Board may require to prove the title of the transferor, the transferee shall be registered as a Member but the Board shall, in either case, have the same right to decline or suspend registration as it would have had in the case of a Transfer of the Share by that Member before such Member’s death or bankruptcy, as the case may be.
 
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(2)   If the person so becoming entitled shall elect to be registered himself as holder he shall deliver or send to the Company a notice in writing signed by him stating that he so elects.
 
(3)   A person becoming entitled to a Share by reason of the death or bankruptcy or liquidation or dissolution of the holder (or in any other case than by transfer) shall be entitled to the same Dividends and other advantages to which he would be entitled if he were the registered holder of the Share. However, he shall not, before being registered as a Member in respect of the Share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company and the Board may at any time give notice requiring any such person to elect either to be registered himself or to Transfer the Share. If the notice is not complied with within ninety days the Board may thereafter withhold payment of all Dividends, bonuses or other monies payable in respect of the Share until the requirements of the notice have been complied with.
 
DIVIDENDS AND OTHER DISTRIBUTIONS
 
70.
Declaration of Dividends by the Board
 
The Board may, subject to any rights or restrictions at the time lawfully attached to any class or series of Shares and subject to these Articles and in accordance with the Statute, declare Dividends and distributions on Shares in issue and authorise payment of the Dividends or distributions out of the funds of the Company lawfully available therefor. No Dividend or distribution shall be paid except out of the realised or unrealised profits of the Company, or out of the share premium account or as otherwise permitted by the Statute.
 
71.
Deduction of amounts due to the Company
 
(1)   The Board may deduct from the Dividends or distributions payable to any Member all sums of money due (if any) from such Member to the Company on account of calls or otherwise.
 
(2)   Except as otherwise provided by the rights attached to Shares, all Dividends shall be declared and paid according to the par value of the Shares that a Member holds. If any Share is issued on terms providing that it shall rank for Dividend as from a particular date, that Share shall rank for Dividend accordingly.
 
(3)   The Board may declare that any Dividend or distribution be paid wholly or partly by the distribution of specific assets and in particular of Shares, debentures, or securities of any other company or in any one or more of such ways and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may issue fractional Shares and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the basis of the value so fixed in order to adjust the rights of all Members and may vest any such specific assets in trustees as may seem expedient to the Directors.
 
(4)   Any Dividend, distribution, interest or other monies payable in cash in respect of Shares may be paid by wire transfer to the holder or by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the registered address of the holder who is first named on the Register of Members or to such person and to such address as such holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. Any one of two or more joint holders may give effectual receipts for any Dividends, bonuses, or other monies payable in respect of the Share held by them as joint holders.
 
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72.
Unclaimed Dividends
 
Any Dividend which cannot be paid to a Member and/or which remains unclaimed after six months from the date of declaration of such Dividend may, in the discretion of the Board, be paid into a separate account in the Company’s name, provided that the Company shall not be constituted as a trustee in respect of that account and the Dividend shall remain as a debt due to the Member. Any Dividend which remains unclaimed after a period of six years from the date of declaration of such Dividend shall be forfeited and shall revert to the Company.
 
73.
Interest on Dividends
 
No Dividend or distribution shall bear interest against the Company.
 
CAPITALISATION
 
74.
Issue of Dividend Shares
 
The Board may capitalise any sum standing to the credit of any of the Company’s reserve accounts (including share premium account and capital redemption reserve fund) or any sums standing to the credit of the profit and loss account or otherwise available for distribution and to appropriate such sum to Members in the proportions in which such sum would have been divisible amongst them had the same been a distribution of profits by way of Dividend and to apply such sum on their behalf in paying up in full unissued Shares for allotment and distribution credited as fully paid-up to and amongst them in the proportion aforesaid. In such event the Directors shall do all acts and things required to give effect to such capitalisation, with full power to the Directors to make such provisions as they think fit for the case of Shares becoming distributable in fractions (including provisions whereby the benefit of fractional entitlements accrue to the Company rather than to the Members concerned). The Directors may authorise any person to enter on behalf of all of the Members interested into an agreement with the Company providing for such capitalisation and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned.
 
ACCOUNTS AND FINANCIAL STATEMENTS
 
75.
Records of account
 
The Board shall cause to be kept proper records of account with respect to all transactions of the Company and in particular with respect to:
 
(1)   all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure relates;
 
(2)   all sales and purchases of goods by the Company; and
 
(3)   the assets and liabilities of the Company.
 
Proper books shall not be deemed to be kept if there are not kept such books of account as are necessary to give a true and fair view of the state of the Company’s affairs and to explain its transactions.
 
Such records of account shall, subject to Statute, be kept at such place as the Board thinks fit and shall be available for inspection by the Directors during normal business hours. No Member in its
 
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capacity as a Member shall have any right to inspect any accounting record or book or document of the Company except as conferred by the Statute or as authorised by the Board.
 
76.
Financial year end
 
The financial year end of the Company may be determined by the Board and failing such resolution shall be 31st December in each year.
 
77.
Financial statements
 
The Directors may from time to time cause to be prepared and to be laid before the Company in general meeting profit and loss accounts, balance sheets, group accounts (if any) and such other reports and accounts as may be required by law.
 
AUDIT
 
78.
Appointment and remuneration of Auditor
 
  The Directors may appoint an Auditor of the Company who shall hold office until removed from office by a resolution of the Directors, and may fix his or their remuneration. Any Auditor appointed by the Members shall, prior to such appointment, have been appointed by the Audit Committee. Such Auditor may be a Member but no Director, Officer or employee of the Company shall, during his or her continuance in office, be eligible to act as an Auditor of the Company.
 
79.
[Reserved] 
 
80.
Access to books of the Company
 
The Auditor shall at all reasonable times have access to all books kept by the Company and to all accounts and vouchers relating thereto, and the Auditor may call on the Directors or Officers of the Company for any information and explanation as may be necessary relating to the books or affairs of the Company for the performance of the duties of the Auditor.
 
81.
Report of the Auditor
 
(1)   Auditors shall, if so required by the Directors, make a report on the accounts of the Company during their tenure of office at the next annual general meeting following their appointment in the case of a company which is registered with the Registrar of Companies as an ordinary company, and at the next extraordinary general meeting following their appointment in the case of a company which is registered with the Registrar of Companies as an exempted company, and at any other time during their term of office, upon request of the Directors or any general meeting of the Members.
 
(2)   The financial statements provided for by these Articles shall be prepared in accordance with United States GAAP, audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the Auditor shall be submitted to the Members in general meeting.
 
(3)   The generally accepted auditing standards referred to in subparagraph (2) of this Article may be those of a country or jurisdiction other than the Cayman Islands, which shall be disclosed in the financial statements and the report of the Auditor.    
 
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NOTICES
 
82.
Notices to Members of the Company
 
(1)   A notice may be given by the Company to any Member either by delivering it to such Member in person or by sending it to such Member’s address in the Register of Members or to such other address given for the purpose. For the purposes of this Article, a notice may be sent by post, courier service, facsimile, electronic mail or other mode of representing words in a legible and non-transitory form. If such notice is sent by next-day courier, facsimile or electronic-mail, it shall be deemed to have been given the Business Day following the sending thereof and, if by registered post, three Business Days following the sending thereof.
 
(2)   A notice may be given by the Company to the person or persons which the Company has been advised are entitled to a Share or Shares in consequence of the death or bankruptcy of a Member in the same manner as other notices which are required to be given under these Articles and shall be addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description at the address supplied for that purpose by the persons claiming to be so entitled, or at the option of the Company by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred.
 
(3)   Notice of every general meeting shall be given in any manner hereinbefore authorised to every person shown as a Member in the Register of Members on the record date for such meeting except that in the case of joint holders the notice shall be sufficient if given to the joint holder first named in the Register of Members and every person upon whom the ownership of a Share devolves by reason of his being a legal personal representative or a trustee in bankruptcy of a Member of record where the Member of record but for his death or bankruptcy would be entitled to receive notice of the meeting, and no other person shall be entitled to receive notices of general meetings.
 
83.
Service and delivery of notice
 
Subject to Statute and Article 82, any notice shall be deemed to have been served at the time when the same would be delivered in the ordinary course of transmission and, in proving such service, it shall be sufficient to prove that the notice was properly addressed and prepaid, if posted, and the time when it was posted, delivered to the courier or transmitted by facsimile or other method as the case may be.
 
84.
Seal of the Company
 
(1)   The Company may, if the Board so determines, have a seal. The seal shall only be used by the authority of the Directors or of a committee of the Directors authorised by the Directors. Every instrument to which the seal has been affixed shall be signed by at least one person who shall be either a Director or some officer or other person appointed by the Directors for the purpose.
 
(2)   The Company may have for use in any place or places outside the Cayman Islands a duplicate seal or seals each of which shall be a facsimile of the common seal of the Company and, if the Directors so determine, with the addition on its face of the name of every place where it is to be used.
 
(3)   A Director or officer, representative or attorney of the Company may without further authority of the Directors affix the seal over his signature alone to any document of the Company required to be authenticated by him under seal or to be filed with the Registrar of Companies in the Cayman Islands or elsewhere wheresoever.
 
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BENEFITS, PENSIONS AND INSURANCE
 
85.
Benefits
 
The Board may (by establishment of or maintenance of schemes or otherwise) provide benefits, whether by share options or incentive plans and loans to acquire Shares, the payment of gratuities or pensions or by insurance or otherwise, for any past or present Director, Officer or employee of the Company or any of its Subsidiaries or Affiliates and for any member of his or her family (including a spouse and a former spouse) or any individual who is or was dependent on him or her, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such benefit.
 
86.
Insurance
 
Without prejudice to the provisions of Article 33, the Board shall have the power to purchase and maintain insurance for or for the benefit of any individuals who are or were at any time Directors, Officers or employees of the Company, or of any of its Subsidiaries or Affiliates, or who are or were at any time trustees of any pension fund in which Directors, Officers or employees of the Company or any such Subsidiary or Affiliate are interested, including (without prejudice to the generality of the foregoing) insurance against any liability incurred by such individuals in respect of any act or omission in the actual or purported execution or discharge of their duties or in the exercise or purported exercise of their powers or otherwise in relation to their duties, powers or offices in relation to the Company or any such Subsidiary, Affiliate or pension fund.
 
87.
Limitation on accountability
 
No Director or former Director shall be accountable to the Company or the Members for any remuneration or benefit provided pursuant to Articles 22(2), 85 or 86 and the receipt of any such benefit shall not disqualify any individual from being or becoming a Director of the Company.
 
 
UNTRACED MEMBERS
 
88.
Sale of Shares
 
The Company shall be entitled to sell at the best price reasonably obtainable, or if the Shares are listed on a stock exchange to purchase at the trading price on the date of purchase, the Shares of a Member or the Shares to which a Person is entitled by virtue of transmission on death, bankruptcy or otherwise by operation of law; provided, that:
 
(1)   during the period of 12 years prior to the date of the publication of the advertisements referred to in paragraph (2) of this Article 88 (or, if published on different dates, the first thereof) at least three Dividends in respect of the Shares in question have been declared and all Dividends, warrants and checks (cheques) that have been sent in the manner authorised by these Articles in respect of the Shares in question have remained uncashed;
 
(2)   the Company shall as soon as practicable after expiry of the said period of 12 years have inserted advertisements both in a national daily newspaper and in a newspaper circulating in the area of the last known address of such Member or other Person giving notice of its intention to sell or purchase the Shares;
 
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(3)   during the said period of 12 years and the period of three months following the publication of the said advertisements the Company shall have received no indication either of the whereabouts or of the existence of such Member or Person; and
 
(4)   if the Shares are listed on a stock exchange, notice shall have been given to the relevant department of such stock exchange of the Company’s intention to make such purchase prior to the publication of advertisements.
 
If during any 12-year period referred to above, further Shares have been issued in right of those held at the beginning of such period or of any previously issued during such period and all the other requirements of this Article 88 (other than the requirement that they be in issue for 12 years) have been satisfied in regard to the further Shares, the Company may also sell or purchase the further Shares.
 
89.
Instrument of Transfer
 
To give effect to any such sale or purchase under Article 88, the Board may authorise some person to execute an instrument of transfer of the Shares sold or purchased to, or in accordance with the directions of, the purchaser and an instrument of transfer executed by that person shall be as effective as if it had been executed by the holder of, or person entitled by transmission to, the Shares. The transferee of any Shares sold shall not be bound to see to the application of the purchase money, nor shall his title to the Shares be affected by any irregularity in, or invalidity of, the proceedings relating to the sale.
 
90.
Proceeds of Sale
 
The net proceeds of sale or purchase of Shares pursuant to Article 88 shall belong to the Company which, for the period of six years after the Transfer or purchase, shall be obliged to account to the former Member or other Person previously entitled as aforesaid for an amount equal to such proceeds and shall enter the name of such former Member or other Person in the books of the Company as a creditor for such amount. No trust shall be created in respect of the debt, no interest shall be payable in respect of the same and the Company shall not be required to account for any money earned on the net proceeds, which may be employed in the business of the Company or invested in such investments as the Board from time to time thinks fit. After the said six-year period has passed, the net proceeds of Share shall become the property of the Company, absolutely, and any rights of the former Member or other Person previously entitled as aforesaid shall terminate completely.
 
WINDING UP
 
91.
Determination to liquidate
 
Subject to the Statute, the Company may be wound up voluntarily by its Members. If the Company shall be wound up, and the assets available for distribution amongst the Members shall be insufficient to repay the whole of the share capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the Members in proportion to the par value of the Shares held by them. If in a winding up the assets available for distribution amongst the Members shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst the Members in proportion to the par value of the Shares held by them at the commencement of the winding up subject to a deduction from those Shares in respect of which there are monies due, of all monies payable to the Company for unpaid calls or otherwise. This Article is without prejudice to the rights of the holders of Shares issued upon special terms and conditions.  
 
