STIRLING COOKE BROWN HOLDINGS LTD, S-1/A, 1997-11-05

STIRLING COOKE BROWN HOLDINGS LTD
S-1/A, 1997-11-05
INSURANCE AGENTS, BROKERS & SERVICE

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1997
REGISTRATION NO. 333-32995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------

AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
STIRLING COOKE BROWN HOLDINGS LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

BERMUDA 6411 NOT APPLICABLE
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION OF INDUSTRIAL EMPLOYER IDENTIFICATION
INCORPORATION OR CLASSIFICATION CODE NO.)
ORGANIZATION) NUMBER)
VICTORIA HALL, THIRD FLOOR, 11 VICTORIA STREET
HAMILTON, HM 11, BERMUDA
(441) 295-7556
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
NICHOLAS MARK COOKE
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
STIRLING COOKE BROWN HOLDINGS LIMITED
C/O STIRLING COOKE
BROWN NORTH AMERICAN REINSURANCE INTERMEDIARIES INC.
125 MAIDEN LANE
NEW YORK, NEW YORK 10038
(212) 269-6700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
JOHN M. OLSON, ESQ. LOIS F. HERZECA, ESQ. WARREN CABRAL, ESQ.
FOLEY & LARDNER 777 FRIED, FRANK, HARRIS, APPLEBY, SPURLING & KEMPE
EAST WISCONSIN SHRIVER & JACOBSON CEDAR HOUSE, 41 CEDAR
AVENUE ONE NEW YORK PLAZA AVENUE HAMILTON, HM 12,
MIWAUKEE,LWISCONSIN 53202 NEW YORK, NEW YORK BERMUDA (441) 295-2244
(414) 271-2400 10004 (212) 859-8000
---------------
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. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

---------------

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 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

EXPLANATORY NOTE

This Registration Statement covers the registration of $50 million aggregate
offering price of Ordinary Shares of Stirling Cooke Brown Holdings Limited
(the "Company") to be sold in the offering referred to below. This
Registration Statement also covers the registration of an indeterminate number
of Ordinary Shares for resale by Goldman, Sachs & Co. in connection with
market-making transactions in the United States. (No Ordinary Shares are being
registered for the purpose of sales outside the United States.) The complete
Prospectus relating to the offering (the "IPO Prospectus") follows immediately
after this Explanatory Note. Following the IPO Prospectus are certain pages of
the Prospectus relating solely to such market-making transactions (together
with the remainder of the Prospectus as modified as indicated below, the
"Market-Making Prospectus"), including alternate front and back cover pages, a
section entitled "Principal Shareholders" and a section entitled "Plan of
Distribution". The Market-Making Prospectus will not include the stabilization
legend, which will be deleted from the inside front cover page, or the
sections entitled "Principal and Selling Shareholders" and "Underwriting". All
other sections of the IPO Prospectus are to be used in the Market-Making
Prospectus.
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED NOVEMBER 5, 1997

2,500,000 SHARES

STIRLING COOKE BROWN HOLDINGS LIMITED

LOGO
ORDINARY SHARES
(PAR VALUE $.25 PER SHARE)

-----------

Of the 2,500,000 Ordinary Shares offered hereby, 1,375,000 shares are being
sold by the Company and 1,125,000 shares are being sold by the Selling
Shareholders. See "Principal and Selling Shareholders". The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Shareholders.

Prior to the Offering, there has been no public market for the Ordinary
Shares of the Company. It is currently estimated that the initial public
offering price per share will be between $19.00 and $21.00. For factors to be
considered in determining the initial public offering price, see
"Underwriting".

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE ORDINARY SHARES.

Application has been made for the quotation of the Ordinary Shares on the
Nasdaq National Market under the symbol "SCBHF".

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

-----------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT (1) COMPANY (2) SHAREHOLDERS
-------------- ------------ ----------- -------------------
<S> <C> <C> <C> <C>
Per Share.......... $ $ $ $
Total (3).......... $ $ $ $
</TABLE>
- -----
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Before deducting estimated expenses of $850,000 payable by the Company.
(3) Certain of the Selling Shareholders have granted the Underwriters an option
for 30 days to purchase up to an additional 375,000 shares at the initial
public offering price per share, less the underwriting discount, solely to
cover over-allotments. If such option is exercised in full, the total
initial public offering price, underwriting discount and proceeds to
Selling Shareholders will be $ , $ , and $ , respectively. See
"Underwriting".

-----------

The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about , 1997, against payment therefor in immediately available
funds.

GOLDMAN, SACHS & CO.

CIBC OPPENHEIMER SBC WARBURG DILLON READ INC.

-----------

The date of this Prospectus is , 1997.
<PAGE>

Certain persons participating in the Offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the ordinary shares,
including over-allotment, stabilizing and short-covering transactions in such
securities, and the imposition of a penalty bid, in connection with the
Offering. For a description of these activities, see "Underwriting".

----------------

For North Carolina investors: These Securities have not been approved or
disapproved by the Commissioner of Insurance for the State of North Carolina,
nor has the Commissioner of Insurance ruled upon the accuracy or the adequacy
of this document.

----------------

Consent under the Exchange Control Act 1972 (and regulations thereunder) has
been obtained from the Bermuda Monetary Authority for the issue of the shares
being offered pursuant to the Offering. In addition, a copy of this document
has been delivered to the Registrar of Companies in Bermuda for filing
pursuant to the Companies Act 1981 of Bermuda. In giving such consent and in
accepting this prospectus for filing, the Bermuda Monetary Authority and the
Registrar of Companies in Bermuda accept no responsibility for the financial
soundness of any proposal or for the correctness of any of the statements made
or opinions expressed herein.

These securities may not be offered or sold to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses, or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995. All applicable provisions of
the Financial Services Act 1986 of the United Kingdom must be complied with in
relation to anything done in relation to these securities in, from or
otherwise involving the United Kingdom. This document may not be issued or
passed on to any person in the United Kingdom unless that person is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom this document
may otherwise lawfully be issued or passed on.

----------------

The Company intends to furnish to its shareholders annual reports containing
consolidated financial statements prepared in accordance with United States
generally accepted accounting principles, which financial statements will be
examined and subject to a written opinion expressed by an independent public
accounting firm. The Company also intends to make available to its
shareholders quarterly reports for the first three quarters of each fiscal
year containing unaudited financial information.

----------------

No purchaser may acquire directly or indirectly 10% or more of the Company's
outstanding ordinary shares without prior approval by the Insurance Department
of the State of New York. See "Business--Regulation".

2
<PAGE>

ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES LAWS

Stirling Cooke Brown Holdings Limited was organized pursuant to the laws of
Bermuda and certain of the Company's directors and officers and certain of the
experts named herein reside outside of the United States. Moreover, a
significant portion of the assets of the Company is located outside the United
States. Consequently, it may not be possible to effect service of process on
such persons or entities within the United States or to enforce against any of
them judgments of courts in the United States predicated upon the civil
liability provisions of the federal securities laws of the United States. The
Company has been informed that the United States and Bermuda do not currently
have a treaty providing for reciprocal recognition and enforcement of
judgments in civil and commercial matters, and a final judgment for the
payment of money rendered by any federal or state court in the United States
based on civil liability, whether or not predicated solely upon the federal
securities laws, would, therefore, not be automatically enforceable in
Bermuda. The Company has also been advised that a final and conclusive
judgment obtained in federal or state courts in the United States under which
a sum of money is payable as compensatory damages (i.e., not being a sum
claimed by a revenue authority for taxes or other charges of a similar nature
by a governmental authority, or in respect of a fine or penalty or multiple or
punitive damages) may be the subject of an action on a debt in the Supreme
Court of Bermuda under the common law doctrine of obligation. Such an action
should be successful upon proof that the sum of money is due and payable, and
without having to prove the facts supporting the underlying judgment, as long
as (i) the court that gave the judgment was competent to hear the action in
accordance with private international law principles as applied by the courts
in Bermuda and (ii) the judgment is not contrary to public policy in Bermuda,
was not obtained by fraud or in proceedings contrary to natural justice of
Bermuda and is not based on an error in Bermuda law. A Bermuda court may
impose civil liability on the Company or its directors or officers in a suit
brought in the Supreme Court of Bermuda against the Company or such persons
with respect to a violation of federal securities law, provided that the facts
surrounding such violation would constitute or give rise to a cause of action
under Bermuda law.

The Company has been advised that the United States and the United Kingdom
do not currently have a treaty providing for the reciprocal recognition and
enforcement of judgments (other than arbitration awards) in civil and
commercial matters. Therefore, a final judgment for the payment of money
rendered by any federal or state court in the United States based on civil
liability, whether or not predicated solely upon the U.S. federal securities
laws, would not be automatically enforceable in the United Kingdom. In order
to enforce in the United Kingdom any U.S. judgment, proceedings must be
initiated before a court of competent jurisdiction in the United Kingdom. A
U.K. court will, under current practice, normally issue a judgment
incorporating the judgment rendered by a U.S. court if it finds that (i) the
U.S. court had, according to English rules of conflict of laws, jurisdiction
over the original proceeding, (ii) the judgment was obtained without fraud and
in accordance with the principles of natural justice, (iii) the judgment is
final and conclusive on the merits, (iv) the judgment does not contravene the
public policy or public order of the United Kingdom and (v) the judgment is
for a debt or a definite sum of money (not being a penalty, fine, multiple of
damages or taxes). Based on the foregoing, there can be no assurance that U.S.
investors will be able to enforce in the United Kingdom judgments in civil and
commercial matters obtained in any federal or state court in the United
States. There is doubt as to whether a U.K. court would impose civil liability
in an original action predicated solely upon the U.S. federal securities laws
brought in a court of competent jurisdiction in the United Kingdom.

3
<PAGE>

FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements. Forward-looking
statements are statements other than historical information or statements of
current condition. Some forward-looking statements may be identified by use of
terms such as "believes", "anticipates", "intends" or "expects". The forward-
looking statements contained and incorporated by reference in this Prospectus
are generally located in the material set forth under the headings "Prospectus
Summary", "Risk Factors", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" but may be found in other
locations as well. These forward-looking statements relate to the plans and
objectives of the Company for future operations, including the Company's
policy concerning dividends. In light of the risks and uncertainties inherent
in all future projections, including but not limited to those set forth under
the heading "Risk Factors", the inclusion of the forward-looking statements in
this Prospectus should not be regarded as a representation by the Company or
any other person that the objectives or plans of the Company will be achieved.
Many factors could cause the Company's actual results to differ materially
from those in the forward-looking statements, including the following: (i)
loss of the services of any of the Company's key personnel; (ii) increased
competitive pressure caused by increase in the supply of traditional
insurance, new entrants in the alternative market services industry, or the
willingness of existing competitors to accept lower returns in exchange for
market share; (iii) adverse changes in the statutes or regulations under which
the Company's and its subsidiaries' businesses operate in one or more of the
various jurisdictions in which the Company's or its subsidiaries' businesses
are located; (iv) a contention by the United States Internal Revenue Service
that the Company's operations in Bermuda or the United Kingdom are engaged in
the conduct of a trade or business within the U.S.; (v) a competitive
disadvantage resulting from certain of the competitors of Realm National
Insurance Company having higher financial ratings than Realm National
Insurance Company or any future decline in Realm National Insurance Company's
financial ratings; (vi) the termination of the Company's managing general
agency agreements with certain large insurers; (vii) the failure of one or
more of the Company's reinsurers to fulfill their obligations under
reinsurance agreements; (viii) the inability of the Company to obtain adequate
reinsurance coverage at acceptable cost; and (ix) changing rates of inflation
and other economic conditions, which could adversely affect loss payments,
investment returns, and the fundamental financial strength of the Company's
target customer base in the regions in which the Company operates. The
foregoing review of important factors should not be construed as exhaustive
and should be read in conjunction with other cautionary statements that are
included in this Prospectus. The Company undertakes no obligation to update
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.

4
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and consolidated financial
statements (and the related notes thereto) included elsewhere in this
Prospectus. As used in this Prospectus, unless the context otherwise requires,
the term "Company" includes Stirling Cooke Brown Holdings Limited and all of
its subsidiaries as they have existed from time to time during the periods
covered by this Prospectus, on a consolidated basis. In January 1996, the
Company acquired Realm Investments Ltd. ("RIL"), an affiliated Bermuda-based
holding company with subsidiaries engaged in managing general underwriting,
managing general agency, reinsurance, captive management and insurance
brokering activities, in a share for share exchange accounted for as a purchase
(the "Acquisition"). Unless otherwise indicated, all financial statements used
in this Prospectus have been prepared in accordance with United States
generally accepted accounting principles and all dollar references are to U.S.
dollars, which are the Company's functional currency. Except as otherwise
indicated, all information in this Prospectus has been adjusted to give effect
to a four for one split of the Ordinary Shares which occurred effective June
30, 1997, and assumes no exercise of the Underwriters' over-allotment option.
See "Glossary of Selected Insurance Terms" for definitions of certain terms
used in this Prospectus; such terms are printed in boldface the first time they
appear in the text below. An investment in the Ordinary Shares offered hereby
involves significant risks. See "Risk Factors".

THE COMPANY

Stirling Cooke Brown Holdings Limited is a Bermuda holding company which,
through its subsidiaries, provides risk management services and products
predominantly to U.S. based small and mid-sized businesses seeking cost-
effective alternatives to traditional WORKERS' COMPENSATION insurance. In
addition, the Company arranges REINSURANCE for its products as well as for
those offered by independent U.S. based insurance carriers active in the
workers' compensation, occupational accident and health insurance markets. The
Company believes that its integrated approach, experienced personnel and market
position provide the Company with the ability to offer innovative cost-
effective alternatives to traditional workers' compensation coverage in a
variety of market conditions.

The Company provides most of its services and products to, and derives a
significant portion of its risk management and brokerage fees from, the
workers' compensation insurance market. Workers' compensation is an attractive
market for the structuring of ALTERNATIVE MARKET insurance coverage given the
relatively frequent yet predictable nature of claims, as well as the need to
control costs arising from medical expenses, litigation and other economic
factors. Alternative insurance products typically involve financial
participation by the insured in some or all of the risk, as compared to
traditional insurance products which shift all, or a substantial portion, of
the insured's risk to the insurer. Alternative solutions to traditional
workers' compensation are designed to reduce insurance costs by allowing the
insured to retain a level of risk consistent with the predictable portion of
the loss experience. The Company believes that alternative market workers'
compensation products comprised at least $16.4 billion in 1996, or
approximately 39% of the estimated $42.4 billion total market for workers'
compensation insurance in the U.S. that year. In recent years, the Company has
applied its integrated risk transfer approach to the development of insurance
programs for other SPECIALTY CASUALTY LINES.

The Company has historically experienced strong growth in revenues and
earnings despite the current prolonged SOFT INSURANCE MARKET. The expansion of
the Company's risk management services and products, including the Acquisition,
has led to an increase in the Company's net income from $2.1 million in 1993 to
$9.9 million in 1996. The Company's revenues are predominantly fee based, as
the

5
<PAGE>

Company earns risk management fees for providing services and products to
insureds, insurers and reinsurers. In 1996, 72.2% of the Company's total
revenues were derived from risk management fees including agency and brokerage
fees and commissions, underwriting management and administration fees and fees
from other non-risk bearing activities.

Immediately after the Acquisition in January 1996, certain investment funds
affiliated with The Goldman Sachs Group, L.P. (collectively, the "GS Funds")
made an equity investment in the Company. Consistent with the Company's
strategy of providing services and products at multiple stages in the risk
transfer process, the Company used the proceeds from this investment to acquire
and provide additional capital for Realm National Insurance Company ("Realm"),
a New York domiciled insurance company, in September 1996. The acquisition of
Realm had an insignificant impact on the Company's net income for 1996 and for
the first six months of 1997. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations". The Company is in the process
of integrating Realm's insurance underwriting capabilities with the Company's
risk management services and will seek to earn additional income through a
combination of policy issuance fees and NET PREMIUMS EARNED while retaining a
minimum amount of risk. The net proceeds received by the Company from the
offering of the Ordinary Shares pursuant to this Prospectus (the "Offering")
will be used primarily to provide additional capital to Realm, allowing the
Company to expand its underwriting activities. See "The Company" and "Use of
Proceeds".

BUSINESS STRATEGY

The Company believes that growth potential exists in its markets which will
provide opportunities to increase fee-based revenues, net premiums earned and
net investment income. To capitalize on these opportunities, the Company has
established the following strategic priorities which the Company believes will
allow it to maintain and enhance its position as a provider of alternatives to
traditional workers' compensation insurance:

. Increase market penetration and extend agency network. The Company, through
its MANAGING GENERAL AGENCY network, typically receives net fee income from
the insurance carrier of between 13% and 17% of the insured's gross premium
on the underlying policy for providing underwriting services, POLICY
ADMINISTRATION and PREMIUM ACCOUNTING, and CLAIMS ADJUSTING and
administrative services. The Company intends to increase the market
penetration of its existing agency network by concentrating its marketing
efforts on the most productive agents and by continuing to use agency
incentive and promotional programs to encourage increased levels of new
business development. In addition, the Company intends to continue to
increase the number of INDEPENDENT PRODUCING AGENTS distributing the
Company's services and products.

. Expand current insurance operations. The Company currently uses independent
primary insurance carriers in connection with most of its existing workers'
compensation business, and expects these arrangements to continue for much of
this existing business. However, through Realm, the Company intends to act as
an issuing carrier for a portion of its new business opportunities and
receive a combination of policy issuance fees (typically 7% of the insured's
gross premiums) and/or net premiums earned. The Company is in the process of
increasing Realm's capital base and expanding the number of states in which
Realm is licensed.

. Expand product offerings through existing distribution network. The Company
seeks to expand its product offerings by developing services and products
that meet the financial and risk management objectives of its clients. For
example, in response to rising workers' compensation costs, the Company was
one of the pioneers in the development of alternative NON-SUBSCRIBER
PROGRAMS, which the Company began to market and sell in Texas in the early
1990s. The Company intends to

6
<PAGE>

continue to develop new services and products to be marketed through its
agency distribution network.

. Expand and develop program business. The Company structures and markets
comprehensive programs to transfer risk from an insured to insurers and
ultimately to reinsurers in the workers' compensation market as well as for
other specialty casualty lines. These programs enable the Company to provide
a range of risk management services and products for retail agents, while
also maximizing the Company's revenues at each stage of the risk transfer
process. The Company intends to utilize its existing reinsurance business
relationships to expand the number of programs it offers and also intends to
increase the sale of insurance policies issued under existing programs
through its agency network. The Company expects the growth of its PROGRAM
BUSINESS to increase total revenues as well as increase the revenues
generated from specialty casualty lines.

. Increase reinsurance brokering revenues. The Company's REINSURANCE BROKERING
subsidiaries arrange the reinsurance programs associated with the Company's
products, and also arrange reinsurance programs for numerous other U.S. and
European insurance companies. The Company expects that Realm's expansion will
generate additional business for the Company's reinsurance brokering
operations.

. Selectively pursue acquisitions. The Company is continuously looking to
expand its business by selectively acquiring general agencies and books of
insurance business. Given the Company's ability to earn fees throughout the
risk transfer process, the Company believes the selective acquisition of
general agencies and books of insurance business can generate significant
additional profits relative to the costs of such acquisitions.

Because the Company has already developed the infrastructure necessary to
implement these strategies, the Company believes that its objectives can be
achieved with minimal additional costs. In connection with the Offering, the
Company will raise additional capital required to facilitate the planned
expansion of Realm's business.

THE OFFERING

<TABLE>
<S> <C> <C>
Ordinary Shares offered by the Company......... 1,375,000 Ordinary Shares
Ordinary Shares offered by the Selling
Shareholders.................................. 1,125,000 Ordinary Shares
---------
Total...................................... 2,500,000 Ordinary Shares
=========
Ordinary Shares to be outstanding immediately
after the Offering............................ 9,863,372 Ordinary Shares
</TABLE>

Dividend Policy....... After the Offering, the Company currently intends to
declare quarterly dividends on the Ordinary Shares and
expects that the first quarterly dividend payment will
be $0.03 per Ordinary Share (a rate of $0.12 annually)
and will be declared and paid in the first quarter of
1998. The declaration and payment of future dividends
is at the discretion of the Company's Board of
Directors and will depend upon, among other things,
future earnings, capital requirements, the general
financial condition of the Company, general business
conditions and other factors. The Company, as a holding
company, is dependent on the payment of dividends from
its operating subsidiaries. Certain of the Company's
insurance subsidiaries are subject to regulations and
may be subject to certain taxes that could limit the
amount of or restrict the

7
<PAGE>

payment of dividends to the Company. See "Risk
Factors--Potential Impact of Holding Company Structure
on Dividends", "Dividend Policy", "Business--
Regulation", "Certain Tax Considerations", and
"Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and
Capital Resources".

Use of Proceeds.......
The proceeds to the Company from the sale of Ordinary
Shares by the Company are expected to be approximately
$24.5 million (net of underwriting discounts and
estimated expenses payable by the Company). The Company
currently intends to use approximately $20.0 million of
the net proceeds from the sale of shares by the Company
to periodically provide additional capital to the
Company's wholly-owned insurance subsidiary, Realm. As
Realm's business expands, it will require the
additional funds to meet regulatory capital
requirements. Any remaining funds will be used for
general corporate purposes, which could include
acquisitions of general insurance agencies and books of
insurance business. Pending investment of the net
proceeds in Realm, the Company will invest such net
proceeds in short-term investments. The Company will
not receive any proceeds from the sale of shares by the
Selling Shareholders. See "Principal and Selling
Shareholders" and "Use of Proceeds".

Listing............... Application has been made to have the Ordinary Shares
quoted on the Nasdaq National Market under the symbol
"SCBHF". See "Market for the Ordinary Shares".

RISK FACTORS

Prospective purchasers of the Ordinary Shares should consider carefully the
specific investment considerations set forth under the caption "Risk Factors"
as well as the other information set forth in this Prospectus.

8
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The historical consolidated balance sheet data presented below as of December
31, 1995 and 1996 and the consolidated income statement data for each of the
years in the three-year period ended December 31, 1996, were derived from the
Company's audited consolidated financial statements included elsewhere in this
Prospectus. The historical consolidated balance sheet data as of December 31,
1992, 1993 and 1994 and the consolidated income statement data for the years
ended December 31, 1992 and 1993 were derived from the Company's unaudited
consolidated financial statements. The consolidated income statement data set
forth below for the nine-month periods ended September 30, 1996 and 1997 and
the consolidated balance sheet data at September 30, 1997 have been derived
from the Company's unaudited consolidated financial statements appearing
elsewhere in this Prospectus. In the opinion of the Company, such information
reflects all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of operations during, and the
financial condition of the Company at the end of, such periods. Results for
interim periods should not be considered as indicative of results for any other
periods or for the full year. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations". For additional information
regarding RIL and Realm, see the audited financial statements of RIL for the
year ended December 31, 1995 and Realm for the period from January 1, 1996 to
September 4, 1996 included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS
AS OF OR FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996(1) 1996(1) 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues
Brokerage fees and
commissions........... $ 4,510 $ 10,283 $ 11,670 $ 17,084 $ 20,117 $ 15,125 $ 17,901
Managing general agency
fees.................. 0 0 0 0 6,016 4,374 8,207
Underwriting Management
Fees.................. 0 0 0 0 4,045 3,016 3,037
Captive management and
program fees.......... 0 0 0 0 1,625 1,227 2,099
Loss control and audit
fees.................. 0 0 0 0 2,039 1,302 2,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total risk management
fees................. 4,510 10,283 11,670 17,084 33,842 25,044 33,244
Net premiums earned.... 0 0 0 0 8,754 5,799 9,111
Net investment income.. 278 514 703 1,964 3,405 2,281 4,318
Other income........... 0 0 0 0 841 723 866
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues........ 4,788 10,797 12,373 19,048 46,842 33,847 47,539
---------- ---------- ---------- ---------- ---------- ---------- ----------
Expenses
Net losses and loss
expenses incurred..... 0 0 0 0 6,765 4,091 8,428
Acquisition costs...... 0 0 0 0 1,618 1,447 537
Salaries and benefits.. 2,246 3,658 4,454 6,066 13,106 8,870 13,285
General and
administration
expenses.............. 1,386 3,602 3,788 5,828 13,154 9,158 13,637
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses........ 3,632 7,260 8,242 11,894 34,643 23,566 35,887
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income Before Taxation.. 1,156 3,537 4,131 7,154 12,199 10,281 11,652
Taxation............... 398 1,419 1,298 2,560 2,281 2,159 2,070
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income............ $ 758 $ 2,118 $ 2,833 $ 4,594 $ 9,918 $ 8,122 $ 9,582
========== ========== ========== ========== ========== ========== ==========
Net Income Per
Share(2)(3)............ $ 0.18 $ 0.49 $ 0.66 $ 1.07 $ 1.19 $ 0.98 $ 1.15
Weighted Average
Ordinary Shares
Outstanding(3)......... 4,288,908 4,288,908 4,288,908 4,304,098 8,306,610 8,297,016 8,341,347
BALANCE SHEET DATA:
Cash and marketable
securities............. $ 616 $ 368 $ 428 $ 688 $ 38,221 $ 35,673 $ 42,341
Total assets(4)......... 13,057 15,576 61,914 103,273 235,084 230,455 428,593
Long-term debt.......... 0 0 0 0 0 0 0
Ordinary Shares subject
to redemption(5)....... 0 0 0 0 14,457 14,457 14,529
Total shareholders'
equity................. 1,520 2,532 4,596 7,055 29,001 27,121 37,698
OTHER SELECTED DATA:
Fee income as a percent
of total revenues...... 94.2% 95.2% 94.3% 89.7% 72.3% 74.0% 70.0%
Number of employees..... 62 74 84 104 235 221 303
</TABLE>
(Footnotes on following page)

9
<PAGE>

- --------

(1) Includes the operations of RIL from its January 1996 acquisition by the
Company, Realm from its September 1996 acquisition by the Company and the
operations of North American Risk, Inc. ("North American Risk") from its
July 1996 acquisition by the Company. All of such acquisitions were
accounted for as purchases. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
(2) Net income per share is calculated by dividing net income by the weighted
average number of Ordinary Shares and Ordinary Share equivalents
outstanding during the period. Stock options are considered share
equivalents and are included in the computation of the weighted average
number of Ordinary Shares outstanding using the treasury stock method.
Shares and options issued within one year prior to the registration
statement are deemed outstanding for all periods presented.

(3) All share and per share data have been retroactively restated to reflect
the four for one stock split effected by the Company on June 30, 1997. See
Note 19 to the Company's Consolidated Financial Statements.
(4) Total assets comprise corporate assets together with cash held and
insurance balances receivable in a fiduciary capacity. See Note 5 to the
Company's Consolidated Financial Statements.
(5) The Ordinary Shares owned by the GS Funds are subject to a conditional put
option exercisable after January 2004. Such shares are excluded from total
shareholders' equity. The put option will expire upon the consummation of
the Offering. See Note 11 to the Company's Consolidated Financial
Statements and Note 3 to the Unaudited Consolidated Financial Statements.

10
<PAGE>

RISK FACTORS

COMPETITION; CYCLICALITY OF INSURANCE AND REINSURANCE BUSINESSES

The business of providing risk management services and products to the
workers' compensation and property and casualty insurance markets is highly
competitive. The Company competes with other providers of alternative market
services (including domestic and foreign insurance companies, reinsurers,
insurance brokers, CAPTIVE insurance companies, RENT-A-CAPTIVES, self-
insurance plans, risk retention groups, state funds, ASSIGNED RISK POOLS and
other risk-financing mechanisms) and with providers of traditional insurance
coverage. Many of the Company's competitors have significantly greater
financial resources, longer operating histories, and better financial ratings
and offer a broader line of insurance products than the Company.

Factors affecting the traditional insurance and reinsurance industry
influence the environment for alternative risk management services and
products. Insurance market conditions historically have been subject to
cyclicality and volatility due to premium rate competition, judicial trends,
changes in the investment and interest rate environment, regulation and
general economic conditions, causing many insurance buyers to search for more
stable alternatives. The traditional insurance and reinsurance industry is in
a protracted period of significant price competition, due in part to excess
capacity in most lines of business. While some form of workers' compensation
insurance is a statutory requirement in most states, the choices exercised by
employers in response to the underwriting cycle in traditional insurance and
reinsurance markets have had and will continue to have a material effect on
the Company's results of operations. Although most of the Company's revenues
are derived from fees and commissions rather than underwriting activities, a
substantial portion of the Company's fees are calculated as a percentage of
premium volume, and therefore the Company's fee revenues are directly and
adversely affected by highly competitive market conditions. Additionally,
changes in risk retention patterns by purchasers of insurance and reinsurance
products could have an adverse effect upon the Company.

DEPENDENCE ON RELATIONSHIPS WITH INDEPENDENT PRIMARY INSURANCE CARRIERS

The Company's managing general agencies market insurance products and
programs developed by the Company on behalf of independent insurance carriers,
primarily Clarendon National Insurance Company and its affiliates
("Clarendon") and Legion Insurance Company and its affiliates ("Legion"). In
addition, the Company's insurance brokering and reinsurance brokering
operations, managing general underwriters, and claims and loss control
servicing operations provide additional business and services to Clarendon and
Legion in respect of these products and other insurance and reinsurance
policies. In 1996, fees received from Clarendon accounted for approximately
55% of the Company's total revenues, while fees received from Legion accounted
for less than 10% of the Company's total revenues. Historically, the Company
has had a good relationship with both Clarendon and Legion. There can be no
assurance, however, that Clarendon or Legion will not institute changes which
affect their relationships with the Company. The loss of business from
Clarendon or Legion could have a material adverse effect on the Company's
results of operations and financial conditions. Additionally, any decline in
or disruption of Clarendon's or Legion's business could disrupt the Company's
business and could have a material adverse effect on the Company's results of
operations and financial condition. See "Business--Relationships with
Independent Primary Insurance Carriers".

REINSURANCE CONSIDERATIONS; AVAILABILITY AND COSTS; CREDIT RISKS

The Company relies upon the use of reinsurance agreements in its various
programs to limit and manage the amount of risk retained by the Company or its
customers, including insurance companies. The availability and cost of
reinsurance may vary over time and is subject to prevailing market conditions.
A lack of available reinsurance coverage could limit the Company's ability to
continue certain of its insurance programs. When the Company's own insurance
operations are participating in a program, the lack of available reinsurance
or increases in the cost of reinsurance could also increase

11
<PAGE>

the amount of risk retained by the Company. In addition, while the Company
seeks to obtain reinsurance with coverage limits intended to be appropriate
for the risk exposures assumed, there can be no assurance that losses
experienced by the Company will be within the coverage limits of the Company's
reinsurance agreements.

The Company is also subject to credit risk as a result of its reinsurance
arrangements, as the Company is not relieved of its liability to policyholders
by ceding risk to its reinsurers. The Company is selective in regard to its
reinsurers, placing reinsurance with only those reinsurers that it believes
have strong balance sheets. The Company monitors the financial strength of its
reinsurers on an ongoing basis. The insolvency or inability of any of the
reinsurers used by the Company to meet its obligations could have a material
adverse effect on the results of operations and financial position of the
Company. No assurance can be given regarding the future ability of any of the
Company's reinsurers to meet their obligations.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a substantial extent on the ability and
experience of its executive officers. See "Management". The loss of the
services of one or more such persons could have a material adverse effect on
the business of the Company and its future operations.

POSSIBLE REVISIONS TO LOSS RESERVES

To the extent its activities involve any retention of risk of loss, the
Company maintains LOSS RESERVES to cover its estimated ultimate liability for
losses and loss adjustment expenses with respect to reported and unreported
claims incurred. Reserves are estimates involving actuarial and statistical
projections at a given time of what the Company expects to be the cost of the
ultimate settlement and administration of claims based on facts and
circumstances then known, estimates of future trends in claims severity and
other variable factors such as inflation. To the extent that reserves prove to
be inadequate in the future, the Company would have to increase such reserves
and incur a charge to earnings in the period such reserves are increased,
which could have a material adverse effect on the Company's results of
operations and financial condition. The establishment of appropriate reserves
is an inherently uncertain process and there can be no assurance that ultimate
losses will not materially exceed the Company's loss reserves. The Company has
limited historical claim loss experience to serve as a reliable basis for the
estimation of ultimate claim losses. Although the Company has no reason to
believe that its loss reserves are inadequate, it is possible that the Company
will need to revise the estimate of claim losses significantly in the near
term. In the event of such an increase, the amount, net of associated
reinsurance recoveries, would be reflected in the Company's income statement
in the period in which the reserves were increased.

ADVERSE EFFECT OF LEGISLATION AND REGULATORY ACTIONS

The Company conducts business in a number of states and foreign countries.
Certain of the Company's subsidiaries are subject to comprehensive regulation
and supervision by government agencies in the states and foreign jurisdictions
in which they do business. The primary purpose of such regulation and
supervision is to provide safeguards for policyholders rather than to protect
the interests of shareholders. The laws of the various state jurisdictions
establish supervisory agencies with broad administrative powers with respect
to, among other things, licensing to transact business, licensing of agents,
admittance of assets, regulating premium rates, approving policy forms,
regulating unfair trade and claims practices, establishing reserve
requirements and solvency standards, requiring participation in guarantee
funds and shared market mechanisms, and restricting payment of dividends.
Also, in response to perceived excessive cost or inadequacy of available
insurance, states have from time to time created state insurance funds and
assigned risk pools which compete directly, on a subsidized basis, with
private providers such as the Company. Any such event, in a state in which the
Company has substantial operations, could substantially affect the
profitability of the Company's operations in such state, or cause the Company
to change its marketing focus.

State insurance regulators and the National Association of Insurance
Commissioners (the "NAIC") continually re-examine existing laws and
regulations. It is impossible to predict the future impact of

12
<PAGE>

potential state, federal and foreign country regulations on the Company's
operations, and there can be no assurance that future insurance-related laws
and regulations, or the interpretation thereof, will not have an adverse
effect on the operations of the Company's business.

POSSIBLE ADVERSE IMPACT OF LICENSING PROCESS ON REALM

The Company is in the process of seeking the regulatory approvals necessary
to expand Realm's business to include workers' compensation and other
specialty casualty insurance lines in each of the states in which Realm is
currently licensed to offer other insurance products, and intends to license
Realm in substantially all of the remaining 50 states and the District of
Columbia. See "Business--Risk Transfer and Management". The Company expects
that as Realm receives such approvals and licenses, the revenues to be
generated by Realm and its integration into the Company's existing businesses
will become an important component of the Company's future earnings growth.
However, no assurance can be given that Realm will receive such approvals and
licenses, or when such approvals and licenses will be granted if Realm does
receive them. See "Business--Regulation". A state may require as part of its
licensing process that the insurer or its management have a certain period of
experience (typically one to three years) in the lines of business for which a
license is being sought. Although the Company's management has been involved
in offering workers' compensation products and services for many years,
Realm's own experience in this line of business began for all material
purposes after Realm's acquisition by the Company in September 1996.
Therefore, some states may determine that Realm does not have the requisite
experience to meet this requirement. In the absence of such experience, the
insurance regulatory authority may delay issuing a license until such time as
the experience is obtained. The failure to receive, or a delay in receiving,
one or more of such approvals and licenses could have a material adverse
impact on Realm's ability to generate future earnings growth for the Company.

POTENTIAL IMPACT OF HOLDING COMPANY STRUCTURE ON DIVIDENDS

The Company is a holding company that conducts no operations of its own and
whose assets essentially consist of its equity interest in its subsidiaries.
The Company will rely on cash dividends and other permitted payments from its
subsidiaries to pay creditors and to pay cash dividends, if any, to the
Company's shareholders. Certain of the Company's subsidiaries are subject to
regulations and may be subject to certain taxes that could limit the amount or
restrict the payment of dividends to the Company. By agreement with the New
York Department of Insurance, Realm is restricted from declaring dividends
until September 5, 1998. See "Dividend Policy", "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources", "Certain Tax Considerations", "Business--Regulation" and
Note 17 to the Company's Consolidated Financial Statements.

