Start of Conditional Dealings

Lancashire Holdings Limited
13 December 2005


                          Lancashire Holdings Limited

    For publication in the United Kingdom and Bermuda only. Not for release,
publication or distribution in the United States of America, Australia, Canada,
                 South Africa, the Republic of Ireland or Japan

13 December, 2005
                         LANCASHIRE RAISES US$1 BILLION
                 PROPOSED ADMISSION TO TRADING IN LONDON ON AIM
           A.M. BEST NOTIFICATION OF INDICATIVE A- (EXCELLENT) RATING
                LAUNCH OF NEW INSURANCE AND REINSURANCE COMPANY

Introduction

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

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

Lancashire's ticker is LRE.

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

Lancashire's Proposed Business Activities

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

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

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

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

Board and Management

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

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

Financing

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

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

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

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

Placing statistics and expected timetable

Placing Price                                                                 284p (US$5.00)

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

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

Conditional dealings in common shares commence                             13 December 2005

Admission and commencement of unconditional dealings                       16 December 2005



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

Contacts:

Merrill Lynch

Rupert Hume-Kendall         [phone]

Simon Fraser

Matthew Thomson

Benfield Advisory

Tristan McDonald            [phone]

Ross Milburn

Kinmont

Gavin Kelly                 [phone]
John O'Malley

Financial Dynamics

Robert Bailhache            [phone]

Dominick Peasley


Merrill Lynch, JPMorgan Cazenove, Fox-Pitt, Kelton, Teather & Greenwood,
Benfield Advisory and Kinmont, each of which is authorised and regulated in the
UK by the Financial Services Authority, are each acting for the Company and
no-one else in connection with the Placing and Admission and will not be
responsible to anyone other than the Company for providing the protections
afforded to their respective clients or for providing advice in relation to the
Placing and Admission, this announcement or any other matter. Merrill Lynch's
responsibilities as the nominated adviser to the Company are owed solely to the
London Stock Exchange and are not owed to the Company or to any Director or to
any other person, whether in respect of any decision to acquire common shares,
in relation to any part of this announcement or otherwise.

In connection with the Placing, no common shares of the Company have been
marketed to or are available for purchase by the public in the United Kingdom,
Bermuda or elsewhere.

The release, publication or distribution of this announcement in certain
jurisdictions may be restricted by law and therefore persons in such
jurisdictions into which this announcement is released, published or distributed
should inform themselves about and observe such restrictions.

No offer, invitation or inducement to acquire common shares or other securities
in the Company or any other company is being made by this announcement.

Certain statements contained in this announcement may constitute forward-looking
statements. Any such forward-looking statements involve risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
Lancashire, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. These forward-looking statements speak only as of
the date of this announcement and there can be no assurance that the results and
events contemplated by such forward-looking statements will, in fact, occur. The
Company and the Directors expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement
contained herein, save as required to comply with any legal or regulatory
obligations (including the AIM Rules).

This announcement is not an invitation nor is it intended to be an inducement to
engage in investment activity for the purpose of Section 21 of the Financial
Services and Markets Act 2000 ('FSMA'). The Company's common shares are in any
event being placed only with (i) persons who have professional experience in
matters relating to investments and who are investment professionals within the
meaning of Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 of the United Kingdom (the 'Financial Promotion
Order') or (ii) persons who fall within Article 49(2)(a) to (d) ('high net worth
companies, unincorporated associations etc.') of the Financial Promotion Order
(all such persons together being referred to as 'relevant persons'). Any
investment or investment activity to which this announcement relates is
available only to relevant persons in the United Kingdom and will be engaged in
only with relevant persons. Anyone other than a relevant person must not rely on
this announcement.

The contents of this announcement, which have been prepared by and are the sole
responsibility of Lancashire Holdings Limited, have been approved by Merrill
Lynch International of Merrill Lynch Financial Centre, 2 King Edward Street,
London EC1A 1HQ, solely for the purposes of section 21(2)(b) of FSMA.

THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION OR DISTRIBUTION INTO THE
UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA, THE REPUBLIC OF IRELAND OR
JAPAN. NEITHER THIS ANNOUNCEMENT NOR ANY COPY OF IT MAY BE TAKEN OR DISTRIBUTED
OR PUBLISHED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES, AUSTRALIA, CANADA,
SOUTH AFRICA, THE REPUBLIC OF IRELAND OR JAPAN OR DISTRIBUTED TO U.S. PERSONS.

THE MATERIAL SET FORTH HEREIN IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT
INTENDED, AND SHOULD NOT BE CONSTRUED, AS AN OFFER OF SECURITIES FOR SALE INTO
THE UNITED STATES OR ANY OTHER JURISDICTION. SECURITIES MAY NOT BE OFFERED OR
SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED OR AN APPLICABLE EXEMPTION FROM REGISTRATION. THE SECURITIES OF
THE COMPANY DESCRIBED HEREIN HAVE NOT BEEN AND WILL NOT BE SO REGISTERED. THERE
WILL BE NO PUBLIC OFFER OF SECURITIES IN THE UNITED STATES, AUSTRALIA, CANADA,
OR JAPAN OR ANY OTHER JURISDICTION.

Copies of the Company's Admission Document, which is dated 13 December 2005,
will be available free of charge to the public during normal business hours on
any weekday (except Saturdays, Sundays and public holidays) from the registered
office of the Company at Clarendon House, 2 Church Street, Hamilton HM11,
Bermuda and from the offices of Merrill Lynch at Merrill Lynch Financial Centre,
2 King Edward Street, London EC1A 1HQ for one month from the date of Admission.

Stabilisation / FSA


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