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92.
Winding up/distribution by liquidator
 
If the Company shall be wound up the liquidator may, with the sanction of a Special Resolution of the Members and any other sanction required by Statute, divide amongst the Members or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he or she deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Members as the liquidator, with the like sanction, shall think fit, but so that no Member shall be compelled to accept any Shares or other securities or assets whereon there is any liability.
 
AMENDMENTS OF MEMORANDUM AND ARTICLES OF ASSOCIATION AND ALTERATION OF CAPITAL
 
93.
The Company may by Ordinary Resolution:
 
(1)   increase the share capital by such sum as the resolution shall prescribe and with such rights, priorities and privileges annexed thereto, as the Company in general meeting may determine;
 
(2)   consolidate and divide all or any of its share capital into Shares of larger amount than its existing Shares;
 
(3)   by subdivision of its existing Shares or any of them divide the whole or any part of its Share capital into Shares of smaller amount than is fixed by the Memorandum or into Shares without par value; and
 
(4)   cancel any Shares that at the date of the passing of the resolution have not been taken or agreed to be taken by any person.
 
All new Shares created in accordance with the provisions of the preceding Article shall be subject to the same provisions of the Articles with reference to the payment of calls, liens, Transfer, transmission, forfeiture and otherwise as the Shares in the original share capital.  
 
94.
Subject to the provisions of the Statute and the provisions of these Articles as regards the matters to be dealt with by Ordinary Resolution, the Company may by Special Resolution:
 
(1)   change its name;
 
(2)   alter or add to these Articles;
 
(3)   alter or add to the Memorandum with respect to any objects, powers or other matters specified therein; and
 
(4)   reduce its share capital and any capital redemption reserve fund.
 
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REGISTERED OFFICE FOR THE TIME BEING OF THE COMPANY
 
95.
Subject to the provisions of the Statute, the Company may by resolution of the Directors change the location of the registered office for the time being of the Company.
 
CERTAIN SUBSIDIARIES
 
96.
Voting of subsidiary shares
 
Notwithstanding any other provision of these Articles to the contrary, if the Company is required or entitled to vote at general meetings of (i) Greenlight Reinsurance or (ii) any Designated Subsidiary (as defined in Article 97), the Directors shall refer the subject matter of the vote to the Members on a poll and seek authority from the Members to have the Company’s corporate representative or proxy vote in favour of the resolution proposed by Greenlight Reinsurance and/or such Designated Subsidiary. The Directors shall cause the Company’s corporate representative or proxy to vote the Company’s shares in Greenlight Reinsurance and/or such Designated Subsidiary pro rata to the votes received at the general meeting of the Company, with votes for or against the directing resolution being taken, respectively, as an instruction for the Company’s corporate representative or proxy to vote the appropriate proportion of its shares for and the appropriate proportion of its shares against the resolution proposed by Greenlight Reinsurance and/or such Designated Subsidiary. All votes referred to the Company’s Members pursuant to this Article 96 shall be subject to the voting power restrictions of Articles 12(3), 43(3), and 54 (and the additional restrictions and rights of the Class B Ordinary Shares set forth in Schedule A hereto).
 
97.
Articles or Articles of Association of certain subsidiaries
 
The Board shall require that the Articles of Association of Greenlight Reinsurance and may require that the Articles or Articles of Association of each other direct or indirect Subsidiary of the Company organized under the laws of a jurisdiction outside the United States that is treated as a corporation for U.S. federal tax purposes and designated by the Board, contain provisions substantially similar to Article 96, herein (any such Subsidiary so designated by the Board is referred to herein as a “Designated Subsidiary”). If the Board designates any indirect Subsidiary of the Company as a Designated Subsidiary, the Board shall also designate each intermediate Subsidiary between such Designated Subsidiary and the Company (other than Greenlight Reinsurance) as a Designated Subsidiary hereunder. The Company in its discretion may enter into agreements with each Designated Subsidiary, as reasonably necessary, to effect or implement this Article.
 
TRANSFER BY WAY OF CONTINUATION
 
98.
Continuation
 
If the Company is exempted as defined in the Statute, it shall, subject to the provisions of the Statute and with the approval of a Special Resolution, have the power to register by way of continuation as a body corporate under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.
 
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SCHEDULE - FORM A (ARTICLE 61)
 
NOTICE OF LIABILITY TO FORFEITURE FOR NON PAYMENT OF CALL

You have failed to pay the call of [amount of call] made on the ...... day of ........, 2004, in respect of the number Share(s) [numbers in figures] standing in your name in the Register of Members of the Company, on the ...... day of ........., 2004 the day appointed for payment of such call. You are hereby notified that unless you pay such call together with interest thereon at the rate of .......... per annum computed from the said ....... day of ........., 2004, on or before the ....... day of ........., 2004 at the place of business of the Company the Share(s) will be liable to be forfeited.
 
Dated this ....... day of .............., 20...

Signature of Secretary
By order of the Board
 
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SCHEDULE - FORM B (ARTICLE 65)
 
TRANSFER OF A SHARE OR SHARES


FOR VALUE RECEIVED ....................................................................................................................................................................... [amount]
................................................................................................................................................................................................................ [transferor]
hereby sell assign and transfer unto ............................................................................................................................................... [transferee]
of ............................................................................................................................................................................................................... [address]
................................................................................................................................................................................................... [number of Shares]
Shares of ..................................................................................................................................................................................[name of Company]

 
Dated ...................................................
 
 
...................................................
(Transferor)
 
 
In the presence of:
 
 
..............................................................
(Witness)
 
 
.......................................................
(Transferee)
 
 
In the presence of:
 
 
..............................................................
(Witness)
 
 
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SCHEDULE - FORM C (ARTICLE 70)
 
TRANSFER BY A PERSON BECOMING ENTITLED ON DEATH/BANKRUPTCY
OF A MEMBER
 
I/We have become entitled in consequence of the death/bankruptcy of name of the deceased Member to number Share(s) standing in the register of members of Company in the name of the said name of deceased Member instead of being registered myself/ourselves elect to have name of transferee (the “Transferee”) registered as a Transferee of such Share(s) and I/we do hereby accordingly transfer the said Share(s) to the Transferee to hold the same unto the Transferee his or her executors administrators and assigns subject to the conditions on which the same were held at the time of the execution thereof; and the Transferee does hereby agree to take the said Share(s) subject to the same conditions.
 
WITNESS our hands this ........ day of ..........., 20...

Signed by the above-named
)
person or persons entitled
)
in the presence of:
)


Signed by the above-named
)
Transferee
)
in the presence of:
)
 
44


 
SCHEDULE A TO ARTICLES
 
DESIGNATIONS, NUMBER, VOTING POWERS;
PREFERENCES AND RIGHTS OF CLASS B ORDINARY SHARES
 
1.   Designation and Amount .
 
(a)   The Shares of this series shall be designated the Class B Ordinary Shares, par value $0.10 per Share (the “Class B Ordinary Shares”).
 
(b)   The Class B Ordinary Shares shall only be held by David Einhorn and his Permitted Transferees.
 
2.   General .
 
Except as provided in items 3 and 4 below, each Class B Ordinary Share shall be entitled to the same rights, and be subject to the same restrictions, as the Class A Ordinary Shares as set forth in these Articles.
 
3.   Voting .
 
(a)   Generally, each holder of Class B Ordinary Share is entitled to ten (10) votes per Class B Ordinary Share. However, in the event that the aggregate number of votes conferred by all of the issued and outstanding Class B Ordinary Shares, voting as a class, exceeds 9.5% of the Total Voting Power, then the Total Voting Power of the class shall be reduced to 9.5% of the Total Voting Power. The voting power of any Class A Ordinary Shares held by any holder of Class B Ordinary Shares (whether directly, or indirectly or constructively under applicable attribution and constructive ownership rules contained in the Code) shall be included for purposes of measuring Total Voting Power in the immediately preceding sentence, except, and only to the extent, the right to vote such Class A Ordinary Shares has been limited pursuant to the Articles.
 
In addition to the limitation in the immediately preceding sentence, the restrictions on the voting power of Class B Ordinary Shares contained in Articles 12(3) and 54 shall apply to holders of Class B Ordinary Shares.
 
(b)   the voting rights attached to any Class B Ordinary Shares which are determined by the Board to represent in excess of 9.5% of the Total Voting Power, whether pursuant to Schedule A Section 3(a) or Article 12(3), shall be allocated for voting purposes to all the other Members of the Company pro rata according to their percentage interest in the Company; provided however, that no other Member shall be allocated voting rights pursuant to this sentence if doing so would (i) render such other Member a 9.9% Member or (ii) cause the holders of Class B Ordinary Shares, as a class, to hold more than 9.5% of the Total Voting Power as a result of applicable attribution and constructive ownership rules contained in the Code.
 
4.   Requirement to Provide Information and Notice .
 
(a)   The Board shall have the authority to request from any Member holding Class B Ordinary Shares, and such Member shall provide, such information as the Board may request for the purpose of determining whether any Member’s voting rights are to be adjusted. If such Member fails to respond to such a request, or submits incomplete or inaccurate information in response to such a request,
 
45

the Board may in its sole and absolute discretion determine that such Member’s Class B Ordinary Shares shall carry no voting rights in which case such Class B Ordinary Shares shall not carry any voting rights until otherwise determined by the Board in its sole and absolute discretion.
 
(b)   Notwithstanding the foregoing, no Member shall be liable to any other Member or the Company for any losses or damages resulting from such Member’s failure to respond to, or submission of incomplete or inaccurate information in response to, a request under paragraph (4)(a).
 
(c)   The Company may, but shall have no obligation to provide notice to any Member of any adjustment to its voting power.
 
(d)   One of the purposes of the voting limitation set forth in this Schedule A is to seek to reduce the likelihood that there would be adverse tax consequences to U.S. Persons if the Company were to be characterized as a controlled foreign corporation as defined in the Code. Nevertheless, the Board will not be liable to the Company, its Members or any other Person whatsoever for any errors in judgment made by its interpreting or enforcing this paragraph or in granting any waiver or waivers to the foregoing restrictions in any case so long as the Board shall have acted in good faith.
 
5.   Conversion

(a)   Following a sale, transfer, exchange or other disposition of any Class B Ordinary Shares by a holder thereof to a purchaser or other transferee, the Class B Ordinary Shares shall immediately and automatically convert into an equal number of Class A Ordinary Shares on a one-for-one basis, by way of redemption and reissue, except for those transfers to a Permitted Transferee, or unless such transfer is unanimously approved by the Board of Directors. Any Class B Ordinary Shares converted to Class A Ordinary Shares pursuant to the immediately preceding sentence shall be subject to the restrictions on voting contained in Articles 12(3) and 54.
 
(b)   The Company shall at all times reserve and keep available out of its authorized but unissued Class A Ordinary Shares, solely for the purpose of effecting the conversion of the Class B Ordinary Shares, such number of its shares as shall from time to time be sufficient to effect the conversion of all the outstanding Class B Ordinary Shares.
 
(c)   If any Class B Ordinary Shares shall be converted pursuant to this item 5, the Shares so converted shall be retired and returned to the authorized but unissued Class B Ordinary Shares.
 
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EXHIBIT 8.1


[FORM OF OPINION OF AKIN GUMP STRAUSS HAUER & FELD LLP]

[DATE]

Greenlight Capital Re, Ltd.

802 West Bay Road, The Grand Pavilion P.O. Box 31110

Grand Cayman, KY 1-1205

Cayman Islands

Re:  

Registration Statement on Form S-1 of Greenlight Capital Re, Ltd. filed

January 16, 2007 (the “Registration Statement”)

Ladies and Gentlemen:

We have acted as special tax counsel for Greenlight Capital Re, Ltd., a Cayman Islands exempted company (the “Company”) in connection with the transactions described in the Registration Statement (the “Transaction”).

We hereby confirm that the discussion and the legal conclusions set forth in the Registration Statement under the heading “Certain United States Tax Considerations” are accurate and complete in all material respects and constitutes our opinion, which is subject to the assumptions and qualifications set forth therein, as to the material tax consequences of the Transaction.

In rendering this opinion, we do not express any opinion concerning any laws other than the Federal laws of the United States, including without limitation the Internal Revenue Code of 1986, as amended.  Our opinion is based upon the existing provisions of applicable law and the regulations issued or proposed thereunder, published rulings and releases of applicable agencies or other governmental bodies and existing case law, any of which or the effect of any of which could change at any time.  Any such changes may be retroactive in application and could modify the legal conclusions upon which our opinion is based.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption “Certain United States Tax Considerations.”  In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 and the rules and regulations thereunder.  

IRS Circular 230 Notice Requirement.  The tax advice contained in this document is not given in the form of a covered opinion, within the meaning of Circular 230 issued by the United States Secretary of the Treasury.  Thus, we are required to inform you that you cannot rely upon any advice contained in this document for the purpose of avoiding United States federal tax penalties.  The tax advice contained in this document was written to support the promotion or marketing of the transactions or matters described in this document.  Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

Very truly yours,





Exhibit 10.17

[EXECUTION COPY]

SERVICE AGREEMENT

THIS SERVICE AGREEMENT (the ‘‘ Service Agreement ’’), is made this 21 st day of February, 2007 (the ‘‘ Effective Date ’’), by and between GREENLIGHT CAPITAL RE, LTD. (‘‘ Greenlight Re ’’), and DME ADVISORS, LP (the ‘‘ Service Provider ’’).

RECITALS :

A.    Greenlight Re desires to employ an investor relations manager to assist it in communicating with analysts and shareholders.

B.    Greenlight Re desires to contract with Service Provider for investor relations services.

AGREEMENT :

Now therefore, in consideration of the foregoing premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

Section 1.     Investor Relations Services .