TAXATION OF THE COMPANY AND CERTAIN OF ITS SUBSIDIARIES

The Company and certain of its subsidiaries are incorporated outside the
United States and, as foreign corporations, do not file United States tax
returns. These entities believe that they operate in such a manner that they
will not be subject to U.S. tax (other than U.S. excise tax on reinsurance
premiums and withholding tax on certain investment income from U.S. sources)
because they do not engage in business in the United States. There can be no
assurance, however, that these entities will not become subject to U.S. tax
because U.S. law does not provide definitive guidance as to the circumstances
in which they would be considered to be doing business in the United States.
If such entities are deemed to be engaged in business in the United States
(and, if the Company were to qualify for benefits under the income tax treaty
between the United States and Bermuda or the United States and the United
Kingdom, such business were attributable to a "permanent establishment" in the
United States), the Company would be subject to U.S. tax at regular corporate
rates on its income that is effectively connected with its U.S. business plus
an additional 30% "branch profits" tax on income remaining after the regular
tax. See "Certain Tax Considerations".

SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS

The Company is a Bermuda company and the majority of its officers and
directors are residents of various jurisdictions outside the United States. A
significant portion of the assets of the Company

13
<PAGE>

and such officers and directors, at any one time, are or may be located in
jurisdictions outside the United States. It may be difficult for investors to
effect service of process within the United States on directors and officers
of the Company who reside outside the United States or to enforce against the
Company or such directors and officers judgments of United States courts
predicated upon civil liability provisions of the United States federal
securities laws. See "Enforceability of Civil Liabilities Under United States
Laws".

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS; POSSIBLE ADVERSE EFFECT
ON FUTURE MARKET PRICES

Upon completion of the Offering, there will be 9,863,372 Ordinary Shares
outstanding. The 2,500,000 shares sold in the Offering will be immediately
tradeable without restriction by persons other than those who may be deemed
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"). The remaining
7,363,372 shares were issued by the Company in private transactions prior to
the Offering and are "restricted securities" as that term is defined in Rule
144. The holders of these shares, as Selling Shareholders, have agreed not to
sell any Ordinary Shares without the consent of Goldman, Sachs & Co., on
behalf of the Underwriters, for a period of 180 days following the date of
this Prospectus. After the Offering, the holders of 7,363,372 Ordinary Shares
will have the right, subject to certain conditions and limitations, to require
the Company to register all or a portion of such shares under the Securities
Act to permit the public sale of such shares. Significant sales of Ordinary
Shares under a registration statement, pursuant to Rule 144 or otherwise in
the future, or the prospect of such sales, may depress the price of the
Ordinary Shares or any market that may develop. See "Shares Eligible for
Future Sale" and "Description of Capital Shares--Registration Rights
Agreement".

PRINCIPAL SHAREHOLDERS; POSSIBLE CONFLICTS OF INTEREST

Following the Offering, the Company's officers and directors will
beneficially own approximately 31.3% of the outstanding Ordinary Shares.
Accordingly, these officers and directors will have the ability to
significantly influence the election of directors and most other corporate
actions. See "Principal and Selling Shareholders".

The GS Funds own approximately 34.0% of the outstanding Ordinary Shares.
After completion of the Offering, the GS Funds are expected to own
approximately 24.0% of the outstanding Ordinary Shares. In addition, of the
six current members of the Company's Board of Directors, two are Managing
Directors of Goldman, Sachs & Co.

Goldman, Sachs & Co. (directly or through affiliates) are engaged in certain
commercial activities and transactions with the Company. See "Certain
Relationships and Related Party Transactions". Goldman, Sachs & Co. are acting
as lead manager of the Offering. Because the GS Funds are affiliates of
Goldman, Sachs & Co. and own in the aggregate more than 10% of the Ordinary
Shares of the Company, the underwriting arrangements for the Offering must
comply with the requirements of Rule 2720 of the National Association of
Securities Dealers, Inc. (the "NASD"). Those requirements provide that, when
an NASD member firm participates in distributing an affiliate's equity
securities, the price of the securities must be no higher than the price
determined by a "qualified independent underwriter". Accordingly, SBC Warburg
Dillon Read Inc. is acting as a qualified independent underwriter for purposes
of determining the price of the Ordinary Shares offered hereby. See
"Underwriting".

POSSIBLE ISSUANCES OF UNDESIGNATED SHARES; ANTI-TAKEOVER PROVISIONS

The Board of Directors is authorized under the Company's Bye-Laws to issue
up to 5,000,000 preference shares and to determine their relative rights,
preferences, privileges and restrictions, including voting rights. Therefore,
the rights of the holders of Ordinary Shares will be subject to and may be
adversely affected by the rights of the holders of any preference shares that
may be

14
<PAGE>

designated and issued in the future. Although there is no current intention to
do so, the issuance of newly designated shares could have the effect of
delaying, deferring or preventing a change in control of the Company, which
could deprive the Company's shareholders of opportunities to sell their
Ordinary Shares at a premium. The Company's Board of Directors is divided into
three groups serving staggered three-year terms. Additionally, directors may
only be removed by shareholders holding not less than 75% of the outstanding
Ordinary Shares. The Company's Bye-Laws contain certain provisions that may
have the effect of making more difficult the acquisition of control of the
Company by means of a tender offer, open market share purchases, a proxy
contest or otherwise. Such provisions include a restriction on voting of
Ordinary Shares held by certain holders (other than the existing shareholders)
of 10% or more of the Ordinary Shares ("Interested Shareholders") and
restrictions on certain business combinations with certain Interested
Shareholders. While these provisions may have the effect of encouraging
persons seeking to acquire control of the Company to negotiate with the Board
of Directors, they could also have the effect of discouraging a prospective
acquiror from making a tender offer or otherwise attempting to gain control of
the Company. See "Description of Capital Shares".

INTEREST RATE FLUCTUATIONS

The Company maintains most of its cash in the form of short-term, fixed-
income securities, the value of which is subject to fluctuation depending on
changes in prevailing interest rates. The Company generally does not hedge its
cash investments against interest rate risk. Accordingly, changes in interest
rates may result in fluctuations in the income derived from the Company's cash
investments.

NO PRIOR MARKET FOR ORDINARY SHARES; POSSIBLE VOLATILITY OF ORDINARY SHARES
PRICE AND THE SECURITIES MARKETS

Prior to the Offering there has been no public market for the Ordinary
Shares. Application has been made to have the Ordinary Shares quoted on the
Nasdaq National Market. The initial public offering price of the Ordinary
Shares will be determined through negotiations between the Company, the
Selling Shareholders and the representatives of the Underwriters. There can be
no assurance that the initial public offering price will correspond to the
price at which the Ordinary Shares will trade in the public market subsequent
to the Offering or that an active trading market for the Ordinary Shares will
develop and continue after the completion of the Offering. See "Underwriting".
In addition, the market price of the Ordinary Shares upon the completion of
the Offering could be subject to significant fluctuations in response to
variations in the Company's quarterly financial results or other developments,
such as announcements of new products by the Company or the Company's
competitors, enactment of legislation or regulation affecting the insurance
industry, interest rate movements or general economic conditions.

The Company has been advised by Goldman, Sachs & Co. that, subject to
applicable laws and regulations, Goldman, Sachs & Co. currently intend to make
a market in the Ordinary Shares following completion of the Offering. However,
they are not obligated to do so and any market-making may be discontinued at
any time without notice. In addition, such market-making activity will be
subject to the limits imposed by the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). There can be no
assurance that an active market for the Ordinary Shares will develop or, if
developed, will continue. Moreover, because of the affiliation of Goldman,
Sachs & Co. with the Company, Goldman, Sachs & Co. are required to deliver a
current prospectus and otherwise comply with the requirements of the
Securities Act in connection with any secondary market sale of the Ordinary
Shares, which may affect their ability to continue market-making activities.

DILUTION

Purchasers of Ordinary Shares in the Offering will incur immediate and
substantial dilution in the net tangible book value of their Ordinary Shares
($13.11 per share assuming an initial public offering price of $20.00 per
share, the midpoint of the range set forth on the cover page of this
Prospectus). See "Dilution".

15
<PAGE>

THE COMPANY

The Company is a Bermuda holding company which, through its subsidiaries,
provides risk management services and products predominantly to U.S. based
small and mid-sized businesses seeking cost-effective alternatives to
traditional workers' compensation insurance. In addition, the Company arranges
reinsurance for its products as well as for those offered by independent U.S.
based insurance carriers active in the workers' compensation, occupational
accident and health insurance markets.

The Company believes that its integrated approach, experienced personnel and
market position provide the Company with the ability to offer innovative cost-
effective alternatives to traditional workers' compensation coverage in a
variety of market conditions. The Company structures and markets comprehensive
programs to transfer risk from an insured to insurers and ultimately to
reinsurers in the workers' compensation market as well as other specialty
casualty lines. The Company is able to offer these programs primarily as a
result of the strong relationships and expertise it has developed through its
reinsurance brokering activities. Furthermore, although certain of the
Company's programs utilize an independent primary insurance carrier, the
Company is capable of providing or obtaining the services and products
required at each stage of the risk transfer process. The Company believes
these programs are cost-effective to the insured and provide additional
business to reinsurers with excess underwriting capacity. Thus, the Company is
able to provide RETAIL AGENTS and insureds with the advantages of being a
single source provider of risk management services and products, while also
maximizing its own revenues at each stage of the risk transfer process.

The Company earns risk management fees and may retain a portion of the
premium paid by the insured on the underlying policy for providing its
services and products. In 1996, 72.2% of the Company's total revenues were
derived from risk management fees including agency and brokerage fees and
commissions, underwriting management and administration fees and fees from
other non-risk bearing activities.

The Company provides most of its services and products to, and derives a
significant portion of its risk management and brokerage fees from, the
workers' compensation insurance market. Workers' compensation is an attractive
market for the structuring of alternative market insurance coverage given the
relatively frequent yet predictable nature of claims, as well as the need to
control costs arising from medical expenses, litigation and other economic
factors. Alternative insurance products typically involve financial
participation by the insured in some or all of the risk, as compared to
traditional insurance products which shift all, or a substantial portion, of
the insured's risk to the insurer. Alternative solutions to traditional
workers' compensation are designed to reduce insurance costs by allowing the
insured to retain a level of risk consistent with the predictable portion of
the loss experience. The Company believes that alternative market workers'
compensation products comprised at least $16.4 billion in 1996, or
approximately 39% of the estimated $42.4 billion total market for workers'
compensation insurance in the U.S. that year. In recent years, the Company has
applied its integrated risk transfer approach to the development of insurance
programs for other specialty casualty lines.

16
<PAGE>

reinsurance programs. The Company soon began to develop and market its own
innovative services and products designed for employers seeking effective
methods of alleviating onerous insurance costs.

Beginning in 1992, the Company identified a number of opportunities and
undertook certain strategic initiatives to enhance its growth prospects. To
further these plans, the Company acquired RIL in January 1996. The Company has
expanded its business and services to include managing general agency
services, insurance underwriting, underwriting management, claims
administration, loss and safety control and premium auditing, enabling it to
diversify its revenues and increase its overall control of the risk transfer
process.

Immediately after the Acquisition in January 1996, the GS Funds made an
equity investment in the Company. Consistent with the Company's strategy of
providing services and products at multiple stages in the risk transfer
process, the Company used the proceeds from this investment to acquire and
provide additional capital for Realm in September 1996. The Company is in the
process of integrating Realm's insurance underwriting capabilities with the
Company's risk management services and will seek to earn additional income
through a combination of policy issuance fees and net premiums earned
associated with the underwriting function while retaining a minimum amount of
risk. The net proceeds received by the Company from the Offering will be used
primarily to provide additional capital to Realm, allowing the Company to
expand its underwriting activities. See "Use of Proceeds".

The Company has historically experienced strong growth in revenues and
earnings despite the current prolonged soft insurance market. The expansion of
the Company's risk management services and products, including the
Acquisition, has led to an increase in the Company's net income from $2.1
million in 1993 to $9.9 million in 1996. At September 30, 1997, the Company
had approximately $428.6 million in assets and 303 employees.

The Company was incorporated in 1995, its principal offices are located at
Victoria Hall, Third Floor, 11 Victoria Street, Hamilton, HM 11, Bermuda, and
its telephone number at that address is (441) 295-7556. The Company, through
its subsidiaries, also maintains offices in London, England; New York, New
York; and at various locations in Florida and Texas.

USE OF PROCEEDS

The proceeds to the Company from the sale of Ordinary Shares by the Company
are expected to be approximately $24.5 million (net of underwriting discounts
and estimated expenses payable by the Company). The Company currently intends
to use approximately $20.0 million of the net proceeds from the sale of shares
by the Company to periodically provide additional capital to the Company's
wholly-owned insurance subsidiary, Realm. As Realm's business expands, it will
require the additional funds to meet regulatory capital requirements. Any
remaining funds will be used for general corporate purposes, which could
include acquisitions of general insurance agencies and books of insurance
business. Pending investment of the net proceeds in Realm, the Company will
invest such net proceeds in short-term investments. The Company will not
receive any proceeds from the sale of shares by the Selling Shareholders. See
"Principal and Selling Shareholders".

MARKET FOR ORDINARY SHARES

Prior to the Offering, there has been no public market for the Ordinary
Shares. Application has been made to have the Ordinary Shares quoted on the
Nasdaq National Market under the symbol "SCBHF". The Company has been advised
by Goldman, Sachs & Co. that, subject to applicable laws and regulations,
Goldman, Sachs & Co. currently intend to make a market in the Ordinary Shares
following completion of the Offering. However, they are not obligated to do so
and any market-making may be discontinued at any time without notice. In
addition, such market-making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act. There can be no assurance that an
active market for the Ordinary Shares will develop or, if developed, will
continue. See "Risk Factors--No Prior Market for Ordinary Shares; Possible
Volatility of Ordinary Shares Price and the Securities Markets" and
"Underwriting".

17
<PAGE>

DIVIDEND POLICY

After the Offering, the Company currently intends to declare quarterly
dividends on the Ordinary Shares and expects that the first quarterly dividend
payment will be $0.03 per Ordinary Share (a rate of $0.12 annually) and will
be declared and paid in the first quarter of 1998. The declaration and payment
of future dividends is at the discretion of the Company's Board of Directors
and will depend upon, among other things, future earnings, capital
requirements, the general financial condition of the Company, general business
conditions and other factors. The Company, as a holding company, is dependent
on the payment of dividends from its operating subsidiaries. Certain of the
Company's subsidiaries are subject to regulations and may be subject to
certain taxes that could limit the amount of or restrict the payment of
dividends to the Company. By agreement with the New York Department of
Insurance, Realm is restricted from declaring dividends until September 5,
1998. See "Risk Factors--Potential Impact of Holding Company Structure on
Dividends", "Business--Regulation", "Certain Tax Considerations",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Note 17 to the Company's
Consolidated Financial Statements.

DILUTION

At September 30, 1997, the Company had a pro forma net tangible book value
of $43.4 million or $5.12 per Ordinary Share. Net tangible book value per
share is determined by dividing the Company's tangible net book value (total
tangible assets less total liabilities) by the total number of Ordinary Shares
outstanding after giving effect to the termination of the put option relating
to the Ordinary Shares subject to redemption. After giving effect as of that
date to the sale of the 1,375,000 Ordinary Shares offered by the Company
hereby, at an assumed initial offering price of $20.00 per share (the mid-
point of the range set forth on the cover page of this Prospectus), and after
deducting estimated underwriting discounts and commissions and offering
expenses payable by the Company, the Company's adjusted net tangible book
value would have been approximately $67.9 million, or $6.89 per Ordinary
Share. This represents an immediate increase in net tangible book value of
$1.77 per share to the existing shareholders and an immediate dilution in net
tangible book value of $13.11 per share to new investors purchasing Ordinary
Shares in the Offering. The following table illustrates this dilution on a per
share basis:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............ $20.00
Pro forma net tangible book value per share before
the Offering...................................... $5.12
Increase per share attributable to new investors... 1.77
-----
Net tangible book value per share after the Offering....... 6.89
------
Dilution per share to new investors........................ $13.11
======
</TABLE>

The following table sets forth the number of Ordinary Shares purchased from
the Company, the total consideration paid and the average price per share paid
by the Company's existing shareholders and to be paid by new investors in the
Offering (assuming an initial public offering price of $20.00 per share, the
mid-point of the range set forth on the cover page of this Prospectus) and
before deduction of estimated underwriting discounts and commissions:

<TABLE>
<CAPTION>
ORDINARY SHARES AVERAGE
PURCHASED (1) TOTAL CONSIDERATION PRICE
----------------- ------------------- PER ORDINARY
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C>
Existing shareholders........ 8,488,372 86.1% $21,762,416 44.2% $ 2.56
New investors................ 1,375,000 13.9 27,500,000 55.8 20.00
--------- ---- ----------- ----
Total...................... 9,863,372 100% $49,262,416 100%
========= ==== =========== ====
</TABLE>
- --------
(1) Does not reflect the sale of 1,125,000 Ordinary Shares by the Selling
Shareholders in the Offering.

18
<PAGE>

Sales by the Selling Shareholders in the Offering will reduce the number of
Ordinary Shares held by existing shareholders to 7,363,372 or approximately
74.7% and will increase the number of Ordinary Shares held by new investors to
2,500,000 or approximately 25.3% of the total number of Ordinary Shares
outstanding after the Offering.

CAPITALIZATION

The following table sets forth as of September 30, 1997 (i) the actual
consolidated capitalization of the Company, (ii) the consolidated
capitalization of the Company on a pro forma basis to reflect the termination,
upon the consummation of the Offering, of the put option relating to the
Ordinary Shares subject to redemption and (iii) such capitalization as
adjusted to reflect the sale of the 1,375,000 Ordinary Shares offered by the
Company hereby (at an assumed initial public offering price of $20.00 per
share, the mid-point of the range set forth on the cover page of this
Prospectus) and the application of the net proceeds therefrom, net of
estimated underwriting discounts and expenses of the Offering. See "Use of
Proceeds". This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Unaudited Consolidated Financial Statements and the Notes
thereto, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------
PRO
FORMA AS
ACTUAL PRO FORMA ADJUSTED
------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt..................................... $ 0 $ 0 $ 0
Ordinary Shares subject to redemption.............. 14,529 0 0
Shareholders' equity:
Ordinary Shares, $0.25 par value, 20,000,000
shares authorized, 6,199,484 shares issued and
fully paid, 8,488,372 shares issued and fully
paid pro forma, and 9,863,372 shares issued and
outstanding as adjusted......................... 1,550 2,122 2,466
Additional paid in capital....................... 13,722 27,679 51,860
Notes receivable on exercise of options.......... (1,625) (1,625) (1,625)
Unrealized gain on marketable securities......... 84 84 84
Retained earnings................................ 23,967 23,967 23,967
------- ------- -------
Total capitalization........................... $52,227 $52,227 $76,752
======= ======= =======
</TABLE>

19
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS
AS OF OR FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996(1) 1996(1) 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues
Brokerage fees and
commissions........... $ 4,510 $ 10,283 $ 11,670 $ 17,084 $ 20,117 $ 15,125 $ 17,901
Managing general agency
fees.................. 0 0 0 0 6,016 4,374 8,207
Underwriting management
fees.................. 0 0 0 0 4,045 3,016 3,037
Captive management and
program fees.......... 0 0 0 0 1,625 1,227 2,099
Loss control and audit
fees.................. 0 0 0 0 2,039 1,302 2,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total risk management
fees................ 4,510 10,283 11,670 17,084 33,842 25,044 33,244
Net premiums earned.... 0 0 0 0 8,754 5,799 9,111
Net investment income.. 278 514 703 1,964 3,405 2,281 4,318
Other income........... 0 0 0 0 841 723 866
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues....... 4,788 10,797 12,373 19,048 46,842 33,847 47,539
---------- ---------- ---------- ---------- ---------- ---------- ----------
Expenses
Net losses and loss
expenses incurred..... 0 0 0 0 6,765 4,091 8,428
Acquisition costs...... 0 0 0 0 1,618 1,447 537
Salaries and benefits.. 2,246 3,658 4,454 6,066 13,106 8,870 13,285
General and
administration
expenses.............. 1,386 3,602 3,788 5,828 13,154 9,158 13,637
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses....... 3,632 7,260 8,242 11,894 34,643 23,566 35,887
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income Before Taxation.. 1,156 3,537 4,131 7,154 12,199 10,281 11,652
Taxation............... 398 1,419 1,298 2,560 2,281 2,159 2,070
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........... $ 758 $ 2,118 $ 2,833 $ 4,594 $ 9,918 $ 8,122 $ 9,582
========== ========== ========== ========== ========== ========== ==========
Net Income Per
Share(2)(3)............ $ 0.18 $ 0.49 $ 0.66 $ 1.07 $ 1.19 $ 0.98 $ 1.15
Weighted Average
Ordinary Shares
Outstanding(3)......... 4,288,908 4,288,908 4,288,908 4,304,098 8,306,610 8,297,016 8,341,347
BALANCE SHEET DATA:
Cash and marketable
securities............. $ 616 $ 368 $ 428 $ 688 $ 38,221 $ 35,673 $ 42,341
Total assets(4)......... 13,057 15,576 61,914 103,273 235,084 230,455 428,593
Long-term debt.......... 0 0 0 0 0 0 0
Ordinary Shares subject
to redemption(5)....... 0 0 0 0 14,457 14,457 14,529
Total shareholders'
equity................. 1,520 2,532 4,596 7,055 29,001 27,121 37,698
OTHER SELECTED DATA:
Fee income as a percent
of total revenues...... 94.2% 95.2% 94.3% 89.7% 72.3% 74.0% 70.0%
Number of employees..... 62 74 84 104 235 221 303
</TABLE>
(Continued on following page)

20
<PAGE>

(1) Includes the operations of RIL from its January 1996 acquisition by the
Company, Realm from its September 1996 acquisition by the Company and the
operations of North American Risk from its July 1996 acquisition by the
Company. All of such acquisitions were accounted for as purchases. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations".
(2) Net income per share is calculated by dividing net income by the weighted
average number of Ordinary Shares and Ordinary Share equivalents
outstanding during the period. Stock options are considered share
equivalents and are included in the computation of the weighted average
number of Ordinary Shares outstanding using the treasury stock method.
Shares and options issued within one year prior to the registration
statement are deemed outstanding for all periods presented.

(3) All share and per share data have been retroactively restated to reflect
the four for one stock split effected by the Company on June 30, 1997. See
Note 19 to the Company's Consolidated Financial Statements.
(4) Total assets comprise corporate assets together with cash held and
insurance balances receivable in a fiduciary capacity. See Note 5 to the
Company's Consolidated Financial Statements.
(5) The Ordinary Shares owned by the GS Funds are subject to a conditional put
option exercisable after January 2004. Such shares are excluded from
shareholders' equity. The put option will expire upon the consummation of
the Offering. See Note 11 to the Company's Consolidated Financial
Statements and Note 3 to the Unaudited Consolidated Financial Statements.

21
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company derives its revenues principally from (i) risk management fees
earned from non-risk bearing services, (ii) net premiums earned from providing
insurance and reinsurance coverage and (iii) net investment income. In 1996,
the Company's risk management fees accounted for 72.2% of total revenues. The
Company's fees were generated from brokerage activities, managing general
agencies, captive management and various other services. Net premiums earned
accounted for 18.7% of total revenues in 1996. In 1996, a substantial majority
of the Company's net premiums earned were generated from Comp Indemnity
Reinsurance Company Limited, the Company's reinsurance subsidiary ("CIRCL").
In September 1996, the Company acquired Realm, a primary insurance carrier. As
a result of this acquisition, the Company expects that a greater proportion of
its net premiums earned will be derived from insurance business written
through Realm. However, the Company seeks to structure comprehensive
reinsurance programs in order to reduce the Company's participation to a
minimal level of risk, subject to applicable insurance regulations. Finally,
net investment income accounted for 7.3% of total revenues in 1996. The
Company earns investment income on both its investment portfolio and on cash
held in fiduciary accounts. Cash held in fiduciary accounts relates to
premiums collected pending the remittance of such funds to the insurance
company or underwriter.

The Company's ability to achieve profitable growth depends upon, among other
things, (i) its overall volume and mix of business; (ii) its ability to
attract and retain customers; (iii) the size of its investment portfolio; (iv)
the average cash balance held in a fiduciary capacity; (v) the pricing of its
insurance and reinsurance products (which is primarily a function of
competitive conditions and management's ability to assess and manage losses);
and (vi) its effective tax rate, since its subsidiaries are located in
Bermuda, the U.K. and the U.S. Additionally, general economic and market
conditions, including the Company's regulatory environment, will affect
revenues and profitability.

In January 1996, the Company's current holding company structure was created
through a share for share exchange in which Stirling Cooke Brown Holdings
Limited exchanged Ordinary Shares for all of the outstanding share capital of
Stirling Cooke Brown Holdings (UK) Limited ("Stirling Cooke UK") and RIL.
Stirling Cooke UK is a United Kingdom corporation and is deemed the
predecessor of the Company for accounting purposes. The share for share
exchange with RIL was treated as a purchase for accounting purposes. The
purchase price for the Acquisition was approximately $12.8 million, of which
approximately $7.5 million was allocated to goodwill and will be amortized
over a twenty-year period. Therefore, beginning in 1996 the Company's
financial statements reflect the operations of both Stirling Cooke UK and RIL,
while prior to 1996 the Company's financial statements reflect only the
operations of Stirling Cooke UK. See "Certain Relationships and Related Party
Transactions" for additional information regarding the acquisition of RIL.

Immediately following the Acquisition in January 1996, the GS Funds made an
equity investment in the Company. The proceeds of the GS Funds' equity
investment were used to purchase Realm in September 1996. The Company's 1996
consolidated financial statements therefore reflect only three months of
Realm's operations. Following the acquisition of Realm, the Company has
expanded Realm's licenses and business to include workers' compensation and
other specialty casualty lines.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996

Net income increased $1.5 million, or 18.0%, to $9.6 million in the first
nine months of 1997 from $8.1 million in the same period of 1996. Excluding
foreign exchange gains, net income increased $1.9

22
<PAGE>

million or 25.6% to $9.5 million in the first nine months of 1997 from $7.6
million in the same period of 1996.

REVENUES. The components of the Company's revenues are illustrated below:

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------------
1996 1997
------------- -------------
% OF % OF
TOTAL TOTAL TOTAL TOTAL
------- ----- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Risk management fees.............................. $25,044 74.0% $33,244 69.9%
Net premiums earned............................... 5,799 17.1 9,111 19.2
Net investment income............................. 2,281 6.7 4,318 9.1
Other income...................................... 723 2.2 866 1.8
------- ----- ------- -----
Total revenues.................................. $33,847 100.0% $47,539 100.0%
======= ===== ======= =====
</TABLE>

Total revenues increased $13.7 million, or 40.5%, to $47.5 million in the
first nine months of 1997, from $33.8 million in the first nine months of
1996. The increase consisted primarily of an $8.2 million increase in risk
management fees due to increased volume which translated into higher brokerage
fees associated with the Company's U.K. brokering subsidiaries, increased
managing general agency fees as a result of a greater penetration of existing
markets by the Company's managing general agency network, and additional risk
management fees generated by services provided by North American Risk. Net
investment income increased $2.0 million, reflecting an increase in the
average balances of cash, including cash held in fiduciary accounts, and
marketable securities during the first nine months of 1997, primarily as a
result of increased cash flow from the Company's operations and greater
retained earnings. Net premiums earned increased $3.3 million primarily due to
the acquisition of Realm in September 1996.

Risk management fees as a percent of total revenues decreased to 69.9% from
74.0% while net premiums earned as a percent of total revenues increased to
19.2% from 17.1% in the first nine months of 1997 and 1996, respectively. The
Company expects risk management fees as a percent of total revenues to
continue to decrease in future periods and net premiums earned to continue to
increase as a percent of total revenues as Realm becomes licensed to write
insurance in additional states and increases its policy issuance although such
a shift is not expected to be substantial. The anticipated trend will be
partially offset by an increase in risk management fees associated with the
new business expected to be produced through Realm.

RISK MANAGEMENT FEES. The components of the Company's risk management fees
are illustrated below:

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------------
1996 1997
------------- -------------
% OF % OF
TOTAL TOTAL TOTAL TOTAL
------- ----- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Brokerage fees and commissions.................... $15,125 60.4% $17,901 53.9%
Managing general agency fees...................... 4,374 17.5 8,207 24.7
Underwriting management fees...................... 3,016 12.0 3,037 9.1
Captive management and program fees............... 1,227 4.9 2,099 6.3
Loss control and audit fees....................... 1,302 5.2 2,000 6.0
------- ----- ------- -----
Total risk management fees...................... $25,044 100.0% $33,244 100.0%
======= ===== ======= =====
</TABLE>

23
<PAGE>

Risk management fees increased $8.2 million, or 32.7%, to $33.2 million in
the first nine months of 1997 from $25.0 million in the first nine months of
1996. Managing general agency fees had the most significant impact on the
growth of total risk management fees in the first nine months of 1997,
increasing $3.8 million, primarily as a result of the Company's expansion of
its managing general agency operations in Florida, and to a lesser extent,
Texas. Brokerage fees and commissions increased $2.8 million in the first nine
months of 1997, primarily the result of increased insurance and reinsurance
brokerage activities from the Company's U.K.-based brokerage operations.
Captive management and program fees increased $0.9 million due to an increase
in the market penetration of the Company's managing general agency network. In
July 1996, the Company established North American Risk which earns fees by
providing claims administration, safety and loss control services, and premium
audit services. Loss control and audit fees for these services increased $0.7
million in the first nine months of 1997.

Brokerage fees and commissions represented 53.9% of risk management fees in
the first nine months of 1997 compared to 60.4% in the first nine months of
1996. This decrease was primarily a result of the Company's strategy to
further expand and diversify its risk management business through its managing
general agency operations and other service-providing subsidiaries. As a
result, managing general agency fees comprised 24.7% of risk management fees
in the first nine months of 1997 compared to 17.5% in the first nine months of
1996 and loss control and audit fees (a service provided by North American
Risk) comprised 6.0% of risk management fees in the first nine months of 1997
compared to 5.2% in the same period of 1996.

EXPENSES. The components of the Company's expenses are illustrated below:

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
---------------
1996 1997
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Net losses and loss expenses incurred.......................... $ 4,091 $ 8,428
Insurance premium acquisition costs............................ 1,447 537
------- -------
Total insurance costs........................................ 5,538 8,965
------- -------
Salaries and benefits.......................................... 8,870 13,285
General and administration expenses............................ 9,158 13,637
------- -------
Total operating expenses..................................... 18,028 26,922
------- -------
Total expenses............................................. $23,566 $35,887
======= =======
</TABLE>

Total expenses increased $12.3 million, or 52.3%, to $35.9 million in the
first nine months of 1997 from $23.6 million in the first nine months of 1996.
Total insurance costs, which includes net losses and loss expenses incurred
and insurance premium acquisition costs, increased $3.4 million. The increase
in total insurance costs from the first nine months of 1996 to the first nine
months of 1997 was a direct result of the increase in net premiums earned
during those periods. Total operating expenses increased $8.9 million, or
49.3%, to $26.9 million in the first nine months of 1997 from $18.0 million in
the first nine months of 1996. Salaries and benefits, the largest component of
operating expenses, increased $4.4 million while other general and
administration expenses increased $4.5 million. These increases are primarily
the result of expansion into additional related business lines. The Company
has expanded, and continues to actively seek opportunities to expand, its
operations in order to strengthen its control over the production sources of
its business and to broaden the services it provides to clients.

INCOME. Income before taxation increased $1.4 million, or 13.3%, to $11.7
million in the first nine months of 1997 from $10.3 million in the first nine
months of 1996. Excluding foreign exchange gains,

24
<PAGE>

income before taxation increased $1.8 million, or 17.8%, to $11.6 million in
the first nine months of 1997 from $9.8 million in the first nine months of
1996. Provision for income taxes decreased $0.1 million to $2.1 million in the
first nine months of 1997 compared to $2.2 million in the first nine months of
1996, representing effective tax rates of 17.8% and 21.0%, respectively. This
decrease in the effective tax rate was due to the relative increase in profits
from the Company's Bermuda subsidiaries, together with a decrease in corporate
income tax rates in the U.K. from 33% to 31%. The Company expects its
effective tax rate to increase marginally as the percentage of its revenues
earned in the United States increases.

YEARS ENDED DECEMBER 31, 1996 AND 1995

As a result of the Acquisition in January 1996, the Company's 1996 financial
statements reflect a full year of combined operations for Stirling Cooke Brown
Holdings (U.K.) Limited and RIL. The 1995 financial statements reflect the
operations of Stirling Cooke Brown Holdings (U.K.) Limited only. A comparison
of 1996 financial results to 1995 financial results presents significant
differences that are primarily attributable to the Acquisition.

Net income increased $5.3 million, or 115.9%, to $9.9 million in 1996 from
$4.6 million in 1995 primarily as a result of the Acquisition.

REVENUES. The components of the Company's revenues are illustrated below:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1996
------------------ ------------------
TOTAL % OF TOTAL TOTAL % OF TOTAL
------- ---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Risk management fees...................... $17,084 89.7% $33,842 72.2%
Net premiums earned....................... 0 0.0 8,754 18.7
Net investment income..................... 1,964 10.3 3,405 7.3
Other income.............................. 0 0.0 841 1.8
------- ----- ------- -----
Total revenues.......................... $19,048 100.0% $46,842 100.0%
======= ===== ======= =====
</TABLE>

Revenues increased $27.8 million, or 145.9%, to $46.8 million in 1996 from
$19.0 million in 1995. The increase was principally comprised of a $16.8
million increase in risk management fees as a result of the Acquisition, and
to a much lesser extent, an increase in brokerage fees. Net premiums earned
equaled $8.8 million in 1996, and net investment income increased $1.4
million. Net premiums earned was primarily comprised of net premiums earned by
the Company's reinsurance subsidiary, CIRCL, and to a lesser extent, net
premiums earned through Realm following its acquisition by the Company in
September 1996. The increase in net investment income reflects an increase in
the Company's cash balances, including cash held in fiduciary accounts, and
marketable securities to $88.5 million in 1996 from $24.7 million in 1995,
primarily as a result of the acquisition of RIL, increased cash flow from the
Company's operations, greater retained earnings and, to a lesser extent, the
proceeds from the GS Funds' equity investment.

For the year ending December 31, 1996, risk management fees accounted for
72.2% of total revenues while net premiums earned accounted for 18.7% and net
investment income accounted for 7.3% of total revenues.

25
<PAGE>

RISK MANAGEMENT FEES. The components of the Company's risk management fees
are illustrated below:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1996
------------------ ------------------
TOTAL % OF TOTAL TOTAL % OF TOTAL
------- ---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Brokerage fees and commissions............ $17,084 100.0% $20,117 59.4%
Managing general agency fees.............. 0 0.0 6,016 17.8
Underwriting management fees.............. 0 0.0 4,045 12.0
Captive management and program fees....... 0 0.0 1,625 4.8
Loss control and audit fees............... 0 0.0 2,039 6.0
------- ----- ------- -----
Total risk management fees.............. $17,084 100.0% $33,842 100.0%
======= ===== ======= =====
</TABLE>

Risk management fees increased $16.8 million, or 98.1%, to $33.8 million in
1996 from $17.1 million in 1995. This increase was primarily a result of the
Acquisition and to a lesser extent an increase in brokerage fees earned by the
Company's London brokering operations. The addition of managing general agency
fees, underwriting management fees, captive management and program fees were
attributable to the operations of RIL. In addition, brokerage fees increased
$3.0 million due in part to higher premium volume generated by the managing
general agency network of RIL and a general increase in reinsurance brokering
business.

In July 1996, the Company established North American Risk, which earns fees
by providing claims administration, safety and loss control services and
premium audit services to its clients. Fees earned by North American Risk
contributed $2.0 million to the Company's total revenues in 1996.

Brokerage fees and commissions comprised 59.4% of risk management fees in
1996 while managing general agency fees comprised 17.8% and loss control and
audit fees (a service provided by North American Risk) comprised 6.0% of risk
management fees in 1996.

