MASTER SEPARATION AGREEMENT

THIS MASTER SEPARATION AGREEMENT (this Agreement) is made and entered into as of April 27, 2004, among ACE Limited, a Cayman Islands corporation (ACE), ACE Financial Services Inc., a Delaware corporation (ACE Financial Services), ACE Bermuda Insurance Ltd., a Bermuda company (ACE Bermuda), and Assured Guaranty Ltd., a Bermuda company (the Company).

RECITALS

ACE has sponsored the formation of the Company and in connection therewith:

A.            ACE Financial Services has formed Assured Guaranty US Holdings Inc., a Delaware corporation (Assured Guaranty US Holdings), has transferred to Assured Guaranty US Holdings all of the issued and outstanding shares of capital stock of each of Assured Guaranty Corp., a Maryland corporation (Assured Guaranty) and AGR Financial Products Inc., a Delaware corporation (Assured Guaranty Financial Products), in exchange for all issued and outstanding shares of capital stock of Assured Guaranty US Holdings and a note payable from Assured Guaranty US Holdings to ACE Financial Services in the amount of $200.0 million and in the form attached hereto as Exhibit A (the Assured Guaranty US Holdings Note).

B.            Assured Guaranty Re Overseas Ltd., a Bermuda company (Assured Guaranty Re Overseas), has transferred to ACE Bermuda all of the issued and outstanding shares of capital stock of ACE Capital Title Reinsurance Company, a New York corporation (ACE Title).

C.            The Company has filed a registration statement under the Securities Act (as defined below) for the purpose of registering the sale (the Public Offering) of a portion of the common shares, each having a par value of US$0.01, of the Company (the Common Shares) to be issued to ACE Financial Services and ACE Bermuda in connection with the formation of the Company; and, on or after the effective date of the registration statement under the Securities Act, the Company, ACE Financial Services and ACE Bermuda shall enter into an underwriting agreement (the Underwriting Agreement) with the underwriters of the Public Offering providing for the public offering of the Common Shares.

D.            After the execution and delivery of the Underwriting Agreement (the date of such execution and delivery is referred to herein as the Effective Date) and prior to the Closing Time (as defined below), (i) ACE shall transfer to ACE Bermuda all of the issued and outstanding shares of the Company owned by ACE and (ii) ACE Financial Services will transfer to the Company (a) all of the issued and outstanding shares of capital stock of Assured Guaranty US Holdings in exchange for 35,140,889 Common Shares and a note payable from the Company to ACE Financial Services in the amount of $900,000 and in the form attached hereto as Exhibit B (the Company Note A) and (b) all of the issued and outstanding shares of capital stock of Assured Guaranty Finance Overseas Ltd., a company organized under the laws of England (Assured Guaranty Finance Overseas), in exchange for 30,111 Common Shares and a note payable from the Company to ACE Financial Services in the amount of $100,000 and in the form attached hereto as Exhibit C (the Company Note B).

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E.             In addition, after the Effective Date and prior to the Closing Time, ACE Bermuda will transfer to the Company all of the issued and outstanding shares of capital stock of Assured Guaranty Re International Ltd., a Bermuda company (Assured Guaranty Re International), in exchange for 38,629,000 Common Shares and a note payable from the Company to ACE Bermuda in the amount of $1.0 million and in the form attached hereto as Exhibit D (the Company Note C).

F.             The parties hereto wish to provide for certain other transactions to be entered into in connection with the formation of the Company and the Public Offering and to set forth herein certain arrangements that will govern the relationship between ACE, the Company and their respective Affiliates (as defined below) following the Closing Time.

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, the sufficiency of which is acknowledged, the parties hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1             Definitions.  As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

ACE has the meaning specified in the preamble to this Agreement.

ACE Bermuda has the meaning specified in the preamble to this Agreement.

ACE Business means the business conducted by any member of the ACE Group (whether conducted before or after the Closing Time).

ACE Confidential Information has the meaning specified in Section 9.3.

ACE Financial Services has the meaning specified in the preamble to this Agreement.

ACE Group means ACE and each Post-Closing Subsidiary of ACE.

ACE Indemnified Party has the meaning specified in Section 8.1.

ACE Liabilities means collectively, except as otherwise provided for in this Agreement or the Ancillary Agreements, any and all Liabilities that arise out of any act, omission, event or condition occurring or arising out of or relating to (i) the ownership, operation or use of the ACE Business or (ii) the Transferred Business.