(a)     Performance of IR Services.     Subject to all the terms and conditions of this Agreement, the Service Provider, as requested and at the direction of the Chief Executive Officer and/or the Chief Financial Officer of Greenlight Re, shall, during the Term (as defined below), provide, or cause to be provided, the investor relation services described in Schedule A attached hereto, and such additional services pursuant this Agreement as may mutually be agreed in writing by the Service Provider and Greenlight Re (collectively, all such services being the ‘‘ IR Services ’’).

(b)     Limitations .    In performing the IR Services under this Agreement, the Service Provider shall comply with all applicable corporate, securities and other statutes, laws, rules, regulations and orders, including those of any applicable securities exchange, and in particular, the Service Provider shall not (i) conduct any meetings with third party financial analysts about Greenlight Re or its business without informing Greenlight Re in advance of the proposed meeting and the format or agenda of such meeting, and (ii) after receiving written notice from Greenlight Re that Greenlight Re has filed materials with the Securities and Exchange Commission with respect to a proposed public offering of securities by Greenlight Re, and during the period of restriction on publicity required by applicable law, rule regulation or order in connection with such public offering, the Service Provider shall not engage in any public relations efforts not in the normal course without the prior approval of counsel for Greenlight Re and of counsel to the underwriters in such offering, if any.

Section 2.     Term; Termination .

(a)     Term .    Subject to earlier termination as provided in Section 2(b) below, the term of this Agreement (the ‘‘ Term ’’) shall commence on the Effective Date, and shall continue until the first anniversary of the Effective Date; provided , however , that the Term shall automatically be extended for additional one year periods, unless either party provides written notice of non-renewal to the other party at least 30 days prior to the end of the then-expiring term.

(b)     Termination .    Notwithstanding any provision of this Agreement to the contrary, either Greenlight Re or the Service Provider may terminate this Agreement at any time and for any reason upon 30 days prior written notice to the other party.

(c)     Effect of Termination .    Any termination of this Agreement under this Section 2 shall not affect the obligations of (i) Greenlight Re to pay fees and expenses accrued prior to the effective date of such termination to the full extent provided herein, or (ii) the parties to indemnify each other pursuant to Section 6 of this Agreement.



Section 3.     Fees for IR Services; Expenses .

(a)     Service Fee .    In consideration for the IR Services provided by the Service Provider to Greenlight Re pursuant to this Agreement, Greenlight Re shall pay to the Service Provider a monthly fee of $5,000 (the ‘‘ Service Fee ’’). Greenlight Re shall pay the accrued Service Fee to the Service Provider within 10 days after the last day of each calendar quarter during the Term. The amount of the Service Fee payable for the period beginning on the Effective Date and ending on the last day of the first calendar quarter of the year during the Term shall be pro rated. In addition, if the last day of the Term is a day other than the last day of a calendar quarter, then the amount of the Service Fee payable for such period shall be pro rated.

(b)     Reimbursement of Expenses .    During the Term, Greenlight Re will reimburse the Service Provider for all reasonable out-of-pocket expenses incurred by the Service Provider in connection with the performance of the Service Provider’s duties under this Agreement; provided, however, that the Service Provider shall require the prior approval of Greenlight Re before incurring any individual out-of-pocket expense in excess of $1,500. The Service Provider will provide Greenlight Re with invoices for such expenses.

Section 4.     Employees .    The persons assigned by the Service Provider to perform the IR Services pursuant to this Agreement will remain employees of the Service Provider and shall remain subject to the Service Provider’s salary and benefits program; provided , however , that this Agreement shall not require the Service Provider to maintain the employment of any individual. The Service Provider shall cause such employees providing the IR Services to be reasonably available for consultation with directors, officers, and agents of Greenlight Re and other such persons as Greenlight Re may reasonably request upon reasonable prior notice to the Service Provider. Greenlight Re acknowledges and agrees that the Service Provider’s personnel shall be required to devote only so much of their time to the performance of the IR Services pursuant to this Agreement as in the sole judgment of the Service Provider the performance of such IR Services hereunder shall reasonably require.

Section 5.     Standard of Care; Exculpation; Limitation of Liability.

(a)     Standard of Care .    The parties acknowledge and agree that (i) the Service Provider is not in the business of providing any IR Services to third parties, and (ii) the Service Provider will provide the IR Services to Greenlight Re in the same manner and using the same standard of care as the Service Provider’s personnel currently provide such services to its affiliates.

(b)     Exculpation .    Neither the Service Provider, DME Advisors GP, LLC, nor any of their respective directors, officers, employees, members, managers, partners or agents (the ‘‘ Service Provider Covered Persons ’’) shall be liable to Greenlight Re for any action taken or omitted to be taken by the Service Provider or such Service Provider Covered Person in connection with the performance by the Service Provider or such Service Provider Covered Person of its obligations under this Agreement so long as the Service Provider or such Service Provider Covered Person acted in good faith and is not found to be guilty of fraud, gross negligence or willful misconduct with respect thereto.

(c)     Limitation of Liability .    NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN NO EVENT SHALL THE SERVICE PROVIDER OR GREENLIGHT RE BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF ANTICIPATED PROFITS, IN CONNECTION WITH OR ARISING OUT OF THE TRANSACTIONS UNDER OR RELATING TO THIS SERVICE AGREEMENT.

Section 6.     Indemnification; Contribution; Insurance .

(a)     Indemnification by Greenlight Re .    Greenlight Re will indemnify and defend the Service Provider Covered Persons against and hold each Service Provider Covered Person harmless from any and all liabilities, obligations, losses, damages, costs, expenses, claims, judgments and reasonable attorneys’ fees and expenses (collectively, ‘‘ Losses ’’) that the Service Provider Covered Persons may

2



incur or become subject to as a result of, in connection with or arising out of (i) the nonfulfillment or breach of any covenant, undertaking, agreement or other obligation of Greenlight Re in this Agreement, or (ii) the fraud, gross negligence or willful misconduct on the part of Greenlight Re or anyone acting on Greenlight Re’s behalf; provided , however , nothing in this paragraph shall require Greenlight Re to indemnify the Service Provider Covered Persons for any Loss to the extent that such Loss is caused by the fraud, gross negligence or willful misconduct on the part of any Service Provider Covered Person.

(b)     Indemnification by the Service Provider .    The Service Provider will indemnify and defend Greenlight Re and its subsidiaries and their respective directors, officers and employees (the ‘‘ Greenlight Re Covered Persons ’’) against and hold each Greenlight Re Covered Person harmless from any and all Losses that the Greenlight Re Covered Persons may incur or become subject to as a result of, in connection with or arising out of (i) the nonfulfillment or breach of any covenant, undertaking, agreement or other obligation of the Service Provider in this Agreement, or (ii) the fraud, gross negligence or willful misconduct on the part of the Service Provider or anyone acting on the Service Provider’s behalf; provided , however , nothing in this paragraph shall require the Service Provider to indemnify the Greenlight Re Covered Persons for any Loss to the extent that such Loss is caused by the fraud, gross negligence or willful misconduct on the part of any Greenlight Re Covered Person.

(c)     Defense of Actions .    If any party shall receive notice of any claim pursuant to this Agreement or otherwise has actual knowledge of any Losses which such party has determined has given, or is likely to result in, a right of indemnification, the party being indemnified shall give the indemnifying party written notice of any claim, action or Loss to which such indemnity relates; provided , however , that failure to notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have on account of the claim or Loss, except to the extent that the indemnifying party shall have been materially prejudiced by such failure. The indemnifying party shall be entitled to assume control of the defense or settlement of such matter. If the indemnifying party elects to assume such control, the party being indemnified and its counsel shall be entitled to consult with the indemnifying party and its counsel and participate in the defense or settlement of such matter at its own cost; provided, however, that the indemnifying party shall bear the costs and expenses of the indemnified party’s counsel (from one law firm) if, in the reasonable opinion of counsel mutually acceptable to the parties hereto, use of such indemnified party’s counsel is necessary as a result of a conflict of interest between Greenlight Re and the Service Provider. In any event, the indemnifying party shall indicate in writing to the party being indemnified within 10 calendar days after the party being indemnified has given the indemnifying party written notice whether the indemnifying party intends to pay the claim or assume control of the defense or settlement of such matter.

In the event the indemnifying party exercises its right to assume control of the defense, the indemnified party shall reasonably cooperate with the indemnifying party in such defense and make available to the indemnifying party witnesses, pertinent records, materials and information in its possession or under its control relating thereto as are reasonably requested by the indemnifying party. No claim may be settled by the indemnifying party without the written consent of the indemnified party, which consent shall not be unreasonably withheld or delayed; provided , however , that the indemnifying party may settle such claim without the consent of the indemnified party so long as the settlement (x) includes an unconditional release of the indemnified party, in form and substance reasonably satisfactory to the indemnified party, from the claimant, (y) does not impose any liabilities or obligations on the indemnified party, and (z) with respect to any non-monetary provision of any settlement of a claim does not impose any conditions upon the indemnified party.

(d)     No Special Damages .    All indemnification obligations set forth in this Section 6 will exclude incidental, consequential, indirect, punitive or exemplary Losses or lost profits.

(e)     Reduction for Insurance .    The amount which the Service Provider or Greenlight Re is required to pay to, or for the benefit, of an indemnified person under this Section 6 will be reduced (including, without limitation, retroactively) by any insurance proceeds which may reasonably be recovered by or on behalf of the indemnified party in reduction of the related Loss.

3



(f)     Contribution .    If the indemnification provided for in this Section 6 is prohibited under applicable law to a Service Provider Covered Person or a Greenlight Re Covered Person then the indemnitor, in lieu of indemnifying the indemnitee, will contribute to the amount paid or payable by the indemnitee as a result of the Losses in such proportion as is appropriate to reflect the relative fault of the indemnitor, on the one hand, and of the indemnitee, on the other, in connection with the events or circumstances which resulted in the Losses as well as any other relevant equitable considerations. The relative fault of the indemnitor, on the one hand, and of the indemnitee, on the other, will be determined by reference to, among other things, such persons’ relative intent, knowledge, access to information and opportunity to correct or prevent the events or circumstances resulting in the Losses.

(g)     Sole and Exclusive Remedy .    The provisions of this Section 6 shall be the sole and exclusive remedy for all Losses arising out of or resulting from the breach of any covenant, undertaking, agreement or other obligation made pursuant this Agreement, absent fraud or intentional misrepresentation.

Section 7.    [Intentionally Omitted]

Section 8.     Limitations on Services .    The Service Provider shall not be responsible for failure to provide any IR Services hereunder caused by fire or other casualty suffered, or strike, war, insurrection, or act of government (each such cause or contingency being termed herein a ‘‘force majeure’’), provided that the Service Provider shall give prompt (under the circumstances) notice of such force majeure to Greenlight Re and uses its reasonable efforts to alleviate such force majeure as expeditiously as practicable. In the event the Service Provider fails, other than by reason of force majeure, to provide any required services hereunder in a timely manner and Greenlight Re requires such services, Greenlight Re may obtain such services from third parties, to the extent available, at Greenlight Re’s own expense, on an ad   hoc basis, provided that the services so obtained must not adversely affect the operations of the Service Provider, and, provided   further , that Greenlight Re shall not be responsible for any Service Fees hereunder for such services provided by third parties.

Section 9.     Arbitration .

(a)     General .    Any action, suit or proceeding arising relating to this Agreement will be settled by arbitration in New York, New York in accordance with the rules of the American Arbitration Association; provided , however , that a party, without prejudice to these procedures may seek a preliminary injunction or order for provisional relief if, in its judgment, such action is deemed necessary to avoid irreparable damages or to preserve the status quo. The costs and expenses of the arbitration, including the arbitrator’s fees and expenses (‘‘ Arbitration Costs ’’), will be borne by the parties as determined by the arbitrator to be fair and reasonable, provided that each party will pay for and bear the cost of its own experts, evidence and counsel. No award of punitive damages may be rendered by the arbitrator in such proceeding.

(b)     Procedures .    Any arbitration hereof will be conducted in accordance with the following procedures:

(i)    Any party (the ‘‘ Requesting Party ’’) demanding arbitration hereunder will give a written notice of such arbitration demand (‘‘ Arbitration Notice ’’) to the other party which Arbitration Notice will describe in reasonable detail the nature of the claim, dispute or controversy and any relief or remedy sought.

(ii)    Within 15 days after the receipt of an Arbitration Notice, the Requesting Party, on the one hand, and the other party (the ‘‘ Responding Party ’’), on the other hand, will mutually select and designate in writing one reputable, independent, disinterested individual (a ‘‘ Qualified Individual ’’) willing to act as an arbitrator of the claim, dispute or controversy in question. In the event that the Requesting Party and the Responding Party are unable to agree on a Qualified Individual within the 15-day period referred to above, then, on the application of either the Requesting Party or the Responding Party, the American Arbitration Association will promptly select and appoint a present or former partner of a reputable accounting or law firm having no affiliation with any of the parties as the Qualified Individual to act as the arbitrator.

4



(iii)    The presentations of the Requesting Party and the Responding Party in the arbitration proceeding will be commenced and completed within 60 days after the selection of the arbitrator pursuant to this clause (b) above, and the arbitrator will render its decision in writing within 30 days after the completion of such presentations.

(c)     Binding Character .    Any decision rendered by the arbitrator pursuant to this Section will be final and binding on the parties thereto, and judgment thereon may be entered by any state or federal court of competent jurisdiction.

Section 10.     Parties in Interest .    This Service Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and assigns of the parties hereto, except as otherwise provided in Section 6 above; provided , however , that neither this Service Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of each other party hereto.

Section 11.     Relationship of the Parties .    The parties are independent contractors. Nothing in this Service Agreement or in the activities contemplated by the parties pursuant to this Service Agreement shall be deemed to create an agency, partnership, employment or joint venture relationship between the parties. Each party shall be deemed to be acting solely on its own behalf and, except as expressly stated, has no authority to pledge the credit of, or incur obligations or perform any acts or make any statements on behalf of, the other party. Neither party shall represent to any person or permit any person to act upon the belief that it has any such authority from the other party. Neither party’s officers or employees, agents or contractors shall be deemed officers, employees, agents or contractors of the other party for any purpose.