EXPENSES. The components of the Company's expenses are illustrated below:

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31,
---------------
1995 1996
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Net losses and loss expenses incurred.......................... $ 0 $ 6,765
Insurance premium acquisition costs............................ 0 1,618
------- -------
Total insurance costs........................................ 0 8,383
------- -------
Salaries and benefits.......................................... 6,066 13,106
General and administrative expenses............................ 5,828 13,154
------- -------
Total operating expenses....................................... 11,894 26,260
------- -------
Total expenses............................................... $11,894 $34,643
======= =======
</TABLE>

Total expenses increased $22.7 million, or 191.3%, to $34.6 million in 1996
from $11.9 million in 1995, primarily as a result of the Acquisition. Total
insurance costs, which includes net losses and loss expenses incurred and
insurance premium acquisition costs, equaled $8.4 million in 1996. Total
operating expenses increased $14.4 million, or 120.1%, to $26.3 million in
1996 from $11.9 million in 1995 primarily as a result of the Acquisition.
Salaries and benefits, the largest component of operating expenses, increased
$7.0 million while other general and administration expenses increased $7.3
million. These increases were primarily the result of additional operating
expenses arising from the

26
<PAGE>

Acquisition and the acquisitions of Realm and North American Risk, as well as
the expansion of the Company's managing general agency and managing general
underwriter operations. The Company has expanded, and continues to seek
opportunities to expand, its operations in order to strengthen its control
over the production sources of its business and broaden the services it
provides to clients. While this planned expansion led to expected lower
operating profit margins in 1996, the Company believes it has developed the
infrastructure necessary to accommodate expected growth opportunities.

INCOME. The components of the Company's income are illustrated below:

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31,
---------------
1995 1996
------ -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Risk management income......................................... $5,190 $ 8,342
Insurance loss................................................. 0 (389)
Investment income.............................................. 1,964 3,405
Other income................................................... 0 841
------ -------
Income before taxation........................................ 7,154 12,199
------ -------
Taxation....................................................... 2,560 2,281
------ -------
Net income................................................... $4,594 $ 9,918
====== =======
Effective tax rate............................................. 35.8% 18.7%
====== =======
</TABLE>

Income before taxation increased $5.0 million, or 70.5%, to $12.2 million in
1996 from $7.2 million in 1995, primarily as a result of the Acquisition.
Income before taxation generated from the Company's risk management was $8.3
million. The insurance loss of $0.4 million in 1996 was primarily due to a
small number of losses incurred by Realm on its existing property insurance
portfolio during the period after it was acquired in September 1996.
Investment income increased $1.4 million, reflecting an increase in the
Company's cash balances including cash held in fiduciary accounts and
marketable securities primarily as a result of the Acquisition. Other income
in 1996 included foreign exchange gains of $0.5 million.

Provisions for income taxes decreased $0.3 million, or 10.9%, to $2.3
million in 1996 from $2.6 million in 1995, representing effective tax rates of
18.7% and 35.8%, respectively. The significant decrease in the Company's
effective tax rate was primarily due to the Acquisition since the income of
the Company's Bermuda subsidiaries is not subject to income tax.

YEARS ENDED DECEMBER 31, 1995 AND 1994

Prior to 1996, the Company's financial statements reflect the operations of
Stirling Cooke Brown Holdings (U.K.) Limited only.

Net income increased $1.8 million, or 62.2%, to $4.6 million in 1995 from
$2.8 million in 1994.

REVENUES. Revenues increased $6.7 million, or 53.9%, to $19.0 million in
1995 from $12.4 million in 1994. The increase was the result of a $5.4 million
increase in risk management fees and a $1.3 million increase in net investment
income. Risk management fees, which were entirely comprised of brokerage fees
and commissions, increased $5.4 million, or 46.4%, to $17.1 million in 1995
from $11.7 million in 1994. This increase in brokerage fees and commissions
was primarily due to a volume increase resulting from the Company's
relationship with RIL, which generated significant reinsurance business for
the Company. In addition, the Company experienced significant growth from
business generated with other third party insurance and reinsurance companies.
The increase in net investment

27
<PAGE>

income reflects an increase in the Company's cash balances, including cash
held in fiduciary accounts, increased cash flow from the Company's operations
and greater retained earnings.

EXPENSES. Total expenses increased $3.7 million, or 44.3%, to $11.9 million
in 1995 from $8.2 million in 1994. Salaries and benefits increased $1.6
million primarily due to increases in the Company's employee base resulting
from the expansion of the Company's brokering operations while other general
and administration expenses increased $2.0 million primarily due to increased
volume of the Company's brokering operations.

INCOME. Income before taxation increased $3.0 million, or 73.2%, to $7.2
million in 1995 from $4.1 million in 1994. Growth in income before taxation
was primarily due to overall growth in the Company's brokerage operations
which also resulted in a general increase in the Company's profit margin.
Provision for income taxes increased $1.3 million, or 97.2%, to $2.6 million
in 1995 from $1.3 million in 1994.

LIQUIDITY AND CAPITAL RESOURCES

As a holding company that conducts all its business operations through
subsidiaries based in the United States, England and Bermuda, the Company
relies primarily on dividend payments from its subsidiaries to meet its cash
requirements and to pay dividends to shareholders. The payment of dividends by
certain of the Company's subsidiaries is subject to regulations and may be
subject to certain taxes that could limit the amount or restrict the payment
of such dividends to the Company. See "Risk Factors--Potential Impact of
Holding Company Structure on Dividends", "Business--Regulation" and "Certain
Tax Considerations". The principal uses of funds at the holding company level
are the payment of operating expenses and, following the Offering, the payment
of dividends to shareholders.

During 1996, the Company continued to produce a positive cash flow, with
$14.9 million of net cash provided by operating activities in 1996 compared to
$3.2 million in 1995. The principal sources of funds for the Company are risk
management fees, net premiums earned and net investment income. Operating
funds are used primarily for the payment of operating expenses, claims
payments and reinsurance costs. The Company has raised additional capital in
recent years primarily to support the growth of its insurance operations.
During 1996, the Company raised $14.5 million of additional cash in connection
with the equity investment of the GS Funds. The Company purchased Realm for
$9.0 million, and provided an additional capital contribution to Realm of
$12.1 million in September 1996.

At September 30, 1997, the Company held cash and marketable securities of
$42.3 million compared to $38.2 million at December 31, 1996. In addition, the
Company held cash in fiduciary accounts relating to insurance client premiums
amounting to $56.4 million at September 30, 1997 compared to $50.2 million at
December 31, 1996. These increased cash balances reflect the growth in the
Company's business activities for the first nine months of 1997. Of the $42.3
million of cash and marketable securities held by the Company at September 30,
1997, $40.0 million were held by subsidiaries whose payment of dividends to
the Company was subject to regulatory restrictions or possible tax
liabilities. At September 30, 1997, Realm's investment portfolio (at fair
market value) totaled $21.8 million. The portfolio consisted primarily of U.S.
Treasury, short term cash and A rated corporate debt securities.

During the nine months ended September 30, 1997, the Company's operating
activities generated $6.8 million of net cash, compared to generating $12.1
million of net cash during the same period of 1996. The Company used $1.2
million of cash to acquire a book of insurance business in January 1997 and
$0.8 million to repurchase certain of its Ordinary Shares during the first
nine months of 1997. The Company expects its operations will generate positive
cash flow for the remainder of fiscal 1997.

28
<PAGE>

The Company does not have any long-term or short-term debt and therefore has
no debt servicing requirements.

The Company believes that the Company's future operating cash flows and the
proceeds of the Offering will be sufficient to meet the Company's presently
expected liquidity needs both on a short-term basis and long-term basis. No
assurance can be given that the Company will not require additional sources of
funding in the future in light of unexpected business developments or
acquisitions not currently contemplated.

29
<PAGE>

BUSINESS

THE COMPANY

The Company believes that its integrated approach, experienced personnel and
market position provide the Company with the ability to offer innovative cost-
effective alternatives to traditional workers' compensation coverage in a
variety of market conditions. The Company structures and markets comprehensive
programs to transfer risk from an insured to insurers and ultimately to
reinsurers in the workers' compensation market as well as other specialty
casualty lines. The Company is able to offer these programs primarily as a
result of the strong relationships and expertise it has developed through its
reinsurance brokering activities. Furthermore, although certain of the
Company's programs utilize an independent primary insurance carrier, the
Company is capable of providing or obtaining the services and products
required at each stage of the risk transfer process. The Company believes
these programs are cost-effective to the insured and provide additional
business to reinsurers with excess underwriting capacity. Thus, the Company is
able to provide retail agents and insureds with the advantages of being a
single source provider of risk management services and products, while also
maximizing its own revenues at each stage of the risk transfer process.

The Company provides most of its services and products to, and derives a
significant portion of its risk management and brokerage fees from, the
workers' compensation insurance market. Workers' compensation is an attractive
market for the structuring of alternative market insurance coverage given the
relatively frequent yet predictable nature of claims, as well as the need to
control costs arising from medical expenses, litigation and other economic
factors. Alternative insurance products typically involve financial
participation by the insured in some or all of the risk, as compared to
traditional insurance products which shift all, or a substantial portion, of
the insured's risk to the insurer. Alternative solutions to traditional
workers' compensation are designed to reduce insurance costs by allowing the
insured to retain a level of risk consistent with the predictable portion of
the loss experience. The Company believes that alternative market workers'
compensation products comprised at least $16.4 billion in 1996, or
approximately 39% of the estimated $42.4 billion total market for workers'
compensation insurance in the U.S. that year. In recent years, the Company has
applied its integrated risk transfer approach to the development of insurance
programs for other specialty casualty lines.

30
<PAGE>

The Company, through its original operating subsidiary, Stirling Cooke Brown
Insurance Brokers Limited, began operations in 1989 as an insurance broker in
London specializing in the placement of alternatives to traditional workers'
compensation insurance and the arrangement of associated reinsurance programs.
The Company soon began to develop and market its own innovative services and
products designed for employers seeking effective methods of alleviating
onerous insurance costs.

Beginning in 1992, the Company identified a number of opportunities and
undertook certain strategic initiatives to enhance its growth prospects. To
further these plans, the Company acquired an affiliated company, RIL, in
January 1996. For a description of the assets and liabilities of RIL at the
time of the purchase, see Note 3 to the Company's Consolidated Financial
Statements. The Company has expanded its business and services to include
managing general agency services, insurance underwriting, underwriting
management, claims administration, loss and safety control and premium
auditing, enabling it to diversify its revenues and income and increase its
overall control of the risk transfer process.

Immediately after the Acquisition in January 1996, the GS Funds made an
equity investment in the Company. Consistent with the Company's strategy of
providing services and products at multiple stages in the risk transfer
process, the Company used $9 million of the proceeds from this investment to
acquire Realm in September 1996. For a description of the assets and
liabilities of Realm at the time of the purchase, see Note 3 to the Company's
Consolidated Financial Statements. The Company is in the process of
integrating Realm's insurance underwriting capabilities with the Company's
risk management services and will seek to earn additional income through a
combination of policy issuance fees and net premiums earned while retaining a
minimum amount of risk. The net proceeds received by the Company from the
Offering will be used primarily to provide additional capital to Realm,
allowing the Company to expand its underwriting activities. See "Use of
Proceeds".

For certain financial information concerning the Company's business segments
and a geographic breakdown of the Company's revenues, income and assets, see
Note 15 to the Company's Consolidated Financial Statements.

INDUSTRY OVERVIEW

The Company's operations focus primarily on the workers' compensation market
within the commercial insurance industry in the United States. The Company's
risk management services and products are designed to offer an alternative to
traditional workers' compensation insurance. Consequently, the Company
competes with traditional providers of workers' compensation insurance as well
as alternative market providers. The Company believes that the annual amount
U.S. employers pay to provide workers' compensation benefits is at least $57
billion. This total is comprised of estimated premium (for both private
insurance carriers and state funds) and estimated self-insurance costs.

Many commercial insurance buyers seek alternative means of coverage due to
the cyclical nature of the commercial insurance market in the United States
which has, in recent years, resulted in unpredictable and severe swings in the
pricing and availability of coverage. Increasing numbers of buyers recognize
that an effective way to stabilize insurance costs is to retain a portion of
the risk, which traditionally has been fully transferred to insurers. This
trend has led to the development of the alternative market. The alternative
market provides insureds with risk management and financing vehicles,
including captive insurance companies, risk retention groups, rent-a-captive
programs, self-

31
<PAGE>

insurance plans, policyholder owned insurance groups, large-deductible and
retrospectively-rated programs, and other non-traditional insurance products.
These risk management and financing vehicles enable the insured to transfer
risk to the various participants in the risk transfer process in order to
obtain the most attractive pricing and coverage terms under various market
conditions. The ability of alternative market providers to offer coverage
terms and attractive pricing depends, in part, upon their obtaining
reinsurance coverage for these vehicles. In the current soft insurance market,
reinsurers with excess underwriting capacity have increasingly expanded their
participation in the risk transfer process through these vehicles.

Generally, a goal of alternative insurance products is for the insured to
retain, in some manner, those loss events that occur frequently, are low in
severity and are relatively predictable. By retaining such risks, the insured
can (i) obtain a desired level of coverage at an attractive premium; (ii)
eliminate or reduce the transaction costs associated with transferring these
loss events to an insurer, which costs can exceed 30% of the insured's gross
insurance premium; (iii) retain the investment income produced by the funds
set aside to cover these loss events; and (iv) avoid the cyclical nature of
the price demanded by the commercial insurance market to insure these events.
Employers' liability under workers' compensation statutes closely fits this
loss profile, and as a result alternative insurance products have been widely
accepted in the workers' compensation risk management market. Insurance
products in which the insured retains some of the risk also highlight the
benefits of aggressive loss prevention and effective claims management by
aligning the interests of the insurer and the insured to reduce costs. The
Company believes that alternative market workers' compensation products
comprised at least $16.4 billion in 1996, or approximately 39% of the
estimated $42.4 billion total market for workers' compensation insurance in
the U.S. that year. In recent years, the Company has applied its integrated
risk transfer approach to the development of alternative market insurance
programs for other specialty casualty lines.

BUSINESS STRATEGY

INCREASE MARKET PENETRATION AND EXTEND AGENCY NETWORK

The Company, through its managing general agency network, typically receives
net fee income from the insurance carrier of between 13% and 17% of the
insured's gross premium on the underlying policy for providing underwriting
services, policy administration and premium accounting, and claims adjusting
and administrative services. Business originated in the managing general
agency network is central to the Company's business strategy since the
managing general agencies are able to direct the services and products
provided to the insured. The Company intends to increase the market
penetration of its existing agency network by concentrating its marketing
efforts on the most productive agents and by continuing to use agency
incentive and promotional programs to encourage increased levels of new
business development. In addition, the Company intends to continue to increase
the number of independent producing agents distributing the Company's services
and products.

EXPAND CURRENT INSURANCE OPERATIONS

32
<PAGE>

7% of the insured's gross premiums) and/or net premiums earned. The Company is
in the process of increasing Realm's capital base and expanding the number of
states in which Realm is licensed.

EXPAND PRODUCT OFFERINGS THROUGH EXISTING DISTRIBUTION NETWORK

The Company seeks to expand its product offerings by developing services and
products that meet the financial and risk management objectives of its
clients. For example, in response to rising workers' compensation costs, the
Company was one of the pioneers in the development of alternative non-
subscriber programs, which the Company began to market and sell in Texas in
the early 1990s. To better serve client needs, the Company has expanded its
service and product offerings to include loss control and audit services,
premium auditing and claims administration capabilities. The Company intends
to continue to develop new services and products to be marketed through its
agency distribution network.

EXPAND AND DEVELOP PROGRAM BUSINESS

The Company structures and markets comprehensive programs to transfer risk
from an insured to insurers and ultimately to reinsurers in the workers'
compensation market as well as for other specialty casualty lines. These
programs enable the Company to provide a range of risk management services and
products for retail agents, while also maximizing the Company's revenues at
each stage of the risk transfer process. The Company intends to utilize its
existing reinsurance business relationships to expand the number of programs
it offers and also intends to increase the sale of insurance policies issued
under existing programs through its agency network. The Company expects the
growth of its program business to increase its revenues generated from
specialty casualty lines relative to its revenues generated from the workers'
compensation market.

INCREASE REINSURANCE BROKERING REVENUE

The Company's reinsurance brokering subsidiaries arrange for the reinsurance
programs associated with the Company's products and also arrange reinsurance
programs for numerous other U.S. and European insurance companies. The Company
earns commissions for providing these services. The Company's reinsurance
brokering subsidiaries are located in the key markets of the U.S., Bermuda and
London. The Company expects that Realm's expansion will generate additional
business for the Company's reinsurance brokering operations.

SELECTIVELY PURSUE ACQUISITIONS

The Company is continuously looking to expand its business by selectively
acquiring general agencies and books of insurance business. Given the
Company's ability to earn fees throughout the risk transfer process, the
Company believes the selective acquisition of general agencies and books of
insurance business can generate significant additional profits relative to the
costs of such acquisitions. In January 1997, the Company acquired a book of
insurance business of approximately $20 million of annual written premiums
from a managing general agency for approximately $1.2 million. The Company
expects to earn multiple fees from this book of insurance business, including
managing general agency fees, reinsurance brokerage commissions and other
service fees.

RISK TRANSFER AND MANAGEMENT

As a provider of alternative market services and products, the Company seeks
to develop cost-effective risk transfer solutions for clients with specific
insurance or reinsurance needs. Through customized programs, the Company's
clients are able to participate in certain types of risks and retain certain
levels of risk while insuring or reinsuring the remaining risk. The Company
receives fees and commissions for its services and products and may receive a
portion of the UNDERWRITING PROFIT OR LOSS generated from its programs.

33
<PAGE>

The following diagram and discussion illustrate, in summary form, a typical
risk transfer process wherein the Company participates and generates revenues
from services and products provided at various stages in the risk transfer
process. The amount and type of the revenues generated by the Company depends
on the nature of the risk management services and products provided by the
Company, as well as the point at which the business originates in the risk
transfer process. For example, the Company's participation in the risk
transfer process may begin with a retail agent seeking primary insurance
coverage through one of the Company's managing general agency subsidiaries, or
may begin with an insurance company or reinsurance company seeking reinsurance
coverage through the Company's reinsurance brokering operations.
<TABLE>
<CAPTION>

THE RISK
TRANSFER FUNCTIONS TYPE OF REVENUE COMPANY PROVIDER
PROCESS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

Insured (Employer)

Retail Agent

Underwriting, Policy
Administration, Fees and Commissions MGAs in Texas,
Managing General Premium Collection and Florida and New York
Agent ("MGA") Claims Management

Captive Management Fees and Commissions MGAs and
Realm Captive Mgmt.

Direct Insurance Underwriting Profit Realm
Coverage and Investment Income

Primary Insurance Policy Issuance Fees Realm
Carrier

Premium Auditing, and
Accident and Loss Fees North American Risk
Control

Reinsurance Broker Placement of Risk Commissions Stirling Cooke Brown
Brokers

Managing General
Underwriter Underwriting and Fees and Commissions MGUs in Bermuda
("MGU") Premium Collection

Reinsurance Reinsurance Coverage Underwriting Profit and CIRCL
Company Investment Income

</TABLE>
34
<PAGE>

MANAGING GENERAL AGENT

Typically, when an employer seeks to purchase commercial insurance coverage,
such as workers' compensation insurance or other alternative market products,
it will instruct a local retail insurance agent to survey the market and
obtain the desired coverage at acceptable terms. The retail agent has
established relationships with representatives of insurance carriers known as
managing general agents that have expertise in the relevant property and
casualty program and the ability to offer the requested coverage. Managing
general agents ("MGAs") are authorized to underwrite risks, issue policies,
administer claims and accept associated premiums on behalf of various primary
insurance carriers. The Company's MGA network is an important entry point for
much of the Company's business and typically provides an initial net fee-based
revenue opportunity of between 13% and 17% of the insured's gross premium on
the underlying policy. The Company's MGAs earn fees and commissions for
providing underwriting services, policy administration and premium accounting,
and claims adjusting and administration services. In addition, once an MGA has
secured an account, numerous opportunities exist for the Company to generate
additional revenues at other stages in the risk transfer process, as
illustrated in the preceding diagram.

Through its MGA network, the Company also markets its captive and rent-a-
captive arrangements to larger employers or associations (generating $1
million or more in standard premium) wishing to use this alternative market
strategy. In these circumstances, the Company earns an MGA fee and, through
its subsidiary Realm Captive Management, a captive program administration fee.

PRIMARY INSURANCE CARRIER AND RELATED SERVICES

PRIMARY INSURANCE CARRIER. Once an MGA has accepted risk on behalf of an
insurance carrier, it issues a policy to the insured, collects the required
premium, retains its agreed fees and/or commissions and remits the balance of
the premium to the insurance carrier. The insurance carrier may receive an
issuance fee and/or may retain a portion of the premium to cover its RETAINED
RISK. The balance of the premium typically passes to the insurance carrier's
participating reinsurers through a prearranged reinsurance contract.

The Company currently uses independent primary insurance carriers in
connection with most of its existing workers' compensation business, and
expects these arrangements to continue for much of this existing business.
However, through Realm, the Company intends to act as an issuing carrier for a
portion of its new business opportunities and receive a combination of policy
issuance fees (typically 7% of the insured's gross premiums) and/or net
premiums earned. Furthermore, Realm provides the Company with the opportunity
to generate business and receive premiums and fees from sources outside the
Company's MGA network as non-affiliated MGAs may place business with Realm.
The Company expects the revenues to be generated through the integration of
Realm into the Company's existing businesses to be an important component of
future earnings growth.

Realm had shareholders' equity of approximately $21.3 million at September
30, 1997, net premiums earned of approximately $1.9 million in the nine month
period ended September 30, 1997 and a B+ (Very Good) rating from A.M. Best
Company. Prior to its acquisition by the Company, Realm primarily issued
property and casualty insurance in a limited number of states. Subsequent to
its acquisition by the Company, Realm's gross premiums written were $4.0
million (net premiums written were $0.8 million) in 1996, substantially all of
which were related to property insurance, and its underwriting loss ratio
(i.e. the ratio of net losses and net loss expenses to net earned premium) for
such period was 75.3%. For the nine months ended September 30, 1997, Realm's
gross premiums written were $12.3 million (net premiums written were $2.4
million), of which $7.5 million were related to property insurance and $4.8
million were related to workers' compensation insurance. The Company is in the
process of expanding Realm's business to include workers' compensation and
other specialty casualty insurance lines in each of the 19 states in which
Realm is currently licensed to offer property

35
<PAGE>

and casualty insurance. The Company intends to license Realm in substantially
all of the remaining states and the District of Columbia. In order to obtain a
license in a given state, Realm must complete an application and demonstrate
compliance with state licensing requirements. The applicable insurance
regulatory authority reviews the application, which review may take from three
months to two or more years. If all requirements are met, a license is issued.

In determining whether to issue a license to do business in a state, the
state's insurance regulatory agency is required by statute or regulation to
consider a number of factors, largely for the purpose of protecting
policyholders within the state. Typically, the application process will
involve a review of the applicant's recent audited and statutory financial
statements, and in many states one or more years of operating projections, to
assess the financial strength of the applicant; biographical information
concerning the experience and fitness of directors, officers and major
shareholders; reports of recent examinations as to the applicant's compliance
record, finances and market practices in its state of domicile; proposed
policy forms and rate schedules; and the applicant's experience in
underwriting the line or lines of business to be offered.

RELATED SERVICES. The Company also provides premium auditing, claims
administration and loss control services to Realm and other issuing carriers
through its subsidiary North American Risk. The Company charges a fee for
providing these services. The Company believes these services are an important
component of its business and allow the Company to provide its customers with
a full range of products.

REINSURANCE BROKERING

Generally, in the risk transfer process, alternative market insurance
carriers will not offer products directly to the retail agent or insured
unless they have effective reinsurance programs in place. The economics and
quality of these reinsurance arrangements affect the insurance carrier's
ability to compete with other insurance products. Insurance carriers use the
services of reinsurance brokers or other intermediaries to arrange these
reinsurance programs. The Company's reinsurance brokering subsidiary, Stirling
Cooke Brown Reinsurance Brokers Limited ("SCBRIB"), is a reinsurance broker
for alternative and traditional workers' compensation, accident, health, and
specialty casualty lines. SCBRIB operates in the reinsurance markets of
London, the U.S. and Bermuda. Through SCBRIB, the Company generates fee and
commission-based revenues without assuming risk. The Company believes that
SCBRIB gives it a competitive advantage over other industry participants and
allows it to structure more cost-effective alternative programs which are then
marketed by its MGAs. SCBRIB also arranges RETROCESSIONAL REINSURANCE coverage
for reinsurers.

MANAGING GENERAL UNDERWRITER

The Company owns a number of reinsurance carrier representatives known as
MANAGING GENERAL UNDERWRITERS ("MGUs"). These MGUs are authorized to
underwrite reinsurance contracts on behalf of a number of reinsurance carriers
and to accept the associated premium. MGUs earn fees and commissions for
providing underwriting and other services related to the reinsurance contract,
including reinsurance claims administration and other services.

REINSURANCE COMPANY

The Company has a Bermuda based reinsurance company, CIRCL, which reinsures
a portion of the underwriting risk on business provided to or by the Company
and receives a reinsurance premium to cover that risk. CIRCL accepts a portion
of the reinsurance risk from an independent insurance carrier on programs
managed by the Company, and then purchases reinsurance protection to minimize
its risk. CIRCL primarily reinsures workers' compensation, and associated
property and general liability risks. CIRCL's gross premiums assumed were
$12.5 million (net premiums assumed were $9.3 million)

36
<PAGE>

in 1996, of which $9.5 million were related to workers' compensation insurance
and $3.0 million were related to property and general liability insurance.
CIRCL's underwriting loss ratio (i.e. the ratio of net losses and net loss
expenses to net assumed premium) for such period was 77.5%. For the nine
months ended September 30, 1997, CIRCL's gross premiums assumed were $12.0
million (net premiums assumed were $8.2 million), of which $11.3 million were
related to workers' compensation insurance and $0.7 million were related to
property and general liability insurance.

MARKETING

The Company markets and originates business at various stages in the risk
transfer process, through its MGAs, Realm and its insurance and reinsurance
brokering activities.

MGAS

The Company markets its workers' compensation products and other specialty
lines to retail agents in the U.S. through its three Company-owned MGAs and
through other affiliates. Individual MGA offices market their services and
products through sales representatives, targeted direct mail, local and
regional advertising, seminars, and trade and industry conventions. The
Company advertises in U.S. and international trade journals, and has also
contributed articles to a quarterly trade magazine circulated to agents and
policyholders. Additionally, the Company participates as an exhibitor in the
annual Risk and Insurance Management Society conventions.

Given its general reliance on retail agents as an important source of
business production, the Company places emphasis on building and maintaining
relationships with individual retail agents, and on expanding its network of
retail producers. To encourage loyalty from the retail agents to the Company's
MGAs, the Company seeks to provide a high level of service, offer insurance
products that satisfy the needs of clients and reward increased levels of
production through incentive compensation schedules. The Company believes that
it has successfully developed a reputation for providing quality service,
cost-effective products and strong marketing support which has enabled it to
develop strong relationships with its retail agents and commercial customers.

PRIMARY INSURANCE CARRIERS

The Company's MGAs market insurance products on behalf of both Realm and
independent primary insurance carriers, primarily Clarendon and Legion. In
addition, Realm's insurance products are marketed to independent agents and
other procurers of insurance through other unaffiliated MGA networks. The
Company expects Realm's marketing efforts to increase as it becomes licensed
in additional states.

INSURANCE AND REINSURANCE BROKERING

The Company markets its insurance and reinsurance brokering capabilities in
a number of specialty insurance markets, both alternative and traditional. The
Company focuses its insurance brokering marketing efforts on wholesale and
retail agents, and its reinsurance brokering marketing efforts on a number of
primary insurance and reinsurance companies.

COMPETITION

The business of providing risk management services and products to the
workers' compensation and property and casualty insurance markets is highly
competitive. The Company competes with providers of traditional insurance
coverage and with other providers of alternative market services (including
domestic and foreign insurance companies, reinsurers, insurance brokers,
captive insurance companies, rent-a-captives, self-insurance plans, risk
retention groups, state funds, assigned risk pools and other risk-financing
mechanisms). Many of the Company's competitors have significantly greater
financial resources, longer operating histories, better financial ratings and
offer a broader line of insurance products than the Company. The Company
believes the key factors to effectively compete

37
<PAGE>

in the risk management market are price, the ability to tailor programs to the
needs of the insured and the ability to rapidly develop new solutions to
address changing market needs. The Company believes that its services and
products are competitively priced, and that its combination of MGA, insurance
and reinsurance services and products enables it to rapidly develop tailored
programs and act as a single source provider of risk management services and
products. See "Risk Factors--Competition; Cyclicality of Insurance and
Reinsurance Businesses".

Realm is rated B+ (Very Good) by A.M. Best Company and in certain
circumstances may be at a competitive disadvantage to insurance carriers with
higher ratings. The Company's MGAs also represent carriers with higher ratings
from A.M. Best Company, ensuring that the Company's MGAs are not negatively
impacted in circumstances where Realm is not selected as insurance carrier due
to its rating.

REGULATION

The Company's subsidiaries that are engaged in the underwriting of insurance
(primarily Realm and CIRCL) are subject to regulation by government agencies
in the states and foreign jurisdictions in which they do business. The nature
and extent of such regulation vary from jurisdiction to jurisdiction, but
typically involve prior approval of the acquisition of control of an insurance
company or of any company controlling an insurance company; regulation of
certain transactions entered into by an insurance company with any of its
affiliates; approval of premium rates, forms and policies used for many lines
of insurance; standards of solvency and minimum amounts of capital and surplus
which must be maintained; establishment of reserves required to be maintained
for unearned premium, losses and loss expense or for other purposes;
limitations on types and amounts of investments; restrictions on the size of
risks which may be insured by a single company; licensing of insurers and
agents; deposits of securities for the benefit of policyholders; and the
filing of periodic reports with respect to financial condition and other
matters.

In addition, state regulatory examiners perform periodic examinations of
insurance companies. Such regulation is generally intended for the protection
of policyholders rather than security holders. In April, 1997, the New York
Insurance Department issued a report on the examination of Realm's
predecessor, Lloyds New York Insurance Company, covering the period 1991
through 1995. The examination was limited to financial statements and general
business practices. No material deficiencies were found in the financial
statements. However, Realm was penalized for the failure of predecessor
management to provide the Insurance Department prior notice of reinsurance
agreements with affiliates. The Company believes its subsidiaries are in
compliance, in all material respects, with all applicable government
regulations.

In addition to the oversight of the Company's insurance subsidiaries, the
Company, as the ultimate parent of a New York domiciled insurer (Realm), is
also subject to regulation under the New York Insurance Holding Company System
Regulatory Act (the "Holding Company Act"). The Holding Company Act contains
certain reporting requirements including those requiring the Company, as the
ultimate parent company, to file information relating to its capital
structure, ownership, and financial condition and general business operations
of its insurance subsidiaries. The Holding Company Act contains special
reporting and prior approval requirements with respect to transactions among
affiliates.

Insurance companies are also affected by a variety of state and federal
legislative and regulatory measures and judicial decisions that define and
extend the risks and benefits for which insurance is sought and provided.
These include redefinitions of risk exposure in areas such as products
liability, environmental damage, and employee benefits, including workers'
compensation and disability benefits. In addition, individual state insurance
departments may prevent premium rates for some classes of insurers from
reflecting the level of risk assumed by the insurer for those classes. Such
developments may result in adverse effects on the profitability of various
lines of insurance. In some

38
<PAGE>

cases, these adverse effects on profitability can be reduced through repricing
of coverages, if permitted by applicable regulations, or limitation or
cessation of the affected business.

Certain of the Company's subsidiaries are also subject to regulation as
insurance intermediaries. Under the applicable regulations, the intermediary
is responsible as a fiduciary for funds received for the account of the
parties to the insurance or reinsurance transaction and is required to hold
such funds in appropriate bank accounts subject to restrictions on withdrawals
and prohibitions on commingling. The Company's insurance intermediaries
include several MGAs. MGAs produce, underwrite, and manage claims or negotiate
reinsurance for a specific portion of an insurance company's business in
certain states, and they are subject to regulation under state law regarding
licensure, fiduciary obligations with respect to premium and concerning the
general management of the insurer's business.

The activities of Stirling Cooke Brown Insurance Brokers Limited as an
insurance broker in the U.K. require it to be authorized under the Insurance
Brokers (Registration) Act of 1977 by the Insurance Brokers Registration
Council (the "Council"). Authorization by this body involves continuing
compliance with rules made by the Council, which require, among other things,
that the Company maintain a minimum level of working capital, that it allocate
not more than a specified level of its business to any particular insurance
company or group of insurance companies, that it supply reports to the
Council, and that it conduct its business in accordance with the conduct of
business rules published by the Council. It is a condition to the
authorization from the Council that a majority of the directors of Stirling
Cooke Brown Insurance Brokers Limited are and remain registered as insurance
brokers in the U.K.

INSURANCE REGULATION CONCERNING CHANGE OR ACQUISITION OF CONTROL

Realm is organized under the insurance laws of the State of New York (the
"Insurance Code of New York"). The Insurance Code of New York provides that
the acquisition or change of "control" of a domestic insurer or any person
that controls a domestic insurer cannot be consummated without the prior
approval of the relevant insurance regulatory authority. A person seeking to
acquire control, directly or indirectly, of a domestic insurance company or
any person controlling a domestic insurance company must generally file with
the relevant insurance regulatory authority an application for change of
control (commonly known as a "Form A") containing certain information required
by statute and published regulations and provide a copy of such Form A to the
domestic insurer. Under the Insurance Code of New York, control is presumed to
exist if any person, directly or indirectly, owns, controls, holds with power
to vote or holds proxies representing ten percent or more of the voting
securities of any other person.

In addition, many state insurance regulatory laws contain provisions that
require pre-notification to state agencies of a change in control of a non-
domestic admitted insurance company in that state. While such pre-notification
statutes do not authorize the state agency to disapprove the change of
control, such statutes do authorize issuance of a cease and desist order with
respect to the non-domestic admitted insurer if certain conditions exist such
as undue market concentration.

The foregoing requirements may deter, delay or prevent certain transactions
affecting the control of the Company or the ownership of Ordinary Shares,
including transactions that could be advantageous to the shareholders of the
Company.

MEMBERSHIP IN INSOLVENCY FUNDS AND ASSOCIATIONS

Most states require property and casualty insurers licensed to transact
insurance in the state to become members of insolvency funds or associations
which generally protect policyholders against the insolvency of such insurers.
Members of the fund or association must contribute to the payment of certain
claims made against insolvent insurers. Maximum contributions required by law
in any one year vary between 1% and 2% of annual premiums written by a member
in that state. Assessments from insolvency funds paid by Realm were immaterial
in 1994, 1995, and 1996. The cost of most of these assessments is recoverable
through future policy surcharges and premium tax deductions.

39
<PAGE>

Realm is also required to participate in various mandatory insurance
facilities or in funding mandatory pools, which are generally designed to
provide insurance coverage for consumers who are unable to obtain insurance in
the voluntary insurance market. One such pool is the multi-state workers'
compensation pool operated by the National Council on Compensation Insurance.
These pools typically require all companies writing applicable lines of
insurance in the state for which the pool has been established to fund
deficiencies experienced by the pool based upon each company's relative
premium writings in that state, with any excess funding typically distributed
to the participating companies on the same basis. To the extent that these
assessments are not covered by Realm's reinsurance treaties, they may have an
adverse effect on Realm. Total assessments incurred by Realm from all such
facilities for 1994, 1995, and 1996 were immaterial.

RESTRICTIONS ON DIVIDENDS

Realm is subject to various state statutory and regulatory restrictions,
generally applicable to each insurance company in its state of incorporation,
which limit the amount of dividends or distributions payable by an insurance
company to its shareholders. By agreement with the New York Department of
Insurance, Realm is restricted from declaring dividends for a two year period
from September 5, 1996, the date upon which its acquisition by the Company was
completed. The restrictions are generally based on certain levels of surplus,
investment income, and operating income, as determined under statutory
accounting practices.

The Insurance Code of New York regulates the distribution of dividends and
other payments to the Company by Realm. Under the applicable New York statute,
unless prior regulatory approval is obtained, an insurer may not declare or
distribute any dividend to shareholders which, together with all dividends
declared or distributed by it during the preceding twelve months, exceeds the
lesser of (i) 10% of its surplus to policyholders as shown by its last
statement on file with the New York Department of Insurance, or (ii) 100% of
adjusted net investment income during such period. Such restrictions or any
additional subsequently imposed restrictions may in the future affect the
Company's ability to pay principal and interest on its debt, expenses, and any
cash dividends to its shareholders. Future dividends from the Company's
subsidiaries may also be limited by business considerations.