ACE Title has the meaning specified in the recitals to this Agreement.

Action means any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, any governmental or other regulatory or administrative agency or commission or any arbitration tribunal.

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Affiliate of any Person means any Person that, directly or indirectly, controls, is under common control with, or is controlled by, such Person.

AFS Tax Sharing Agreement means the Amended and Restated Agreement Concerning Filing of Consolidated Federal Income Tax Returns, dated November 13, 1995, with respect to the ACE Financial Services subgroup included within the ACE Prime Holdings Inc. consolidated group.

AGR Tax Sharing Agreement means the Agreement Concerning Filing of Consolidated Federal Income Tax Returns, dated August 1, 2000, among ACE Capital Re USA Holdings Incorporated, Assured Guaranty Re Overseas, ACE Capital Mortgage Reinsurance Company, ACE Title and ACE Capital Re Inc.

Ancillary Agreements means the agreements set forth in Section 3.1.

Arbitrator has the meaning specified in Section 10.3.

Assured Guaranty has the meaning specified in the recitals of this Agreement.

Assured Guaranty Finance Overseas has the meaning specified in the recitals of this Agreement.

Assured Guaranty Finance Overseas Shares has the meaning specified in Section 2.3(a).

Assured Guaranty Financial Products has the meaning specified in the recitals of this Agreement.

Assured Guaranty Financial Products Shares has the meaning specified in Section 2.1(a).

Assured Guaranty Re International has the meaning specified in the recitals of this Agreement.

Assured Guaranty Re International Shares has the meaning specified in Section 2.4(a).

Assured Guaranty Re Overseas has the meaning specified in the recitals of this Agreement.

Assured Guaranty Shares has the meaning specified in Section 2.1(a).

Assured Guaranty US Holdings has the meaning specified in the recitals of this Agreement.

Assured Guaranty US Holdings Note has the meaning specified in the recitals of this Agreement.

Assured Guaranty US Holdings Shares has the meaning specified in Section 2.1(b).

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Business Day means any day excluding Saturday, Sunday and any day on which banks in New York, New York or Hamilton, Bermuda have the option by law or other governmental action to close.

Closing has the meaning specified in Section 3.4.

Closing Time has the meaning specified in Section 3.4.

Code means the U.S. Internal Revenue Code of 1986, as amended.

Commission means the U.S. Securities and Exchange Commission.

Common Shares has the meaning specified in the recitals of this Agreement.

Company has the meaning specified in the preamble to this Agreement.

Company Business means the business conducted by any member of the Company Group (whether conducted before or after the Closing Time).

Company Confidential Information has the meaning specified in Section 9.3.

Company Group means the Company and each Post-Closing Subsidiary of the Company.

Company Indemnified Parties has the meaning specified in Section 8.1.

Company Liabilities means collectively, except as otherwise provided for in this Agreement or the Ancillary Agreements, any and all Liabilities that arise out of any act, omission, event or condition occurring or arising out of or relating to the ownership, operation or use of the Company Business, but excluding any Liabilities arising out of or relating to the Transferred Business.

Company Note A has the meaning specified in the recitals of this Agreement.

Company Note B has the meaning specified in the recitals of this Agreement.

Company Note C has the meaning specified in the recitals of this Agreement.

Confidential Information has the meaning specified in Section 9.3.

Dispute has the meaning specified in Section 10.3.

Effective Date has the meaning specified in the recitals of this Agreement.

Employment Agreement means the Employment Agreement, dated February 2, 1999, between ACE Financial Services and Joseph W. Swain.

Encumbrance means any security interest, pledge, hypothecation, mortgage, lien (including, without limitation, environmental and tax liens), violation, charge, lease, license,

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encumbrance, servient easement, adverse claim, reversion, reverter, preferential arrangement, restrictive covenant or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

 Governmental Order means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any self-regulatory organization having jurisdiction over the parties hereto or any of the parties to any of the Ancillary Agreements, any United States or non-United States federal, national, supranational, state, provincial, local or similar government, governmental, regulatory (including, without limitation, insurance regulatory) or administrative authority, legislative body, agency or commission or any court, tribunal or judicial or arbitral body.

Indemnified Party has the meaning specified in Section 8.2.

Indemnifying Party has the meaning specified in Section 8.2.