Section 12.     Survival .    Sections 5 and 6 shall remain in effect following termination of this Service Agreement and shall not terminate.

Section 13.     Entire Agreement; Amendments .    This Service Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof. This Service Agreement may be amended or modified only by a written instrument duly executed by each of the parties hereto.

Section 14.     Headings .    The section headings contained in this Service Agreement are inserted for reference purposes only and shall not affect in any way the meaning or interpretation of this Service Agreement.

Section 15.     Notices .    All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or mailed (by registered or certified mail, return receipt requested and postage prepaid) to such other address as the party to whom notice is to be given may have furnished to the other parties in writing in accordance herewith. All notices shall be deemed to be delivered when actually received by the other party.

Section 16.     Counterparts .    This Service Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which shall together constitute one and the same agreement.

Section 17.     Waivers .    Any party to this Service Agreement may, by written notice to the other parties hereto, waive any provision of this Service Agreement. The waiver by any party hereto of a breach of any provision of this Service Agreement shall not operate or be construed as a waiver of any subsequent breach.

Section 18.     Further Assurances .    Each party hereto agrees to act reasonably in good faith and to reasonably cooperate with the other party to implement their rights hereunder and to take such further actions as may be reasonably requested by the other party to give effect to the provisions of this Service Agreement.

5



In witness whereof, the parties have caused this Agreement to be executed as of the date and year first written above.

SERVICE PROVIDER :


Address for Notices : DME ADVISORS, LP
c/o Greenlight Capital, Inc.    
140 East 45 th Street, 24 th Floor By: DME Advisors GP, LLC, its General Partnert
New York, New York 10017
Attention: Harry Brandler
Facsimile No.: 212-973-9219 		   
  By:         /s/ Harry Brandler
    Name:    Harry Brandler
Title:    Chief Financial Officer

GREENLIGHT RE :


Address for Notices : GREENLIGHT CAPITAL RE, LTD.
802 West Bay Road
The Grand Pavilion
Grand Cayman, KY 1-1205
Attention:    Leonard Goldberg
            Chief Executive Officer 		   
Facsimile No.: 345-745-4576 By:         /s/ Leonard Goldberg
    Name:    Leonard Goldberg
Title:    Chief Executive Officer

6



Schedule A

Duties and Obligations of the Service Provider

At the request of either the Chief Executive Officer and/or the Chief Financial Officer of Greenlight Re, the Service Provider will perform the following duties:

1.  Provide assistance to Greenlight Re in its initial public offering of Class A Ordinary Shares and any subsequent public offering, including, without limitation, preparation of road show materials and presentations to analysts;
2.  Manage and oversee the implementation of the Greenlight Re directed share program;
3.  Manage and oversee relationships with investment bankers and analysts;
4.  Assist with shareholder communications;
5.  Aid in the preparation for annual meetings;
6.  Manage public relations outsourcing;
7.  Regularly review Greenlight Re’s website structure and content, provide feedback from an investor perspective;
8.  Assist in writing and revising scripts for quarterly analyst calls; and
9.  Arrange speaking engagements, presentations at financial conferences, etc.

7





EXHIBIT 10.18


GREENLIGHT CAPITAL RE, LTD.

SECOND AMENDED AND RESTATED

2004 STOCK INCENTIVE PLAN


1.

Purposes .

(a)

Eligible Award Recipients .  The persons eligible to receive Awards are the Employees, Directors and Consultants of the Company and its Affiliates.  

(b)

Available Awards .  The purpose of the Plan is to provide a means by which eligible Employees, Directors and Consultants may be given an opportunity to benefit from increases in value of the Shares through the granting of the following awards:  (i) stock options, (ii) stock bonuses and (iii) restricted stock (collectively, “Awards”).  The Plan was initially adopted on August 12, 2004, was initially amended and restated effective as of August 15, 2005 and was further amended and restated effective as of February 14, 2007.

(c)

General Purpose .  The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.

2.

Definitions .

(a)

“ Affiliate ” means any subsidiary of the Company or any entity selected by the Board to participate in this Plan.

(b)

“ Agreement ” means a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Award.  Each Award Agreement shall be subject to the terms and conditions of the Plan (and in the event of any inconsistency between the terms of an Agreement and the Plan, the terms of the Plan will override).

(c)

“ Award ” has the meaning set forth in Section 1(b) of the Plan.

(d)

“ Board ” means the board of directors of the Company.

(e)

“ Cause ” means, if the Participant is a party to an employment agreement or other agreement for services with the Company or its Affiliates and such agreement provides for a definition of Cause, the definition therein contained, or, if no such agreement or definition exists, it shall mean a Participant’s (i) material breach of any of such Participant’s covenants or obligations under any applicable employment agreement or agreement for services or non-compete agreement; (ii) continued failure after written notice from the Company or any applicable Affiliate to satisfactorily perform assigned job responsibilities or to follow the reasonable instructions of such Participant’s superiors, including, without limitation, the Board; (iii) commission of a crime constituting a criminal offense or felony (or its equivalent) under the laws of any jurisdiction in which the Company or any applicable Affiliate conducts its business or other crime involving moral turpitude; or (iv) material violation of any material law or



2




regulation (including, without limitation, the Foreign Corrupt Practices Act or any similar non-U.S. statute) or any policy or code of conduct adopted by the Company or engaging in any other form of misconduct which, if it were made public, could reasonably be expected to adversely affect the business reputation or affairs of the Company or of an Affiliate.  The Board or Committee, in good faith, shall determine all matters and questions relating to whether a Participant has been discharged for Cause.  

(f)

“ Change in Control ” means the occurrence of one of the following events:

(i)

any “person” or “group” becomes the “beneficial owner” (as such terms are used in Rule 13d-3 promulgated under the U.S. Securities Exchange Act of 1934, as amended, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 51% or more of the Shares (measured by voting power rather than number of shares); provided , however , that an event described in this paragraph (i) shall not be deemed to be a Change in Control if any of following becomes such a beneficial owner: (A) any tax-qualified, broad-based employee benefit plan sponsored or maintained by the Company or any majority-owned subsidiary, (B) any Company underwriter temporarily holding securities pursuant to an offering of such securities, or (C) any person or group pursuant to a Non-Qualifying Transaction (as defined in paragraph (ii)); or

(ii)

the Company consolidates or merges with or into any other person or group or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets and the assets of the Company’s direct and indirect subsidiaries (on a consolidated basis) to any other person or group, in either one transaction or a series of related transactions which occur within six months, other than a consolidation or merger or disposition of assets: (A) of or by the Company into or to a 100% owned subsidiary of the Company, or (B) pursuant to a transaction in which the outstanding Shares are changed into or exchanged for securities or other property with the effect that the beneficial owners of the outstanding Shares immediately prior to such transaction, beneficially own, directly or indirectly, at least a majority of the Shares (measured by voting power rather than number of shares) of the surviving corporation or the person or group to whom the Company’s assets are transferred immediately following such transaction (any transaction which satisfies the criteria specified in (A) or (B) above shall be deemed to be a “Non-Qualifying Transaction”).

(g)

“ Code ” means the U.S. Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

(h)

“ Committee ” means the Board, unless and until a committee of one or more members of the Board is appointed by the Board in accordance with Section 3(c) of the Plan.

(i)

“ Company ” means Greenlight Capital Re, Ltd., its successors and assigns.

(j)

“ Consultant ” means any person, including an advisor, who is engaged by the Company or an Affiliate to render consulting or advisory services and who is not either an Employee or Director.




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(k)

“ Continuous Service ” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, has not been interrupted or terminated.  The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service.  For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director will not constitute an interruption of Continuous Service.  The Board or the Committee, in its sole discretion, may determine whether Continuous Service shall be considered interrupted.

(l)

“ Covered Employee ” means the chief executive officer and the four (4) other highest compensated officers of the Company for whom total compensation is required to be reported to shareholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.

(m)

“ Director ” means a member of the Board or any member of the board of directors of any Affiliate.

(n)

“ Disability ” means, if the Participant is a party to an employment agreement or other agreement for services with the Company or its Affiliates and such agreement provides for a definition of Disability, the definition therein contained, or, if no such agreement or definition exists, it shall mean the failure of any Participant to perform his or her duties due to physical or mental incapacity as determined by the Committee.

(o)

“ Effective Date ” shall mean August 12, 2004.

(p)

“ Employee ” means any person employed by the Company or an Affiliate.  

(q)

“ Event ” has the meaning set forth in Section 11(a) of the Plan.

(r)

“ Exchange Act ” means the U.S. Securities Exchange Act of 1934, as amended.

(s)

“ Fair Market Value ” per share as of a particular date shall mean the last reported sale price (on the day immediately preceding such date) of the Shares on any national securities exchange or national market system upon which price quotations for the Company’s Shares are regularly available; provided , however , that at any time that the Shares of the Company are not traded on a public exchange, Fair Market Value per share shall mean, as of any date, except as may otherwise be provided in an Award Agreement, the fair market value on such date as determined in good faith by the Board.

(t)

“ Foreign Corrupt Practices Act ” means the U.S. Foreign Corrupt Practices Act.

(u)

“ Initial Public Offering ” means the consummation of the first public offering of the Shares pursuant to a registration statement filed with, and declared effective by, the applicable regulatory and/or governing body.




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(v)

“ Non-Employee Director ” means a Director who serves on the Board and who is a “non-employee director” within the meaning of Rule 16b-3 and who is also an “outside director” within the meaning of Section 162(m) of the Code.

(w)

“ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act.

(x)

“ Option ” means a non-qualified stock option to purchase Shares which is not intended to be an “incentive stock option” within the meaning of Section 422 of the Code.

(y)

“ Option Agreement ” means a written agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant.  Option Agreements shall be subject to the terms and conditions of the Plan and need not be identical (and may include a term to the effect that, in the event of any inconsistency between the terms of an Option Agreement and the Plan, the terms of the Plan will prevail);

(z)

“ Optionee ” means a person holding an Option granted pursuant to the Plan.

(aa)

“ Participant ” means a person holding an Award granted pursuant to the Plan.

(bb)

“ Plan ” means the Greenlight Capital Re, Ltd. Amended and Restated 2004 Stock Incentive Plan.

(cc)

 “ Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

(dd)

“ Sarbanes-Oxley Act of 2002 ” means that certain U.S. federal legislation adopted on July 30, 2002, as amended or supplemented from time to time, or any U.S. federal statute or regulation adopted by the U.S. Securities and Exchange Commission in effect that has replaced, amended or supplemented or will replace, amend or supplement such statute, and any reference in this Plan to a provision of the Sarbanes-Oxley Act of 2002 or a rule or regulation promulgated thereunder or in connection therewith means such provision, rule or regulation as amended or supplemented from time to time or any provision of a federal law, or any federal rule or regulation, from time to time in effect that has replaced such provision, rule or regulation.

(ee)

“ SEC ” means the U.S. Securities and Exchange Commission.

(ff)

“ Securities Act ” means the U.S. Securities Act of 1933, as amended.

(gg)

“ Shares ” means the Class A ordinary shares of the Company, $0.10 par value per share.

3.

Administration .

(a)

Administration .  The Plan shall be administered by the Board and, if and when appointed, the Committee.




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(b)

Powers of Committee .  The Committee shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(i)

To determine from time to time which of the persons eligible under the Plan shall be granted Awards; when and how each Award shall be granted; what type or combination of types of Awards shall be granted; the provisions of each Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Shares pursuant to an Award; and the number of Shares with respect to which an Award shall be granted to each such person.

(ii)

To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for its administration.  The Committee, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective, but it may not do so to the extent that such correction materially prejudices the recipients of any Awards.  The Committee shall expressly have the authority to adopt any modifications, procedures and sub-plans as may be necessary or desirable to comply with provisions of the law of foreign countries in which the Company or its Affiliates may operate to assure the viability of the benefits from Awards granted to Participants employed or providing services in such countries and to meet the objectives of the Plan.  If, in connection with the adoption of a sub-plan of the Plan, approval is required from any applicable agency of any other country or jurisdiction, the Committee shall have the authority to seek such approval and the adoption of the sub-plan shall be conditioned on such approval being obtained.

(iii)

Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan.

(c)

Delegation to Committee .  The entire Board may comprise the Committee or the Board may delegate administration of the Plan to a Committee which, if required under applicable law, shall consist of two (2) or more Non-Employee Directors.  In such event, the term “Committee” shall apply to any person or persons to whom such authority has been delegated.  Furthermore, unless a Committee has been appointed by the Board, any reference to the Committee in the Plan shall mean the Board.  If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board (and references in this Plan to the Board shall thereafter be to the Committee) subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.  The Board may abolish the Committee at any time and re-vest in the Board the administration of the Plan.  The Board may also (A) delegate to a committee of one or more members of the Board who are not “outside directors” within the meaning of Section 162(m) of the Code the authority to grant Awards to eligible persons who are either (1) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Award or (2) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code or (B) delegate to a committee of one or more members of the Board who are not “non-employee directors” within the meaning of Rule 16b-3 the authority to grant Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.




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(d)

Effect of Committee’s Decision .  All determinations, interpretations and constructions made by the Committee in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.  Members of the Committee and any officer or employee of the Company or any Affiliate acting at the direction of the Committee shall (as far as permitted by applicable law) not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified by the Company with respect to any such action or determination.

4.

Shares Subject to the Plan .

Subject to the provisions of Section 11, the total number of Shares that shall be available for the grant of Awards under the Plan shall not exceed in the aggregate 2,000,000 Shares.  If any Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised or realized in full, the Shares not acquired under such Award shall again become available to be made subject to Awards under the Plan.  The Shares subject to the Plan may be authorized but unissued shares or shares reacquired by the Company in any manner.