Additionally, CIRCL is subject to certain regulations that may restrict its
ability to pay dividends. See "--Bermuda Regulation".

NAIC FORMULAS

The National Association of Insurance Commissioners has adopted a
methodology for assessing the adequacy of statutory surplus of property and
casualty insurers which includes a risk-based capital requirement. Insurance
companies are required to calculate and report information under a risk-based
formula which attempts to measure statutory capital and surplus needs based on
the risks in a company's mix of products and investment portfolio. The formula
is designed to allow state insurance regulators to identify potential weakly
capitalized companies. Under the formula, a company determines its "risk-based
capital" ("RBC") by taking into account certain risks related to the insurer's
assets (including risks related to its investment portfolio and ceded
reinsurance) and the insurer's liabilities (including underwriting risks
related to the nature and experience of its insurance business). The RBC rules
provide for different levels of regulatory attention depending on the ratio of
a company's total adjusted capital to its "authorized control level" of RBC.
Under the formula, a higher ratio reflects a greater adequacy of capital.
Based on calculations made by the Company, the RBC level for the Company's
insurance subsidiaries exceeds levels that would trigger regulatory attention.
At December 31, 1996, Realm's RBC ratio was approximately 1,908%, and the
threshold requiring minimum regulatory involvement was 200%. Therefore, the
Company's capital exceeds all requirements of the Risk-Based Capital Model
Act. The NAIC has also developed an Insurance Regulatory Information System
("IRIS") to assist state insurance departments in their oversight of the
financial condition of

40
<PAGE>

insurance companies operating in their respective states. IRIS identifies 11
industry ratios and specifies "usual values" for each ratio. Departure from
the usual values in four or more ratios generally leads to inquiries from
individual state insurance commissioners. Management believes Realm's IRIS
ratios are such as to not attract such regulatory attention.

EFFECT OF FEDERAL LEGISLATION

Although the U.S. federal government does not directly regulate the business
of insurance, federal initiatives often affect the insurance industry in a
variety of ways. Current and proposed federal measures which may significantly
affect the insurance industry include federal government participation in
asbestos and other product liability claims, pension regulation (ERISA),
examination of the taxation of insurers and reinsurers, minimum levels of
liability insurance, and automobile safety regulations.

BERMUDA REGULATION

THE INSURANCE ACT 1978, AS AMENDED, AND RELATED REGULATIONS. As a holding
company, the Company is not subject to Bermuda insurance regulations. However,
the Insurance Act 1978, as amended (the "Insurance Act"), which regulates the
insurance business of CIRCL, an insurance subsidiary of the Company, provides
that no person shall carry on insurance business in or from within Bermuda
unless registered as an insurer under the Insurance Act by the Minister of
Finance (the "Minister"). The registration of an applicant as an insurer is
subject to its complying with the terms of its registration and such other
conditions as the Minister may impose from time to time.

The Insurance Act provides a minimum liquidity ratio for general business.
An insurer engaged in general business is required to maintain the value of
its relevant assets at not less than 75% of the amount of its relevant
liabilities. Relevant assets include cash and time deposits, quoted
investments, unquoted bonds and debentures, first liens on real estate,
investment income due and accrued, accounts and premiums receivable,
reinsurance balances receivable and funds held by ceding reinsurers. There are
certain categories of assets which, unless specifically permitted by the
Minister, do not automatically qualify as relevant assets such as unquoted
equity securities, investments in and advances to affiliates, real estate and
collateral loans. The relevant liabilities are total general business
insurance reserves and total other liabilities less deferred income tax and
sundry liabilities (by interpretation, those not specifically defined),
letters of credit and guarantees.

An insurer is required to maintain a principal office in Bermuda and to
appoint and maintain a principal representative in Bermuda to oversee the
business of the insurer and to report to the Minister and the Registrar of
Companies in respect of certain events. Unless the approval of the Minister is
obtained, an insurer may not terminate the appointment of its principal
representative, and the principal representative may not cease to act as such,
unless 30 days' notice in writing to the Minister is given of the intention to
do so. Within 30 days of the principal representative's knowing or having
reason to believe that the insurer the representative represents is likely to
become insolvent or that an "event" has occurred, the principal representative
must provide a written report to the Minister setting out all the particulars
of the case that are available to the representative. Examples of such an
"event" include failure by the insurer to comply substantially with a
condition imposed upon the insurer by the Minister relating to a solvency
margin or a liquidity or other ratio.

The Minister may appoint an inspector with extensive powers to investigate
the affairs of an insurer if the Minister believes that an investigation is
required in the interest of the insurer's policyholders or persons who may
become policyholders. In order to verify or supplement information otherwise
provided to him, the Minister may direct an insurer to produce documents or
information relating to matters connected with the insurer's business.

41
<PAGE>

If it appears to the Minister that there is a risk of the insurer becoming
insolvent, the Minister may direct the insurer not to take on any new
insurance business; not to vary any insurance contract if the effect would be
to increase the insurer's liabilities; not to make certain investments; to
realize certain investments; to maintain in Bermuda, or transfer to the
custody of a Bermuda bank, certain assets; and to limit its premium income.

In general, the regulation of insurers in Bermuda relies heavily upon
auditors, loss reserve specialists, directors, and managers, who must certify
that an insurer meets minimum capital and solvency requirements. Every
registered insurer must appoint a government approved auditor who will
annually audit and report on the Statutory Financial Statements and the
Statutory Financial Return of the insurer.

CIRCL is registered as a Class 3 insurer and, as such: (i) is required to
maintain a minimum statutory capital and surplus equal to the greatest of: (a)
$1 million; (b) 20% of the first $6 million of its net premiums written plus
15% of its net premiums written over $6 million; and (c) 15% of its net
outstanding losses and loss expenses; (ii) is limited in declaring or paying
any dividends during any financial year with respect to a specified minimum
solvency margin or minimum liquidity ratio or if the declaration or payment of
such dividends would cause it to fail to meet such margin or ratio; (iii) is
prohibited, without the approval of the Minister, from reducing by 15% or more
its total statutory capital, as set out in its previous year's financial
statements; and (iv) is required to report its failure to meet its minimum
solvency margin to the Minister within 30 days after becoming aware of such
failure or having reason to believe that such failure has occurred. CIRCL is
also required to obtain an annual loss reserve opinion issued by a government
approved loss reserve specialist.

The Bermuda government actively encourages foreign investment in "exempted"
entities like CIRCL that are based in Bermuda but do not operate in
competition with local businesses. As well as having no restrictions on the
degree of foreign ownership, CIRCL is exempted from taxes on its income until
March 28, 2016 and is not subject to tax on its dividends or to any foreign
exchange controls in Bermuda. In addition, there currently is no capital gains
tax in Bermuda, and profits can be accumulated by CIRCL, as required, without
limitation.

EXTRATERRITORIAL REGULATION OF CIRCL

As indicated above, CIRCL is registered as an insurer and is subject to
regulation and supervision in Bermuda. CIRCL is not admitted or authorized to
do business in any jurisdiction except Bermuda. The insurance laws of the
various states of the United States do not directly regulate the sale of
reinsurance within their jurisdictions by alien insurers, such as CIRCL.
Nevertheless, the provision of reinsurance by alien reinsurers, such as CIRCL,
to insurance companies domiciled or licensed in United States jurisdictions is
indirectly regulated by state "credit for reinsurance" laws that operate to
deny financial statement credit to ceding insurers unless the non-admitted
alien reinsurer posts acceptable security for ceded liabilities and agrees to
certain contract provisions (e.g., insolvency and intermediary clauses).
Although the insurance laws of United States jurisdictions generally exempt
the business of reinsurance from "doing business" laws, CIRCL conducts its
business at its principal offices in Bermuda and does not maintain an office
in the United States, and its personnel do not solicit, advertise, settle
claims or conduct other insurance activities in the United States. All
policies are issued and delivered and premiums are received outside the United
States. CIRCL does not believe that it is subject to the insurance laws of any
state in the United States.

From time to time, there have been congressional and other initiatives in
the United States regarding the supervision and regulation of the insurance
industry, including proposals to supervise and regulate alien reinsurers.
While none of these proposals has been adopted to date on either the federal
or state level, there can be no assurance that federal or state legislation
will not be enacted subjecting CIRCL to supervision and regulation in the
United States, which could have a material adverse effect on the Company. In
addition, no assurance can be given that if CIRCL were to become subject to
any laws of the United States or any state thereof or of any other country at
any time in the future, it would be in compliance with such laws.

42
<PAGE>

CIRCL does not intend to maintain an office or to solicit, advertise, settle
claims or conduct other insurance activities in any jurisdiction other than
Bermuda where the conduct of such activities would require that CIRCL be so
admitted. CIRCL is not registered as an insurer in England or in any other
jurisdiction. The Company believes that CIRCL is not required to be registered
as an insurance company in the United Kingdom.

OUTSTANDING LOSSES AND LOSS EXPENSES

The Company owns Realm, a primary insurance carrier, and CIRCL, a Bermuda
based reinsurance company. CIRCL was acquired in January 1996 and Realm was
acquired in September 1996. Both of these companies maintain loss reserves to
reflect anticipated future claims payments. The Company establishes reserves
for losses and loss adjustment expenses related to claims which have been
reported on the basis of the evaluations of independent claims adjusters and
the Company's own claims staff. In addition, reserves are established for
losses which have occurred but have not yet been reported and for adverse
development of reserves on reported losses by the Company. The estimate of
claims arising for accidents which have not yet been reported is based upon
the Company's and the insurance industry's experience together with
statistical information with respect to the probable number and nature of such
claims. The Company engages independent actuaries to assist in this process.

The following table sets forth a reconciliation of beginning and ending
reserves for losses and loss adjustment expenses:

RECONCILIATION OF OUTSTANDING LOSSES AND LOSS EXPENSES

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31, 1996
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Net balance for Realm and CIRCL, at acquisition......... $ 2,957
-------
Incurred related to:
Current year.......................................... 6,515
Prior years........................................... 250
-------
Total incurred...................................... 6,765
-------
Paid related to:
Current year.......................................... 1,334
Prior years........................................... 675
-------
Total paid.......................................... 2,009
-------
Net balance............................................. 7,713
Plus reinsurance recoverable............................ 16,588
-------
Balance at end of year.................................. $24,301
=======
</TABLE>

The previous table presents a reconciliation of reserves in accordance with
generally accepted accounting principles ("GAAP"). The following table
reconciles the difference between the Company's portion of these reserves and
those contained in regulatory filings made by the Company's subsidiaries in
accordance with statutory accounting practices ("SAP").

43
<PAGE>

RECONCILIATION OF SAP AND GAAP RESERVES

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31, 1996
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Reserves for losses and loss adjustment expenses, end
of year SAP........................................... $ 7,843
Gross-up for ceded reinsurance reserves................ 16,588
Provision for salvage receivable not included on a SAP
basis................................................. (29)
Provision for loss portfolio transfer not included in
SAP reserves.......................................... (101)
-------
Reserves for losses and loss adjustment expenses, end
of year GAAP.......................................... $24,301
=======
</TABLE>

RELATIONSHIPS WITH INDEPENDENT PRIMARY INSURANCE CARRIERS

The Company's MGAs market insurance products and programs developed by the
Company on behalf of independent insurance carriers, primarily Clarendon and
Legion. In addition, the Company's brokering and reinsurance brokering
operations, managing general underwriters, and claims and loss control
servicing operations provide additional business and services to Clarendon and
Legion in respect of these products and other insurance and reinsurance
policies. In 1996, fees received from Clarendon accounted for approximately
55% of the Company's total revenues, while fees received from Legion accounted
for less than 10% of the Company's total revenues. Although the loss of either
Clarendon or Legion could have a material adverse effect on the Company, the
Company believes that Realm and other independent primary insurance carriers
have sufficient underwriting capacity to reduce the impact of such a loss. See
"Risk Factors--Dependence on Relationships with Independent Primary Insurance
Carriers".

EMPLOYEES

As of September 30, 1997, the Company had 303 employees. The service nature
of the Company's business makes its employees an important corporate asset.
While the market for qualified personnel is extremely competitive, the Company
believes that its relationship with its employees is good. None of the
Company's employees are represented by a union.

FACILITIES

The Company's principal executive offices are located in Hamilton, Bermuda.
This facility currently serves as the headquarters for senior management, the
financial and administrative departments and the Company's Bermuda
subsidiaries. The following table sets forth additional information concerning
the Company's facilities:

<TABLE>
<CAPTION>
APPROXIMATE LEASE
PROPERTY SQUARE FEET EXPIRATION
-------- ----------- ----------
<S> <C> <C>
Hamilton, Bermuda......................... 5,900 March 31, 2000
London, England........................... 12,500 August 10, 2009
Dallas, Texas............................. 14,700 September 30, 2003
New York, New York........................ 7,900 October 3, 2003
Sarasota, Florida......................... 8,300 June 14, 1998
Orlando, Florida.......................... 3,400 June 30, 1999
Fort Lauderdale, Florida.................. 11,100 January 1, 2000
</TABLE>

All of the Company's facilities are leased. Aggregate lease payments for
1996 were $1.3 million. The Company anticipates that it will be able to extend
these leases as they expire or, if necessary or desirable, locate substitute
facilities on acceptable terms. See Note 16 to the Consolidated Financial
Statements for additional information regarding these leases.

LEGAL PROCEEDINGS

The Company is not a party to any litigation, and is not aware of any
pending or threatened litigation, that could be expected to have a material
adverse effect on the Company or its business.

44
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are listed below.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Nicholas Mark Cooke. 40 Chairman, President, Chief Executive Officer and
Director(1)
Nicholas Brown...... 38 Director(2); Managing Director of Stirling Cooke
Brown Insurance Brokers Limited and Stirling Cooke
Brown Reinsurance Brokers Limited
George W. Jones..... 43 Chief Financial Officer and Director(3)
Warren W. Cabral.... 36 Director(3)
Reuben Jeffery III.. 44 Director(2)
Sanjay H. Patel..... 36 Director(1)
</TABLE>
- --------
(1) Term expires at annual shareholders meeting in 2001.
(2) Term expires at annual shareholders meeting in 2000.
(3)Term expires at annual shareholders meeting in 1999.

NICHOLAS MARK COOKE has been Chief Executive Officer of the Company or its
predecessors since 1990 and Chairman and President, and a Director of the
Company since it began operations in January 1996. Prior to 1990, Mr. Cooke
was a director of two Lloyds brokers and has had continuous employment in the
insurance and reinsurance industry in the London market since 1976.

NICHOLAS BROWN has been a Director of the Company since it began operations
in January 1996. Mr. Brown has been Managing Director of Stirling Cooke Brown
Insurance Brokers Limited and of Stirling Cooke Brown Reinsurance Brokers
Limited, U.K. subsidiaries of the Company, and has been a Director of these
companies since 1992. Prior to 1992, Mr. Brown was a director of a Lloyds
broker and has had continuous employment in the insurance and reinsurance
industry in the London market since 1977.

GEORGE W. JONES has been Chief Financial Officer and a Director of the
Company since it began operations in January 1996, and Chief Financial Officer
and a Director of Stirling Cooke Brown (U.K.) Holdings Limited since 1992 and
its subsidiaries since 1988.

WARREN W. CABRAL has been a Director of the Company since it was founded in
December 1995. Mr. Cabral has been a partner in Appleby, Spurling & Kempe, a
Bermuda law firm that has provided legal services to the Company since 1992.

REUBEN JEFFERY III has been a Director of the Company since it began
operations in January 1996. Mr. Jeffery has been a member of Goldman, Sachs &
Co.'s Financial Institutions Group since its inception and was named a
Managing Director of such group in 1992. Since 1997, Mr. Jeffery has been a
Managing Director of Goldman Sachs Paris Inc. et Cie. Mr. Jeffery was
nominated to the Board by one of the GS Funds pursuant to the terms of a
shareholders agreement among the Company and all of its shareholders (the
"Shareholders Agreement"). See "Certain Relationships and Related Party
Transactions".

SANJAY H. PATEL has been a Director of the Company since it began operations
in January 1996. Mr. Patel has been a Managing Director in the Principal
Investment Area of Goldman, Sachs & Co. since 1996. From 1987 to 1996, Mr.
Patel worked in the Leveraged Buyout Group of Goldman, Sachs & Co. Mr. Patel
also serves on the Advisory Committee and Board of Directors of Marcus Cable
Company, L.P. and Recovery Engineering, Inc., respectively. Mr. Patel was
nominated to the Board by one of the GS Funds pursuant to the terms of the
Shareholders Agreement. See "Certain Relationships and Related Party
Transactions".

45
<PAGE>

PROVISIONS GOVERNING THE BOARD OF DIRECTORS

NUMBER AND TERMS OF DIRECTORS

The Board of Directors of the Company (the "Board") currently consists of
six members. Following completion of the Offering, the Company intends to add
an additional independent Director to the Board. Under the Bye-Laws, Directors
are segregated into three classes, with staggered terms whereby one class'
term expires at each annual shareholders meeting, beginning with Class I in
1999. Candidates for election to the Board will be nominated by the Board and,
subject to certain notice and other requirements, may be nominated by
shareholders.

The Bye-Laws provide for a minimum of three and a maximum of eight Directors
and empower the Board to fix the exact number of Directors within these limits
and to appoint persons to fill any vacancies on the Board. Vacancies on the
Board are filled by action of a majority of the Board remaining in office,
with each such appointed Director holding office until the next following
annual shareholders' meeting at which the Class to which such Director is
appointed stands for election, and at which he or his successor will be
elected. Shareholders are not entitled to fill vacancies except upon annual
election. Directors may take action by a majority of their number present at a
duly called and held meeting at which a quorum is present. The quorum
necessary for the transaction of business by the Board may be fixed by the
Board and, unless so fixed at any other number, is two Directors. A Director
who expects to be unable to attend any meeting of the Board or any committee
thereof for any reason may appoint any person as an alternate Director to
attend and act in his place. A Director also may be represented at any meeting
of the Board or any committee by a proxy appointed by him.

The foregoing summarizes certain provisions of the Bye-Laws, which are
subject to Bermuda law. See "Description of Capital Shares".

BOARD COMMITTEES

The Audit Committee is responsible for recommending to the Board the
appointment of independent auditors, reviewing and approving the scope of the
annual audit activities of the auditors, approving the audit fee payable to
the auditors, reviewing audit results and approving related party
transactions. Messrs. Jones, Patel and Cabral have been appointed as members
of the Audit Committee.

The Compensation Committee is responsible for reviewing and recommending to
the Board the compensation structure for the Company's directors, officers and
other managerial personnel, including salaries, bonuses, participation in
incentive compensation and benefit plans, fringe benefits, non-cash
perquisites and other forms of compensation, and will administer the Company's
1997 Equity Incentive Plan. Messrs. Jeffery, Patel and Cabral have been
appointed as members of the Compensation Committee.

46
<PAGE>

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION INFORMATION

The following table sets forth certain information for 1996 concerning
compensation paid to or earned by the Company's Chief Executive Officer and
the Company's other executive officers. The persons named in the table are
sometimes referred to herein as the "named executive officers".

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
1996 ANNUAL
COMPENSATION
----------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1)
--------------------------- -------- -------- ---------------
<S> <C> <C> <C>
Nicholas Mark Cooke.................. $300,000 $300,000 $24,000
Chairman, President and Chief
Executive Officer
Nicholas Brown....................... 314,160 405,243 68,067
Managing Director of Stirling Cooke
Brown Reinsurance Brokers Limited
and Stirling Cooke Brown Insurance
Brokers Limited
George W. Jones...................... 152,109 -- 11,936
Chief Financial Officer
</TABLE>
- --------
(1) Reflects only amounts paid by the Company pursuant to defined contribution
pension plans.

STOCK OPTIONS

OPTION VALUES. The following table sets forth the aggregate value of
unexercised options at December 31, 1996 held by each of the named executive
officers. There were no option exercises during 1996 by any named executive
officer. All of the options listed in the table were exercisable at December
31, 1996 and were exercised on June 30, 1997 at an exercise price of $2.71 per
Ordinary Share. See "Certain Relationships and Related Party Transactions".

1996 YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF DOLLAR VALUE
SHARES OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
NAME 1996 1996(1)
---- ------------ ------------
<S> <C> <C>
Nicholas Mark Cooke............................. 120,000 $2,074,800
Nicholas Brown.................................. 319,800 5,529,342
George W. Jones................................. 40,200 695,058
</TABLE>
- --------
(1) Determined by subtracting the option exercise price per Ordinary Share
from an assumed initial public offering price per share of $20.00 (the
mid-point of the range set forth on the cover page of this Prospectus) and
multiplying by the number of shares subject to purchase upon option
exercise.

DIRECTOR COMPENSATION

The directors of the Company receive no compensation for service as members
of either the Board or committees thereof, other than reimbursement for out-
of-pocket expenses. Warren W. Cabral, a Director of the Company, is a partner
in a law firm that has provided legal services to the Company in each year
since 1992.

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<PAGE>

EMPLOYMENT CONTRACTS

Each of the named executive officers has an employment contract with a
subsidiary of the Company. Each employment contract runs through September 1,
2000, and thereafter for one-year terms unless terminated by either party on
twelve months prior written notice. The contracts provide for 1997 annual
salaries of $375,000, $375,000 and $275,000 for Messrs. Cooke, Brown and
Jones, respectively. Each contract also requires the applicable subsidiary to
pay for a car and for certain medical and pension benefits. Each executive
officer agrees to maintain the confidentiality of the Company's business
affairs both during and after his employment, to not solicit any employees of
the Company for one year after his termination, and to not compete with the
Company during his employment and for one year after his termination. Each
executive officer's employment automatically terminates if he ceases to be a
Director of the Company, and may be terminated by the Company if, among other
things, he becomes incapacitated, becomes of unsound mind, is prohibited by
law from being a Director of the Company, is guilty of misconduct or commits a
serious or persistent breach of his obligations to the Company or fails to
perform his duties competently as reasonably determined by the Board.

1997 EQUITY INCENTIVE PLAN

GENERAL

The purpose of the Stirling Cooke Brown Holdings Limited 1997 Equity
Incentive Plan (the "Plan") is to promote the best interests of the Company
and its shareholders by providing key employees of the Company and its
subsidiaries with an opportunity to acquire a proprietary interest in the
Company. The Plan is intended to promote continuity of management and to
provide increased incentive and personal interest in the welfare of the
Company by those key employees who are primarily responsible for shaping and
carrying out the long-range plans of the Company and securing the Company's
continued growth and financial success.

ADMINISTRATION AND ELIGIBILITY

The Plan is required to be administered by a committee of the Company's
Board (the "Committee") consisting of no less than two "outside directors"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). In the event that the Committee is not appointed, the
functions of the Committee will be exercised by those members of the Board who
qualify as "outside directors" within the meaning of Section 162(m), or if no
such members are so qualified, by the Board. The Compensation Committee has
been designated as the current administrator of the Plan. Among other
functions, the Committee has the authority to establish rules for the
administration of the Plan; to select the key employees of the Company and its
subsidiaries to whom awards will be granted; to determine the types of awards
to be granted to key employees and the number of shares covered by such
awards; and to set the terms and conditions of such awards. The Committee may
also determine whether the payment of any proceeds of any award shall or may
be deferred by a key employee participating in the Plan. Subject to the
express terms of the Plan, determinations and interpretations with respect
thereto will be in the sole discretion of the Committee, whose determinations
and interpretations will be binding on all parties.

Any key employee of the Company and its subsidiaries, including any
executive officer or employee-director of the Company who is not a member of
the Committee, is eligible to be granted awards by the Committee under the
Plan.

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<PAGE>

AWARDS UNDER THE PLAN; AVAILABLE SHARES

The Plan authorizes the granting to key employees of: (a) stock options,
which may be either incentive stock options meeting the requirements of
Section 422 of the Code ("ISOs") or non-qualified stock options; (b) stock
appreciation rights ("SARs"); (c) restricted stock; and (d) performance
shares. The Plan provides that up to a total of 500,000 Ordinary Shares
(subject to adjustment as described below) will be available for the granting
of awards thereunder. No awards have been granted to date under the Plan;
however, the Company intends to grant non-qualified stock options to purchase
up to 300,000 Ordinary Shares to employees prior to the closing of the
Offering. The exercise price of such options will be equal to the initial
public offering price in the Offering, and the named executive officers will
not receive any of such options.

If any Ordinary Shares subject to awards granted under the Plan, or to which
any award relates, are forfeited or if an award otherwise terminates, expires
or is canceled prior to the delivery of all of the Ordinary Shares or other
consideration issuable or payable pursuant to the award, such Ordinary Shares
will be available for the granting of new awards under the Plan. Any Ordinary
Shares delivered pursuant to an award may be either authorized and unissued
Ordinary Shares or treasury shares held by the Company.

TERMS OF AWARDS

OPTIONS. Options granted under the Plan to key employees may be either ISOs
or non-qualified stock options. No individual key employee may be granted
options to purchase in excess of 100,000 Ordinary Shares under the Plan
(subject to adjustment as described below).

The exercise price per Ordinary Share subject to options granted to key
employees under the Plan will be determined by the Committee, provided that
the exercise price may not be less than 100% of the fair market value of an
Ordinary Share on the date of grant. The term of any option granted to a key
employee under the Plan will be as determined by the Committee, provided that
the term of an ISO may not exceed ten years from the date of its grant.
Options granted to key employees under the Plan will become exercisable in
such manner and within such period or periods and in such installments or
otherwise as determined by the Committee. Options may be exercised by payment
in full of the exercise price, either (at the discretion of the Committee) in
cash or in whole or in part by tendering Ordinary Shares or other
consideration having a fair market value on the date of exercise equal to the
option exercise price. All ISOs granted under the Plan will also be required
to comply with all other terms of Section 422 of the Code.

SARS. An SAR granted under the Plan will confer on the key employee holder a
right to receive, upon exercise thereof, the excess of (a) the fair market
value of one Ordinary Share on the date of exercise over (b) the grant price
of the SAR as specified by the Committee. The grant price of an SAR under the
Plan will not be less than 100% of the fair market value of an Ordinary Share
on the date of grant. The grant price, term, methods of exercise, methods of
settlement (including whether the holder of an SAR will be paid in cash,
Ordinary Shares or other consideration), and any other terms and conditions of
any SAR granted under the Plan will be determined by the Committee at the time
of grant. Pursuant to the terms of the Plan, no individual key employee may be
granted SARs thereunder with respect to in excess of 100,000 Ordinary Shares
(subject to adjustment as described below).

RESTRICTED STOCK. Restricted Ordinary Shares granted to key employees under
the Plan will be subject to such restrictions as the Committee may impose,
including any limitation on the right to vote such Ordinary Shares or receive
dividends thereon. The restrictions imposed on the Ordinary Shares may lapse
separately or in combination at such time or times, or in such installments or
otherwise, as the Committee may deem appropriate. Except as otherwise
determined by the Committee, upon

49
<PAGE>

termination of a key employee's employment for any reason during the
applicable restriction period, all Ordinary Shares of restricted stock still
subject to restriction will be subject to forfeiture by the key employee.

The Plan limits the total number of Ordinary Shares of restricted stock that
may be awarded thereunder to 150,000 Ordinary Shares. In addition, no
individual key employee may be granted in excess of 100,000 shares of
restricted stock under the Plan. The foregoing numerical limitations on the
issuance of shares of restricted stock are subject to adjustment as described
below.

PERFORMANCE SHARES. The Plan also provides for the granting of performance
shares to key employees. The Committee will determine the applicable
performance period, the performance goal or goals (and the performance level
or levels related thereto) to be achieved during any performance period, the
proportion of payments, if any, to be made for performance between the minimum
and full performance levels for any performance goal and, if applicable, the
relative percentage weighting given to each of the selected performance goals,
the restrictions applicable to shares of restricted stock received upon
payment of performance shares if payment is made in such manner, and any other
terms, conditions and rights relating to the grant of performance shares.
Under the terms of the Plan, the Committee may select from various performance
goals, including return on equity, return on investment, return on net assets,
economic value added, earnings from operations, pre-tax profits, net earnings,
net earnings per Ordinary Share, net cash provided by operating activities,
market price for the Ordinary Shares and total shareholder return. In
conjunction with selecting the applicable performance goal or goals, the
Committee will also fix the relevant performance level or levels which must be
achieved with respect to the goal or goals in order for the performance shares
to be earned by the key employee. The performance goals selected by the
Committee under the Plan may, to the extent applicable, relate to a specific
division or subsidiary of the Company or apply on a Company-wide basis.

Following completion of the applicable performance period, payment on
performance shares granted to and earned by key employees will be made in
Ordinary Shares (which, at the discretion of the Committee, may be shares of
restricted stock) equal to the number of performance shares payable. The
Committee may provide that, during a performance period, key employees will be
paid cash amounts with respect to each performance share granted to such key
employees equal to the cash dividend paid on an Ordinary Share. Pursuant to
the terms of the Plan, no key employee may receive more than 100,000
performance shares thereunder (subject to adjustment as described below).

ADJUSTMENTS. If any dividend or other distribution, recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, or exchange of Ordinary Shares or other
securities of the Company, issuance of warrants or other rights to purchase
Ordinary Shares or other securities of the Company, or other similar corporate
transaction or event affects the Ordinary Shares so that an adjustment is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee will generally have the authority to, in such manner as it deems
equitable, adjust (a) the number and type of shares subject to the Plan and
which thereafter may be made the subject of awards, (b) the number and type of
shares subject to outstanding awards, and (c) the grant, purchase or exercise
price with respect to any award, or may make provision for a cash payment to
the holder of an outstanding award.

LIMITS ON TRANSFERABILITY. Except as specifically provided for by the
Committee at the time an award is made, no award granted under the Plan (other
than an award of restricted stock on which the restrictions have lapsed) may
be assigned, sold, transferred or encumbered by any participant, otherwise
than by will, by designation of a beneficiary, or by the laws of descent and
distribution. Each award will be exercisable during the participant's lifetime
only by such participant or, if permissible under applicable law, by the
participant's guardian or legal representative.

50
<PAGE>

AMENDMENT AND TERMINATION. The Board may amend, suspend or terminate the
Plan at any time, except that no such action may adversely affect any award
granted and then outstanding thereunder without the approval of the respective
participant. The Plan further provides that shareholder approval of any
amendment thereto must also be obtained if required by (a) the rules and/or
regulations promulgated under Section 16 of the Exchange Act (in order for the
Plan to remain qualified under Rule 16b-3), (b) the Code or any rules
promulgated thereunder (in order to allow for ISOs to be granted thereunder)
or (c) the quotation or listing requirements of any exchange or market on
which the Ordinary Shares is then traded (in order to maintain the trading of
the Ordinary Shares on such exchange or market).

WITHHOLDING. Not later than the date as of which an amount first becomes
includable in the gross income of a key employee for United States federal
income tax purposes with respect to any award under the Plan, the key employee
will be required to pay to the Company or one of its subsidiaries, or make
arrangements satisfactory to the Company or one of its subsidiaries regarding
the payment of, any United States federal, state, local or other taxes of any
kind required by law to be withheld with respect to such amount. Unless
otherwise determined by the Committee, withholding obligations arising with
respect to awards under the Plan may be settled with Ordinary Shares (other
than shares of restricted stock), including Ordinary Shares that are part of,
or are received upon exercise of, the award that gives rise to the withholding
requirement. The obligations of the Company under the Plan are conditional on
such payment or arrangements, and the Company and its subsidiaries will, to
the extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the key employee. The Committee may establish such
procedures as it deems appropriate for the settling of withholding obligations
with Ordinary Shares.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

STOCK OPTIONS. The grant of a stock option under the Plan will create no
United States income tax consequences to the key employee. A key employee who
is granted a non-qualified stock option will generally recognize ordinary
income at the time of exercise in an amount equal to the excess of the fair
market value of the Ordinary Shares at such time over the exercise price. The
Company will be entitled to a deduction in the same amount and at the same
time as ordinary income is recognized by the key employee. A subsequent
disposition of the Ordinary Shares will give rise to capital gain or loss to
the extent the amount realized from the sale differs from the key employee's
tax basis for the Ordinary Shares, i.e., the fair market value of the Ordinary
Shares on the date of exercise. This capital gain or loss will be a long-term
capital gain or loss if the Ordinary Shares have been held for more than one
year from the date of exercise.

In general, a key employee will recognize no United States income or gain as
a result of exercise of an ISO (except that the United States alternative
minimum tax may apply). Except as described below, any gain or loss realized
by the key employee on the disposition of the Ordinary Shares acquired
pursuant to the exercise of an ISO will be treated as a long-term capital gain
or loss and no deduction will be allowed to the Company. If the key employee
fails to hold the Ordinary Shares acquired pursuant to the exercise of an ISO
for at least two years from the date of grant of the ISO and one year from the
date of exercise, the key employee will recognize ordinary income at the time
of the disposition equal to the lesser of (a) the gain realized on the
disposition, or (b) the excess of the fair market value of the Ordinary Shares
on the date of exercise over the exercise price. The Company will be entitled
to a deduction in the same amount and at the same time as ordinary income is
recognized by the key employee. Any additional gain realized by the key
employee over the fair market value at the time of exercise will be treated as
a capital gain. This capital gain will be a long-term capital gain if the
Ordinary Shares have been held for more than one year from the date of
exercise.

51
<PAGE>

STOCK APPRECIATION RIGHTS. The grant of an SAR will create no United States
income tax consequences for the key employee or the Company. Upon exercise of
an SAR, the key employee will recognize ordinary income equal to the amount of
any cash and the fair market value of any Ordinary Shares or other property
received, except that if the key employee receives an option or shares of
restricted stock upon exercise of an SAR, recognition of income may be
deferred in accordance with the rules applicable to such other awards. The
Company will be entitled to a deduction in the same amount and at the same
time as income is recognized by the key employee.

RESTRICTED STOCK. A key employee will not recognize income for United States
income tax purposes at the time an award of restricted stock is made under the
Plan, unless the election described below is made. However, a key employee who
has not made such an election will recognize ordinary income at the time the
restrictions on the stock lapse in an amount equal to the fair market value of
the restricted stock at such time. The Company will be entitled to a
corresponding deduction in the same amount and at the same time as the key
employee recognizes income. Any otherwise taxable disposition of the
restricted stock after the time the restrictions lapse will result in capital
gain or loss (long-term or short-term depending on the length of time the
restricted stock is held after the time the restrictions lapse). Dividends
paid in cash and received by a participant prior to the time the restrictions
lapse will constitute ordinary income to the participant in the year paid. The
Company will be entitled to a corresponding deduction for such dividends. Any
dividends paid in stock will be treated as an award of additional restricted
stock subject to the tax treatment described herein.

A key employee may, within 30 days after the date of the award of restricted
stock, elect to recognize ordinary income as of the date of the award in an
amount equal to the fair market value of such restricted stock on the date of
the award. The Company will be entitled to a corresponding deduction in the
same amount and at the same time as the key employee recognizes income. If the
election is made, any cash dividends received with respect to the restricted
stock will be treated as dividend income to the key employee in the year of
payment and will not be deductible by the Company. Any otherwise taxable
disposition of the restricted stock (other than by forfeiture) will result in
capital gain or loss (long-term or short-term depending on the holding
period). If the key employee who has made an election subsequently forfeits
the restricted stock, the key employee will not be entitled to deduct any
loss. In addition, the Company would then be required to include as ordinary
income the amount of the deduction it originally claimed with respect to such
shares.

PERFORMANCE SHARES. The grant of performance shares will create no United
States income tax consequences for the key employee or the Company. Upon the
receipt of Ordinary Shares at the end of the applicable performance period,
the key employee will recognize ordinary income equal to the fair market value
of the Ordinary Shares received, except that if the key employee receives
shares of restricted stock in payment of performance shares, recognition of
income may be deferred in accordance with the rules applicable to such
restricted stock. In addition, the key employee will recognize ordinary income
equal to the dividend equivalents paid on performance shares prior to or at
the end of the performance period. The Company will be entitled to a deduction
in the same amount and at the same time as income is recognized by the key
employee.

PLAN BENEFITS. No awards have been made to date under the Plan and the
Company cannot currently determine the awards that may be granted in the
future to key employees thereunder. Such determinations will be made from time
to time by the Committee.

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<PAGE>

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Ordinary Shares as of November 1, 1997, and after
giving effect to the Offering, by (i) each of the Company's directors and
executive officers, (ii) all directors and executive officers as a group,
(iii) all selling shareholders, and (iv) each person known by the Company to
own beneficially more than 5% of the Ordinary Shares outstanding. Except as
otherwise noted, each of the holders listed below has sole voting and
investment power over the shares beneficially owned.