Information has the meaning specified in Section 9.1.

Insurance Proceeds means those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of the insured, in either case net of any applicable premium adjustments, retrospectively rated premium adjustments, deductibles, retentions or costs paid by such insured.

JAMS has the meaning specified in Section 10.3.

Keepwell Amendment means an amendment to the Amended and Restated Guaranty, dated February 15, 2000, by Assured Guaranty Re Overseas in favor of ACE Title that permanently eliminates any liability of Assured Guaranty Re Overseas thereunder in respect of (x) all insurance and reinsurance business written by ACE Title subsequent to the date of such amendment and (y) all other payment obligations incurred by ACE Title subsequent to the date of such amendment.

Liabilities means any and all debts, liabilities and obligations, payments, costs and expenses, whether accrued or unaccrued, absolute or contingent, matured or unmatured, disclosed or undisclosed, known or unknown, liquidated or unliquidated or determined or determinable, including, without limitation, those arising under any law or regulation (including, without limitation, any insurance law but excluding any tax law), Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking.

Losses means any and all losses, liabilities, claims, damages, obligations, payments, interest, penalties, fines, costs and expenses, matured or unmatured, absolute or contingent, disclosed or undisclosed, determined or determinable, accrued or unaccrued, liquidated or unliquidated, known or unknown (including, without limitation, the costs and expenses of any Action, threatened Action, demand, assessment, judgment, settlement and compromise relating thereto and attorneys fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against, or settling any such Action or threatened Action).

Misstatement has the meaning specified in Section 8.1.

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New York Property means Unit No. 35D in The Museum Tower Condominium located at 15 West 53^rd Street, New York, NY.

Person includes an individual, a partnership, a joint venture, a limited liability company, a corporation, a trust, a body corporate, an unincorporated organization, a group and a government or other department or agency thereof.

Post-Closing Subsidiaries with respect to either ACE or the Company means collectively all of the Persons that will, immediately following the Closing Time, be Subsidiaries of such entity.

Pre-Closing Periods means any taxable period ending before or on the date of the Closing.

Public Offering has the meaning specified in the recitals of this Agreement.

Registration Statement means the Registration Statement on Form S-1, as amended and supplemented from time to time, filed with the Commission under the Securities Act relating to the Public Offering.

Representatives has the meaning specified in Section 9.1.

Return shall have the meaning given to such term in the Tax Allocation Agreement.

Securities Act means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

Subsidiary means, as to any Person, (i) any corporation, partnership or other entity of which at the time of determination more than 50% of the outstanding Voting Stock is owned, directly or indirectly, by such Person and/or one or more Subsidiaries of such Person.

Tax Allocation Agreement means the Tax Allocation Agreement specified in Section 3.1(xi).

Tax Authority shall have the meaning given to such term in the Tax Allocation Agreement.

Taxes means any federal, state, county, local or foreign taxes, charges, fees, levies or other assessments, including all net income, gross income, sales, use, ad valorem, transfer, gains, profits, excise, value added, franchise, real and personal property, gross receipt, capital stock, business, disability employment, payroll, license, estimated, stamp, custom or withholding taxes or charges imposed by any governmental entity, and includes any interest and penalties on or additions to any such taxes and any such expenses incurred in connection with the determination, settlement or litigation of any Tax liability.

Transferred Business means the obligations of members of the Company Group that have been retroceeded to or otherwise assumed by members of the ACE Group pursuant to the Ancillary Agreements specified in Section 3.1(i) through (ix).

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Underwriting Agreement has the meaning specified in the recitals of this Agreement.

Voting Stock means stock of any class or classes or other ownership interest having general voting power under ordinary circumstances to elect a majority of the board of directors, managers, trustees or persons with similar functions of the entity in question; provided that, for the purposes of this definition, stock which carries only the right to vote conditionally on the happening of an event will not be considered Voting Stock, whether or not that event has happened.

Section 1.2             Other Definitional Provisions.  The words hereof, hereto, herein, hereunder and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, and references to any Article, Section, Exhibit or Schedule are references to Articles, Sections, Exhibits or Schedules in or to this Agreement unless otherwise specified.

ARTICLE II
TRANSFER OF SUBSIDIARIES AND ASSETS

Section 2.1             Formation of Assured Guaranty US Holdings and Transfer of Certain Subsidiaries.

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