5.

Eligibility .

(a)

Eligibility for Options .  Options may be granted to Employees, Directors and Consultants.

(b)

Section 162(m) Limitation .  Subject to the provisions of Section 11, no Employee shall be eligible to be granted Options to acquire more than 500,000 Shares during any calendar year.  

(c)

Consultants .

(i)

At any time that the Shares are not publicly traded, a Consultant shall not be eligible for the grant of an Award if, at the time of grant, either the offer or the sale of the Company’s securities to such Consultant is not exempt under Rule 701 of the Securities Act (“ Rule 701 ”) because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by Rule 701, unless the Committee determines that such grant need not comply with the requirements of Rule 701 and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.  

(ii)

At any time that Shares are publicly traded, a Consultant shall not be eligible for the grant of an Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“ Form S-8 ”) is not available to register either the offer or the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (A) that such grant either (1) shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or (2) does not require registration under the




7




Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (B) that such grant complies with the securities laws of all other relevant jurisdictions.

(iii)

Rule 701 and Form S-8 generally are available to Consultants and advisors only if (a) they are natural persons; (b) they provide bona fide services to the issuer, its parent, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer’s parent; and (c) the services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the issuer’s securities.

6.

Option Provisions .

Each Option shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate.  The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:

(a)

Term .  No Option shall be exercisable after the expiration of ten (10) years from the date it was granted.

(b)

Exercise Price of an Option .  The exercise price of each Option shall be established by the Committee but shall be not less than one hundred percent (100%) of the Fair Market Value of the Shares subject to the Option on the date the Option is granted (and not less than the par value of the Shares).

(c)

Consideration .  The purchase price of Shares acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash or cashiers’ check at the time the Option is exercised or (ii) at the discretion of the Committee at the time of the grant of the Option or subsequently (A) by delivery to the Company of other Shares having an aggregate Fair Market Value equal to the exercise price to be satisfied by their delivery or (B) in any other form of legal consideration that may be acceptable to the Committee, including, without limitation, a “cashless” exercise program established with a broker that does not violate the Sarbanes-Oxley Act of 2002.  Unless otherwise specifically provided in the Option, the purchase price of Shares acquired pursuant to an Option that is paid by delivery to the Company of other Shares acquired, directly or indirectly from the Company, shall be paid only by Shares that have been held by the Optionee for more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes).

(d)

Transferability of Options .  An Option shall be transferable to the extent provided in the Option Agreement.  If the Option does not provide for transferability, then the Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionee only by the Optionee.  Notwithstanding the foregoing, the Optionee may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death or incapacity of the Optionee, shall thereafter be entitled to exercise the Option.




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(e)

Vesting .  The total number of Shares subject to an Option may, but need not, vest and become exercisable in periodic installments that may, but need not, be equal.  The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Committee may deem appropriate.  The vesting provisions of individual Options may vary.  The provisions of this Section 6(e) are subject to any Option provisions governing the minimum number of Shares as to which an Option may be exercised.  No Option may be exercised for a fraction of a Share.

(f)

Termination of Continuous Service . Unless otherwise provided in an Option Agreement, in the event an Optionee’s Continuous Service terminates (other than upon the Optionee’s death or Disability), all unvested Options shall terminate and the Optionee may exercise his or her vested Options, but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionee’s Continuous Service, or (ii) the expiration of the term of the Option as set forth in the Option Agreement; provided , that , if the termination of Continuous Service is by the Company for Cause, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable.  If, after termination, the Optionee does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.

(g)

Disability of Optionee .  Unless otherwise provided in an Option Agreement, in the event that an Optionee’s Continuous Service terminates as a result of the Optionee’s Disability, all unvested Options shall terminate and the Optionee (or a person designated to exercise the Option upon the Optionee’s Disability pursuant to Section 6(d)) may exercise his or her vested Options, but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate.

(h)

Death of Optionee .  Unless otherwise provided in an Option Agreement, in the event an Optionee’s Continuous Service terminates as a result of the Optionee’s death, then all unvested Options shall terminate and the vested Options may be exercised by the Optionee’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionee’s death pursuant to Section 6(d), but only within the period ending on the earlier of (i) the date twelve (12) months following the date of death or (ii) the expiration of the term of such Option as set forth in the Option Agreement.  If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.

(i)

Change in Control .  Unless otherwise provided in an Option Agreement and except as otherwise provided in the Plan, a Change in Control shall not effect any Options granted under the Plan.  

7.

Provisions of Awards Other Than Options .

(a)

Stock Bonus Awards .  Each Agreement evidencing a stock bonus shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate.  The terms and conditions of such Agreements may change from time to time, and the terms and




9




conditions of separate Agreements need not be identical, but each such Agreement shall include (through incorporation of provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:  

(i)

Consideration .  A stock bonus may be awarded in consideration for past services actually rendered to the Company or an Affiliate.

(ii)

Vesting .  Shares awarded under the stock bonus Agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Committee.

(iii)

Termination of Participant’s Continuous Service .  In the event a Participant’s Continuous Service terminates, the Company may reacquire, for par value, any or all of the Shares held by the Participant which have not vested as of the date of termination under the terms of the applicable Agreement.

(iv)

Transferability .  Shares under the applicable Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Agreement, as the Committee shall determine in its discretion, so long as the Shares awarded under the Agreement remains subject to the terms of the Agreement.

(b)

Restricted Stock Awards .  Each such Agreement evidencing a grant of restricted Shares shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate.  The terms and conditions of such Agreements may change from time to time, and the terms and conditions of separate Agreements need not be identical, but each such Agreement shall include (through incorporation of provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

(i)

Purchase Price .  The purchase price of Awards of restricted Shares shall be determined by the Committee, which shall in no event be less than the par value per share.

(ii)

Consideration .  The purchase price of Shares acquired pursuant to the applicable Agreement shall be paid either:  (i) in cash at the time of purchase; (ii) at the discretion of the Committee, according to a deferred payment or other similar arrangement with the Participant to the extent it does not violate the Sarbanes-Oxley Act of 2002 or any other applicable law; or (iii) in any other form of legal consideration that may be acceptable to the Committee in its discretion.

(iii)

Vesting .  Restricted Shares shall vest in accordance with a vesting schedule to be determined by the Committee under the applicable Agreement and may, but need not, be subject to a share repurchase option in favor of the Company.

(iv)

Termination of Participant’s Continuous Service .  In the event a Participant’s Continuous Service terminates, the Company may repurchase or otherwise reacquire, for par value, any or all of the Shares held by the Participant which have not vested as of the date of termination under the terms of the applicable Agreement.




10




(v)

Transferability .  Restricted Shares under the Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Agreement, as the Committee shall determine in its discretion, so long as Shares awarded under the Agreement remain subject to the terms of the Agreement.

8.

Covenants of the Company

(a)

Availability of Shares .  During the terms of the Awards, the Company shall keep available at all times the number of Shares required to satisfy such Awards.

(b)

Securities Law Compliance .  The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell Shares upon exercise of the Awards; provided , however , that this undertaking shall not require the Company to register under the Securities Act or any other applicable law of the United States or otherwise the Plan, any Awards or any Shares issued or issuable pursuant to any such Awards.  If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Shares under the Plan, the Company shall be relieved from any liability for failure to issue and sell Shares upon grant or exercise of such Awards unless and until such authority is obtained.

9.

Use of Proceeds from Stock .

Proceeds from the sale of Shares pursuant to the grant or exercise of Awards shall constitute general funds of the Company.

10.

Miscellaneous .

(a)

Acceleration of Exercisability and Vesting .  The Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.  

(b)

Shareholder Rights .  No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Shares subject to such Award unless and until such Participant has satisfied all requirements for exercise of the Award pursuant to its terms and has become the registered holder of such shares.

(c)

No Employment or other Service Rights .  Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without Cause, (ii) the service of a Consultant with or without notice and with or without Cause or (iii) the service of a Director pursuant to the Memorandum and Articles of Association of the Company or an Affiliate, and any applicable




11




provisions of the corporate law of the jurisdiction in which the Company or the Affiliate is incorporated, as the case may be.

(d)

Investment Assurances .  The Company may require a Participant, as a condition of exercising or acquiring Shares under any Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Award; (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Shares subject to the Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Shares; and (iii) to execute a Shareholders’ Agreement or such other documentation as the Company may require.  The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the Shares upon the exercise or acquisition of Shares under the Award has been registered under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Shares.

(e)

Withholding Obligations .  The Company shall have the right to deduct from any compensation paid to the Participant pursuant to the Plan the amount of taxes required by law to be withheld therefrom, or to require the Participant to pay the Company in cash such amount required to be withheld.  To the extent provided by the terms of an Award Agreement, the Participant may satisfy any foreign, federal, state or local tax withholding obligation relating to the exercise or acquisition of Shares under an Award by any of the following means (in addition to the Company’s right to withhold or to direct the withholding from any compensation paid to the Participant by the Company or by an Affiliate) or by a combination of such means:  (i) tendering a cash payment; (ii) authorizing the Company to withhold Shares from the Shares otherwise issuable to the Participant as a result of the exercise or acquisition of Shares under the Award; provided , however , that no Shares are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company or to an Affiliate, owned and unencumbered Shares not acquired from the Company with a Fair Market Value equal to the amount of tax liability to be satisfied by their delivery.

11.

Adjustments Upon Changes in Stock .

(a)

Capitalization Adjustments . In the event of any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets or stock of the Company, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event (an “Event”), and




12




in the Committee’s opinion, such event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Committee shall, in such manner as it may deem equitable, without limitation, adjust any or all of the following: (i)  the number and kind of Shares (or other securities or property) with respect to which Awards may be granted or awarded; (ii) the number and kind of Shares (or other securities or property) subject to all or any outstanding Awards; and (iii) the grant or exercise price with respect to all or any outstanding Awards.  The Committee’s determination under this Section 11(a) shall be final, binding and conclusive.

(b)

Termination of Awards .  Unless otherwise provided in an Award Agreement, upon the occurrence of an Event, or other similar corporate event or transaction in which outstanding Awards are not to be assumed by the surviving entity or otherwise continued following such an Event or other similar corporate event or transaction, the Committee may, in its discretion, terminate any outstanding Award without a Participant’s consent and (i) provide for the purchase of any such Award for an amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Participant’s rights had such Award been currently exercisable or payable or fully vested (based on the Fair Market Value of the shares on the date of such termination) or the replacement of such Award with other rights or property selected by the Committee in its sole discretion and/or (ii) provide that such Award shall be exercisable (whether or not vested) as to all shares covered thereby for at least thirty (30) days prior to such Event or other similar corporate event or transaction but will terminate at the end of that period.

(c)

Future Transactions .  The existence of the Plan, the Award Agreements and the Award granted hereunder shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Shares or the rights thereof or which are convertible into or exchangeable for Shares, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

12.

Amendment of the Plan and Awards .

(a)

Amendment of Plan .  The Board at any time, and from time to time, may amend the Plan.  However, except as provided in Section 11 relating to adjustments upon changes in Shares, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy any applicable law or any national securities exchange listing requirements.

(b)

Stockholder Approval .  The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations




13




thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers.

(c)

Contemplated Amendments .  It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder and/or to bring the Plan into compliance therewith.

(d)

No Impairment of Rights .  Subject to Section 11, rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.

(e)

Amendment of Awards .  Subject to Section 11, the Board at any time, and from time to time, may amend the terms of any one or more Awards; provided , however , that the rights under any Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.

13.

Termination or Suspension of the Plan .

(a)

Plan Term .  The Committee may suspend or terminate the Plan at any time.  Unless sooner terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier.  No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

(b)

No Impairment of Rights .  Subject to Section 11, suspension or termination of the Plan shall not impair rights and obligations under any Award granted while the Plan is in effect except with the written consent of the Participant.

14.

Repurchase Right .  

(a)

Options .  Prior to an Initial Public Offering, to the extent permitted by applicable law, if any Participant (i) resigns or terminates his Continuous Service for any reason or (ii) is discharged by the Company for any reason, the Company shall have the right (but not the obligation) within ninety (90) days following such termination, or such shorter period if required by applicable law, to elect to purchase some or all of the Participant’s outstanding and vested Options held by the Participant upon such termination for an amount in cash, equal to the number of Shares subject to such Option multiplied by the difference between (1) the Fair Market Value of one Share on the date the Company elects to purchase such Option and (2) the exercise price per Share of the Option.

(b)

Shares .  Prior to an Initial Public Offering, to the extent permitted by applicable law, if any Participant (i) resigns or terminates his Continuous Service for any reason or (ii) is discharged by the Company for any reason, the Company shall have the right (but not the obligation) within ninety (90) days following such termination, or such shorter period if required by applicable law, to elect to purchase some or all of the Shares acquired by the Participant as a result of the grant or exercise of Awards under the Plan, at their then current Fair Market Value.




14




(c)

Closing .  In the event the Company elects to purchase Options and/or Shares pursuant to this Section 14, the selling Participant shall sell and the Company shall purchase the Options and/or Shares as soon as administratively feasible following the exercise of the Company’s rights under this Section 14, but in any event no later than ninety (90) days thereafter.

15.

Section 409A of the Code .  

This Plan is intended to comply with Section 409A of the Code and shall be administered, construed and interpreted in accordance with such intent.  To the extent that an Award, issuance and/or payment under the Plan is subject to Section 409A of the Code, it shall be awarded and/or issued or paid in a manner that will comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the U.S. Secretary of the Treasury and the Internal Revenue Service with respect thereto (the “Guidance”).  Any provision of this Plan that would cause an Award, issuance and/or payment to fail to satisfy Section 409A of the Code shall have no force and effect until amended by the Committee, with or without the consent of any Participant, to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by the Guidance).

16.

Effective Date of Plan .