<TABLE>
<CAPTION>
PRIOR TO THE NUMBER
OFFERING OF AFTER THE OFFERING
-------------------- ORDINARY --------------------
SHARES SHARES SHARES
BENEFICIALLY BEING BENEFICIALLY
NAME OWNED(1) PERCENT OFFERED OWNED(1) PERCENT
---- ------------ ------- -------- ------------ -------
<S> <C> <C> <C> <C> <C>
The Goldman Sachs Group,
L.P.(2).................... 2,888,888 34.0 521,388 2,367,500 24.0
Nicholas Brown(3)........... 1,148,808 13.5 150,423 998,385 10.1
Penelope Atteline Cooke(4).. 1,036,204 12.2 109,947 926,257 9.4
Nicholas Mark Cooke(5)...... 730,956 8.6 77,558 653,398 6.6
George William Jones(6)..... 566,700 6.7 60,130 506,570 5.1
Jacques Georges Sacy(7)..... 562,516 6.6 52,000 510,516 5.2
Mark Kerr-Smiley(8)......... 272,268 3.2 28,889 243,379 2.5
David Terrell Colley(8)..... 265,032 3.1 21,000 244,032 2.5
Richard John Wells(8)....... 153,468 1.8 16,284 137,184 1.4
Jeffrey Ronald Butler(8).... 149,832 1.8 15,898 133,934 1.4
Paul Ian Pearson(8)......... 149,832 1.8 15,898 133,934 1.4
Orion Nominees Limited a/c
703(9)..................... 135,000 1.6 14,324 120,676 1.2
Christopher James Blois
Needham(8)................. 125,984 1.5 13,368 112,616 1.1
David Maxwell Tarsh(8)...... 129,500 1.5 13,741 115,759 1.2
Dominic Hagger(8)........... 40,200 * 4,265 35,935 *
Duncan Vere Hopegood(8)..... 40,200 * 4,265 35,935 *
Allan Cooper(8)............. 27,000 * 2,865 24,135 *
Paul Murray(8).............. 25,984 * 2,757 23,227 *
Sanjay H. Patel(10)......... -- * -- -- *
Reuben Jeffery III(11)...... -- * -- -- *
Warren W. Cabral............ -- * -- -- *
All executive officers and
directors as a group
(6 persons)................ 2,446,464 28.8 288,111 2,158,353 21.9
</TABLE>
- --------
*Less than 1%.
(1) In accordance with Securities and Exchange Commission rules, each
beneficial owner's holdings have been calculated assuming full exercise of
outstanding options exercisable by such owner within 60 days after the
date of this Prospectus, but no exercise of outstanding options held by
any other person. The table set forth above assumes that the over-
allotment option is not exercised by the Underwriters. For further
information about the calculation of beneficial ownership, see the
footnotes below.
(2) Represents shares owned by the GS Funds, which are affiliated with The
Goldman Sachs Group, L.P. (the "GS Group"). Includes 1,852,852 shares
beneficially owned by GS Capital Partners II, L.P.; 122,372 shares
beneficially owned by Bridge Street Fund 1995, L.P.; 108,740 shares
beneficially owned by Stone Street Fund 1995, L.P.; 736,588 shares
beneficially owned by GS Capital Partners II Offshore, L.P.; and 68,336
shares beneficially owned by GS Capital Partners II Germany Civil Law
Partnership. The GS Group disclaims beneficial ownership of the shares
owned by the GS Funds to the extent attributable to equity interests
therein held by persons other than the GS Group and its affiliates. Each
of the GS Funds shares voting and investment power with certain of its
respective affiliates. The address of the GS Group is 85 Broad Street,
New York, New York 10004.
(3) Mr. Brown is the Director of Reinsurance of the Company and is a Director
of the Company. Mr. Brown's address is c/o the Company at Victoria Hall,
Third Floor, 11 Victoria Street, Hamilton, HM-11, Bermuda.
(Continued on following page)

53
<PAGE>

(4) Ms. Cooke is Secretary of the Company and her address is c/o the Company
at Victoria Hall, Third Floor, 11 Victoria Street, Hamilton, HM-11,
Bermuda. Ms. Cooke is married to Nicholas Mark Cooke. Ms. Cooke disclaims
beneficial ownership of 730,956 Ordinary Shares beneficially owned by
Nicholas Mark Cooke.
(5) Mr. Cooke is the Chairman, President and Chief Executive Officer and a
Director of the Company and his address is c/o the Company at Victoria
Hall, Third Floor, 11 Victoria Street, Hamilton, HM-11, Bermuda. Mr.
Cooke is married to Penelope Atteline Cooke. Mr. Cooke disclaims
beneficial ownership of 1,036,204 Ordinary Shares beneficially owned by
Penelope Atteline Cooke.
(6) Mr. Jones is Chief Financial Officer and a Director of the Company and
his address is c/o the Company at Victoria Hall, Third Floor, 11 Victoria
Street, Hamilton, HM-11, Bermuda.
(7) Mr. Sacy is an employee of the Company and his address is c/o Stirling
Cook Brown Insurance Brokers Limited, 65 Leadenhall Street, London EC3A
2AD, England.
(8) The indicated individual is an employee of the Company.
(9) Orion Nominees Limited a/c 703 holds such shares as nominee of Orion
Trust Limited as Trustee of the Nightingale Trust.
(10) Mr. Patel, who is a Managing Director of Goldman, Sachs & Co., disclaims
beneficial ownership of the 2,888,888 Ordinary Shares owned by the GS
Funds, except to the extent of his pecuniary interest therein.
(11) Mr. Jeffery, who is a Managing Director of Goldman, Sachs & Co.,
disclaims beneficial ownership of the 2,888,888 Ordinary Shares owned by
the GS Funds, except to the extent of his pecuniary interest therein.

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<PAGE>

CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS

In January, 1996, the GS Funds purchased 2,000,000 newly issued Ordinary
Shares from the Company for a purchase price of $14.7 million and 600,000
outstanding Ordinary Shares from certain shareholders for an aggregate
purchase price of $4.6 million. As a result of those purchases, at December
31, 1996 the GS Funds held an aggregate of 2,600,000 Ordinary Shares,
representing 32.5% of the issued and outstanding Ordinary Shares. Pursuant to
that purchase the GS Funds obtained certain anti-dilution rights in the event
specified options (discussed below) were exercised. Such options have been
exercised with the result that the GS Funds received an additional 288,888
Ordinary Shares. As of the date hereof, the GS Funds hold an aggregate of
2,888,888 Ordinary Shares, representing 34.0% of the issued and outstanding
Ordinary Shares. After completion of the Offering, the GS Funds are expected
to own approximately 24.0% of the Outstanding Shares.

In connection with the subscription and purchase described above, the
Company and its shareholders entered into a Shareholders Agreement dated
January 24, 1996 (the "Shareholders Agreement") and the GS Funds, the Company
and all its other shareholders on such date entered into a Registration Rights
Agreement, also dated January 24, 1996 (the "Registration Rights Agreement").
Any person who acquires Ordinary Shares originally held by a signatory to the
Registration Rights Agreement, as well as any person who acquires Ordinary
Shares upon the exercise of options or other securities exchangeable for
Ordinary Shares, is deemed to be a party to the Registration Rights Agreement.
Pursuant to the Shareholders Agreement, the Board is to consist of a maximum
of six directors of which the GS Funds have the sole right to appoint, remove
and replace two directors. The other shareholders have the sole right to
appoint, remove and replace the other four directors. The GS Funds also have
the right, with certain limitations, to appoint one director to the Board of
each of the Company's subsidiaries. The Shareholders Agreement terminates on
the effective date of the Offering. Pursuant to the Registration Rights
Agreement, the GS Funds are entitled to certain rights with respect to the
registration of Ordinary Shares under the Securities Act. The Offering is not
being made pursuant to any demand under the Registration Rights Agreement. See
"Description of Capital Shares--Registration Rights".

In January 1996 the Company acquired RIL, a Bermuda corporation and an
affiliate of the Company, in a share for share exchange in which the Company
issued 1,999,980 Ordinary Shares in exchange for all of the outstanding
capital stock of RIL. Penelope A. Cooke, the Secretary of the Company, a
Director of RIL and the spouse of Nicholas Mark Cooke, the Chairman, President
and Chief Executive Officer of the Company and a Director of RIL, Nicholas
Brown, the Director of Reinsurance of the Company, George W. Jones, the Chief
Financial Officer of the Company, and Jacques G. Sacy, an employee and
shareholder of the Company, were all shareholders of RIL and received 720,060,
420,000, 240,000 and 160,080 Ordinary Shares, respectively, in connection with
such share exchange. Prior to the share exchange, RIL and the Company engaged
in business transactions which generated substantial brokerage fees to the
Company from unrelated third parties.

On June 29, 1995, the Company entered into Option Agreements with certain
officers and employees of the Company for the purchase of an aggregate of
600,000 Ordinary Shares at a subscription price of $2.71 per Ordinary Share.
The Option Agreements provided a six-year exercise

55
<PAGE>

period beginning on the first anniversary of the date of the Option
Agreements. Such options were exercised in full in June 1997. Simultaneously
with the exercise of the options, a subsidiary of the Company loaned each
officer an amount equal to the aggregate exercise price of such officer's
options. Such loans bear interest at 7% per annum and are repayable in full on
the earliest of: (i) 10 days following the first day of the trading of the
Company's Ordinary Shares on the Nasdaq National Market or (ii) June 30, 1998.
Pursuant to such loans, the named executive officers, Mr. Cooke, Mr. Brown and
Mr. Jones, borrowed $324,900, $865,858 and $108,841, respectively.

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<PAGE>

DESCRIPTION OF CAPITAL SHARES

The following description of the capital shares of the Company summarizes
certain provisions of the Memorandum of Association and the Bye-Laws of the
Company. Such summary does not purport to be complete or to give full effect
to Bermuda statutory or common law and in all respects is qualified by
reference to the applicable provisions of the Bermuda Companies Act 1981 (the
"Act") and is subject to and qualified in its entirety by reference to all of
the provisions of the Memorandum of Association and the Bye-Laws. Copies of
the Memorandum of Association and the Bye-Laws are filed as exhibits to the
Registration Statement of which this Prospectus is a part.

GENERAL

The authorized capital stock of the Company consists of 20,000,000 Ordinary
Shares, par value $.25 per share, and 5,000,000 preference shares, par value
$0.01 per share, the rights, preferences and powers of which may be designated
by the Board. Upon completion of the Offering, there will be 9,863,372
Ordinary Shares outstanding. On September 30, 1997 there were 22 holders of
record of Ordinary Shares.

ORDINARY SHARES

Holders of the Ordinary Shares have no pre-emptive, redemption, conversion
or sinking fund rights. Holders of Ordinary Shares are generally entitled to
one vote per share on all matters submitted to a vote of holders of Ordinary
Shares and do not have any cumulative voting rights. The Bye-Laws restrict the
voting rights of Ordinary Shares held by certain holders of 10% or more of the
outstanding Ordinary Shares. See "--The Bye-Laws". 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 the assets of the Company,
if any, remaining after the payment of all debts and liabilities of the
Company. The outstanding Ordinary Shares are, and the Ordinary Shares offered
by the Company hereby when issued will be, fully paid and nonassessable.
Additional authorized but unissued Ordinary Shares may be issued by the Board
of the Company without the approval of the shareholders.

Holders of the Ordinary Shares will receive such dividends, if any, as may
be declared by the Board out of funds legally available for such purposes.
Under the Act, dividends can only be paid out of the profits of the Company
available for that purpose. The Act defines the profits of a company available
for the payment of dividends as its accumulated, realized profits, so far as
not previously utilized by distribution or capitalization, less its
accumulated realized losses, so far as not previously written off in a
reduction or reorganization of capital duly made by the Company. Bermuda law
currently imposes no restrictions on the payment of dividends to residents of
other countries. Tax and insurance regulatory limitations on the payment of
dividends by the Company's subsidiaries might impair the ability of the
Company to pay dividends in the future. See "Business--Regulation--
Restrictions on Dividends".

PREFERRED SHARES

The Board is authorized to provide for the issuance of preferred shares in
one or more series and to fix the designations, preferences, powers, and
relative, participating, optional or other rights and restrictions thereof
(including without limitation the dividend rate, conversion rights, voting
rights, redemption price and liquidation preference), to fix the number of
shares constituting any such series and to increase and decrease the number of
shares of any such series. The Company has no present plans to issue any
preferred shares.

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THE BYE-LAWS

The provisions of the Company's Bye-Laws summarized in the succeeding
paragraphs may be deemed to have an anti-takeover effect and may delay, defer,
or prevent a tender offer or takeover attempt that a shareholder might
consider in such shareholder's best interest, including those attempts that
might result in shareholders receiving a premium over the market price for the
shares.

The Board of the Company is divided into three classes that are elected for
staggered three-year terms. Shareholders may only remove a director at a
general meeting of shareholders and only if (i) such director has received
fourteen days prior written notice of such intended removal prior to such
general meeting and (ii) such removal is approved by shareholders holding not
less than 75% of the shares entitled to vote at such meeting.

Pursuant to the Company's Bye-Laws, the Company's Board may divide its
preferred shares into several classes and attach thereto preferences,
designations, relative voting rights, dividend rights, liquidation and other
rights, preferences and limitations as may be fixed by the Board without any
further shareholder approval. Such rights, preferences, powers and limitations
as may be established could have the effect of impeding or discouraging the
acquisition of control of the Company.

The Act provides that the Bye-Laws may only be amended by a Board resolution
that is subsequently approved by the Company's shareholders. The Company's
Bye-Laws provide that (i) the Board has the authority to issue share purchase
rights to specific classes of shareholders, which may exclude certain persons
or groups holding large blocks of Ordinary Shares without the prior approval
of the Board; (ii) no person or group (other than the existing shareholders)
may exercise the right to vote more than 10% of the outstanding voting shares
of the Company without receiving the approval of the Board prior to the
acquiring the shares in excess of 10%; and (iii) certain "business
combinations" (as defined below) with certain "interested persons" (as defined
below) require the favorable vote at a shareholders' meeting of the holders of
75% or more of the shares entitled to vote at such meeting, unless, among
other things, such interested person enters into certain agreements with the
Company and a proxy statement meeting certain requirements is mailed to
holders of all shares carrying voting rights. A "business combination" is (a)
any scheme, arrangement, reconstruction, amalgamation or similar business
combination involving the Company or any of its subsidiaries that is proposed
or initiated by an interested person or an affiliate of an interested person,
(b) any sale, purchase, lease, exchange, mortgage, pledge, transfer or other
disposition or other encumbrance of assets between the Company and an
interested person involving in excess of 5% of the consolidated book value of
the Company prior to such transaction and (c) certain other transactions or
events, including certain issuances or transfers of Company securities to an
interested person, the liquidation or dissolution of the Company, and certain
reclassifications of the Company's securities involving an interested person.
An "interested person" is generally any shareholder of the Company deemed to
hold 10% or more of the outstanding Ordinary Shares, except for the
shareholders of the Company holding in excess of such amount on July 30, 1997.

DIFFERENCES IN CORPORATE LAW

The Act 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 the Act (including modifications
adopted pursuant to the Bye-Laws) applicable to the Company, which differ in
certain respects from provisions of Delaware corporate law. The following
statements are summaries, and do not purport to deal with all aspects of
Bermuda law that may be relevant to the Company and its shareholders.

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INTERESTED DIRECTORS

The Bye-Laws provide that any transaction entered into by the Company in
which a director has an interest is not voidable by the Company nor can such
director be liable to the Company for any profit realized pursuant to such
transaction provided the nature of the interest is disclosed at the first
opportunity at a meeting of directors, or in writing to the directors. Under
Delaware law, such transaction would not be voidable if (i) 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, (ii) such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the transaction is
specifically approved in good faith by vote of the stockholders or (iii) 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 any transaction for which such director derived an improper
personal benefit.

MERGERS AND SIMILAR ARRANGEMENTS

The Company may acquire the business of another Bermuda company similarly
exempt from Bermuda taxes or a company incorporated outside Bermuda and carry
on such business when it is within the objects of its Memorandum of
Association. The Company may also amalgamate with another Bermuda company or
with a body incorporated outside Bermuda upon the approval of the board of
directors and the holders of 75% of the outstanding shares of the Company,
including any shares that would otherwise be non-voting shares. In the case of
an amalgamation, a shareholder may apply to a Bermuda court for a proper
valuation of such shareholder's shares if such shareholder is not satisfied
that fair value has been paid for such shares. The court ordinarily would not
set aside the transaction on that ground absent evidence of fraud or bad
faith. Under Delaware law, with certain exceptions, any merger, consolidation
or sale of all or substantially all the assets of a corporation must be
approved by the board of directors and the holders of a majority of the
outstanding shares entitled to vote. Under Delaware law, a stockholder of a
corporation participating in certain major corporate transactions may, under
varying 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 or by agreement of the
corporation and the stockholder) in lieu of the consideration such stockholder
would otherwise receive in the transaction. Delaware law does not provide
stockholders of a corporation with voting or appraisal rights when the
corporation acquires another business through the issuance of its stock or
other consideration (i) in exchange for the assets of the business to be
acquired, (ii) in exchange for the outstanding stock of the corporation to be
acquired or (iii) in a merger of the corporation to be acquired with a
subsidiary of the acquiring corporation.

TAKEOVERS

Bermuda law provides that where an offer is made for shares of another
company and, within four months of the offer, the holders of not less than 90%
of the shares which are the subject of the offer accept, the offeror may by
notice require the nontendering shareholders to transfer their shares on the
terms of the offer. Dissenting shareholders may apply to the court within one
month of the notice objecting to the transfer. The burden is on the dissenting
shareholders to show that the court should exercise its discretion to enjoin
the required transfer, which the court will be unlikely to do unless there is
evidence of fraud or bad faith or collusion between the offeror and the
holders of the shares who have accepted the offer as a means of unfairly
forcing out minority shareholders. Delaware law provides that a parent
corporation, by resolution of its board of directors and without any
stockholder vote, may merge with any 90% or more owned subsidiary. Upon any
such merger, dissenting stockholders of the subsidiary would have appraisal
rights.

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SHAREHOLDER'S SUIT

A shareholder who considers that the affairs of the Company are being
conducted in a manner which is unfairly prejudicial or oppressive to the
interests of some of the shareholders may apply to the Bermuda court for
relief under the Act. The court may grant such relief as it considers fit.
Class actions and derivative actions are generally not available to
shareholders under the laws of Bermuda. However, the Bermuda courts ordinarily
would be expected to follow English case law precedent, which would permit a
shareholder to commence an action in the name of the Company to remedy a wrong
done to the Company where the act complained of is alleged to be beyond the
corporate power of the Company or is illegal or would result in the violation
of the Memorandum of Association or Bye-Laws. Furthermore, consideration would
be given by the court to acts that are alleged to constitute a fraud against
the minority shareholders or where an act requires the approval of a greater
percentage of the Company's shareholders than actually approved it. The
winning party in such an action generally would be able to recover a portion
of attorneys' fees incurred in connection with such action. Class actions and
derivative actions generally are available to stockholders under Delaware law
for, among other things, breach of fiduciary duty, corporate waste and actions
not taken in accordance with applicable law. In such actions, the court has
discretion to permit the winning party to recover attorneys' fees incurred in
connection with such action.

INDEMNIFICATION OF DIRECTORS

The Company may indemnify its 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 negligence, default, breach of duty or
breach of trust of which a director or officer may be guilty in relation to
the Company other than in respect of his own fraud or dishonesty. Under
Delaware law, a corporation may adopt a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
breaches of the director's duty of loyalty, for acts or omissions not in good
faith or which involve intentional misconduct or knowing violations of law,
for improper payment of dividends or for any transaction from which the
director derived an improper personal benefit. Delaware law has provisions and
limitations similar to Bermuda regarding indemnification by a corporation of
its directors or officers, except that under Delaware law the statutory rights
to indemnification may not be as limited.

INSPECTION OF CORPORATE RECORDS

Members of the general public have the right to inspect the public documents
of the Company available at the office of the Registrar of Companies in
Bermuda, which will include the Memorandum of Association (including its
objects and powers) and any alteration to the Memorandum of Association and
documents relating to any increase or reduction of authorized capital. The
shareholders have the additional right to inspect or obtain copies of the Bye-
Laws, minutes of general meetings and audited financial statements of the
Company, which must be presented to the annual general meeting of
shareholders. The register of shareholders of the Company is also open to
inspection by shareholders without charge, and to members of the public for a
fee. The Company is required to keep at its registered office a register of
its directors and officers which is open for inspection by members of the
public without charge. Bermuda law does not, however, provide a general right
for shareholders to inspect or obtain copies of any other corporate records.
Delaware law permits any stockholder to inspect or obtain copies of a
corporation's stockholder list and its other books and records for any purpose
reasonably related to such person's interest as a stockholder. Delaware law
does not permit inspection by the public of the register of stockholders.

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REGISTRATION RIGHTS

After the Offering, the GS Funds, which will hold in the aggregate 2,367,500
Ordinary Shares, and certain executives and employees of the Company, who will
hold 4,995,872 Ordinary Shares, are entitled to certain rights with respect to
the registration of such shares under the Securities Act. See "Certain
Relationships and Related Party Transactions". Under the terms of the
Registration Rights Agreement, the GS Funds may demand registration, on five
separate occasions, of all or any of their Ordinary Shares and all other
parties to the Registration Rights Agreement have piggy-back rights to such
demand registration. All registration rights are subject to certain conditions
and limitations. With certain exceptions, the Company is required to bear the
expenses of the first three of such registrations. The registration rights of
each of the holders expire at such time that all registrable Ordinary Shares
held by such holder have been effectively registered and disposed of pursuant
to such registration or sold pursuant to Rule 144 under the Securities Act
("Rule 144"). Goldman, Sachs & Co. have the right to act as the lead managing
underwriter in any registration pursuant to the Registration Rights Agreement.
The Offering is not being made pursuant to any demand under the Registration
Rights Agreement.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Ordinary Shares is
Firstar Trust Company.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering there has been no public market for the Ordinary
Shares of the Company and no prediction can be made as to the effect, if any,
that market sales of shares or the availability of such shares for sale will
have on the market price of the Ordinary Shares prevailing from time to time.
Future sales of substantial numbers of Ordinary Shares in the public market,
however, could adversely affect prevailing market prices and impair the
Company's future ability to raise capital through the sale of its equity
securities.

Upon completion of the Offering, the Company will have outstanding 9,863,372
Ordinary Shares. Of these shares, the 2,500,000 sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act, except for any Ordinary Shares purchased by "affiliates" of
the Company (as defined under the Securities Act). Ordinary Shares purchased
by affiliates may not be sold unless the sale is registered under the
Securities Act or unless they are sold pursuant to Rule 144 or another
exemption from registration.

Of the 8,488,372 Ordinary Shares outstanding at the date of this Prospectus,
2,116,816 are held by persons not deemed by the Company to be affiliates. Of
these Ordinary Shares, 2,076,816 are subject to 180 day lock-up agreements.
The remaining 40,000 Ordinary Shares not subject to a 180 day lock-up
agreement are held by a shareholder who is not a Selling Shareholder. See
"Underwriting". These shares are "restricted securities" within the meaning of
Rule 144 and will be tradeable without restriction under Rule 144(k) after the
end of the 180 day lock-up. The remaining 6,371,556 outstanding Ordinary
Shares are held by persons deemed to be affiliates, all of whom have also
entered into 180 day lock-up agreements with the Underwriters. These shares
will be available for sale in the public market beginning 180 days after the
date of this Prospectus (or earlier with the consent of the Underwriters),
subject to the restrictions imposed by Rule 144.

In general, under Rule 144 as in effect on the date of this Prospectus, an
affiliate of the Company, or person (or persons whose shares are aggregated)
who has beneficially owned restricted securities for at least one year, will
be entitled to sell in any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding Ordinary Shares of the
Company (approximately 98,000 shares immediately after the Offering) or (ii)
the average weekly trading volume during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Securities
and Exchange Commission. Sales pursuant to Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of current
public information about the Company. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days immediately preceding the sale and who has
beneficially owned restricted shares for at least two years is entitled to
sell shares pursuant to Rule 144(k) without regard to the limitations above.

The GS Funds, which hold an aggregate of 2,888,888 Ordinary Shares, have
certain demand registration rights with respect to such shares and all other
current shareholders of the Company have piggy-back rights to such demand
registration. See "Description of Capital Shares--Registration Rights". Such
rights are not exercisable during the 180-day lock-up period beginning on the
date of this Prospectus.

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CERTAIN TAX CONSIDERATIONS

The following discussion of taxation of the Company and the taxation of
certain shareholders of the Company is based upon current law, and summarizes
the principal Bermuda, United Kingdom and United States federal income tax
consequences of the Company's operations and of the ownership and disposition
of the Company's Ordinary Shares by certain persons under United States tax
laws. Legislative, judicial or administrative changes may be forthcoming that
could affect this summary.

This summary does not purport to be a complete analysis of all of the tax
considerations that may be applicable to a decision to acquire Ordinary Shares
of the Company and, unless explicitly noted to the contrary, deals only with
investors who are U.S. Persons (as defined below) who will hold the Ordinary
Shares as "capital assets" within the meaning of Section 1221 of the Code. In
addition, except as explicitly provided below, the summary does not apply to a
10% U.S. shareholder (as defined below) of the Company. The tax treatment of
any particular shareholder may vary depending on such shareholder's particular
tax situation or status. Consequently, each prospective shareholder is urged
to consult his or its own tax advisors as to the particular tax consequences
of the ownership and disposition of the Ordinary Shares to such shareholder,
including the effect and applicability of federal, state, local and foreign
income and other tax laws.

BERMUDA

The following statements as to Bermuda tax law are the opinion of Appleby,
Spurling & Kempe, Bermuda counsel to the Company, and are subject to the
qualifications and assumptions set forth in such statements. Under current
Bermuda law, there is no Bermuda income tax, withholding tax, capital gains
tax or capital transfer tax levied on the Company or its shareholders.

The Company and its Bermuda subsidiaries have obtained a written undertaking
from the Minister of Finance of Bermuda under the Exempted Undertakings Tax
Protection Act 1966 (as amended) that, in the event of there being enacted in
Bermuda any legislation imposing tax computed on profits or income, or
computed on any capital asset, gain or appreciation, or any tax in the nature
of estate duty or inheritance tax, such tax shall not, until March 28, 2016,
be applicable to the Company or any of its operations, or to the shares,
debentures or other obligations of the Company, except insofar as such tax
applies to persons ordinarily resident in Bermuda and holding such shares,
debentures or other obligations of the Company or to any land leased or let to
the Company.

UNITED KINGDOM

The following statements as to the United Kingdom tax law are the opinion of
Richards Butler, United Kingdom counsel to the Company, and are subject to the
qualifications and assumptions set forth in such statements. In accordance
with common practice in the United Kingdom, the opinion of such counsel is
given "for the sole benefit of [the Company] . . . and may not be relied upon
by anyone else." The purpose of such limitation is to restrict the reliance of
unauthorized persons under the common law principles of the United Kingdom;
however, such limitation does not affect the rights of any person under
Section 11 of the Securities Act, or other provisions of state or federal
securities laws. Additionally, this discussion is intended only as a general
guide to the current tax position under the tax legislation of the United
Kingdom at the date of this document of the consequences of the Company's
operations carried on through, and the ownership of, U.K. resident
subsidiaries, and to the extraction of profits therefrom. It does not purport
to summarize the tax consequences of the ownership and disposition of the
Ordinary Shares. A shareholder who is in any doubt as to his tax position
should consult his professional advisers in the jurisdiction in which he is
resident.

U.K. SUBSIDIARIES

Stirling Cooke Brown Holdings (U.K.) Limited and its U.K. resident
subsidiaries (the "U.K. Subsidiaries") are subject to corporation tax on their
worldwide income, profits and gains in the United Kingdom.

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Under current U.K. legislation no tax is withheld from any dividend paid by
Stirling Cooke Brown Holdings (U.K.) Limited to the Company. However, when
dividends are paid Stirling Cooke Brown Holdings (U.K.) Limited must make a
prepayment of corporation tax to the Inland Revenue (advance corporation tax
or "ACT") at the rate of 20% of the aggregate of the dividend paid and the
ACT, equating to 25% of the cash dividend paid. Stirling Cooke Brown Holdings
(U.K.) Limited can set off this ACT against its mainstream corporation tax
liabilities subject to various limits and any excess may be carried back to be
set against earlier years' tax bills, carried forward to be set off against
future tax bills or surrendered to the U.K. Subsidiaries for utilization by
them.

Stirling Cooke Brown Holdings (U.K.) Limited may elect to pay a dividend as
a foreign income dividend ("FID"). In that event, ACT will still be payable to
the Inland Revenue, but Stirling Cooke Brown Holdings (U.K.) Limited may be
able to recover all or a portion of that ACT if the FID can be matched with
foreign source profits and it so elects and further elects to have the ACT
repaid to it. On July 2, 1997, the Chancellor of the Exchequer announced the
intention to abolish the FID regime referred to above with effect from 6th
April 1999.

The U.K. Subsidiaries must deduct tax at the specified rate (currently 20%)
from any payments of interest made by the U.K. Subsidiaries to the Company and
account to the Inland Revenue for such sums. If the amount of interest is
considered by the Inland Revenue to be excessive, they may treat the excess
over and above a reasonable commercial return or that which they consider
represents an amount which would not have been paid if the companies had been
companies between whom there was no relationship, arrangement or other
connection (whether formal or informal) as a distribution, in which case ACT
would be payable in respect of the amount of the distribution as set out
above.

The United Kingdom has not entered into a tax treaty with Bermuda.

UNITED KINGDOM INSURANCE PREMIUM TAX

The United Kingdom imposes an insurance premium tax ("IPT") on premiums paid
in respect of taxable insurance contracts. Premiums are taxed at a standard
rate of 4% but for some insurance contracts the rate is 17.5%. It is the duty
of the insurer to collect this tax and remit the IPT to the Inland Revenue.

UNITED STATES

The following discussion summarizes the principal United States federal tax
considerations relating to the taxation of the Company and its subsidiaries,
and to the ownership of Ordinary Shares. This discussion is based upon the
existing method of operations of the Company and its subsidiaries as described
in this Prospectus. It is also based on applicable provisions of the Code, the
regulations promulgated by the United States Treasury Department thereunder,
rulings of the United States Internal Revenue Service (the "Service") and
decisions of United States courts, all as currently existing and in effect.
Except for statements that begin with the words "The Company believes" or "The
Company anticipates," the statements made below are the opinion of Foley &
Lardner, U.S. counsel to the Company ("U.S. Counsel"), subject to the
qualifications and assumptions set forth in such statements. The statements as
to the Company's actions, beliefs and conclusions regarding the application of
such tax laws to the Company represent the views of the Company's management
and do not represent legal opinions of the Company or U.S. Counsel.

For purposes of this discussion, the term "Domestic Subsidiaries" means
those subsidiaries of the Company that are created or organized under the laws
of the United States or any state thereof, within the meaning of Section
7701(a)(4) of the Code, and the term "Foreign Subsidiaries" means those
subsidiaries of the Company that are not Domestic Subsidiaries. The term "U.S.
Person" means (i) an individual who is a citizen or resident of the United
States or any political subdivision thereof, (ii) a corporation or partnership
created or organized in or under the laws of the United States or any state

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thereof, or (iii) an estate or trust the income of which is subject to United
States federal income taxation regardless of its source. The term "Foreign
Person" means a person other than a U.S. Person. The term "United States
corporation" means a corporation created or organized in or under the laws of
the United States or any state thereof, and the term "foreign corporation"
means a corporation other than a United States corporation.

The Company has not applied for, and does not intend to apply for, a ruling
from the Service with regard to any of the matters discussed below. The
opinion of U.S. Counsel is not binding on the Service.

FEDERAL TAXES IMPOSED ON THE COMPANY AND ITS SUBSIDIARIES

UNITED STATES TAXATION OF DOMESTIC SUBSIDIARIES. The Domestic Subsidiaries
are subject to United States federal income tax on their worldwide income. The
highest marginal federal income tax rate currently is 35% for corporations.

UNITED STATES TAXATION OF FOREIGN COMPANIES WITH INCOME EFFECTIVELY
CONNECTED WITH THE CONDUCT OF A TRADE OR BUSINESS IN THE UNITED STATES. If a
foreign corporation is engaged in a trade or business in the United States,
then, unless otherwise provided under the terms of an applicable income tax
treaty: (i) the income of the corporation that is effectively connected with
this trade or business is subject to United States federal income tax (at a
current maximum rate of 35%); and (ii) the corporation is subject to an
additional 30% United States "branch profits tax" on its effectively connected
earnings and profits (with certain adjustments) that are deemed repatriated.
Although the federal income tax and branch profits tax imposed on effectively
connected income are generally computed on a "net basis" (after allowance for
deductions), no deductions are allowed to a foreign corporation for a taxable
year unless a federal income tax return is filed on a timely basis for that
taxable year.

The Company believes that neither it nor any of the Foreign Subsidiaries is
engaged in a trade or business in the United States. The Company and the
Foreign Subsidiaries have not and do not intend to file United States income
tax returns. Current law does not provide a comprehensive definition of the
activities that constitute being engaged in a trade or business in the United
States, and the determination is essentially factual in nature. There can be
no assurance that the Service could not contend successfully that the Company
and/or one or more Foreign Subsidiaries are engaged in a trade or business in
the United States. If the Company and/or one or more Foreign Subsidiaries were
found to be engaged in a trade or business in the United States, deficiencies
for federal income taxes and branch profits taxes (together with penalties and
interest) could be assessed against such company. In addition, a failure to
file United States federal income tax returns on a timely basis would result
in a disallowance of deductions, as described above.

The United States has entered into a tax treaty with Bermuda (the "Bermuda
Treaty") relating to certain "enterprises of insurance". An enterprise of
insurance is defined to be an enterprise the predominant business activity of
which consists of issuing insurance contracts or acting as a reinsurer. An
entity that is a resident of Bermuda is not entitled to the benefits of the
Bermuda Treaty unless (i) more than 50% of the beneficial interests in such
entity are beneficially owned, directly or indirectly, by individuals who are
Bermuda residents or United States citizens or residents, and (ii) the
entity's income is not used in substantial part, directly or indirectly, to
make disproportionate distributions to, or to meet certain liabilities to,
persons who are not Bermuda residents or United States citizens or residents
(the "Bermuda Treaty Benefits Test").

A resident of Bermuda that is an "enterprise of insurance" and that is
entitled to the benefits of the Bermuda Treaty is not subject to United States
federal income tax or branch profits tax on its business profits, unless the
business profits are attributable to a United States permanent establishment
maintained by the resident. Because the Company is not itself engaged in an
insurance

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business, the Company is not an "enterprise of insurance" within the meaning
of the Bermuda Treaty. It is uncertain whether, upon completion of the
Offering or at any time thereafter, any Foreign Subsidiary that is
incorporated in Bermuda and that is an "enterprise of insurance" (such as
CIRCL) can satisfy the Bermuda Treaty Benefits Test. Even if a Foreign
Subsidiary (such as CIRCL) does satisfy the Bermuda Treaty Benefits Test and
even if the Foreign Subsidiary does not maintain a permanent establishment in
the United States, the Foreign Subsidiary may be subject to United States
federal income tax and branch profits tax on any investment income (whether
from United States sources or foreign sources) that is effectively connected
with a trade or business conducted in the United States. Furthermore, even if
a Foreign Subsidiary (such as CIRCL) does satisfy the Bermuda Treaty Benefits
Test, and even if this Foreign Subsidiary is exempt from United States tax on
its business profits (on the ground that the Foreign Subsidiary does not
maintain a United States permanent establishment), the Bermuda Treaty does not
prevent the United States from imposing a "second-tier" gross-basis tax on
dividends paid by this Foreign Subsidiary in the event that the Foreign
Subsidiary is engaged in a trade or business in the United States. In
particular, a portion of any dividends paid by CIRCL to CIRCL Holdings Ltd.
will be subject to the second-tier gross-basis United States tax (at a rate of
30%) if CIRCL is engaged in a trade or business in the United States but is
protected by the Bermuda Treaty from United States taxation on its business
profits.

