1179755--3/2/2009--ENDURANCE_SPECIALTY_HOLDINGS

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We are exposed to significant financial and capital markets risk, including changes in interest rates, credit spreads, and foreign currency exchange rates, which may adversely affect our results of operations, financial condition or liquidity. A portion of our investment portfolio is allocated to alternative investments, which we expect to have different risk characteristics than our investments in traditional fixed maturity securities and short term investments, which in turn could result in a material adverse change to our investment performance, and accordingly adversely affect our financial results. The effect that governmental actions for the purpose of stabilizing the financial markets will have on such markets generally or on us is difficult to determine at this time. Governmental initiatives intended to alleviate the current financial crisis may not be effective and, may be accompanied by other initiatives, including new capital requirements or other regulations, that could materially affect our results of operations, financial condition and liquidity in ways that we cannot predict. Losses due to defaults by others, including issuers of investment securities (which include structured securities such as commercial mortgage-backed securities and residential mortgage-backed securities or other high yielding bonds) or reinsurance counterparties, could adversely affect the value of our investments, results of operations, financial condition or cash flows. We could incur substantial losses and reduced liquidity if one of the financial institutions we use in our operations, including those institutions that participate in our credit facility and the counterparty to our $150 million variable delivery equity forward, fails. Our participation in a securities lending program subjects us to potential liquidity and other risks. Further deterioration in the public debt and equity markets could lead to additional investment losses. Our valuation of fixed maturity investments, short-term investments and preferred equity securities may include methodologies, estimations and assumptions, which are subject to differing interpretations, and could result in changes to investment valuations that may materially adversely affect our results of operations or financial condition. The determination of the other-than-temporary impairments taken on our investments is highly subjective and could materially impact our financial position or results of operations. Some of our investments are relatively illiquid and are in asset classes that have been experiencing significant market valuation fluctuations. Our investment liquidity and investment performance may affect our financial assets and ability to conduct business. Changes in current accounting practices and future pronouncements may materially impact our reported financial results. Our results of operations may fluctuate significantly from period to period and may not be indicative of our long-term prospects. If actual claims exceed our reserve for losses and loss expenses, our financial condition and results of operations could be adversely affected. As a property, agriculture and catastrophe insurer and reinsurer, we are particularly vulnerable to losses from catastrophes. As a property and casualty insurer and reinsurer, we could face losses from war, terrorism and political unrest. The risks associated with property and casualty reinsurance underwriting could adversely affect us. If actual renewals of our existing contracts do not meet expectations, our gross premiums written in future years and our future results of operations could be materially adversely affected. The development of our U.S.-based insurance operations is subject to increased risk from changing market conditions. The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or on our results of operations. We may be unable to purchase reinsurance and our net income could be reduced or we could incur a net loss in the event of an unusual loss experience. Since we are dependent on key executives, the loss of any of these executives or our inability to retain other key personnel could adversely affect our business. Our business could be adversely affected by Bermuda employment restrictions. A decline in our financial strength ratings could affect our standing among brokers and customers and cause our premiums and earnings to decrease. Our holding company structure and certain regulatory and other constraints affect our ability to pay dividends and make other payments. The cost of reinsurance security arrangements may materially impact our margins. Profitability may be adversely impacted by inflation. Adverse changes to the economy in the countries in which we operate could lower the demand for our insurance and reinsurance products and could have a materially adverse effect on the profitability of our operations. We may be adversely affected by foreign currency fluctuations. Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs, access to capital and cost of capital. Our failure to comply with restrictive covenants contained in the indentures governing our senior notes or our current or future credit facility could trigger prepayment obligations, which could adversely affect our business, financial condition and results of operations. Since we depend on a few brokers for a large portion of our revenues, loss of business provided by any one of them could adversely affect us. Our reliance on brokers subjects us to their credit risk. The effects of emerging claim and coverage issues on our business are uncertain. We operate in a highly competitive environment which could adversely impact our operating margins. The historical cyclicality of the property and casualty reinsurance industry may cause fluctuations in our results. Recent or future legislation may decrease the demand for our property catastrophe reinsurance products and adversely affect our business and results of operations. Acquisitions or strategic investments that we made or may make could turn out to be unsuccessful. The regulatory system under which we operate, and potential changes thereto, could have a material adverse effect on our business. Heightened scrutiny of issues and practices in the insurance industry may adversely affect our business. Operational risks, including systems or human failures, are inherent in business, including ours. There are provisions in our charter documents that may reduce or increase the voting rights of our ordinary shares. Provisions of Endurance Holdings bye-laws may restrict the ability to transfer shares of Endurance Holdings. A shareholder may be required to sell its shares of Endurance. A shareholder may be required to indemnify us for any tax liability that results from the acts of that shareholder. There are regulatory limitations on the ownership and transfer of our ordinary shares. U.S. persons who own our ordinary shares may have more difficulty in protecting their interests than U.S. persons who are shareholders of a U.S. corporation. Anti-takeover provisions in our bye-laws could impede an attempt to replace or remove our directors, which could diminish the value of our ordinary shares. It may be difficult to enforce service of process and enforcement of judgments against us and our officers and directors. We may become subject to taxes in Bermuda after March 28, 2016, which may have a material adverse effect on our financial condition. We and our subsidiaries may be subject to U.S. tax which may have a material adverse effect on our financial condition and results of operations. Holders of Endurance Holdings ordinary shares or Series A Preferred Shares who own 10% or more of our voting power may be subject to taxation under the controlled foreign corporation ( CFC ) rules. U.S. Persons who hold ordinary shares or Series A Preferred Shares may be subject to U.S. income taxation on their pro rata share of our related party insurance income ( RPII ). U.S. Persons who hold ordinary shares or Series A Preferred Shares will be subject to adverse tax consequences if we are considered a passive foreign investment company (a PFIC ) for U.S. federal income tax purposes. Changes to U.S. Tax Legislation could have an adverse impact on us or our shareholders. The Organization for Economic Cooperation and Development ( OECD ) and the European Union are considering measures that might increase our taxes and reduce our net income. Statutory and GAAP Financial Statements Enhanced Capital Requirement, Minimum Solvency Margin and Restrictions on Dividends and Distributions Certain Other Bermuda Law Considerations Insurance Holding Company Regulation of Endurance Holdings State Insurance Regulation of the Company s U.S. Operating Subsidiaries Operations of Endurance U.K. and Endurance Bermuda Certain United Kingdom Tax Considerations Certain United States Federal Income Tax Considerations United States Taxation of Endurance Holdings and its Operating Subsidiaries United States Taxation of Holders of Ordinary Shares and Series A Preferred Shares

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1179755--3/2/2009--ENDURANCE_SPECIALTY_HOLDINGS_LTD