The Plan shall become effective as of the Effective Date.  

17.

Choice of Law .

The laws of the Cayman Islands shall govern all questions concerning the construction, validity and interpretation of this Plan.




15





 

KPMG

 

 

 

P.O. Box 493 GT, Century Yard Building
Grand Cayman, Cayman Islands

Telephone
Fax
E-mail
Website

+1 345 949-4800
+1 345 949-7164
kpmg@kpmg.ky
www.kpmg.ky

 

 

 

 





March 9, 2007

Securities and Exchange Commission
Washington, D.C. 20549

Ladies and Gentlemen:

We were previously principal accountants for Greenlight Capital Re, Ltd and under the date of March 20, 2006, we reported on the consolidated financial statements of Greenlight Capital Re, Ltd as of and for the years ended December 31, 2004 and 2005. On December 12, 2006 we were dismissed. We have read Greenlight Capital Re, Ltd's statements included under its Form S-1/A dated March 9, 2007, and we agree with such statements, except that we are not in a position to agree or disagree with Greenlight Capital Re, Ltd's stated reason for changing principal accountants.

Very truly yours,







KPMG, a Cayman Islands partnership, is the Cayman Islands
member firm of KPMG International, a Swiss cooperative.







Consent of Independent Registered Public Accounting Firm

Greenlight Capital Re, Ltd.
Grand Cayman, Cayman Islands

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated March 8, 2007, relating to the consolidated financial statements and schedules of Greenlight Capital Re, Ltd. which is contained in that Prospectus.

We also consent to the reference to us under the caption ‘‘Experts’’ in the Prospectus.


 

BDO Seidman, LLP
Grand Rapids, Michigan

March 8, 2007




Exhibit 99.1


CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF GREENLIGHT CAPITAL RE, LTD.

This amended and restated Charter identifies the purpose, composition, meeting requirements, committee responsibilities, annual evaluation procedures and investigations and studies of the Audit Committee (the “ Committee ”) of the Board of Directors (the “ Board ”) of Greenlight Capital Re, Ltd., (the “ Company ”), which is incorporated under the laws of the Cayman Islands.

1.

PURPOSE

The Committee has been established to oversee the accounting and financial reporting processes of the Company and the audit of the Company’s financial statements.

The primary responsibilities of the Committee are to:

(a)

assist the Board in its oversight responsibilities regarding:


(1)

the integrity of the Company’s financial statements,

(2)

the Company’s compliance with legal and regulatory requirements,

(3)

the independent auditor’s qualifications, independence and performance; and

(4)

the Company’s systems of internal controls regarding finance and accounting;


(b)  

appoint, retain, compensate, evaluate and terminate the Company’s independent auditors;


(c)  

prepare the Committee report required by the rules of the Securities and Exchange Commission (the “ SEC ”) to be included in the Company’s annual proxy statement;


(d)  

perform such other functions as the Board may from time to time assign to the Committee, including reviewing the operations of the Company’s third party administrators.


In performing its duties, the Committee shall seek to maintain an effective working relationship with the Board, the independent auditors, third party administrators and management of the Company.

A.

Composition

The Committee shall be composed of at least three, but not more than five, members (including a Chairperson), all of whom shall be “independent directors,” as such term is defined in the rules and regulations of the Nasdaq Stock Market Inc. Marketplace Rules (the “ Nasdaq Rules ”) and Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act” ).  No member of the Committee shall have participated in the preparation of the financial statements of the Company or any current subsidiary at any time during the past three years.  The members of the Committee and the Chairperson shall be selected by the Board



1





and serve at the pleasure of the Board.  A Committee member (including the Chairperson) may be removed at any time, with or without cause, by the Board.  The Board may designate one or more independent directors as alternate members of the Committee, who may replace any absent or disqualified member or members at any meetings of the Committee.

No member of the Committee may be an affiliated person of the Company or any of its subsidiaries.

If a member of the Committee ceases to be independent for reasons outside the member’s reasonable control, his or her membership on the Committee may continue until the earlier of the Company’s next annual meeting of shareholders or one year from the occurrence of the event that caused the failure to qualify as independent; provided that if the annual meeting of shareholders occurs within 180 days following the event that caused the failure to comply with the independence requirement, the member’s membership on the Committee may continue until the 180 th day following such event.  Also, if the Company is not already relying on this provision, and the Company fails to comply with the Nasdaq Rules’ requirement regarding audit committee composition due to a single vacancy on the Committee, then the Company will have until the earlier of one year from the occurrence of the event that caused the failure or the next annual meeting of shareholders to comply; provided that if the annual meeting of shareholders occurs within 180 days following the event that caused such failure to comply, the Company will instead have 180 days from the event to regain compliance with such Nasdaq requirement.  If the Company intends to rely on either of these cure periods, the Company shall provide notice to the Nasdaq Stock Market, Inc. immediately upon learning of the event or circumstance that caused the non-compliance.

Except for Board and Board committee fees, a member of the Committee shall not be permitted to accept any fees paid directly or indirectly for services as a consultant, legal advisor or financial advisor to the Company.  Members of the Committee may receive their Board and Board committee fees in cash, Company stock or options or other in-kind consideration as determined by the Board or the Company’s compensation committee, in addition to all other benefits that other directors of the Company receive.

All members of the Committee shall have a working familiarity with basic finance and accounting practices and be able to read and understand fundamental financial statements, including balance sheets, income statements and statements of cash flow, and at least one member of the Committee shall be an “audit committee financial expert” as defined by the SEC. Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Company or an outside consultant.  The Chairperson of the Committee shall maintain regular communication with the chief executive officer, chief financial officer and the lead partner of the independent auditors.

2.

MEETING REQUIREMENTS

The Committee shall meet as necessary, but at least four (4) times each year, to enable it to fulfill its responsibilities.  The Committee shall meet at the call of its Chairperson, preferably in conjunction with regular Board meetings.  The Committee may meet by telephone conference call or by any other means permitted by law or the Company’s memorandum and articles of



2





association, as may be amended from time to time.  A majority of the members of the Committee shall constitute a quorum.  The Committee shall act on the affirmative vote of a majority of members present at a meeting at which a quorum is present.  Without a meeting, the Committee may act by unanimous written consent of all members.  The Committee shall determine its own rules and procedures, including designation of a chairperson pro tempore, in the absence of the Chairperson, and designation of a secretary.  The secretary need not be a member of the Committee and shall attend Committee meetings and prepare minutes.  The Committee shall keep written minutes of its meetings, which shall be recorded or filed with the books and records of the Company.  Any member of the Board shall be provided with copies of the Committee minutes if requested.

The Committee may ask members of management, employees, outside counsel, the independent auditors, third party administrators or others whose advice and counsel are relevant to the issues then being considered by the Committee, to attend any meetings and to provide such pertinent information as the Committee may request.

The Chairperson of the Committee shall be responsible for leadership of the Committee, including preparing the agenda, presiding over Committee meetings, making Committee assignments and reporting the Committee’s actions to the Board from time to time (but at least once each year) as requested by the Board.

As part of its responsibility to foster free and open communication, the Committee should meet periodically with management, third party administrators and the independent auditors to discuss any matters that the Committee or any of these groups believe should be discussed privately.  In addition, the Committee or at least its Chairperson should meet with the independent auditors, third party administrators and management on a regular basis, or at least quarterly, to review the Company’s operations and the financial statements prior to their public release.  The Committee may also meet from time to time with the Company’s investment bankers, investor relations professionals and financial analysts who follow the Company.

3.

COMMITTEE RESPONSIBILITIES

In carrying out its responsibilities, the Committee’s policies and procedures should remain flexible to enable the Committee to react to changes in circumstances and conditions so that it can fulfill its oversight responsibilities.  In addition to such other duties as the Board may from time to time assign, the Committee shall have the following responsibilities:

A.

Oversight of the Financial Reporting Processes

1.

In consultation with the independent auditors and management, review the integrity of the Company’s financial reporting processes, both internal and external.

2.

Consider the independent auditor’s judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting. Consider alternative accounting principles and estimates.

3.

Review and discuss the reports required to be delivered by the Company’s independent auditors pursuant to Section 10A(k) of the Exchange Act regarding:



3





•

all critical accounting policies and practices to be used,

•

all alternative treatments of financial information within generally accepted accounting principles (“ GAAP ”) that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors, and

•

other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences.

4.

Annually review with management, and separately with the independent auditors, major issues regarding the Company’s auditing and accounting principles and practices and their presentation of financial statements, including the adequacy of internal controls and special audit steps adopted in light of any identified material internal control deficiencies, the adequacy of disclosures about charges in internal control over financial reporting and any audit problems or difficulties.

5.

Review all analyses prepared by management and the independent auditors of significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any analysis of the effect of alternative GAAP methods on the Company’s financial statements and a description of any transactions as to which management obtained Statement on Auditing Standards No. 50 letters.

6.

Review with management and the Company’s independent auditors the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the Company’s financial statements.

7.

Discuss with management and legal counsel the status of pending litigation, taxation matters, compliance policies and other areas of oversight applicable to the legal and compliance area as may be appropriate.

8.

Meet at least annually with the Company’s chief financial officer, the third party administrators and the independent auditors, as applicable, in separate executive sessions.

9.

Review with the independent auditors and management the extent to which changes or improvements in financial or accounting practices have been implemented.  This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.

10.

Meet separately with management to discuss accounting and auditing related issues.

11.

Prepare regular reports to the Board on all matters within the scope of the Committee’s functions.



4





12.

Discuss with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, as amended or superceded, relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.

13.

Following completion of the annual external audit, review separately with management and the independent auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.

B.

Review of Documents and Reports

1.

Review and discuss with management and the independent auditors the Company’s annual audited financial statements and quarterly financial statements prior to the filing of the Company’s Form 10-K or Form 10-Q, including disclosures made in Management’s Discussion and Analysis of Financial Conditions, and any reports or other financial information submitted to any governmental body, or the public, including any certification, report, opinion or review rendered by the independent auditors, considering, as appropriate, whether the information contained in these documents is consistent with the information contained in the financial statements and whether the independent auditors and legal counsel are satisfied with the disclosure and content of such documents. These discussions shall include consideration of the quality of the Company’s accounting principles as applied in its financial reporting, including review of audit adjustments (whether or not recorded) and any such other inquires as may be appropriate.

2.

Recommend to the Board that the audited financial statements be included in the Company’s Form 10-K.

3.

Review and discuss with management and the independent auditors earnings press releases, as well as financial information and earnings guidance, if any, provided to analysts and rating agencies. The Committee need not discuss in advance each earnings release but should generally discuss the types of information to be disclosed and the type of presentation to be made in any earnings release or guidance.

4.

Review reports from management, third party administrators and the Company’s independent auditors on the Company’s compliance with the Company’s policies, applicable law and insider and related party transactions.

5.

Submit the minutes of all meetings of the Committee to, or discuss the matters discussed at each Committee meeting with, the Board.

6.

Review any restatements of financial statements that have occurred or were recommended.



5





C.

Independent Auditor Matters

1.

Interview and retain the Company’s independent auditors, considering the accounting firm’s independence and effectiveness and approve the engagement fees and other compensation to be paid to the independent auditors.

2.

Meet with the Company’s independent auditors and the Company’s financial management to review the scope of the proposed external audit for the current year including the general planning and staffing of the audit.

3.

Preapprove all auditing services, internal control-related services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by the independent auditors, subject to such exceptions for non-audit services as permitted by applicable laws and regulations.  The Committee may when it deems appropriate form and delegate this authority to a subcommittee consisting of one or more Committee members, including the authority to grant preapprovals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant preapprovals shall be presented to the full Committee at its next meeting.

4.

On an annual basis, the Committee shall evaluate the independent auditors’ qualifications, performance and independence. To assist in this undertaking, the Committee shall require the independent auditors to submit a report (which report shall be reviewed by the Committee) describing (a) the independent auditors’ internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the accounting firm or by any inquiry or investigations by governmental or professional authorities (within the preceding five years) respecting one or more independent audits carried out by the independent auditors, and any steps taken to deal with any such issues and (c) all relationships the independent auditors have with relevant third parties to determine the impact, if any of such relationships on the independence and objectivity of the independent auditors. In making its determination, the Committee shall consider not only auditing and other traditional accounting functions performed by the independent auditors, but also consulting, legal, information technology services and other professional services rendered by the independent auditors and its affiliates.

5.

Review on an annual basis the experience and qualifications of the senior members of the independent audit team. Discuss the knowledge and experience of the independent auditors and the senior members of the independent audit team with respect to the Company’s industry.  The Committee shall ensure the regular rotation of the lead audit partner and concurring review partner as required by law and consider whether there should be a periodic rotation of the Company’s independent auditors.

6.

Review the performance of the independent auditors and terminate the independent auditors when circumstances warrant.

7.

Review with the Company’s independent auditors any problems or difficulties the auditors may have encountered and any “management” or “internal control” letter



6





provided by the independent auditors and the Company’s response to that letter. Such review should include:

(a)  any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information and any disagreements with management; and

(b)  any accounting adjustments that were proposed by the independent auditors that were not agreed to by the Company.

8.

Communicate with the Company’s independent auditors regarding (a) alternative treatments of financial information within the parameters of GAAP and (b) critical accounting policies and practices to be used in preparing the audit report.

9.

Periodically consult with the Company’s independent auditors without the presence of management about internal controls and the fullness and accuracy of the Company’s financial statements.

10.

Oversee the relationship with the Company’s independent auditors by discussing with them the nature and rigor of the audit process, receiving and reviewing audit reports and ensuring that the independent auditors have full access to the Committee (and the Board) to report on any and all appropriate matters.

11.

Resolve any disagreement between management and the independent auditors.

D.

Internal Audit Control Matters

1.

Review and approve the engagement of any internal audit service providers considering their qualifications and effectiveness, and approve the scope of their proposed services and the fees and other compensation to be paid to such providers therefor.