Under the income tax treaty between the United Kingdom and the United States
(the "U.K. Treaty"), a Foreign Subsidiary that is resident in the United
Kingdom for United Kingdom tax purposes and that is entitled to the benefits
of the U.K. Treaty is not subject to United States federal income tax or
branch profits tax on its business profits, unless the business profits are
attributable to a permanent establishment maintained in the United States.

PERSONAL HOLDING COMPANY RULES. In general, a corporation is a "personal
holding company" (a "PHC") for a taxable year if (i) at any time during the
last half of the taxable year, more than 50% of its shares (by value) are
owned, directly or indirectly, by five or fewer individuals, and (ii) at least
60% of its "adjusted ordinary gross income" for the taxable year consists of
"personal holding company income" (such as dividends, interest, royalties and
certain other types of passive investment income). A corporation that is a PHC
for a taxable year is subject to a 39.6% federal tax on its undistributed
income for the taxable year, in addition to being subject to regular federal
income tax.

The Company believes that, for purposes of the PHC provisions, more than 50%
of the stock (by value) of the Company and of each subsidiary is likely to be
treated after the Offering as being owned, directly or indirectly, by five or
fewer individuals.

With respect to United States corporations (such as the Domestic
Subsidiaries) that are members of a group filing a consolidated federal income
tax return, the "60% income" test is generally applied to the group as a
whole, and no member of the group of United States corporations is considered
to meet the 60% income test unless the group meets the 60% income test. The
Company believes that the group of Domestic Subsidiaries has not met, and is
not expected to meet, the 60% income test. Accordingly, the Company believes
that no Domestic Subsidiary has been or is expected to be a PHC.

In determining the "adjusted ordinary gross income" of a foreign
corporation, the only income that is taken into account is income that is
effectively connected with the conduct of a trade or business in the United
States, and income from United States sources. For example, if the Company
receives a dividend from a Domestic Subsidiary, and if the Company does not
receive any other income that is effectively connected with a United States
trade or business or that is derived from United States sources, 100% of the
Company's "adjusted ordinary gross income" for the taxable year will consist
of "personal holding company income", and the Company will be subject to the
PHC tax in the taxable year unless it redistributes to its shareholders the
amount received as a dividend from the Domestic Subsidiary.

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The Company believes that, as a result of dividend distributions paid by it
and by its subsidiaries, neither the Company nor any subsidiary has had, or
will have, any "undistributed personal holding company income" for any taxable
year during which the respective corporation is a PHC.

UNITED STATES TAX ON U.S.-SOURCE INVESTMENT INCOME. If a foreign corporation
receives "fixed or determinable annual or periodical gains, profits and
income" (such as dividends and certain types of interest) from sources within
the United States, and if this income is not effectively connected with the
conduct of a United States trade or business (or is not attributable to a
United States permanent establishment, in the event that the recipient is
entitled to the benefits of a United States income tax treaty), such income is
generally subject to a "gross basis" United States tax. The rate of this tax
is 30%, unless the rate is reduced under an applicable tax treaty. The 30% tax
does not apply to "portfolio interest" (within the meaning of Sections 871(h)
and 881(c) of the Code). If a Domestic Subsidiary pays a dividend to the
Company, such dividend will be subject to the 30% United States tax.

UNITED STATES FEDERAL EXCISE TAX ON INSURANCE PREMIUMS. The United States
imposes a federal excise tax on premiums paid to foreign insurers or
reinsurers with respect to risks located in the United States. This excise tax
is imposed at the rate of 4% on premiums for direct coverage and 1% for
reinsurance coverage.

FEDERAL TAX CONSEQUENCES OF OWNERSHIP OF THE ORDINARY SHARES

This discussion summarizes the federal income tax consequences of the
ownership of Ordinary Shares that are held as capital assets within the
meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to holders in light of their particular
circumstances or to holders subject to special rules (such as financial
institutions, insurance companies, broker-dealers, tax-exempt organizations,
or persons who hold Ordinary Shares as part of a straddle or conversion
transaction).

Prospective purchasers of Ordinary Shares should consult their own tax
advisors with regard to the application of the United States federal income
tax laws to their particular situations and any other tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.

U.S. PERSONS.

Dividends and Gains on Sale. Except as described below with respect to the
"controlled foreign corporation", "related person insurance income", and
"passive foreign investment company" rules, distributions by the Company to a
U.S. Person with respect to the Ordinary Shares will be treated as ordinary
dividend income to the extent of the Company's current and accumulated
earnings and profits. Such dividends will not be eligible for the dividend-
received deduction generally allowed under the Code to dividend recipients
that are United States corporations. The amount of any distribution in excess
of the Company's current and accumulated earnings and profits will first be
applied to reduce the holder's tax basis in the Ordinary Shares, and any
amount in excess of tax basis will be treated as gain from the sale or
exchange of the Ordinary Shares. Except as described below with respect to the
"controlled foreign corporation", "related person insurance income", and
"passive foreign investment company" rules, any gain recognized by a U.S.
Person on a sale or exchange of Ordinary Shares (or on a distribution treated
as a sale or exchange) will be treated as capital gain. Capital gains of
corporations are taxable at the same rate as ordinary income. With respect to
non-corporate taxpayers, the excess of net long-term capital gain over net
short term capital loss may be taxed at a substantially lower rate than
ordinary income. A capital gain or loss is long-term if the asset has been
held for more than one year and short-term if held for one year or less. As a
result of the enactment of the Taxpayer Relief Act of 1997, the tax rate that
applies to long-term capital gains on certain types of assets held for more
than 18 months is lower than the tax rate that applies to long-term capital
gains on assets held for more than one year but not more than 18 months. In
addition, the distinction between capital gain or loss and ordinary income or
loss is relevant for purposes of, among other things, limitations on the
deductibility of capital losses.

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Indirect Taxation of 10% Shareholders of Controlled Foreign Corporations.
With respect to any foreign corporation that is a "controlled foreign
corporation" (a "CFC") for an uninterrupted period of 30 days or more during a
taxable year, each U.S. Person that, on the last day of the corporation's
taxable year, is a "10% U.S. Shareholder" (as defined below) and owns,
directly or indirectly through foreign entities, any shares in the foreign
corporation must include in its gross income for United States federal income
tax purposes a pro rata share of the corporation's "Subpart F" income for such
taxable year, whether or not such income is distributed. A "10% U.S.
Shareholder" is a U.S. Person that owns, directly or indirectly, shares
possessing 10% or more of the voting power in the foreign corporation. Subpart
F income includes insurance income (underwriting income and investment income)
relating to risks located outside the country in which the foreign corporation
is incorporated ("Subpart F Insurance Income"), and also includes passive
investment income (such as interest and dividends).

If a U.S. Person recognizes gain from the sale or exchange of Ordinary
Shares, and if at any time during the five years preceding the sale or
exchange such person was a 10% U.S. Shareholder of the Company at a time when
the Company was classified as a CFC, a portion of the gain will be
recharacterized under Section 1248 of the Code as dividend income, rather than
as capital gain. The amount of the gain that is so recharacterized will depend
on the amount of accumulated earnings and profits of the Company and its
Foreign Subsidiaries.

In general, a foreign corporation is classified as a CFC if more than 50% of
the corporation's shares (by vote or value) are owned directly or indirectly
by 10% U.S. Shareholders. A foreign insurance corporation that is not a CFC
under this general rule is treated as a CFC, however, for the sole purpose of
taking into account the corporation's Subpart F Insurance Income if (i) more
than 25% of such corporation's shares (by vote or value) are owned directly or
indirectly by 10% U.S. Shareholders, and (ii) the foreign corporation realizes
in excess of 75% of its gross premium income from the insuring or reinsuring
of risks outside the country in which the foreign corporation is incorporated.
The Company anticipates that over 75% of CIRCL's gross premium income will be
written on risks outside of Bermuda.

The Company anticipates that, because of the dispersion of ownership of its
shares, the Company will not be a CFC after the Offering. In any event, the
characterization of the Company as a CFC does not give rise to a tax on the
Company, and is relevant only to a 10% U.S. Shareholder of the Company. No
assurance can be given, however, that relationships among holders of shares,
or future changes in ownership, will not cause the Company to be or become a
CFC, with the result that any 10% U.S. Shareholder of the Company or of a
Foreign Subsidiary would be required to include in its gross income its pro
rata share of any Subpart F income of the Company or the Foreign Subsidiary.
Even if the Company or a Foreign Subsidiary is determined to be a CFC, no
purchaser of Ordinary Shares will be responsible for the payment of United
States tax with respect to any Subpart F income earned by the Company and the
Foreign Subsidiaries, unless such purchaser is a 10% U.S. Shareholder. Any 10%
U.S. Shareholder of the Company should consult its own tax advisor.

Indirect Taxation Attributable to RPII. If a foreign corporation earns
"related person insurance income" ("RPII"), and if 25% or more (by vote or
value) of the shares of the foreign corporation are owned directly or
indirectly by U.S. Persons for an uninterrupted period of 30 days or more
during the relevant taxable year, then unless one of the exceptions described
below applies, each U.S. Person that owns, directly or indirectly through
foreign entities, any stock in the foreign corporation on the last day of the
taxable year must include in its gross income for United States federal income
tax purposes its allocable share (calculated as if the only stock outstanding
were the stock held by U.S. Persons) of the RPII, whether or not such income
is distributed. RPII consists of insurance income (underwriting and investment
income) relating to policies issued for the benefit of (i) any U.S. Person
that owns, directly or indirectly through foreign entities, any shares in the
foreign corporation, or (ii) any person related to such a U.S. Person.

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Under one exception to the RPII rules, no income inclusion is required if at
all times during the taxable year less than 20% of the voting power and value
of the shares in the foreign corporation are owned, directly or indirectly
through foreign entities, by persons who are, or who are related to persons
who are, directly or indirectly insured by the foreign corporation. Under
another exception to the RPII rules, no income inclusion is required if the
gross amount of RPII of the foreign corporation for the taxable year is less
than 20% of the gross insurance income of the foreign corporation.

The Company anticipates that in each taxable year ending after the Offering
the gross amount of any RPII earned by the Company and each Foreign Subsidiary
will be less than 20% of the gross insurance income earned by the respective
company. Nevertheless, there can be no assurance that RPII income inclusions
will be avoided with respect to holders of Ordinary Shares, particularly
because any Foreign Subsidiary that conducts a reinsurance business may not be
in a position to prove that the persons whose risks the Foreign Subsidiary
indirectly reinsures do not own, directly or indirectly, Ordinary Shares.

As described above with respect to the CFC rules, Section 1248 will apply on
a sale or exchange of Ordinary Shares by a U.S. Person (and will
recharacterize a portion of any gain on the sale or exchange as a dividend) if
at any time during the five years preceding the sale or exchange the U.S.
Person was a 10% U.S. Shareholder at a time when the Company was a CFC.
Section 953(c)(7) of the Code generally provides that Section 1248 also
applies if a U.S. Person sells or exchanges shares in a foreign corporation
that earns RPII and that, at any time in the five years preceding the sale or
exchange, was 25%-or-more owned (directly or indirectly) by U.S. Persons and
would have been taxed as an insurance company under Subchapter L of the Code
if the corporation were a domestic corporation. Section 1248 would apply in
such a case even if the RPII represents less than 20% of the corporation's
insurance income. Furthermore, it is possible that the Service could contend
successfully that Sections 953(c)(7) and 1248 also apply if the foreign
corporation whose shares are sold or exchanged by the U.S. Person has never
been engaged in the insurance business but is the parent of a foreign
corporation that is or has been engaged in an insurance business.

The Company anticipates that it will never be engaged in an insurance
business. Assuming that the Company itself never engages in an insurance
business in the future, the provisions of Section 953(c)(7) should not apply
under current law to any holder of Ordinary Shares. This conclusion is not
free from doubt, however. Because one or more of the Foreign Subsidiaries are
and will be engaged in an insurance business, it is possible that the Service
could contend successfully that Section 1248 should apply to a sale or
exchange of Ordinary Shares by a U.S. Person (which would result in a portion
of any gain on the sale or exchange being recharacterized as a dividend) if,
at any time during the five years preceding the sale or exchange, this U.S.
Person owned, directly or indirectly, shares in the Company at a time when 25%
or more (by vote or value) of shares in the Company were owned, directly or
indirectly, by U.S. Persons.

Passive Foreign Investment Company Rules. In general, a foreign corporation
is a "passive foreign investment company" ("PFIC") during a taxable year if
75% or more of its gross income for the taxable year constitutes "passive
income" or if 50% or more of its assets held during the taxable year produce,
or are held for the production of, passive income. In general, any U.S. Person
who holds, directly or indirectly, any Ordinary Shares will be subject to
penalty taxes (under Section 1291 of the Code) upon the disposition of, or
receipt of "excess distributions" with respect to, such Ordinary Shares if the
Company is a PFIC during the taxable year in which such income is realized by
the U.S. Person, or if the Company was a PFIC during any prior taxable year
that is included in whole or in part in the U.S. Person's "holding period"
(within the meaning of Section 1223 of the Code) for the Ordinary Shares. In
addition to the penalty taxes, there exist several other adverse tax
consequences to any U.S. Person that holds shares in a PFIC.

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The penalty taxes and these other adverse tax consequences do not apply,
however, if the U.S. Person makes a "qualified electing fund" ("QEF") election
with respect to its Ordinary Shares for the first taxable year included in
whole or in part in the U.S. Person's "holding period" in which the Company is
a PFIC. If a QEF election is made by the U.S. Person, then with respect to
each taxable year that the Company is a PFIC, the U.S. Person will have to
include in its gross income for United States federal income tax purposes its
allocable share of the Company's earnings for such taxable year, whether or
not these earnings are distributed.

For purposes of the PFIC rules, "passive income" generally includes
interest, dividends, and other investment income. The PFIC statutory
provisions contain an express exception for income "derived in the active
conduct of an insurance business by a corporation which is predominantly
engaged in an insurance business . . ." (the "Insurance Company Exception").
This exception is intended to ensure that income derived by a bona fide
insurance company is not treated as passive income. However, to the extent
such income is attributable to financial reserves in excess of the reasonable
needs of the insurance business, it may be treated as passive income for
purposes of the PFIC rules. The PFIC statutory provisions also contain a look-
through rule that states that, for purposes of determining whether a foreign
corporation is a PFIC, such foreign corporation shall be treated as if it
"received directly its proportionate share of the income . . ." and as if it
"held its proportionate share of the assets . . ." of any other corporation in
which it owns at least 25% of the value of the stock.

The Company believes that, as a result of the Insurance Company Exception,
CIRCL is not a PFIC. The Company anticipates that CIRCL will not have
financial reserves in excess of the reasonable needs of its insurance
business, and will continue to meet the requirements of the Insurance Company
Exception. The Company anticipates further that, as a result of the look-
through rules, the Company will not be classified as a PFIC. Nevertheless,
there can be no assurance that the Company will not be classified as a PFIC.
The United States Treasury has not yet promulgated final regulations regarding
the application of the Insurance Company Exception and the look-through rules,
and there exists substantial uncertainty regarding the interpretation of these
rules. In addition, it is unclear whether the coverages or services provided
under a rent-a-captive program are to be characterized as "passive" activities
(rather than as non-passive management and related services) for PFIC
purposes.

Foreign Personal Holding Company Rules. In general, a foreign corporation is
a "foreign personal holding company" (a "FPHC") during a taxable year if (i)
at any time during the taxable year, more than 50% of the shares (by vote or
value) of the corporation are owned, directly or indirectly, by five or fewer
individuals who are U.S. Persons, and (ii) at least 50% of the gross income of
the corporation for the taxable year consists of "foreign personal holding
company income" (such as dividends, interest, royalties, and certain other
types of passive investment income). If a foreign corporation is a FPHC for a
taxable year, each U.S. Person who owns, directly or indirectly through
foreign entities, any stock of the corporation is required to recognize, as a
dividend, the U.S. Person's share of the undistributed FPHC income of the
foreign corporation.

The Company believes that neither the Company nor any Foreign Subsidiary has
met or is expected to meet the stock ownership threshold requirement for
classification as a FPHC.

Foreign Tax Credit Treatment of Income Earned With Respect to Ordinary
Shares. If the Company is engaged in a trade or business in the United States
at any time during the three taxable years preceding the taxable year in which
it pays a dividend on its Ordinary Shares to a U.S. Person, and if 25% or more
of the Company's gross income during this three year period was effectively
connected with the United States trade or business, a portion of such dividend
will be treated as United States source income for purposes of computing the
foreign tax credit limitation of the U.S Person that receives the dividend.
Any portion of a dividend received by a U.S. Person that is not treated as
United States source income under the rule described above will nevertheless
be recharacterized in part as

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United States source income if U.S. Persons own, directly or indirectly, 50%
or more of the voting power or value of the shares of the Company. In such an
event, the amount that is so recharacterized will depend on the amount of
United States source income earned by the Company and its subsidiaries. (This
type of recharacterization will also apply to any income inclusion to a U.S.
Person under the CFC, RPII, and QEF rules with respect to the Company or its
Foreign Subsidiaries.) The Company anticipates that a substantial part of the
income earned by the Company and its subsidiaries will be from United States
sources.

The Company anticipates that substantially all of the dividends received
from the Company and any income inclusions applicable to a U.S. Person under
the CFC, RPII, and QEF rules that constitute foreign source income will
constitute either "passive" income or "financial services" income for foreign
tax credit limitation purposes. Thus, it may not be possible for most U.S.
Persons who hold Ordinary Shares to utilize excess foreign tax credits to
reduce United States tax on such income.

Form 5471 Reporting. Any U.S. Person who owns, directly or indirectly, any
shares on the last day of a taxable year of a foreign corporation must
generally file an information report on Form 5471 with respect to such
person's interest in the foreign corporation if: (i) the U.S. Person is a 10%
U.S. Shareholder of the foreign corporation, and the foreign corporation is a
CFC for an uninterrupted period of 30 days or more during the taxable year; or
(ii) 25% or more (by vote or value) of the shares of the foreign corporation
are owned directly or indirectly by U.S. Persons for an uninterrupted period
of 30 days or more during the taxable year, and the gross amount of RPII
earned by the foreign corporation during the taxable year represents 20% or
more of the foreign corporation's gross insurance income. The filing of a Form
5471 is also required in other situations, including the acquisition by a U.S.
Person of 5% or more of the value of the shares of a foreign corporation. The
Company will provide information to assist in the completion of Form 5471 in
situations where such form is required. However, the Company will not itself
determine whether or when such filing is required.

Backup Withholding. Information reporting to the Service by paying agents
and custodians located in the United States will be required with respect to
payments of dividends on the Ordinary Shares to U.S. Persons. A U.S. Person
who holds Ordinary Shares may be subject to backup withholding at a 31% rate
with respect to dividends paid by paying agents or custodians, or proceeds
received on the sale or exchange of Ordinary Shares through a broker, unless
the holder (i) demonstrates that it qualifies for an applicable exemption
(such as the exemption for holders that are corporations), or (ii) provides a
taxpayer identification number and complies with certain other requirements.
Holders of Ordinary Shares should consult their own tax advisors regarding
their qualification for exemption from backup withholding and the procedure
for obtaining such an exemption. The amount of any backup withholding from a
payment to a holder will generally be allowed as credit against such holder's
United States federal income tax liability and may entitle such holder to a
refund, provided that the required information is furnished to the Service.

FOREIGN PERSONS.

U.S. Income Tax. A holder of Ordinary Shares who is a Foreign Person (other
than a former United States citizen described in Section 877(a) of the Code or
a former resident of the United States described in Sections 877(e) or
7701(b)(10) of the Code) will not be subject to United States federal income
tax upon any dividend received on the Ordinary Shares, unless the dividend
income is effectively connected with a United States trade or business
conducted by the Foreign Person. In addition, such a Foreign Person will not
be subject to United States federal income tax upon any gain realized on the
sale or exchange of Ordinary Shares, unless (i) such gain is effectively
connected with a trade or business in the United States conducted by the
holder or (ii) in the case of an individual holder, the holder is present in
the United States for 183 days or more in the taxable year of the sale or
exchange, and either the holder has a "tax home" (as defined in Section
911(d)(3) of the Code) in

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the United States or the gain is attributable to an office or other fixed
place of business maintained in the United States by such holder.

Backup Withholding. If a Foreign Person sells Ordinary Shares through a
United States office of a broker, the broker is required to file an
information report and is required to withhold 31% of the sale proceeds unless
the Foreign Person certifies its non-United States status or otherwise
establishes an exemption. If a Foreign Person sells Ordinary Shares through a
foreign office of a broker, backup withholding is not required; but
information reporting is required if the broker does not have documentary
evidence that the holder is a Foreign Person and if (i) the broker is a U.S.
Person, (ii) the broker is a CFC, or (iii) the broker derives 50% or more of
its gross income for a specified three year period from the conduct of a trade
or business in the United States.

Foreign Persons holding Ordinary Shares should consult their own tax
advisors regarding the application of information reporting and backup
withholding in their particular situations, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if available.
Any amount withheld from payment to a Foreign Person holding Ordinary Shares
under the backup withholding rules will generally be allowed as credit against
such holder's United States federal income tax liability, if any, and may
entitle such holder to a refund, provided that the required information is
furnished to the Service.

U.S. Estate Tax. Any Ordinary Shares held by an individual who is neither a
United States citizen, nor a former United States citizen, nor a resident
(within the meaning of Section 2101 of the Code) of the United States will be
exempt from the United States estate tax.

* * * * *

The foregoing discussion is based upon current law and is for general
information only. The tax treatment of a holder of Ordinary Shares may vary
depending on the holder's particular tax situation. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could be
retroactive and could affect the tax consequences to holders of Ordinary
Shares.

PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES TO THEM OF ACQUIRING,
OWNING AND DISPOSING OF THE ORDINARY SHARES.

EXPERTS

The financial statements and schedules of Stirling Cooke Brown Holdings
Limited as of December 31, 1995 and 1996, and for each of the years in the
three year period ended December 31, 1996 and the consolidated financial
statements of Realm Investments Ltd. for the year ended December 31, 1995,
have been included herein and in the registration statement in reliance upon
the reports of KPMG Peat Marwick, independent chartered accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.

The statement of operations, statement of changes in stockholder's equity
and the statement of cash flows of Realm National Insurance Company for the
period from January 1, 1996 to September 4, 1996 have been included herein and
in the registration statement in reliance upon the report by KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.

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LEGAL MATTERS

The validity of the Ordinary Shares under Bermuda law will be passed upon
for the Company by its Bermuda counsel, Appleby, Spurling & Kempe, Hamilton,
Bermuda. Warren Cabral, a Partner of Appleby, Spurling & Kempe, is a director
of the Company. See "Management". Certain legal matters in connection with the
Offering will be passed upon for the Company with respect to matters of United
States federal law by Foley & Lardner, Milwaukee, Wisconsin, and for the
Company and the Selling Shareholders by Appleby, Spurling & Kempe with respect
to matters of Bermuda law and Richards Butler, London, with respect to matters
involving the laws of the United Kingdom. Certain legal matters will be passed
upon for the Underwriters with respect to matters of United States federal law
by Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York, and with respect to matters of
Bermuda law by Appleby, Spurling & Kempe.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (herein, together with all
amendments thereto, called the "Registration Statement") under the Securities
Act with respect to the Ordinary Shares offered hereby. Reference is made to
the Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof. This Prospectus,
which is a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain items of which are omitted as permitted by the
rules and regulations of the Commission. For further information with respect
to the Company and the Ordinary Shares offered hereby, reference is made to
the Registration Statement and to the financial statements, schedules, and
exhibits filed as a part thereof. The Registration Statement, including all
schedules and exhibits thereto, may be inspected without charge at the public
reference facilities maintained by the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. and at the
Commission's regional offices at 7 World Trade Center, 13th floor, New York,
New York and 500 West Madison Street, Suite 1400, Chicago, Illinois. Copies of
such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates or may be accessed electronically by means of the Commission's home page
on the Internet at http://www.sec.gov.

Statements contained in this Prospectus concerning the contents of any
contract or other document are not necessarily complete and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or otherwise with the Commission, each
such statement being qualified in all respects by such reference.

The Company is, and after the completion of the Offering expects to continue
to be, a "foreign private issuer" as defined in Rule 3b-4 promulgated under
the Exchange Act. As such, the Company will be exempt from certain rules and
reporting requirements under the Exchange Act, including the proxy rules under
Section 14 and the short-swing profit rules under Section 16.

The Company has also filed this Prospectus with the Bermuda Registrar of
Companies in compliance with Part III of the Bermuda Companies Act 1981.

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GLOSSARY OF SELECTED INSURANCE TERMS

Alternative market........... The segment of the insurance market that has
developed in response to volatility in the cost
and availability of traditional insurance
coverages. The alternative market consists of
retrospectively rated programs, deductible
policies and various risk financing mechanisms
including self insurance, captives, rent-a-
captives, risk retention groups and government
pools and trusts.

Assigned risk pool........... A state mandated workers' compensation
insurance program whereby all workers'
compensation insurers in such state are
required to share in the provision of workers'
compensation insurance to those employers in
the state who are unable to obtain such
insurance in the open market.

Captive...................... An insurance or reinsurance company that is
controlled by the insured or a group of
insureds, and is formed for the purpose of
insuring or reinsuring risks associated with
the activities of its shareholders or members.

Claims adjusting............. The service, provided on behalf of insurers, of
examining the circumstances giving rise to a
claim under a policy of insurance, determining
the validity or otherwise of the claim,
deciding the amount of benefits payable and
associated claim costs in accordance with
policy conditions as a result of the claims
events, paying valid claims, and calculating
the level of reserving required of an insurer
to pay future benefits and associated claim
costs as a result of valid claims.

Independent producing agent.. See definition of "retail agent".

Loss expense................. The expense of investigating, adjusting,
defending and settling claims including legal
and other fees and the portion of general
expenses allocated to claim settlement costs.

Loss reserves................ Liabilities established by insurers and
reinsurers to reflect the estimated cost of
claims payments that the insurer or reinsurer
ultimately will be required to pay in respect
of insurance or reinsurance it has written.
Reserves are estimated for losses and loss
expenses, and consist of case reserves for
specific known losses and incurred but not
reported (IBNR) reserves based on claims
history and statistical data.

Managing general agency A person, firm or corporation that has
("MGA")..................... supervisory responsibility for the local agency
and field operations of an insurance company or
is authorized by an insurance company to accept
and process on its behalf insurance policies
sold by other agents. A managing general agency
may typically perform any of the following acts
for an insurance company: underwrite and accept
risks to be bound by the insurance company;
receive and process reports and accounts;
receive and be responsible for balances; adjust
claims; and appoint or direct other agents.

74
<PAGE>

Managing General Underwriter
("MGU").....................
A person, firm or corporation that is
authorized by a reinsurer to accept and process
on its behalf a reinsurance contract. A
managing general underwriter may typically
perform any of the following acts for a
reinsurer: underwrite and accept risks to be
bound by the reinsurer; receive and process
reports and accounts; receive and be
responsible for balances; perform claims
management.

Net premiums earned.......... The pro rata portion of the written premium
covering that part of the policy term that
expired during a specified accounting period
and therefore is recognized for accounting
purposes as income in that period less premiums
ceded to reinsurers with respect to such
period.

Net premiums written......... Gross premiums written during a given period
less premiums ceded to reinsurers during such
period.

Non-subscriber programs...... Programs designed for employers in the state of
Texas that have elected to opt out of or not
subscribe to the insurance provisions of the
Texas Workers' Compensation Act. It is not
mandatory for employers to purchase workers'
compensation insurance in Texas, and there are
a number of occupational accident insurance
coverages available in that state as
alternatives to workers' compensation
insurance.

Policy administration........ The performance of all the tasks surrounding
the production of policy documents, delivery of
policy documents to the insured at the
inception of a policy period, production and
delivery to the insured of any amendments to
the documents during the course of the policy
period, due performance of any undertakings in
the policy documents in connection with renewal
or cancellation of the policy, filing of policy
documents with state departments of insurance
or departments of labor as may be required, and
the maintenance of accurate records of all
policies for the insurer.

Premium accounting........... The reporting and remitting to the insurance
carrier of all premium monies and adjustments
due an insurer in respect of all insurance
policies for risks accepted on behalf of that
insurer.

Program business or Structured insurance products that are each
programs.................... designed for a particular group of insureds.
Each program has its own rates, underwriting
guidelines and reinsurance arrangements,
specialized for that program in order to meet
the particular needs of such group.

Reinsurance.................. A transaction in which one party ("reinsurer"),
in consideration of payment of a premium,
agrees to indemnify another party ("reinsured")
for a specified part or all of the reinsured's
risk under a policy or policies of insurance
written or assumed by the reinsured. The
reinsured may be referred to as the "ceding
company". The purchase of reinsurance does not
legally discharge the ceding company from its
liability to its

75
<PAGE>

insurers. Reinsurance of all or a portion of a
single insurance policy is known as
"facultative reinsurance"; reinsurance of all
or a portion of a specified group of policies
is known as "treaty reinsurance".

Reinsurance brokering........ The design and/or arranging, for a fee or
commission, of a program which transfers risk
and associated premium from an insurance
company or reinsurance company to another
reinsurance company.

Rent-a-captive............... An insurance or reinsurance company formed for
the purpose of insuring risks associated with
the activities of a group of unrelated
shareholders and which is controlled not by its
insurers but by an insured, a broker or an
entity seeking to profit from operating the
rent-a-captive.

Retail agent or independent
producing agent.............
A person, firm or corporation appointed and
authorized by a managing general agent or
insurer to transact insurance business on
behalf of such managing general agent or
insurer. A retail agent typically deals
directly with the insured (i.e. retails the
insurance business) while a managing general
agent typically only deals through retail
agents (i.e., wholesales the insurance
business). An independent producing agent is an
unaffiliated retail agent producing insurance
business to a managing general agent.

Retained risk................ The portion of risk which is not transferred by
the insured or the reinsured to an insurer or
reinsurer.

Retrocessional reinsurance... A type of reinsurance whereby a reinsurer cedes
to another reinsurer, 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.
Reinsurance companies cede risks to
retrocessionaires for reasons similar to those
that cause primary insurers to purchase
reinsurance: to reduce net liability on
individual risks, to protect against
catastrophic losses, to stabilize financial
ratios and to obtain additional underwriting
capacity.

Soft insurance market........ The period of the insurance market cycle which
is characterized by excessive capital and
competition, resulting in an increased
availability of coverage and decreased prices.

Specialty casualty lines..... Insurance primarily intended to cover entities
against certain types of damages and economic
losses arising out of certain actions or
omissions. Specialty casualty lines typically
include certain types of property damage
coverage, combined general liability coverage
and various professional indemnity coverages.

Underwriting profit or loss..
The amount of earned premiums less all
associated losses and expenses (including
additions to reserves) for a given period.
Underwriting profit or loss does not include
investment income associated with the
investment of insurance premiums or realized
gains and losses.

76
<PAGE>

Workers' compensation........ Workers' compensation is a statutory system
that provides funds for medical treatment and
wage replacement for employees injured on the
job. Under workers' compensation laws,
employees do not have the right to sue
employers under common law for damages suffered
in workplace accidents, but in exchange receive
a specified and statutorily guaranteed set of
benefits, regardless of fault. It is mandatory
in all but two states (New Jersey and Texas)
for employers to provide workers' compensation,
which they generally do by purchasing workers'
compensation insurance from the commercial
insurance market, from a state fund, or from an
assigned risk pool, or by qualifying as self-
insurers.

77
<PAGE>

INDEX TO FINANCIAL STATEMENTS

STIRLING COOKE BROWN HOLDINGS LIMITED AND SUBSIDIARIES

<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report............................................ F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996............ F-3
Consolidated Statements of Income for the Years Ended December 31, 1994,
1995 and 1996.......................................................... F-4
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended December 31, 1994, 1995 and 1996................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996.................................................... F-6
Notes to Consolidated Financial Statements for the Years Ended December
31, 1994, 1995 and 1996................................................ F-7
UNAUDITED INTERIM FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheet as of September 30, 1997........... F-25
Unaudited Consolidated Statements of Income for the Nine Months Ended
September 30, 1996 and 1997............................................ F-26
Unaudited Consolidated Statements of Changes in Shareholders' Equity for
the Nine Months Ended September 30, 1996 and 1997...................... F-27
Unaudited Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1996 and 1997...................................... F-28
Notes to Unaudited Consolidated Financial Statements for the Nine Months
Ended September 30, 1996 and 1997...................................... F-29
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Pro Forma Unaudited Consolidated Statement of Income.................... F-31
Notes to Pro Forma Unaudited Consolidated Statement of Income........... F-33

REALM NATIONAL INSURANCE COMPANY

AUDITED FINANCIAL STATEMENTS

Independent Auditors' Report............................................ F-34
Statement of Operations for the Period from January 1, 1996 through
September 4, 1996...................................................... F-35
Statement of Changes in Stockholder's Equity for the Period from
January 1, 1996 to September 4, 1996................................... F-36
Statement of Cash Flows for the Period from January 1, 1996 to September
4, 1996................................................................ F-37
Notes to Financial Statements for the Period from January 1, 1996 to
September 4, 1996...................................................... F-38
</TABLE>

REALM INVESTMENTS LTD.

AUDITED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report............................................ F-43
Consolidated Statement of Operations for the Year Ended December 31,
1995................................................................... F-44
Consolidated Statement of Changes in Shareholder's Equity for the Year
Ended December 31, 1995................................................ F-45
Consolidated Statement of Cash Flows for the Year Ended December 31,
1995................................................................... F-46
Notes to Consolidated Financial Statements for the Year Ended December
31, 1995............................................................... F-47
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of
Stirling Cooke Brown Holdings Limited

We have audited the consolidated financial statements of Stirling Cooke
Brown Holdings Limited and subsidiaries as listed in the accompanying index.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Stirling
Cooke Brown Holdings Limited and subsidiaries as at December 31, 1995 and 1996
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1996, in conformity with United
States generally accepted accounting principles.

KPMG Peat Marwick
Chartered Accountants
Hamilton, Bermuda

November 2, 1997

F-2
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1995 AND 1996
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE
DATA)

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
ASSETS
Marketable securities, at fair value (Note 6)
Debt securities (amortized cost--$18,982)................. $ -- $ 19,033
Equity securities (cost--$3,295).......................... -- 3,466
Short term investments (amortized cost--$120)............. -- 120
-------- --------
Total marketable securities................................. -- 22,619
Cash and cash equivalents................................... 688 15,602
Fiduciary funds--restricted (Notes 4 and 5)................. 24,045 50,240
Insurance and reinsurance balances receivable (affiliates,
1995--$272, 1996--$Nil) (Notes 4 and 18)................... 75,352 103,755
Outstanding losses recoverable from reinsurers (Notes 9 and
10)........................................................ -- 16,588
Deferred acquisition costs.................................. -- 171
Deferred reinsurance premiums ceded (Note 9)................ -- 7,223
Deferred tax asset (Note 13)................................ -- 264
Goodwill.................................................... -- 8,124
Other assets (Note 7)....................................... 3,188 6,451
Assets related to deposit liabilities (Note 8).............. -- 4,047
-------- --------
Total assets............................................ $103,273 $235,084
======== ========
LIABILITIES
Outstanding losses and loss expenses (Note 10).............. $ -- $ 24,301
Unearned premiums........................................... -- 12,515
Deferred income............................................. -- 1,793
Insurance and reinsurance balances payable (affiliates,
1995--$8,613, 1996--$Nil) (Note 18)........................ 91,960 141,483
Funds withheld.............................................. -- 1,384
Accounts payable and accrued liabilities.................... 1,523 3,927
Income taxes payable (Note 13).............................. 2,735 2,176
Deposit liabilities (Note 8)................................ -- 4,047
-------- --------
Total liabilities....................................... 96,218 191,626
-------- --------
Ordinary shares subject to redemption (Note 11)............. -- 14,457
-------- --------
SHAREHOLDERS' EQUITY
Share capital
Authorized 8,048,000 ordinary shares of par value $0.25
each
Issued and fully paid 4,000,020 and 6,000,000 ordinary
shares (Note 11)......................................... 1,000 1,500
Additional paid in capital.................................. -- 12,319
Unrealized gain on marketable securities (Note 6)........... -- 147
Retained earnings........................................... 6,055 15,973
-------- --------
7,055 29,939
Less: 202,784 ordinary shares in treasury, at cost (Note
11)........................................................ -- (938)
-------- --------
Total shareholders' equity.............................. 7,055 29,001
-------- --------
Total liabilities, ordinary shares subject to redemption
and shareholders' equity............................... $103,273 $235,084
======== ========
</TABLE>

See accompanying notes to consolidated financial statements

F-3
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE
DATA)

<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
Risk management fees............................. $ 11,670 $ 17,084 $ 33,842
Net premiums earned (Note 9)..................... -- -- 8,754
Net investment income (Note 6)................... 703 1,964 3,405
Other income..................................... -- -- 841
--------- --------- ---------
Total revenues............................... 12,373 19,048 46,842
--------- --------- ---------
EXPENSES
Net losses and loss expenses incurred (Note 10).. -- -- 6,765
Acquisition costs................................ -- -- 1,618
Depreciation and amortization of capital assets.. 517 659 1,018
Amortization of goodwill......................... -- -- 423
Salaries and benefits............................ 4,454 6,066 13,106
Other operating expenses......................... 3,271 5,169 11,713
--------- --------- ---------
Total expenses............................... 8,242 11,894 34,643
--------- --------- ---------
Income before taxation........................... 4,131 7,154 12,199
Taxation (Note 13)............................... 1,298 2,560 2,281
--------- --------- ---------
Net income....................................... $ 2,833 $ 4,594 $ 9,918
========= ========= =========
Net income per share............................. $ 0.66 $ 1.07 $ 1.19
--------- --------- ---------
Weighted average number of shares and ordinary
share equivalents outstanding................... 4,288,908 4,304,098 8,306,610
--------- --------- ---------
</TABLE>

All per share data has been restated to reflect the four for one stock split
discussed in Note 19.

See accompanying notes to consolidated financial statements

F-4
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE
DATA)

<TABLE>
<CAPTION>
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
ORDINARY SHARES OF PAR VALUE $0.25 EACH
Balance at beginning of year....................... $1,000 $ 1,000 $ 1,000
Issuance of shares................................. -- -- 500
------ ------- -------
Balance at end of year............................. $1,000 $ 1,000 $ 1,500
------ ------- -------
ADDITIONAL PAID IN CAPITAL
Balance at beginning of year....................... $ -- $ -- $ --
Issuance of shares................................. -- -- 12,319
------ ------- -------
Balance at end of year............................. $ -- $ -- $12,319
------ ------- -------
UNREALIZED GAIN ON MARKETABLE SECURITIES
Balance at beginning of year....................... $ -- $ -- $ --
Unrealized gain in year............................ -- -- 147
------ ------- -------
Balance at end of year............................. $ -- $ -- $ 147
------ ------- -------
RETAINED EARNINGS....................................
Balance at beginning of year....................... $1,532 $ 3,596 $ 6,055
Net income......................................... 2,833 4,594 9,918
Dividends.......................................... (769) (2,135) --
------ ------- -------
Balance at end of year............................. $3,596 $ 6,055 $15,973
------ ------- -------
TREASURY STOCK
Balance at beginning of year....................... $ -- $ -- $ --
Purchase of ordinary shares in treasury............ -- -- (938)
------ ------- -------
Balance at end of year............................. $ -- $ -- $ (938)
------ ------- -------
TOTAL SHAREHOLDERS' EQUITY........................... $4,596 $ 7,055 $29,001
====== ======= =======
</TABLE>

Dividends per share were $0.19, $0.53 and $0 for the years ended December
31, 1994, 1995 and 1996, respectively.

All per share data has been restated to reflect the four for one stock split
discussed in Note 19.

See accompanying notes to consolidated financial statements

F-5
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income......................................... $ 2,833 $ 4,594 9,918
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 517 659 1,018
Amortization of goodwill......................... -- -- 423
Amortization of marketable securities............ -- -- (10)
Equity in income of affiliates................... -- -- (282)
Changes in non cash operating assets and
liabilities:
Fiduciary funds.................................. (1,713) (9,883) (18,349)
Insurance and reinsurance balances receivable.... (44,826) (30,884) (31,023)
Outstanding losses recoverable from reinsurers... -- -- (5,159)
Deferred acquisition costs....................... -- -- 1,436
Deferred reinsurance premiums ceded.............. -- -- (762)
Other assets..................................... 827 (185) (942)
Deferred tax asset............................... -- -- 141
Assets related to deposit liabilities............ -- -- (579)
Outstanding losses and loss expenses............. -- -- 9,916
Unearned premiums................................ -- -- 938
Insurance and reinsurance balances payable....... 44,682 37,793 47,065
Funds withheld................................... -- -- (355)
Accounts payable and accrued liabilities......... (483) 136 893
Income taxes payable............................. 75 972 (559)
Deferred income.................................. -- -- 522
Deposit liabilities.............................. -- -- 579
------- ------- -------
Net cash provided by operating activities...... 1,912 3,202 14,829
------- ------- -------
INVESTING ACTIVITIES
Purchase of capital assets......................... (1,296) (807) (1,446)
Sale of capital assets............................. 213 -- 58
Purchase of debt securities........................ -- -- (13,751)
Purchase of equity securities...................... -- -- (39)
Purchase of short-term investments, net............ -- -- (120)
Proceeds on sale of debt securities................ -- -- 2,273
Proceeds on sale of equity securities.............. -- -- 15
Purchase of subsidiaries, net of cash acquired..... -- -- (290)
Investments in affiliates.......................... -- -- (134)
------- ------- -------
Cash used by investing activities.............. (1,083) (807) (13,434)
------- ------- -------
FINANCING ACTIVITIES
Dividends.......................................... (769) (2,135) --
Net proceeds of subscription to share capital
subject to redemption............................. -- -- 14,457
Purchase of common shares in treasury.............. -- -- (938)
------- ------- -------
Cash (used) provided by financing activities... (769) (2,135) 13,519
------- ------- -------
Increase in cash and cash equivalents.............. 60 260 14,914
Cash and cash equivalents at beginning of year..... 368 428 688
------- ------- -------
Cash and cash equivalents at end of year........... $ 428 $ 688 $15,602
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for income taxes..... $ 580 $ 1,588 $ 1,928
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements

F-6
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1994, 1995 AND 1996
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE DATA)

1. GENERAL

Stirling Cooke Brown Holdings Limited (the "Company") was incorporated in
Bermuda on December 12, 1995. The Company is a holding company engaged,
through its subsidiaries, in providing insurance services primarily in the
United States, Bermuda and Europe. The Company's activities include insurance
and reinsurance brokering, underwriting management, risk management, claims
control, loss and safety prevention, third party administration and managed
care services. In January 1996, the Company acquired all the outstanding
common shares of Realm Investments Ltd. in exchange for 1,999,980 of its newly
issued common shares. The Company also acquired, in September 1996, its own
United States domiciled insurance company which, together with the Company's
Bermuda based reinsurance company, writes insurance and reinsurance business.
The Company specializes in the North American occupational accident and
workers' compensation alternative risk transfer markets.

The Company did not conduct any business from the date of its incorporation
until January 1996. In January 1996, under the terms of a Share Purchase
Agreement, the Company exchanged 4,000,020 of its newly issued common shares
for 100% of the outstanding share capital of Stirling Cooke Brown Holdings
(UK) Limited. Stirling Cooke Brown Holdings (UK) Limited was incorporated in
England on February 5, 1990 and formerly acted as the ultimate holding company
for a number of United Kingdom subsidiaries involved in the insurance
brokering industry.

Stirling Cooke Brown Holdings (UK) Limited was the predecessor entity of the
Company. Accordingly, the consolidated financial statements of the Company for
the years ended December 31, 1994 and 1995 are those of Stirling Cooke Brown
Holdings (UK) Limited.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements are prepared in
accordance with United States generally accepted accounting principles which
require 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 revenues and expenses during the reporting period. Actual
results could differ from those estimates. The following are the significant
accounting policies adopted by the Company:

a) Basis of presentation

These consolidated financial statements include the financial statements of
the Company and all of its majority owned subsidiaries (collectively referred
to as the "Company"). All significant intercompany balances and transactions
have been eliminated on consolidation. The results of a number of subsidiaries
have been included from the dates of their acquisition.

b) Marketable securities

Marketable securities comprise investments in debt and equity securities and
short term investments. All investments are classified as available for sale
and are carried at fair value. The difference between fair value and cost is
included as a separate component of shareholders' equity, net of applicable
deferred income taxes. Bond discounts and premiums are amortized over the
remaining term of the securities. Such amortization is included as a component
of net investment income in the consolidated statements of income.

F-7
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Realized gains and losses are determined on the basis of specific
identification. Investment income is recorded as earned and accrued to the
balance sheet date.

c) Premiums written, assumed and ceded

Premiums written and assumed are recorded on the accruals basis and included
in income on a pro-rata basis over the life of the policies or reinsurance
agreements to which they relate, with the unearned portion deferred in the
consolidated balance sheets. Reinsurance premiums ceded are similarly pro-
rated over the terms of the reinsurance contract with the unearned portion
being deferred in the consolidated balance sheets as deferred reinsurance
premiums ceded.

d) Acquisition costs

Acquisition costs associated with the acquisition of new or renewal
business, including commissions and brokerage, are deferred and amortized to
income over the periods in which the premiums are earned. The method followed
in determining the deferred acquisition expenses limits the amount of the
deferral to its realizable value by giving consideration to losses and
expenses expected to be incurred as premiums are earned. Future investment
income is anticipated in determining whether a premium deficiency exists.

e) Losses and loss expenses

Losses and related loss adjustment expenses are charged to income as they
are incurred and are net of losses recovered and recoverable of $Nil, $Nil and
$6,775 for the years ended December 31, 1994, 1995 and 1996 respectively.
Amounts recoverable from reinsurers are estimated in a manner consistent with
the underlying liability associated with the reinsured policy. Outstanding
losses recoverable are shown separately on the consolidated balance sheets.

Reserves are established for losses and loss expenses relating to claims
which have been reported. In addition, reserves are established, in
consultation with the Company's independent actuaries, for losses which have
occurred but have not yet been reported to the Company and for adverse
development of reserves on reported losses. Management believes that the
resulting provision for outstanding losses and loss expenses is adequate to
cover the ultimate net cost of losses and loss expenses incurred, however,
such a provision is necessarily an estimate and may ultimately be settled for
a significantly greater or lesser amount. The Company has limited historical
loss experience available to serve as a reliable basis for the estimation of
ultimate losses. It is at least reasonably possible that management will
revise the estimate of outstanding losses and loss expenses significantly in
the near term. Any subsequent differences arising are recorded in the period
in which they are determined.

f) Risk management fees

The components of the Company's risk management fees are as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Brokerage fees and commissions................... $11,670 $17,084 $20,117
Managing general agency fees..................... -- -- 6,016
Underwriting management fees..................... -- -- 4,045
Captive management and program fees.............. -- -- 1,625
Loss control and audit fees...................... -- -- 2,039
------- ------- -------
Total risk management fees..................... $11,670 $17,084 $33,842
======= ======= =======
</TABLE>

F-8
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(i) Brokerage fees and commissions are recorded and earned as premiums
are billed since substantially all placement services have been provided at
that time. Any subsequent adjustments, including adjustments due to policy
cancellations and premium rate adjustments, are recognized in risk
management fees when advised by the client.

(ii) Managing general agency fees are reported net of commission expense
to agents and are initially recorded as of the effective date of the
related insurance policy. Fee income on instalment premiums is recognized
periodically when the instalment is billed. Such fees are recognized in
income over the period that services are performed in accordance with the
Company's contractual obligations, typically ranging up to five years,
based on the Company's estimation of expected claims handling requirements
in each accounting period. Such estimation is based upon the Company's
claims handling experience over recent years. Any subsequent adjustments,
including adjustments due to policy cancellation and premium adjustments,
are recorded when advised by the client or agent. The portion that will be
earned in the future is deferred and reported as deferred income in the
consolidated balance sheets.

(iii) Underwriting management fees are initially recorded when premium is
billed in accordance with terms of trade. Fee income on instalment premiums
is recognized periodically when the instalment is billed. Fees are
recognized in income over the period that services are performed in
accordance with the Company's contractual obligations. Such fees are
recognized in income over the period that contractual services are
performed, typically up to five years, based on the Company's estimation of
expected claims handling requirements in each accounting period. Such
estimation is based upon the Company's claims handling experience over
recent years. Any subsequent adjustments, including adjustments due to
policy cancellations, and premium adjustments are recorded when advised by
the client or agent. The portion of recorded management fees that will be
earned in the future is deferred and reported as deferred income in the
consolidated balance sheets.

(iv) Captive management and program fees are initially recorded as of the
effective date of the insurance policy or, in the case of installment
premiums, when the installment is billed and are recognized in income over
the period of the underlying policy (which is typically one year) in
proportion to the level of services provided in accordance with the
Company's contractual obligations. Any subsequent adjustments are
recognized in income when advised by the client or agent. The portion of
recorded management fees that will be earned in the future is deferred and
reported as deferred income in the consolidated balance sheet.

(v) Loss control and audit fees comprise claims administration handling,
loss and safety control fees and premium audit fees. Such fees are recorded
as the fees are billed and are recognized in income over the period that
services are performed in accordance with the Company's contractual
obligations, typically ranging up to five years depending on the type of
service provided, based on the Company's estimation of expected claims
handling requirements in each accounting period. Such estimation is based
upon the Company's claims handling experience over recent years. The
proportion that will be earned in the future is deferred and reported as
deferred income in the consolidated balance sheet.

g) Cash and cash equivalents

The Company considers time deposits with original maturity dates of three
months or less to be equivalent to cash. Fiduciary funds are restricted from
use and are not considered cash equivalents.

h) Investments in affiliates

The Company's investments in affiliated companies which are not majority
owned or controlled are accounted for using the equity method if the Company
is able to exert significant influence. Other investments in affiliates are
carried at cost. Investments in affiliates of $Nil and $526 for the years
ended December 31, 1995 and 1996, respectively, are recorded in other assets.
The Company's

F-9
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

equity share in the net income of affiliates, for the years ended December 31,
1994, 1995 and 1996 of $Nil, $Nil and $282 respectively is included in other
income. No dividends have been received from affiliates in the three year
period ended December 31, 1996.

i) Goodwill

Goodwill in the amount of $Nil and $8,124 at December 31, 1995 and 1996
respectively represents the excess of purchase price over fair value of net
assets acquired. Goodwill is amortized on a straight-line basis over the
expected periods to be benefitted, generally 5 to 20 years. Accumulated
amortization at December 31, 1995 and 1996 is $Nil and $423, respectively. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can
be recovered through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.

j) Capital assets and depreciation

Capital assets are stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over four to five
years, which is the estimated useful lives of the related assets.

k) Earnings per share

Net income per ordinary share is calculated by dividing net income by the
weighted average number of ordinary shares and ordinary share equivalents
outstanding during the period. Stock options are considered ordinary share
equivalents and are included in the computation of weighted average number of
ordinary shares outstanding using the treasury stock method. Shares and
options issued within one year prior to the registration statement are deemed
outstanding for all periods presented. There is no material difference between
primary and fully diluted net income per ordinary share.

l) Income taxes

Under the asset and liability method used by the Company, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the consolidated financial
statements carrying amounts of existing assets and liabilities and their
respective tax bases. A valuation allowance is provided for a portion or all
of the deferred tax assets when it is more likely than not that such portion
or all such deferred assets will not be realized.

m) Foreign exchange

The United States Dollar is the Company's functional currency. Foreign
currency monetary assets and liabilities are translated at exchange rates in
effect at the balance sheet date. Fixed assets and deferred income are
translated at their historical exchange rates. Foreign currency revenues and
expenses are translated at the exchange rates in effect at the date of the
transaction. There were no material exchange gains or losses for the years
ended December 1994 and 1995. Net exchange gains of $559 are included in other
income for the year ended December 1996. This is comprised of currency
translation losses of $76 net of realized and unrealized exchange gains of
$465 and $170, respectively, arising on the Company's forward exchange
contracts. See note 14(c).

n) Derivative financial instruments

The Company is party to certain derivative financial instruments, being
forward foreign exchange contracts which are used to manage foreign currency
exposures on non-U.S. dollar denominated assets and liabilities. The Company
does not engage in derivatives for any other purpose. Forward foreign exchange
contracts are recorded at their fair value. The fair values of open contracts
at the

F-10
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

balance sheet dates are based on the quoted market prices of forward contracts
with similar maturities. Changes in fair values are recognized in other income
as appropriate in the period in which the changes occur. Amounts receivable or
payable on open positions are recorded in other assets or accounts payable and
accrued liabilities as appropriate. See note 14(c).

o) Stock compensation plans

The Company adopted FASB Statement No. 123, "Accounting for Stock-Based
Compensation", on January 1, 1996. As permitted by the statement, the Company
has elected to continue to account for stock option grants in accordance with
APB Opinion No. 25, Accounting for Stock Issued to Employees, and,
accordingly, recognizes compensation expense for stock option grants to the
extent that the fair value of the stock exceeds the exercise price of the
option at the measurement date. Any resulting compensation expense is recorded
over the shorter of the vesting or service period.

3. ACQUISITIONS

In January 1996 the Company acquired all of the outstanding common shares of
Realm Investments Ltd. in exchange for 1,999,980 newly issued ordinary shares
of the Company. The fair value assigned to the shares issued was $12,819.
Realm Investments Ltd. was incorporated in Bermuda on September 1, 1993 and
acts as the holding company for a number of Bermuda and United States
subsidiaries involved in the insurance industry. Realm Investments Ltd. was
affiliated with the Company through common ownership and directors.

On September 5, 1996, the Company completed the acquisition of 100% of the
outstanding share capital of Lloyd's New York Insurance Company which
subsequently changed its name to Realm National Insurance Company ("Realm").
The total purchase price of $8,986 comprised a cash payment to the former
owners of $8,783 and legal and other costs associated with the acquisition of
$203. Realm formerly provided property, marine and agricultural coverages. In
the future, it is expected that Realm will write insurance policies in
connection with the Company's workers' compensation programs. In connection
with the acquisition, the former owners and the Company entered into a reserve
indemnity agreement to guarantee the outstanding loss reserves as of June 30,
1996. The agreement provides for amounts to be paid to the purchaser or
received by the seller in the event of any adverse or favorable development on
the June 30, 1996 outstanding loss reserves in the period of two years from
the date of purchase.

The agreement also guarantees any change in unearned premium reserve,
deferred policy acquisition costs, premium receivables, reinsurance
recoverables and funds held assets. No material changes have occurred in these
balances subsequent to June 30, 1996 and therefore no amounts have been booked
through the September 5, 1996 to December 31, 1996 period.

During the period September 5, 1996 through December 31, 1996 favorable
development of $114,090 was experienced on the June 30, 1996 outstanding loss
reserve balance. These financial statements reflect the effect of the
favorable development as a reduction in net losses and loss expenses incurred
and a corresponding charge to other operating expenses for the amount which
would have to be paid to the seller upon the two year termination date. This
amount is subject to change over the two year period.

Management reviews and adjusts the amount payable or receivable under the
guarantee at each reporting date.

During 1996 the Company incorporated a new subsidiary, North American Risk,
Inc., which effective July 1, 1996, acquired the assets and liabilities of
North American Risk Limited (a limited partnership) ("NAR") for a total cash
cost of $94.

F-11
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the purchase prices have been allocated to the
assets acquired and the liabilities assumed based on the estimated fair values
at the dates of acquisition. The excess of purchase price over the estimated
fair values of the net assets acquired has been recorded as goodwill, which is
being amortized on a straight line basis over 20 years, 15 years and 5 years
for Realm Investments Ltd., Realm and NAR, respectively.

The estimated fair values of assets acquired and liabilities assumed are
summarized as follows:

<TABLE>
<CAPTION>
REALM REALM
INVESTMENTS NATIONAL NAR
----------- -------- ----
<S> <C> <C> <C>
Cash.......................................... $ 6,893 $ 1,621 $276
Marketable securities......................... -- 10,764 --
Fiduciary funds--restricted................... 7,846 -- --
Insurance balances receivable................. 18,378 2,485 270
Outstanding losses recoverable from
reinsurers................................... 2,286 10,623 --
Deferred acquisition expenses................. 1,582 26 --
Deferred reinsurance premiums ceded........... 600 5,861 --
Other assets and prepayments.................. 642 112 12
Deferred tax asset............................ 55 426 --
Assets related to deposit liabilities......... 3,468 -- --
Capital assets................................ 623 52 94
Intangible assets............................. 7,698 766 83
Outstanding losses and loss expenses.......... (2,076) (12,309) --
Unearned premiums............................. (4,090) (7,487) --
Deferred income............................... (1,012) -- --
Insurance and reinsurance balances payable.... (25,320) (1,927) (445)
Funds withheld................................ -- (1,739) --
Deposit liabilities........................... (3,468) -- --
Other liabilities............................. (1,286) (288) (196)
-------- ------- ----
$ 12,819 $ 8,986 $ 94
======== ======= ====
</TABLE>

Operating results of Realm Investments Ltd., Realm, and NAR are included in
the Company's consolidated results of operations from the effective dates of
the acquisitions which were January 1, 1996, September 5, 1996, and July 1,
1996, respectively.

The following pro forma financial information presents the combined results
of operations of the Company and Realm Investments Ltd., as if the acquisition
had occurred as of the beginning of 1995, after giving effect to certain
adjustments, including amortization of goodwill. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had the Company and Realm Investments Ltd., constituted a single
entity during such periods. Pro forma financial information has not been
provided for the acquisitions of Realm and NAR since the effects would not be
material due to the run-off nature of Realm's business pending its sale and
the start-up nature of NAR prior to its acquisition.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Total revenues......... $29,635
=======
Net income............. $ 7,475
=======
Earnings per share..... $ 1.19
=======
</TABLE>

4. CONTINGENT LIABILITIES

In the normal course of reinsurance operations the Company's bankers have
issued letters of credit totaling $Nil and $7,015 at December 31, 1995 and
1996 respectively in favor of the ceding

F-12
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

insurance companies. At December 31, 1995 and 1996, $Nil and $7,015 of cash
and cash equivalents were pledged as collateral for these letters of credit
respectively.

One of the Company's subsidiaries is registered with the Society of Lloyd's
as a registered Lloyd's Broker. As required by Lloyd's Brokers Byelaw (No. 5
of 1988), the subsidiary has entered into a trust deed under which all
insurance broking account assets are subject to a floating lien held in trust
for the Society of Lloyd's for the benefit of the insurance creditors.
Insurance and reinsurance balances payable covered by the floating lien at
December 31, 1995 and 1996, amounted to $53,249 and $80,070 respectively,
including relevant creditors of other subsidiaries. The purpose of the trust
deed is to provide security to the Lloyds Broker's insurance creditors in the
event of the Broker's insolvency by creating a charge over the Broker's
insurance transaction assets. The lien becomes enforceable only in the event
the Lloyds Broker becomes insolvent or breaches Lloyds solvency rules or
regulations. The assets which were subject to this floating lien at
December 31, 1995 and 1996 were:

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Fiduciary funds.......................................... $ 8,097 $13,925
Insurance and reinsurance balances receivable............ 51,670 67,749
------- -------
$59,767 $81,674
======= =======
</TABLE>

These amounts were derived from the financial statements of the Lloyds
Broker. The lien had no impact on the Broker's operating statements or cash
flows during the periods.

5. FIDUCIARY FUNDS

In its various capacities as an insurance intermediary, the Company collects
premiums from insureds and other intermediaries, and after deducting its risk
management fee and, where appropriate, surplus lines taxes and stamping fees,
remits the premium to the respective insurance company or underwriter. Pending
the remittance of such funds to the insurance company or underwriter in
accordance with the applicable insurance contract, the Company holds collected
funds in its own segregated bank accounts and is entitled to any accrued
interest on such funds. The obligation to remit these funds is recorded as
insurance and reinsurance balances payable on the Company's balance sheet. The
period for which the Company holds such funds is dependent upon the date the
insured remits the payment of the premium to the Company and the date the
Company is required to forward such payment to the insurer.

6. MARKETABLE SECURITIES

a) The cost/amortized cost and estimated fair value of marketable securities
held as available for sale at December 31, 1996 are as follows:

<TABLE>
<CAPTION>
1996
-----------------------------------------
COST/ GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
agencies............................ $ 6,963 $ 75 $-- $ 7,038
Foreign government................... 1,063 1 3 1,061
Obligations of states and political
subdivisions........................ 1,090 -- -- 1,090
Corporate securities................. 9,866 -- 22 9,844
------- ---- ---- -------
Debt securities...................... 18,982 76 25 19,033
Equity securities.................... 3,295 236 65 3,466
Short term investments............... 120 -- -- 120
------- ---- ---- -------
Total.............................. $22,397 $312 $ 90 $22,619
======= ==== ==== =======
</TABLE>

F-13
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A deferred tax liability of $75 at December 31, 1996, has been provided
against unrealized gains on marketable securities held as "available for sale"
which has been presented net as a separate component of shareholders' equity.

b) The amortized cost and estimated fair value of debt securities at
December 31, 1996, by contractual maturity are shown in the following table.
Actual maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.

<TABLE>
<CAPTION>
1996
-------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
--------- ---------
<S> <C> <C>
Due in one year or less............................... $ 4,180 $ 4,179
Due after one year through five years................. 14,261 14,300
Due after five years through ten years................ 541 554
------- -------
$18,982 $19,033
======= =======
</TABLE>

c) Proceeds from sales of investments in debt securities during 1996 were
$2,273. Proceeds from sales of investments in equity securities during 1996
were $15. There were no realized gains or losses on the sale of marketable
securities during 1996.

d) At December 31, 1996, debt securities having an amortized cost of $2,563
were on deposit with government authorities as required by law.

e) At December 31, 1996, there were no individual investments, other than
investments in U.S. Government securities, which exceeded 10% of shareholders'
equity.

f) Net investment income by source is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Bonds............................................... $ -- $ -- $ 134
Common stock........................................ -- -- 67
Cash, cash equivalents and short-term
investments........................................ 703 1,964 3,216
Other............................................... -- -- 1
------ ------ ------
Total investment income........................... 703 1,964 3,418
Less applicable expenses.......................... -- -- 13
------ ------ ------
Net investment income............................. $ 703 $1,964 $3,405
====== ====== ======
</TABLE>

7. OTHER ASSETS

Included within other assets are capital assets as follows:

<TABLE>
<CAPTION>
1995
----------------------------
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
<S> <C> <C> <C>
Furniture and fixtures....................... $ 600 $ 318 $ 282
Computer equipment........................... 1,514 719 795
Office equipment............................. 345 120 225
Motor vehicles............................... 927 355 572
------ ------ ------
Total...................................... $3,386 $1,512 $1,874
====== ====== ======
</TABLE>

F-14
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
1996
----------------------------
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
<S> <C> <C> <C>
Furniture and fixtures...................... $1,217 $ 502 $ 715
Computer equipment.......................... 2,542 1,229 1,313
Office equipment............................ 649 256 393
Motor vehicles.............................. 1,092 500 592
------ ------ ------
Total..................................... $5,500 $2,487 $3,013
====== ====== ======
</TABLE>

8. DEPOSIT LIABILITIES AND RELATED ASSETS

Certain of the Company's reinsurance contracts, referred to as rent-a-
captive programs, do not satisfy the conditions for reinsurance accounting as
the maximum exposure to loss is fully funded by premium, cash and other
collateral and indemnity agreements. Accordingly, these contracts are
accounted for as deposit liabilities. The Company agrees to return the
underwriting and investment earnings realized on the programs to the insured.
Premiums and other consideration received, together with net investment income
earned on the underlying assets, are recorded as a deposit liability and loss
payments made under the contracts are recorded as a deduction from the
deposit. The assets related to these programs represent funds under management
as the insured retains the risks and rewards of ownership. Such assets are
recorded as assets related to deposit liabilities in the consolidated balance
sheets. These assets comprised cash and short-term deposits at December 31,
1995 and 1996. The Company receives a fee based on a percentage of premiums
written and investment income earned for structuring and providing ongoing
management of the programs.

In addition, deposit liabilities and related assets include $Nil and $2,216
of deposits received from customers as security for the timely payment of
premiums for workers' compensation insurance at December 31, 1995 and 1996,
respectively. The deposit is restricted from use by the Company, and is the
property of the customer. The deposit is refunded to the customer after the
policy expires or is canceled and all claims related to the insurance policy
have been settled. The interest income earned by these restricted deposit
accounts is the property of the customer, and is therefore excluded from the
Company's operating results.

9. REINSURANCE ASSUMED AND CEDED

The Company accounts for reinsurance assumed and ceded in accordance with
SFAS 113 "Accounting and Reporting for Reinsurance of Short-Duration and Long-
Duration Contracts".

Net premiums earned are the result of the following:

<TABLE>
<CAPTION>
1994 1995 1996
------- ------ -------
<S> <C> <C> <C>
Premiums written.................................. $ -- $ -- $ 4,009
Premiums assumed.................................. -- -- 12,467
Change in unearned premiums....................... -- -- (938)
------- ------ -------
Premiums earned................................... -- -- 15,538
------- ------ -------
Premiums ceded.................................... -- -- 7,546
Change in deferred reinsurance premiums ceded..... -- -- (762)
------- ------ -------
Net premiums ceded................................ -- -- 6,784
------- ------ -------
Net premiums earned............................... $ -- $ -- $ 8,754
======= ====== =======
</TABLE>

The Company, in the ordinary course of business, reinsures certain risks
with other companies. Such arrangements serve to enhance the Company's
capacity to write business and limit the Company's maximum loss on large or
unusually hazardous risks.

F-15
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result
in losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the reinsurers
to minimize its exposure to significant losses from reinsurer insolvencies.

At December 31, 1996, there were no amounts due from any individual
reinsurer in excess of 10% of the Company's shareholders' equity.

The Company recognizes reinsurance recoveries when the associated loss is
booked.

Realm has purchased a standard property reinsurance program whereby Realm
retains 25% of the first $1,000 on any one risk and purchased facultative per
risk reinsurance for limits above $1,000 to $200,000. In addition, Realm's net
retained line is further protected by a per risk excess of loss cover which
reduces the maximum loss on any one risk to $125.

Comp Indemnity Reinsurance Company ("CIRCL"), a subsidiary of Realm
Investments Ltd., assumes various quota shares of workers' compensation,
employers' liability on both a primary and excess basis, bodily injury,
difference in conditions and general liability risks written on a treaty
basis. CIRCL's exposure under the reinsurance contracts assumed is limited in
most instances to $250 and $1,000 per occurrence for workers' compensation and
employer's liability, respectively and is subject to an annual aggregate limit
based on various percentages of original gross written premium income. CIRCL
further limits its exposure through the purchase of reinsurance protection for
certain risks covering losses in excess of $10 and $50 per occurrence for
workers' compensation and employers' liability, respectively, and on one
particular program losses in excess of $3,000 per occurrence. In addition, in
1996 CIRCL purchased aggregate reinsurance protection of $1,000 in excess of
the greater of $1,200 or a percentage of net premium written, for certain
risks assumed.

10. OUTSTANDING LOSSES AND LOSS EXPENSES

Outstanding losses and loss expenses relate to the insurance activities of
CIRCL and Realm, which were acquired in January 1996 and September 1996
respectively.

The changes in outstanding losses and loss expenses are summarized as
follows:

<TABLE>
<CAPTION>
1995 1996
------ -------
<S> <C> <C>
Net balance for CIRCL, at acquisition..................... -- 1,270
Net balance for Realm, at acquisition..................... -- 1,687
------ -------
-- 2,957
Incurred related to:
Current year............................................ -- 6,515
Prior years............................................. -- 250
------ -------
Total incurred........................................ -- 6,765
------ -------
Paid related to:
Current year............................................ -- 1,334
Prior years............................................. -- 675
------ -------
Total paid............................................ -- 2,009
------ -------
Net balance............................................... -- 7,713
Plus reinsurance recoverable.............................. -- 16,588
------ -------
Balance at end of year.................................... $ -- $24,301
====== =======
</TABLE>

F-16
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. SHARE CAPITAL AND ADDITIONAL PAID IN CAPITAL

The Company's authorized share capital at December 31, 1996, comprised
8,048,000 ordinary shares of par value $0.25 each and 25 Class "A' non-voting
shares, with a par value of $1.00 each, of which 4,000,020 and 8,000,000 of
the ordinary shares and nil and 25 Class "A' non-voting shares are issued and
fully paid at December 31, 1995 and 1996 respectively.

As discussed in notes 1 and 3 to the consolidated financial statements,
during 1996, the Company issued 1,999,980 shares in exchange for 100% of the
share capital of Realm Investments Ltd. The fair value assigned to the shares
issued was $12,819. The excess of the fair value of the shares issued over par
value was recorded in additional paid in capital. This represents a non-cash
financing and investing activity for the purpose of the statements of cash
flows. The Company also issued 2,000,000 ordinary shares and 25 Class "A' non-
voting shares to a private investor group. Contemporaneously, the private
investor group also acquired additional ordinary shares from existing
shareholders on a pro-rata basis, such that the private investor group's total
ownership represented 32.5% of the total number of issued ordinary share
capital at that time.

The 2,000,000 ordinary shares and related 25 Class "A' shares issued to the
private investor group are subject to a put option whereby, after 2004, the
holders of such shares could request that the Company repurchase the shares
for fair market value at that date. As such shares are subject to redemption
at the option of the holder, the aggregate subscription price has been
classified outside of shareholders' equity. The put option expires upon
consummation by the Company of an initial public offering ("IPO").

The ordinary shares are entitled to one vote per share. The Class "A' non-
voting shares entitle the holder to such number of additional fully paid up
ordinary shares as will ensure that the holder retains 32.5% of the total
number of issued ordinary shares of the Company in the event that any of the
stock options discussed in note 12 to the consolidated financial statements
are exercised. The excess of the par value of the ordinary shares issued over
the par value of the Class A non-voting shares will be recorded as the
deduction from additional paid in capital. The Class "A' non-voting shares are
not entitled to any dividend or distribution of the Company's assets in excess
of their par value. Upon the issuance of the additional ordinary shares to the
holders of the Class "A' non-voting shares, each Class "A' non-voting share
will automatically convert into one deferred share of par value $1. The
deferred shares have no voting rights and are not entitled to any dividend or
distributions, except in the event of the winding up of the Company each
deferred share shall only be entitled to the par value thereof. The Company
has the right to redeem all of the outstanding deferred shares for an
aggregate of $.01.

During 1996 the Company repurchased 202,784 of its ordinary shares from one
of its founding shareholders at a price negotiated between the Company and the
shareholder. Treasury stock is recorded at cost as a deduction from
shareholders' equity. Under certain circumstances the Company may purchase a
further 40,000 shares. The purchase price for such shares varies.

The share amounts have been retroactively restated to reflect the four-for-
one stock split effective June 30, 1997 (see note 19).

12. STOCK OPTIONS

On June 29, 1995, the Company granted 600,000 options to certain employee
shareholders. The terms of the options were subsequently amended in 1996 to
reflect the share exchange factor in the Share Purchase Agreement between the
Company and Stirling Cooke Brown Holdings (UK) Limited discussed in note 1.

The options have an exercise price of $2.71 per share, which reflects the
estimated fair value of the shares at the original grant date as updated for
the exchange factor. The options were fully vested at the grant date and may
be exercised at any time prior to January 23, 2003.

F-17
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In accordance with the provisions of FASB Statement No. 123, the Company has
elected to continue to account for stock option grants in accordance with APB
Opinion No. 25.

The fair value of each option grant is estimated at the date of grant using
the Minimum Value Method, assuming an expected dividend yield of 0%, a risk
free interest rate of 6% and an expected life of options of 3 years. The fair
value of the options at the grant date was $258.

Had the Company elected to recognize compensation cost based on the fair
value of the options granted at the grant date as prescribed by FASB Statement
No. 123, net income and net income per share would have been reduced to the
pro forma amounts indicated below:

<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net income--as reported.............................. $2,833 $4,594 $9,918
Net income--pro forma................................ $2,833 $4,336 $9,918
Net income per share--as reported.................... $ 0.66 $ 1.07 $ 1.19
Net income per share--pro forma...................... $ 0.66 $ 1.01 $ 1.19
</TABLE>

13. TAXATION

Under current Bermuda law, the Company is not required to pay any taxes in
Bermuda on either income or capital gains. The Company has received an
undertaking from the Minister of Finance in Bermuda that in the event of any
such taxes being imposed the Company will be exempted from taxation until the
year 2016.