E.

Oversight of Compliance

1.

Establish regular and separate systems of reporting to the Committee by each of management and the independent auditors regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments.

2.

Establish and conduct procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, as well as for confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters.

3.

Review with management, third party administrators and the Company’s independent auditors any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding the Company’s financial statements or accounting policies.



7





4.

Review and approve all related-party transactions (for these purposes, a “related party” is one who can exercise control or significant influence over another party, to the extent that one of the parties maybe prevented for pursuing its own separate interests).

5.

Review the procedures that the Company has implemented regarding compliance with all applicable national, federal, state, and local laws and regulations and the Company’s code of conduct and monitor the effectiveness of those policies, and institute any changes or revisions to such policies and procedures as may be deemed warranted or necessary.

6.

Periodically discuss with the chief executive officer and chief financial officer and review disclosures made by the chief executive officer and chief financial officer during their certification process for the Form 10-K and Form 10-Q regarding (a) significant deficiencies in the design or operation of the internal controls that could adversely affect the Company’s ability to record, process, summarize and report financial data and (b) any fraud that involves management or other employees who have a significant role in the Company’s internal controls.

7.

Ensure that no officer, director or any person acting under their direction fraudulently influences, coerces, manipulates or misleads the independent auditors for purposes of rendering the Company’s financial statements materially misleading.

8.

Discuss with management the policies with respect to risk assessment and risk management. Although it is management’s duty to assess and manage the Company’s exposure to risk, the Committee should discuss guidelines and policies to govern the process by which risk assessment and control is handled and review the steps management has taken to monitor the Company’s risk exposure.

9.

Obtain from the independent auditors assurance that Section 10A(b) of the Exchange Act has not been implicated.

While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with GAAP.  This is the responsibility of management and the Company’s independent auditors.  


4.

ANNUAL EVALUATION PROCEDURES

The Committee shall annually assess its performance to confirm that it is meeting its responsibilities under this Charter.  In this review, the Committee shall consider, among other things, (a) the appropriateness of the scope and content of this Charter, (b) the appropriateness of matters presented for information and approval, (c) the sufficiency of time for consideration of agenda items, (d) frequency and length of meetings and (e) the quality of written materials and presentations.  The Committee may recommend to the Board such changes to this Charter as the Committee deems appropriate.



8





5.

INVESTIGATIONS AND STUDIES

The Committee shall have the authority and sufficient funding to retain special legal, accounting or other consultants (without seeking Board approval) to advise and assist the Committee. The Committee may conduct or authorize investigations into or studies of matters within the Committee’s scope of responsibilities as described herein, and may retain, at the expense of the Company, independent counsel or other consultants necessary to assist the Committee in any such investigations or studies.  The Committee shall have sole authority to negotiate and approve the fees and retention terms of such independent counsel or other consultants.

6.

MISCELLANEOUS

The Company shall give appropriate funding, as determined by the Committee, for the payment of (i) compensation to the independent auditors, legal, accounting or other advisors employed by the Committee and (ii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out their duties.  Nothing contained in this Charter is intended to expand applicable standards of liability under statutory or regulatory requirements for the members of the Board or any committee of the Board.  The purposes and responsibilities outlined in this Charter are meant to serve as guidelines rather than as inflexible rules and the Committee is encouraged to adopt such additional procedures and standards as it deems necessary from time to time to fulfill its responsibilities. This Charter, and any amendments thereto, shall be displayed on the Company’s website and a printed copy of such shall be made available to any shareholder of the Company who requests it.

Adopted by the Committee and approved
by the Board of Directors of the Company as of February 16, 2007.




9




Exhibit 99.2


CHARTER OF THE COMPENSATION COMMITTEE

OF THE BOARD OF DIRECTORS OF GREENLIGHT CAPITAL RE, LTD.


This amended and restated Charter identifies the purpose, composition, meeting requirements, committee responsibilities, annual evaluation procedures and studies of the Compensation Committee (the “ Committee ”) of the Board of Directors (the “ Board ”) of Greenlight Capital Re, Ltd., (the “ Company ”), which is incorporated under the laws of the Cayman Islands.


I.

PURPOSE

The Committee has been established to:


(a)

assist the Board in ensuring that a proper system of long-term and short-term compensation is in place to provide performance-oriented incentives to management, and that compensation plans are appropriate and competitive and properly reflect the objectives and performance of management and the Company;


(b)

discharge the Board’s responsibilities relating to compensation of the Company’s chief executive officer (“ CEO ”) and the Company’s other executive officers;


(c)

evaluate the Company’s CEO and set his or her remuneration package;


(d)

administer the Company’s incentive-compensation plans and equity-based plans;


(e)

review the disclosures in the Compensation Discussion and Analysis in the Company’s filings made pursuant to the U.S. Securities laws and produce an annual compensation committee report for inclusion in the Company’s proxy statements; and


(f)

perform such other functions as the Board may from time to time assign to the Committee.  


In performing its duties, the Committee shall seek to maintain an effective working relationship with the Board and the Company’s management.


II.

COMPOSITION

The Committee shall be composed of at least three members, all of whom shall be “independent directors” as such term is defined in the rules and regulations of the Nasdaq Stock Market.  In addition, each Committee member shall be a “Non-Employee Director” as defined by Rule 16b-3 under the Securities Exchange Act of 1934 (with each member’s status in reference to Item 404(a) of Regulation S-K being determined pursuant to Note (4) to Rule 16b-3).  The members of the Committee and the Chairperson shall be selected annually by the Board and serve at the pleasure of the Board.  A Committee member (including the Chairperson) may be removed at any time, with or without cause, by the Board.  The Board may designate one or more independent directors as alternate members of the Committee, who may replace any absent or disqualified member or members at any meetings of the Committee.  The Committee shall




1





have authority to delegate responsibilities listed herein to subcommittees of the Committee or to officers of the Company to the extent permitted by applicable law or the compensation plans of the Company if the Committee determines such delegation would be in the best interest of the Company.

III.

MEETING REQUIREMENTS

The Committee shall meet as necessary, but at least once each year, to enable it to fulfill its responsibilities.  The Committee shall meet at the call of its Chairperson, preferably in conjunction with regular Board meetings.  The Committee may meet by telephone conference call or by any other means permitted by law or the Company’s memorandum and articles of association, as may be amended from time to time.  A majority of the members of the Committee shall constitute a quorum.  The Committee shall act on the affirmative vote of a majority of members present at a meeting at which a quorum is present.  Without a meeting, the Committee may act by unanimous written consent of all members.  The Committee shall determine its own rules and procedures, including designation of a chairperson pro tempore, in the absence of the Chairperson, and designation of a secretary.  The secretary need not be a member of the Committee and shall attend Committee meetings and prepare minutes.  The Committee shall keep written minutes of its meetings, which shall be recorded or filed with the books and records of the Company.  Any member of the Board shall be provided with copies of the Committee minutes if requested.

The Committee may ask members of management or others whose advice and counsel are relevant to the issues then being considered by the Committee, to attend any meetings and to provide such pertinent information as the Committee may request.  

The Chairperson of the Committee shall be responsible for leadership of the Committee, including preparing the agenda, presiding over Committee meetings, making Committee assignments and reporting the Committee’s actions to the Board from time to time (but at least once each year) as requested by the Board.  


IV.

COMMITTEE RESPONSIBILITIES

In carrying out its oversight responsibilities, the Committee’s policies and procedures should remain flexible to enable the Committee to react to changes in circumstances and conditions so as to ensure the Company remains in compliance with applicable legal and regulatory requirements.  

The Committee shall have responsibility for oversight of the determination, implementation and administration of remuneration, including compensation, benefits and perquisites, of all members of senior management whose remuneration is the responsibility of the Board.  Such responsibility includes the following:

A.   Compensation and Evaluations


1.

To, in consultation with senior management, establish the Company’s general compensation philosophy and objectives;




2






2.

To review and affirm contractual employment and compensation arrangements, severance arrangements, changes in control provisions and agreements and any special supplemental benefits applicable to the Company’s executive officers and other such members of senior management who are the responsibility of the Board;


3.

To review and to make recommendations to the Board at least annually with respect to the base salary and to administer the annual and long-term incentive compensation of the Company’s executive officers and other such members of senior management who are the responsibility of the Board; and


4.

To review and approve the Company’s goals and objectives relevant to the compensation of the CEO, annually evaluate the CEO’s performance in light of those goals and objectives and based on this evaluation determine the CEO’s compensation level, including salary, bonus, incentive and equity compensation.  


B.   Incentive-Compensation and Equity-Based Plans


1.

To review and to make periodic recommendations to the Board as to the general compensation and benefits policies and practices of the Company;


2.

To review and adopt, and to recommend to the Board for adoption or ratification as required by the applicable plan, policy or program (and for shareholder approval where required by applicable law or the memorandum and articles of association) compensation and benefits policies, plans and programs and amendments thereto, determining eligible employees and the type, amount and timing of such compensation and benefits; and


3.

To oversee the administration of such policies, plans and programs and, on an ongoing basis to monitor them to assure that they remain competitive and within the Board’s compensation objectives for executive officers and such other members of senior management.


C.   Other Duties


1.

To review and discuss with management the disclosures made in Compensation Discussion and Analysis prior to the filing of the Company’s annual report on Form 10-K and proxy statement for the annual meeting of shareholders, and recommend to the Board whether the Compensation Discussion and Analysis should be included in the Form 10-K and proxy statement;

2.

To prepare an annual compensation committee report for inclusion in the Company’s proxy statement for the annual meeting of stockholders in accordance with the applicable rules of the Securities and Exchange Commission;




3





3.

To review and make periodic recommendations to the Board as to the compensation and benefit policies of the directors of the Board;

4.

To review the adequacy of the Company’s equity award policy; and

5.

To perform such other duties as the Board may assign to the Committee.

V.

ANNUAL EVALUATION PROCEDURES

The Committee shall annually evaluate its performance to confirm that it is meeting its responsibilities under this Charter.  In this review, the Committee shall consider, among other things, (a) the appropriateness of the scope and content of this Charter, (b) the appropriateness of matters presented for information and approval, (c) the sufficiency of time for consideration of agenda items, (d) frequency and length of meetings and (e) the quality of written materials and presentations.  The Committee may recommend to the Board such changes to this Charter as the Committee deems appropriate.

VI.

AUTHORITY

The Committee has the authority, to the extent it deems appropriate, to retain one or more compensation consultants to assist in the evaluation of executives or executive compensation.  The Committee may conduct or authorize studies of matters within the Committee’s scope of responsibilities as described above, and may retain, at the expense of the Company, independent counsel or other consultants necessary to assist the Committee in any such studies.  The Committee shall have sole authority to retain and terminate any compensation consultant to be used to survey the compensation practices in the Company’s industry and to provide advice so that the Company can maintain its competitive ability to recruit and retain highly qualified personnel.  The Committee shall have the sole authority to negotiate and approve the fees and retention terms of any compensation consultant retained.

VII.

MISCELLANEOUS

Nothing contained in this Charter is intended to expand applicable standards of liability under statutory or regulatory requirements for the directors of the Company or members of the Committee.  The purposes and responsibilities outlined in this Charter are meant to serve as guidelines rather than as inflexible rules and the Committee is encouraged to adopt such additional procedures and standards as it deems necessary from time to time to fulfill its responsibilities.  This Charter, and any amendments thereto, shall be displayed on the Company’s web site and a printed copy of such shall be made available to any shareholder of the Company who requests it.


Adopted by the Compensation Committee and approved

by the Board of Directors of the Company on February 16, 2007.





4


Exhibit 99.3


CHARTER OF THE FINANCE COMMITTEE OF

THE BOARD OF DIRECTORS OF

GREENLIGHT CAPITAL RE, LTD.


The purpose of the Finance Committee (the “ Committee ”) of the Board of Directors (the “ Board ”) of Greenlight Capital Re, Ltd. (the “ Company ”) is to assist the Board in overseeing all aspects of the Company’s capital structure, structural reorganization, financing arrangements, overall financial management and investment policies, guidelines and activities.

I.

PURPOSES AND RESPONSIBILITIES

More specifically, the Committee shall:

(a) Provide advice and assistance to the Board in connection with any initial public offering, which shall include interviewing and making recommendations to the Board concerning potential underwriters, and discussing and recommending the type of securities to be offered and listed;

(b) Review the adequacy of existing financing facilities.  Monitor the need for any additional financing.  Review, discuss and make recommendations to the Board concerning proposed issuances of equity, debt or other securities and proposed credit and similar facilities, including an initial public offering in the United States of America or any other appropriate jurisdiction;

(c) Review and make recommendations to the Board regarding the Company’s dividend policy and the payment of dividends;

(d) Review, discuss and make recommendations to the Board concerning the Company’s plans for share repurchase plans;

(e)  Review short-term and long-term financing plans;

(f )   Review the Company’s risk management activities;

(g) Review major commercial banking, investment banking, financial consulting, insurance and other relationships of the Company;

(h) Review and make recommendations to the Board regarding any proposed capital expenditure which is required to be approved by the Board;

(i) Review and make recommendations to the Board with respect to any proposal by the Company or by its subsidiaries to acquire or divest, in any manner, any asset, investment, real or personal property, or business interest if such divestiture is required to be approved by the Board;

(j)  Monitor the status of rating agency evaluations and discussions; and

(k) Report regularly to the Board on the Committee’s deliberations and actions taken.



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II.

COMPOSITION

The Committee shall be composed of at least three members.  The members of the Committee and the Chairperson shall be selected annually by the Board and serve at the pleasure of the Board.  A Committee member (including the Chairperson) may be removed at any time, with or without cause, by the Board.  The Board may designate one or more directors as alternate members of the Committee, who may replace any absent or disqualified member or members at any meetings of the Committee.  The Committee shall have authority to delegate responsibilities listed herein to subcommittees of the Committee if the Committee determines such delegation would be in the best interest of the Company.

III.

MEETING REQUIREMENTS

The Committee shall meet as necessary, but at least once each year, to enable it to fulfill its responsibilities.  The Committee shall meet at the call of its Chairperson, preferably in conjunction with regular Board meetings.  The Committee may meet by telephone conference call or by any other means permitted by law or the Company’s memorandum and articles of association, as may be amended from time to time.  A majority of the members of the Committee shall constitute a quorum.  The Committee shall act on the affirmative vote of a majority of members present at a meeting at which a quorum is present.  Without a meeting, the Committee may act by unanimous written consent of all members.  The Committee shall determine its own rules and procedures, including designation of a chairperson pro tempore, in the absence of the Chairperson, and designation of a secretary.  The secretary need not be a member of the Committee and shall attend Committee meetings and prepare minutes.  The Committee shall keep written minutes of its meetings, which shall be recorded or filed with the books and records of the Company.  Any member of the Board shall be provided with copies of the Committee minutes if requested.

The Committee may ask members of management or others whose advice and counsel are relevant to the issues then being considered by the Committee, to attend any meetings and to provide such pertinent information as the Committee may request.  

The Chairperson of the Committee shall be responsible for leadership of the Committee, including preparing the agenda, presiding over Committee meetings, making Committee assignments and reporting the Committee’s actions to the Board from time to time (but at least once each year) as requested by the Board.  

IV.

OUTSIDE ADVISORS

The Committee shall have access to and authority to retain independent advisors, including legal counsel, external auditors and financial advisors, if and when it deems necessary to perform its duties.  The Committee may retain these advisors without seeking Board’s approval and may approve related fees and retention terms.



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V.

ANNUAL EVALUATION PROCEDURES

The Committee shall annually assess its performance to confirm that it is meeting its responsibilities under this charter.  In this review, the Committee shall consider, among other things, (a) the appropriateness of the scope and content of this charter, (b) the appropriateness of matters presented for information and approval, (c) the sufficiency of time for consideration of agenda items, (d) frequency and length of meetings and (e) the quality of written materials and presentations.  The Committee may recommend to the Board such changes to this charter as the Committee deems appropriate.

VI.

MISCELLANEOUS

Nothing contained in this charter is intended to expand applicable standards of liability under statutory or regulatory requirements for the directors of the Company or members of the Committee.  The purposes and responsibilities outlined in this charter are meant to serve as guidelines rather than as inflexible rules and the Committee is encouraged to adopt such additional procedures and standards as it deems necessary from time to time to fulfill its responsibilities.  This charter, and any amendments thereto, shall be displayed on the Company’s website and a printed copy of such shall be made available to any shareholder of the Company who requests it.

Adopted by the Finance Committee and approved

by the Board of Directors of the Company on October 5, 2006.




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Exhibit 99.4

CHARTER OF THE NOMINATING AND CORPORATE GOVERNANCE
COMMITTEE OF THE BOARD OF DIRECTORS
OF GREENLIGHT CAPITAL RE, LTD.


I.

PURPOSES

The Nominating and Corporate Governance Committee (the “ Committee ”) is appointed by the Board of Directors (“ Board ”) of Greenlight Capital Re, Ltd. (“ Greenlight Re ” or the “ Company ”) for the purposes of (a) assisting the Board in identifying individuals qualified to serve as members of the Board, (b) developing and recommending to the Board a set of corporate governance principles for the Company and (c) overseeing the evaluation of the Board.

II.

RESPONSIBILITIES

In addition to such other duties as the Board may from time to time assign, the Committee shall:

•

identify individuals qualified to become Board members, consistent with criteria approved by the Board;

•

recommend to the Board the director nominees for election by the shareholders at each meeting of shareholders at which directors will be elected and recommend to the Board nominees to fill any vacancies and newly created directorships on the Board;

•

develop and recommend to the Board a set of corporate governance guidelines applicable to the Company and review and reassess the adequacy of such guidelines at least annually and recommend any proposed changes to the Board for approval;

•

oversee the evaluation of the Board;

•

periodically review the criteria for the selection of new directors to serve on the Board and recommend any proposed changes to the Board for approval;

•

evaluate candidates for Board membership, including those recommended by shareholders in compliance with the Company’s Memorandum and Articles of Association, as may be amended from time to time (“ Charter ”);

•

periodically review and make recommendations regarding the composition and size of the Board;

•

periodically review and make recommendations regarding the composition, size, purpose, structure, operations and charter of each of the Board’s committees, including the creation of additional committees or elimination of existing committees;



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•

annually recommend to the Board the chairpersons and members of each of the Board’s committees;

•

conduct an annual performance evaluation of the Committee; and

•

review and reassess the adequacy of this charter on an annual basis and recommend any proposed changes to the Board for approval.

III.

COMPOSITION

The Committee shall be comprised of at least three members (including a Chairperson), all of whom shall be “independent directors,” as such term is defined in the rules and regulations of the Nasdaq Stock Market.  The members of the Committee and the Chairperson shall be selected not less frequently than annually by the Board and serve at the pleasure of the Board.  A Committee member (including the Chairperson) may be removed at any time, with or without cause, by the Board.  The Board may designate one or more independent directors as alternate members of the Committee, who may replace any absent or disqualified member or members at any meetings of the Committee.

IV.

MEETINGS AND OPERATIONS

The Committee shall meet as often as necessary, but at least once each year, to enable it to fulfill its responsibilities.  The Committee shall meet at the call of its Chairperson.  The Committee may meet by telephone conference call or by any other means permitted by law or the Company’s Charter.  A majority of the members of the Committee shall constitute a quorum.  The Committee shall act on the affirmative vote of a majority of members present at a meeting at which a quorum is present.  Subject to the Company’s Charter, the Committee may act by unanimous written consent of all members in lieu of a meeting.  The Committee shall determine its own rules and procedures, including designation of a chairperson pro tempore in the absence of the Chairperson, and designation of a secretary.  The secretary need not be a member of the Committee and shall attend the Committee’s meetings and prepare minutes. The Secretary of the Company shall be the Secretary of the Company’s Committee unless the Committee designates otherwise .  The Committee shall keep written minutes of its meetings, which shall be recorded or filed with the books and records of the Company.  Any member of the Board shall be provided with copies of such Committee minutes if requested.

The Committee may ask members of management, employees, outside counsel, or others whose advice and counsel are relevant to the issues then being considered by the Committee to attend any meetings and to provide such pertinent information as the Committee may request.  The Committee shall have authority to delegate any of their responsibilities to one or more subcommittees as the Committee may from time to time deem appropriate.

The Chairperson of the Committee shall be responsible for leadership of the Committee, including preparing the agenda, presiding over the Committee meetings, making Committee assignments and reporting the Committee’s actions to the Board from time to time (but at least once each year) as requested by the Board.



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V.

AUTHORITY

The Committee has the authority, to the extent it deems appropriate, to retain one or more search firms to be used to identify director candidates.  The Committee shall have the sole authority to retain and terminate any such consulting firm, and to approve the firm’s fees and other retention terms.  The Committee shall also have the authority, to the extent it deems necessary or appropriate, to retain other advisors. The Company will provide for appropriate funding, as determined by the Committee, for payment of compensation to any search firm or other advisors employed by the Committee.

Adopted by the Nominating and Governance Committee and

approved by the Board of Directors of the Company on January 8, 2007.



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Exhibit 99.5


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM F-N


APPOINTMENT OF AGENT FOR SERVICE OF PROCESS
BY FOREIGN BANKS AND FOREIGN INSURANCE
COMPANIES AND CERTAIN OF THEIR HOLDING COMPANIES
AND FINANCE SUBSIDIARIES MAKING PUBLIC OFFERINGS
OF SECURITIES IN THE UNITED STATES


GENERAL INSTRUCTIONS

I.

Form F-N shall be filed with the Commission in connection with the filing of a registration statement under the Securities Act of 1933 by:

1.

a foreign issuer that is a foreign bank or foreign insurance company excepted from the definition of an investment company by rule 3a-6 [17 CFR 270.3a-6] under the Investment Company Act of 1940 (the “1940 Act”);

2.

a foreign issuer that is a finance subsidiary of a foreign bank or foreign insurance company, as those terms are defined in rule 3a-6 under the 1940 Act, if such finance subsidiary is excepted from the definition of investment company by rule 3a-5 [17 CFR 270.3a-5] under the 1940 Act; or

3.

a foreign issuer that is excepted from the definition of investment company by rule 3a-1 [17 CFR 270.3a-I] under the 1940 Act because some or all of its majority-owned subsidiaries are foreign banks or foreign insurance companies excepted from the definition of investment company by rule 3a-6 under the 1940 Act.

II.

Notwithstanding paragraph (I), the following foreign issuers are not required to file Form F-N:

1.

a foreign issuer that has filed Form F-X [17 CFR 239.42] under the Securities Act of 1933 with the Commission with respect to the securities being offered; and

2.

a foreign issuer filing a registration statement relating to debt securities or non-voting preferred stock that has on file with the Commission a currently accurate Form N-6C9 [17 CFR 274.304, rescinded] under the 1940 Act.

III.

Six copies of the Form F-N, one of which shall be manually signed, shall be filed with the Commission at its principal office.  A Form F-N filed in connection with any other Commission form should not be bound together with or be included only as an exhibit to, such other form.

A.

Name of issuer or person filing (“Filer”): Greenlight Capital Re, Ltd.

B.

This is (select one):
 an original filing for the Filer

 an amended filing for the Filer

C.

Identify the filing in conjunction with which this Form is being filed:

Name of registrant Greenlight Capital Re, Ltd.



Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.




Form type S-1                                                                                                                                                                                 

File Number (if known)                  333-139993                                                                                                                     

Filed by      Greenlight Capital Re, Ltd.                                                                                                                                    

Date Filed (if filed concurrently, so indicate)             January 16, 2007         

D.

The Filer is incorporated or organized under the laws of (Name of the jurisdiction under whose laws the filer is organized or incorporated)

Cayman Islands                                                                                                                                                                                  

and has its principal place of business at (Address in full and telephone number)

802 West Bay Road, The Grand Pavilion, P.O. Box 31110, Grand Cayman, KY 1-1205, Cayman Islands; (345) 745-4573          

E.

The Filer designates and appoints (Name of United States person serving as agent) Corporation Service Company (“Agent”) located at (Address in full in the United States and telephone number) 1133 Avenue of the Americas, Suite 3100, New York, NY 10036; (212) 299-5600 as the agent of the Filer upon whom may be served any process, pleadings, subpoenas, or other papers in:

(a)

any investigation or administrative proceeding conducted by the Commission, and

(b)

any civil suit or action brought against the Filer or to which the Filer has been joined as defendant or respondent, in any appropriate court in any place subject to the jurisdiction of any state or of the United States or any of its territories or possessions or of the District of Columbia,

arising out of or based on any offering made or purported to be made in connection with the securities registered by the Filer on Form (Name of Form) S-1 filed on (Date) January 16, 2007 or any purchases or sales of any security in connection therewith. The Filer stipulates and agrees that any such civil suit or action or administrative proceeding may be commenced by the service of process upon, and that service of an administrative subpoena shall be effected by service upon, such agent for service of process, and that the service as aforesaid shall be taken and held in all courts and administrative tribunals to be valid and binding as if personal service thereof had been made.

F.

Each person filing this Form stipulates and agrees to appoint a successor agent for service of process and file an amended Form F-N if the Filer discharges the Agent or the Agent is unwilling or unable to accept service on behalf of the Filer at any time until six years have elapsed from the date of the Filer’s last registration statement or report, or amendment to any such registration statement or report, filed with the Commission under the Securities Act of 1933 or Securities Exchange Act of 1934. Filer further undertakes to advise the Commission promptly of any change to the Agent’s name or address during the applicable period by amendment of this Form referencing the file number of the relevant registration form in conjunction with which the amendment is being filed.

G.

Each person filing this form undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the







securities registered pursuant to the form referenced in paragraph E or transactions in said securities.

The Filer certifies that it has duly caused this power of attorney, consent, stipulation and agreement to be signed on its behalf by the undersigned, thereunto duly authorized, in the

City of

Georgetown              

Country of

    Cayman Islands      

this

      28 th    

       

  day

      February                  

  20 07 A.D.

Filer:

  By (Signature and Title):

Greenlight Capital Re, Ltd.                                                                                                                                    

This statement has been signed by the following persons in the capacities and on the dates indicated.

(Signature)    /s/ Tim Courtis                                                                                                      

(Title)      Chief Financial Officer                                                                                               

(Date)

   February 28, 2007                                                                                                         

Instructions

1.

The power of attorney, consent, stipulation and agreement shall be signed by the Filer and its authorized Agent in the United States.

2.

The name of each person who signs Form F-N shall be typed or printed beneath his signature. Where any name is signed pursuant to a board resolution, a certified copy of the resolution shall be filed with each copy of the Form. If any name is signed pursuant to a power of attorney, a manually signed copy of each power of attorney shall be filed with each copy of the Form.







SEC’s Collection of Information


An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.  Filing of this Form is mandatory.  Rule 489 under the Securities Act of 1933 [17 CFR 230.489] requires foreign banks and foreign insurance companies and holding companies and finance subsidiaries of foreign banks and foreign insurance companies that are excepted from the definition of “investment company” by virtue of rules 3a-1, 3a-5, and 3a-6 under the Investment Company Act of 1940 to file Form F-N to appoint an agent for service of process in the United States when making a public offering of securities.  The information collected on Form F-N is publicly available.  Any member of the public may direct to the Commission any comments concerning the accuracy of the burden estimate of this Form and any suggestions for reducing the burden of the Form.  This collection of information has been reviewed by the Office of Management and Budget in accordance with the clearance requirements of 44 U.S.C. §3507.