Total income tax expense for the years ended December 31, 1994, 1995 and
1996 was allocated as follows:

<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Income from continuing operations................... $1,298 $2,560 $2,281
Shareholders' equity (for unrealized gains on
marketable securities)............................. -- -- 75
------ ------ ------
$1,298 $2,560 $2,356
====== ====== ======
</TABLE>

Income tax expense attributable to income from continuing operations
consists of:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
<S> <C> <C> <C>
Year ended December 31, 1994
US Federal and State........................... $ -- $ -- $ --
Foreign (UK)................................... 1,298 -- 1,298
------ ----- ------
$1,298 $ -- $1,298
====== ===== ======
Year ended December 31, 1995
US Federal and State........................... $ -- $ -- $ --
Foreign (UK)................................... 2,560 -- 2,560
------ ----- ------
$2,560 $ -- $2,560
====== ===== ======
Year ended December 31, 1996
US Federal and State........................... $ 627 $(339) $ 288
Foreign (UK)................................... 1,993 -- 1,993
------ ----- ------
$2,620 $(339) $2,281
====== ===== ======
</TABLE>

F-18
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Income tax expense attributable to income from continuing operations was
$1,298, $2,560 and $2,281 for the years ended December 31, 1994, 1995 and 1996
respectively, and differed from the amounts computed by applying the US
federal income tax rate of 34% to income before taxation as a result of the
following:

<TABLE>
<CAPTION>
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Computed expected tax expense..................... $1,405 $2,432 $ 4,148
Foreign income not subject to US taxes............ -- -- (1,813)
Income subject to tax at foreign rates............ (107) 128 (55)
Change in valuation allowance..................... -- -- 190
Miscellaneous permanent differences............... -- -- 56
Acquired temporary difference..................... -- -- (320)
State taxes....................................... -- -- 75
------ ------ -------
Actual tax expense................................ $1,298 $2,560 $ 2,281
====== ====== =======
</TABLE>

The significant components of deferred income tax benefit attributable to
income from continuing operations are as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- -----
<S> <C> <C> <C>
Deferred tax benefit (exclusive of effects of other
component listed below)............................... $-- $-- $ 529
Change in Valuation Allowance.......................... -- -- (190)
---- ---- -----
$-- $-- $ 339
==== ==== =====
</TABLE>

At December 31, 1996, the Company established a valuation allowance relating
to acquired deferred tax benefits. The realization of the tax benefits
attributable to these acquired temporary differences will be applied to reduce
(i) goodwill related to the acquisition, (ii) other acquired intangibles and
(iii) income from other continuing operations.

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred liabilities at December 31,
1995 and 1996, are presented below:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Deferred revenue........ $-- $339
Discount on unearned
premiums and
outstanding loss
reserves............... -- 190
Valuation allowance..... -- (190)
---- ----
-- 339
Deferred tax liabilities:
Unrealized investment
gains.................. -- (75)
---- ----
Net deferred tax asset.... $-- $264
==== ====
</TABLE>

Valuation allowances of $Nil and $190 have been established against the
deferred tax asset as of December 31, 1995 and 1996 respectively. The ultimate
realization of this deferred tax asset depends on the ability of the Company
and its subsidiaries to generate sufficient taxable income during the periods
in which those temporary differences become deductible.

The Company has not recognized a deferred tax liability for the
undistributed earnings of its United States subsidiaries. (A 30% tax is
generally imposed in the United States on dividends paid by United

F-19
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

States corporations to non-United States shareholders). The Company does not
expect those unremitted earnings to become taxable in the foreseeable future.
A deferred tax liability will be recognized when the Company expects that it
will recover those undistributed earnings in a taxable manner, such as the
receipt of dividends.

The deferred tax liability relating to these unremitted earnings which is
not recognized by the Company is approximately $Nil, $Nil, $200 at December
31, 1994, 1995, 1996, respectively.

14. FINANCIAL INSTRUMENTS

a) Fair value

The carrying values of all financial instruments, as defined by SFAS 107 and
as recorded in the consolidated balance sheets approximate their fair value.
The Company does not have any significant off-balance sheet financial
instruments. The following methods and assumptions were used by the Company in
estimating fair values:

Cash and cash equivalents and fiduciary funds: The fair values for these
instruments approximate their carrying amounts because of the short
maturity of such instruments.

Marketable securities: The fair values of debt and equity securities are
based on quoted market prices and dealer quotes at the consolidated balance
sheet dates.

Deposit liabilities and related assets: Underlying assets comprise mainly
cash and deposits. The fair values of these assets and related liabilities
approximate their carrying value due to the short maturity of these
instruments.

Forward foreign exchange contracts: The fair values of such contracts are
based on quoted forward rates available for the remaining duration of the
contracts at the balance sheet dates.

Other assets and liabilities: The fair values of all other financial
instruments, as defined by SFAS 107, approximate their carrying values due
to their short-term nature.

The estimates of fair values presented herein are subjective in nature and
are not necessarily indicative of the amounts that the Company would actually
realize in a current market exchange. Any differences would not be expected to
be material. Certain instruments such as prepaid expenses, other assets,
goodwill and deferred expenses, deferred fee income and outstanding losses and
loss expenses are excluded from fair value disclosure. Thus the total fair
value amounts cannot be aggregated to determine the underlying economic value
of the Company.

b) Concentrations of credit risk and allowance for doubtful accounts

The Company's financial instruments exposed to possible concentrations of
credit risk consist primarily of its cash and cash equivalents, outstanding
losses recoverable from reinsurers and insurance and reinsurance balances
receivable.

The Company maintains a substantial portion of its cash and cash equivalents
in two financial institutions which the Company considers of high credit
quality.

Concentrations of credit risk with respect to other financial instruments
are limited due to the large number of reinsurers, agents and customers
comprising the Company's receivable base. Management does not anticipate
significant credit losses from such financial instruments. As at December 31,
1995 and 1996, there were no significant allowances for doubtful accounts.

F-20
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

c) Forward foreign exchange contracts

The Company's functional currency is the U.S. dollar; however, as the
Company operates internationally, it has exposure to changes in foreign
currency exchange rates. These exposures include net cash inflows on non-U.S.
dollar denominated transactions.

To manage the Company's exposure to these risks, the Company enters into
forward foreign exchange contracts in the currencies to which the Company is
exposed. These contracts generally involve the exchange of one currency for
another at some future date. The Company had a notional principal amount
outstanding of (Pounds)3,500 and (Pounds)2,000, at December 31, 1995 and 1996
respectively, relating to contracts to buy British Pounds Sterling in the
future. There were no significant unrealized gains or losses on forward
exchange contracts for the years ended December 31, 1994 and 1995. Net
unrealized gains on the forward exchange contracts for the year ended December
31, 1996 amounted to $170 and have been accrued in other income and included
in other assets in the consolidated balance sheets. A net realized gain of
$Nil, $Nil and $465 is included in other income in the consolidated statements
of income in respect of such contracts during the years ended December 31,
1994, 1995 and 1996 respectively.

15. SEGMENTAL INFORMATION

a) The Company's two business segments are Risk Management, which represents
the Company's fee income less operating expenses, and Underwriting which
represents the Company's income from underwriting risks it retains. Summarized
financial information by business segment for the years ended December 31,
1994, 1995 and 1996 is as follows:

<TABLE>
<CAPTION>
1994
-------------------------------------------------
ADJUSTMENTS
RISK AND
MANAGEMENT UNDERWRITING ELIMINATIONS CONSOLIDATED
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues................ $ 12,373 $ -- $ -- $ 12,373
======== ======= ========= ========
Income before taxation.. $ 4,131 $ -- $ -- $ 4,131
======== ======= ========= ========
Identifiable assets..... $ 69,129 $ -- $ (7,215) $ 61,914
======== ======= ========= ========
<CAPTION>
1995
-------------------------------------------------
ADJUSTMENTS
RISK AND
MANAGEMENT UNDERWRITING ELIMINATIONS CONSOLIDATED
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
$
Revenues................ $ 19,048 $ -- -- $ 19,048
======== ======= ========= ========
Income before taxation.. $ 7,154 $ -- $ -- $ 7,154
======== ======= ========= ========
Identifiable assets..... $140,340 $ -- $ (37,067) $103,273
======== ======= ========= ========
<CAPTION>
1996
-------------------------------------------------
ADJUSTMENTS
RISK AND
MANAGEMENT UNDERWRITING ELIMINATIONS CONSOLIDATED
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues................ $ 37,448 $ 9,394 $ -- $ 46,842
======== ======= ========= ========
Income before taxation.. $ 12,216 $ 251 $ (268) $ 12,199
======== ======= ========= ========
Identifiable assets..... $310,988 $68,221 $(144,125) $235,084
======== ======= ========= ========
</TABLE>

F-21
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Significantly all of the amounts charged for depreciation and amortization,
and capital expenditures relate to the Risk Management segment for all years.

The revenue of each industry segment includes revenues both from services to
unaffiliated customers and from intersegment sales. Interest income from
services outside the Company is included in revenue if the asset on which the
interest is earned is included among the segment's identifiable assets.

b) Summarized financial information by geographic location for the years
ended December 31, 1994, 1995 and 1996 is as follows:

<TABLE>
<CAPTION>
1994
--------------------------------------------------
ADJUSTMENTS
U.K. AND AND
BERMUDA EUROPE U.S.A. ELIMINATIONS CONSOLIDATED
------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues.................. $ 718 $ 11,655 $ -- $ -- $ 12,373
======= ======== ======= ========= ========
Income before taxation.... $ 188 $ 3,943 $ -- $ -- $ 4,131
======= ======== ======= ========= ========
Identifiable assets....... $ 2,221 $ 66,908 $ -- $ (7,215) $ 61,914
======= ======== ======= ========= ========
<CAPTION>
1995
--------------------------------------------------
ADJUSTMENTS
U.K. AND AND
BERMUDA EUROPE U.S.A. ELIMINATIONS CONSOLIDATED
------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues.................. $ 1,197 $ 17,851 $ -- $ -- $ 19,048
======= ======== ======= ========= ========
Income before taxation.... $ 96 $ 7,058 $ -- $ -- $ 7,154
======= ======== ======= ========= ========
Identifiable assets....... $ 8,649 $131,691 $ -- $ (37,067) $103,273
======= ======== ======= ========= ========
<CAPTION>
1996
--------------------------------------------------
ADJUSTMENTS
U.K. AND AND
BERMUDA EUROPE U.S.A. ELIMINATIONS CONSOLIDATED
------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues.................. $17,279 $ 18,248 $11,315 $ -- $ 46,842
======= ======== ======= ========= ========
Income before taxation.... $ 5,386 $ 5,967 $ 846 $ -- $ 12,199
======= ======== ======= ========= ========
Identifiable assets....... $95,751 $185,401 $83,148 $(129,216) $235,084
======= ======== ======= ========= ========
</TABLE>

Income before taxation is total revenues less operating expenses. In
computing income before taxation by segment, income taxes have not been
deducted.

Identifiable assets by segment are those assets that are used in the
Company's operations in each segment.

c) The Company's managing general agencies market insurance products and
programs developed by the Company on behalf of independent insurance carriers.
In addition, the Company through its brokering and reinsurance brokering
operations, managing general underwriters, claims and loss control servicing
operations provides additional business and services to certain of these
independent insurance carriers in respect of these products and other
insurance and reinsurance policies. For the year ended December 31, 1996, fees
received from one independent insurance carrier accounted for approximately
55% of the Company's total revenues. Although the loss of this

F-22
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

carrier could have a material adverse effect on the Company, the Company
believes that Realm and other independent insurance carriers have sufficient
underwriting capacity to reduce the impact of such a loss.

16. COMMITMENTS

Future minimum lease payments under non-cancelable operating leases as at
December 31, 1996 are as follows:

<TABLE>
<CAPTION>
1996
-------
<S> <C>
1997............................. $ 1,711
1998............................. 1,672
1999............................. 1,338
2000............................. 1,187
2001............................. 970
2002 and thereafter.............. 4,111
-------
$10,989
=======
</TABLE>

Total rental expense for the years ended December 31, 1994, 1995 and 1996,
was $488, $612 and $1,319, respectively.

Certain lease commitments are subject to annual adjustment under escalation
clauses, for real estate taxes and the landlord's operating expenses. Such
adjustments will not be material to the Company.

17. STATUTORY SURPLUS AND DIVIDEND RESTRICTIONS

The Company's ability to pay dividends is subject to certain restrictions
including the following:

a) The Company is subject to a 30% withholding tax on certain dividends and
interest received from its United States subsidiaries.

b) Under New York law, Realm may pay cash dividends only from earned surplus
determined on a statutory basis. Further, Realm is restricted (on the basis of
the lower of 10% of statutory surplus at the end of the preceding twelve-month
period or 100% of the adjusted net investment income for the preceding twelve-
month period) as to the amount of dividends it may declare or pay in any
twelve-month period without the approval of the Insurance Department of the
State of New York. By agreement with the Insurance Department of the State of
New York, Realm is restricted from declaring dividends until September 5,
1998.

Realm did not have any earned surplus available for the payment of dividends
in 1996 due to its statutory-basis accumulated deficit. Additionally, $101 of
statutory surplus has been segregated as special funds as of December 31, 1996
and will not become available for dividend payments until earned.

Realm's total surplus and net income determined on a United States statutory
basis are as follows:

<TABLE>
<S> <C>
Total surplus at December 31, 1996............................... $19,924
Net income for year ended December 31, 1996...................... $ 154
</TABLE>

c) The NAIC has a model law which establishes certain minimum risk-based
capital (RBC) requirements for property-casualty insurance companies. The RBC
calculation serves as a benchmark for the regulation of insurance companies by
state insurance regulators. The calculation specifies

F-23
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

various formulas and weighting factors that are applied to financial balances
or various levels of activity based on the perceived degree of risk and are
set forth in the RBC requirements. The capital of Realm as of December 31,
1996 exceeds the amount calculated using the RBC requirements.

d) Realm is licensed by the Insurance Department of the State of New York
(the "Department") to write Special Risk insurance. Special Risk business
represents business that is sold at rates that are not subject to prior
approval of the Department. The Department's rules and regulations limit the
amount of Special Risk business that a company may write based on the
aggregate writings of the Company. In 1994, Realm disposed of its agricultural
and ocean marine books of business as a condition precedent to the sale of
Realm to a prospective buyer. As a result, Realm was no longer in compliance
with the Department's limitation on Special Risk premium writings. Realm has
received a waiver of such limitations from the Department through September 5,
1997. The current application for extension of the waiver is pending approval
from the Department.

e) The Company's Bermuda insurance subsidiary, CIRCL, is required by its
license to maintain capital and surplus greater than a minimum statutory
amount determined as the greater of a percentage of outstanding losses and
loss expenses (net of reinsurance recoverable) or a given fraction of net
written premiums. At December 31, 1996, CIRCL was required to maintain a
minimum statutory capital and surplus of $1,520.

CIRCL's total surplus and net income determined on a Bermuda statutory basis
is as follows:

<TABLE>
<CAPTION>
1996
------
<S> <C>
Total surplus at December 31...................................... $2,319
Net income for year ended December 31............................. $1,688
</TABLE>

CIRCL is also required to maintain a minimum liquidity ratio whereby the
value of its relevant assets are not less than 75% of the amount of its
relevant liabilities. Certain categories of assets do not qualify as relevant
assets under the statute. At December 31, 1996, CIRCL was required to maintain
relevant assets of at least $9,412. At this date relevant assets were
approximately $14,932 and the minimum liquidity ratio was therefore met.

18. RELATED PARTY TRANSACTIONS

a) As set out in note 3, in January 1996 the Company acquired Realm
Investments Ltd. Prior to the acquisition, the Company earned brokerage
fees from its business dealings with Realm Investments Ltd.

b) Amounts due from/to affiliates are interest free and unsecured with no
fixed terms of repayment.

19. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE

In April 1997, the Company purchased 213,732 of its ordinary shares from a
founding shareholder at a negotiated total cost of $812. Such shares were
recorded as treasury stock at cost.

On June 30, 1997, the Company effected a four for one stock split whereby
each of the Company's ordinary shares of par value $1.00 each were divided
into four ordinary shares of par value $0.25 each.

All share and per share data included in these consolidated financial
statements have been restated to reflect the stock split.

F-24
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

UNAUDITED CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 1997
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE
DATA)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
SEPTEMBER 30, ADJUSTMENT SEPTEMBER 30,
1997 (NOTE 3) 1997
------------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Marketable securities, at fair value
Debt securities (amortized cost--
$16,954)............................. $ 17,051 $ $ 17,051
Equity securities (cost--$631)........ 661 661
Short term investments (amortized
cost--$4,051)........................ 4,051 4,051
-------- ------- --------
Total marketable securities............. 21,763 21,763
Cash and cash equivalents............... 20,578 20,578
Fiduciary funds--restricted............. 56,374 56,374
Insurance and reinsurance balances
receivable............................. 276,194 276,194
Outstanding losses recoverable from
reinsurers............................. 20,612 20,612
Deferred acquisition costs.............. 387 387
Deferred reinsurance premiums ceded..... 9,144 9,144
Deferred tax asset...................... 1,156 1,156
Goodwill................................ 8,776 8,776
Other assets............................ 10,028 10,028
Assets related to deposit liabilities... 3,581 3,581
-------- ------- --------
Total assets........................ $428,593 $ -- $428,593
======== ======= ========
LIABILITIES
Outstanding losses and loss expenses.... $ 32,345 $ 32,345
Unearned premiums....................... 15,810 15,810
Deferred income......................... 2,126 2,126
Insurance and reinsurance balances
payable................................ 315,312 315,312
Funds withheld.......................... 838 838
Accounts payable and accrued
liabilities............................ 3,805 3,805
Income taxes payable.................... 2,549 2,549
Deposit liabilities..................... 3,581 3,581
-------- ------- --------
Total liabilities................... 376,366 -- 376,366
-------- ------- --------
Ordinary shares subject to redemption
(Note 3)............................... 14,529 (14,529) 0
-------- ------- --------
SHAREHOLDERS' EQUITY
Share capital
Authorized 20,000,000 ordinary shares
of par value $0.25 each, 6,199,484
shares issued and fully paid,
8,488,372 shares issued and fully
paid pro forma. (Note 2)............. 1,550 572 2,122
Additional paid in capital.............. 13,722 13,957 27,679
Notes receivable on exercise of options
(Note 2)............................... (1,625) (1,625)
Unrealized gain on marketable securi-
ties................................... 84 84
Retained earnings....................... 23,967 23,967
-------- ------- --------
Total shareholders' equity.......... 37,698 14,529 52,227
-------- ------- --------
Total liabilities, ordinary shares
subject to redemption and
shareholders' equity............... $428,593 $ 0 $428,593
======== ======= ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements

F-25
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE
DATA)

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
REVENUES
Risk management fees..................................... $ 25,044 $ 33,244
Net premiums earned...................................... 5,799 9,111
Net investment income.................................... 2,281 4,318
Other income............................................. 723 866
---------- ----------
Total revenues....................................... 33,847 47,539
---------- ----------
EXPENSES
Net losses and loss expenses incurred.................... 4,091 8,428
Acquisition costs........................................ 1,447 537
Depreciation and amortization of capital assets.......... 687 913
Amortization of goodwill................................. 309 544
Salaries and benefits.................................... 8,870 13,285
Other operating expenses................................. 8,162 12,180
---------- ----------
Total expenses....................................... 23,566 35,887
---------- ----------
Income before taxation................................... 10,281 11,652
Taxation................................................. 2,159 2,070
---------- ----------
Net income............................................... $ 8,122 $ 9,582
========== ==========
Net income per share..................................... $ 0.98 $ 1.15
---------- ----------
Weighted average number of shares and ordinary share
equivalents outstanding................................. 8,297,016 8,341,347
---------- ----------
</TABLE>

All per share data has been restated to reflect the four for one stock split
discussed in Note 2.

See accompanying notes to unaudited consolidated financial statements

F-26
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE
DATA)

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
ORDINARY SHARES OF PAR VALUE $0.25 EACH
Balance at beginning of period............................ $ 1,000 $ 1,500
Issuance of shares........................................ 500 --
Options exercised......................................... -- 150
Cancellation of ordinary shares in treasury............... -- (100)
------- --------
Balance at end of period.................................. $ 1,500 $ 1,550
------- --------
ADDITIONAL PAID IN CAPITAL
Balance at beginning of period............................ $ -- $ 12,319
Issuance of shares........................................ 12,319 --
Proceeds from exercise of options in excess of par........ -- 1,475
Issuance of shares (Note 2)............................... -- (72)
------- --------
Balance at end of period.................................. $12,319 $ 13,722
------- --------
NOTES RECEIVABLE
Balance at beginning of period............................ $ -- $ --
Receivable on exercise of options......................... -- (1,625)
------- --------
Balance at end of period.................................. $ -- $ (1,625)
------- --------
UNREALIZED GAIN ON MARKETABLE SECURITIES
Balance at beginning of period............................ $ -- $ 147
Movement in unrealized gain in period..................... 63 (63)
------- --------
Balance at end of period.................................. $ 63 $ 84
------- --------
RETAINED EARNINGS
Balance at beginning of period............................ $ 6,055 $ 15,973
Net income................................................ 8,122 9,582
Cancellation of ordinary shares in treasury............... -- (1,588)
------- --------
Balance at end of period.................................. $14,177 $ 23,967
------- --------
TREASURY STOCK
Balance at beginning of period............................ $ -- $ (938)
Purchase of ordinary shares in treasury................... (938) (812)
Sale of ordinary shares in treasury....................... -- 61
Cancellation of ordinary shares in treasury............... -- 1,689
------- --------
Balance at end of period.................................. $ (938) $ --
------- --------
TOTAL SHAREHOLDERS' EQUITY.................................. $27,121 $ 37,698
======= ========
</TABLE>

No dividends were paid for the periods ended September 30, 1996 and 1997.
All per share data has been restated to reflect the four for one stock split
discussed in Note 2.

See accompanying notes to unaudited consolidated financial statements

F-27
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 8,122 $ 9,582
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 687 913
Amortization of goodwill............................... 309 544
Amortization of marketable securities.................. 4 140
Equity in income of affiliates......................... (260) (808)
Net realized gain on sale of marketable securities..... -- (411)
Profit on disposal of capital assets................... -- (4)
Changes in non cash operating assets and liabilities:
Fiduciary funds........................................ (23,422) (6,133)
Insurance and reinsurance balances receivable.......... (27,924) (172,439)
Outstanding losses recoverable from reinsurers......... (1,370) (4,024)
Deferred acquisition costs............................. 1,189 (215)
Deferred reinsurance premiums ceded.................... (866) (1,921)
Other assets........................................... 215 (2,732)
Deferred tax asset..................................... 112 (859)
Assets related to deposit liabilities.................. (980) 466
Outstanding losses and loss expenses................... 5,172 8,044
Unearned premiums...................................... 1,309 3,296
Insurance and reinsurance balances payable............. 48,401 173,828
Funds withheld......................................... 29 (546)
Accounts payable and accrued liabilities............... 941 (122)
Income taxes payable................................... (712) 373
Deferred income........................................ 129 333
Deposit liabilities.................................... 980 (466)
-------- ---------
Net cash provided by operating activities............ 12,065 6,839
-------- ---------
INVESTING ACTIVITIES
Purchase of capital assets............................... (1,108) (1,250)
Sale of capital assets................................... 58 132
Purchase of debt securities.............................. -- (238)
Purchase of equity securities............................ (2) (3,977)
Purchase of short-term investments, net.................. (12,000) (3,932)
Proceeds on sale of debt securities...................... 200 2,091
Proceeds on sale of equity securities.................... -- 7,087
Purchase of subsidiaries net of cash acquired............ (290) --
Investments in affiliates................................ (115) (109)
Acquisition of business.................................. -- (1,197)
Dividends received from affiliates....................... -- 281
-------- ---------
Cash used by investing activities.................... (13,257) (1,112)
-------- ---------
FINANCING ACTIVITIES
Net proceeds of subscription to share capital subject to
redemption.............................................. 14,457 --
Sale of common shares in treasury........................ -- 61
Purchase of common shares in treasury.................... (938) (812)
-------- ---------
Cash provided (used) by financing activities......... 13,519 (751)
-------- ---------
Increase in cash and cash equivalents.................... 12,327 4,976
Cash and cash equivalents at beginning of period......... 688 15,602
-------- ---------
Cash and cash equivalents at end of period............... $ 13,015 $ 20,578
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for income taxes........... $ 1,448 $ 940
======== =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements

F-28
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1996 AND 1997
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE
DATA)

1. INTERIM ACCOUNTING POLICY

In the opinion of management of Stirling Cooke Brown Holdings Limited (the
"Company"), the accompanying unaudited consolidated financial statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company and the
results of operations and cash flows for the nine months ended September 30,
1996 and 1997. Although the Company believes that the disclosure in these
financial statements is adequate to make the information presented not
misleading, certain information and footnote information normally included in
financial statements prepared in accordance with generally accepted accounting
principles has been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. Results of operations for the nine
months ended September 30, 1997 are not necessarily indicative of what
operating results may be for the full year. In addition, these unaudited
consolidated financial statements and notes thereto should be read in
conjunction with the audited consolidated financial statements presented
herein.

2. CAPITAL TRANSACTIONS

a) In April 1997, the Company purchased 213,732 of its ordinary shares from
a founding shareholder for a total cost of $812. Such shares were recorded as
treasury stock at cost.

b) In June 1997, the Company reissued 16,000 ordinary shares of its treasury
stock for a total subscription price of $61.

c) On June 30, 1997, the remaining 400,516 ordinary shares held in treasury
at that date were canceled. The excess cost of treasury shares over their par
value was recorded as a deduction from retained earnings.

d) On June 30, 1997, the Company increased its authorized share capital to
20,000,000 ordinary shares of par value $0.25 each.

e) On June 30, 1997, the shareholders exercised their options to purchase
600,000 ordinary shares in the Company (see note 12 to the consolidated
financial statements) at an exercise price of $2.71 per share.
Contemporaneously, 288,888 ordinary shares of par value of $0.25 each were
issued to the holders of the Class "A' shares pursuant to certain anti-
dilution rights, and the Class "A' shares were repurchased by the Company for
nominal consideration. As the 288,888 ordinary shares are subject to a put
option, the aggregate subscription price of such shares is classified outside
of shareholders' equity. The $72 excess of the par value of the ordinary
shares issued over the original par value of the Class "A' shares was recorded
as a deduction from additional paid in capital. On June 30, 1997 the Company
loaned the shareholders $1,625, an amount equal to the aggregate exercise
price of the options. Such loans are evidenced by promissory notes, bear
interest at 7% per annum and mature in June 1998. Notes receivable are
recorded as a deduction from shareholders' equity at September 30, 1997.
Included within notes receivable are $325, $866 and $109 due from Messrs.
Cooke, Brown and Jones, respectively.

f) On June 30, 1997, the Company effected a four for one stock split whereby
each of the Company's ordinary shares of par value $1.00 each was divided into
four ordinary shares of par value $0.25 each.

All share and per share data included in these unaudited consolidated
financial statements have been restated to reflect the stock split.

F-29
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1996 AND 1997
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE
DATA)

3. PRO FORMA ADJUSTMENT

2,288,888 of the Company's ordinary shares are subject to a put option
whereby, after 2004, the holders of such shares can request that the Company
repurchase the shares at fair market value. As such shares are subject to
redemption at the option of the holder, the aggregate subscription price is
classified outside of shareholders' equity in the historical balance sheet at
September 30, 1997. The put option expires upon consummation of an IPO.

The pro forma consolidated balance sheet at September 30, 1997 reflects pro
forma adjustments assuming that the option had expired at that date. The
excess of the carrying value over the par value of the shares of $13,957 is
recorded through additional paid in capital.

4. RISK MANAGEMENT FEES

The components of the Company's risk management fees are as follows:

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
---------------
1996 1997
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Brokerage fees and commissions................................. $15,125 $17,901
Managing general agency fees................................... 4,374 8,207
Underwriting management fees................................... 3,016 3,037
Captive management and program fees............................ 1,227 2,099
Loss control and audit fees.................................... 1,302 2,000
------- -------
Total risk management fees................................... $25,044 $33,244
======= =======
</TABLE>

F-30
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF INCOME

The following unaudited pro forma consolidated statement of income gives
effect to the acquisition by the Company of all the outstanding share capital
of Realm on September 5, 1996, using the purchase method of accounting. The
total purchase price of $9.0 million comprised a cash payment to the former
owners of $8.8 million and legal and other costs associated with the
acquisition of $0.2 million. Goodwill arising on the acquisition, representing
the excess of the purchase price over the fair values of the net assets
acquired, amounted to $0.8 million and is being amortized over 15 years.

The pro forma consolidated statement of income gives effect to the
acquisition as if it had occurred at the beginning of the year. Pro forma
adjustments to reflect the acquisition have been applied to the historical
consolidated statement of income of the Company for the year ended December
31, 1996. Such adjustments are described in the accompanying notes to the pro
forma consolidated statement of income.

The pro forma consolidated financial data do not purport to represent what
the Company's results of operations would have been had the acquisition been
consummated at the beginning of the year nor do they project the Company's
results of operations for any future period.

F-31
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
STIRLING COOKE
REALM BROWN HOLDINGS
STIRLING COOKE (PERIOD FROM LIMITED
BROWN HOLDINGS JANUARY 1 TO PRO FORMA
LIMITED SEPTEMBER 4, PRO FORMA CONSOLIDATED
HISTORICAL 1996) ADJUSTMENTS NOTES STATEMENT OF INCOME
-------------- ------------ ----------- ----- -------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Risk management fees.... $ 33,842 $ -- $ -- $ 33,842
Net premiums earned..... 8,754 1,978 -- 10,732
Net investment income... 3,405 509 (255) (1) 3,659
Other income............ 841 -- -- 841
---------- ------ ----- ----------
Total revenues...... 46,842 2,487 (255) 49,074
---------- ------ ----- ----------
EXPENSES
Net losses and loss
expenses incurred...... 6,765 1,424 -- 8,189
Acquisition costs....... 1,618 73 -- 1,691
Depreciation and
amortization of capital
assets................. 1,018 7 -- 1,025
Amortization of
goodwill............... 423 -- 35 (2) 458
Salaries and benefits... 13,106 350 -- 13,456
Other operating
expenses............... 11,713 731 -- 12,444
---------- ------ ----- ----------
Total expenses...... 34,643 2,585 35 37,263
---------- ------ ----- ----------
Income before taxation.. 12,199 (98) (290) 11,811
Taxation................ (2,281) -- -- (3) (2,281)
---------- ------ ----- ----------
Net income.............. $ 9,918 $ (98) $(290) $ 9,530
---------- ------ ----- ----------
Net income per share.... $ 1.19 $ 1.15
---------- ----------
Weighted average number
of shares and ordinary
share equivalents
outstanding............ 8,306,610 8,306,610
---------- ----------
</TABLE>
All per share data has been restated to reflect the four for one stock split.

See accompanying notes to pro forma unaudited consolidated statement of income.

F-32
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

NOTES TO THE PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

1. To record the reduction in investment income arising from the decrease in
cash and cash equivalents and marketable securities as if such amounts had
been used as consideration for the acquisition of Realm on January 1, 1996.

2. To record goodwill amortization for the period from January 1, 1996 to
September 4, 1996. Goodwill is amortized on a straight-line basis over a
period of 15 years.

3. The Company does not believe that the tax effects of the pro forma
adjustments would be material. In particular, the cash utilized for the
purchase of Realm was previously held by the Bermuda parent company, which
earned tax-free interest on such cash.

F-33
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Realm National Insurance Company:

We have audited the accompanying statements of operations, changes in
stockholder's equity and cash flows of Realm National Insurance Company for
the period from January 1, 1996 to September 4, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations of Realm National
Insurance Company and its cash flows for the period from January 1, 1996 to
September 4, 1996 in conformity with generally accepted accounting principles.

/s/ KPMG Peat Marwick LLP

New York, New York
October 1, 1997

F-34
<PAGE>

REALM NATIONAL INSURANCE COMPANY
(FORMERLY LLOYD'S NEW YORK INSURANCE COMPANY)

STATEMENT OF OPERATIONS

FOR THE PERIOD FROM JANUARY 1, 1996 THROUGH SEPTEMBER 4, 1996

<TABLE>
<S> <C>
Revenues:
Gross premiums written........................................... $9,660,183
Ceded premiums................................................... 7,986,835
----------
Net premiums written........................................... 1,673,348
Change in unearned premiums...................................... 304,165
----------
Premiums earned................................................ 1,977,513
Net investment income............................................ 435,004
Net realized gains on sale of investments........................ 74,128
----------
Total revenues................................................. 2,486,645
Expenses:
Losses incurred.................................................. 1,096,747
Loss adjustment expenses incurred................................ 327,403
Commissions...................................................... 73,138
General and administrative expenses.............................. 1,088,139
----------
Total expenses................................................. 2,585,427
Loss before federal income taxes................................... (98,782)
Federal income taxes............................................... --
----------
Net loss........................................................... $ (98,782)
==========
</TABLE>

See accompanying notes to financial statements.

F-35
<PAGE>

REALM NATIONAL INSURANCE COMPANY
(FORMERLY LLOYD'S NEW YORK INSURANCE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY

FOR THE PERIOD FROM JANUARY 1, 1996 TO SEPTEMBER 4, 1996

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
ADDITIONAL OF AVAILABLE
COMMON PAID-IN FOR SALE ACCUMULATED
STOCK CAPITAL SECURITIES DEFICIT TOTAL
---------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance as of January 1,
1996................... $2,500,000 $6,444,697 $133,615 $(1,237,648) $7,840,664
Net loss................ -- -- -- (98,782) (98,782)
Change in unrealized
appreciation of
available for sale
securities............. -- -- 19,956 -- 19,956
---------- ---------- -------- ----------- ----------
Balance as of September
4, 1996................ $2,500,000 $6,444,697 $153,571 $(1,336,430) $7,761,838
========== ========== ======== =========== ==========
</TABLE>

See accompanying notes to financial statements.

F-36
<PAGE>

REALM NATIONAL INSURANCE COMPANY
(FORMERLY LLOYD'S NEW YORK INSURANCE COMPANY)

STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM JANUARY 1, 1996 TO SEPTEMBER 4, 1996

<TABLE>
<CAPTION>
SEPTEMBER 4,
1996
------------
<S> <C>
Cash flows from operating activities:
Net loss........................................................ $ (98,782)
Adjustments to reconcile net income to net cash used in
operating activities:
Net realized gains on sale of investments..................... (74,128)
Depreciation/amortization expense............................. 9,179
Decrease in accrued investment income......................... 90,877
Decrease in premiums receivable............................... 423,780
Increase in recoverable under reinsurance contracts........... (70,152)
Increase in prepaid reinsurance premiums...................... (503,731)
Decrease in ceded unpaid losses and loss adjusted expenses.... 2,809,934
Decrease in policy acquisition costs.......................... 82,460
Decrease in unpaid losses and loss adjustment expenses........ (3,263,512)
Increase in unearned premiums................................. 199,566
Increase in reinsurance balances payable...................... 564,821
Decrease in funds held under reinsurance treaties............. (219,976)
Other item (net).............................................. 22,462
-----------
Total adjustments........................................... 71,580
-----------
Net cash used by operating activities....................... (27,202)
-----------
Cash flows from investing activities:
Maturities and sales of fixed maturities........................ 10,306,244
Maturities and sales of equity securities....................... 1,410,834
Investments in fixed maturities................................. (10,107,780)
Investments in equity securities................................ (1,375,714)
Purchases of property and equipment; net........................ (8,786)
-----------
Net cash provided by investing activities................... 224,798
-----------
Net increase in cash........................................ 197,596
Cash at beginning of year......................................... 1,423,996
-----------
Cash at end of year............................................... $ 1,621,592
===========
</TABLE>

See accompanying notes to financial statements.

F-37
<PAGE>

REALM NATIONAL INSURANCE COMPANY
(FORMERLY LLOYD'S NEW YORK INSURANCE COMPANY)

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD FROM JANUARY 1, 1996 TO SEPTEMBER 4, 1996

(1)ORGANIZATION OF SIGNIFICANT ACCOUNTING POLICIES

Business and Organization

On July 1, 1992, Realm National Insurance Company (formerly Lloyd's New York
Insurance Company) ("Realm") completed its conversion from an association to a
stock insurance company and a license to transact insurance business as a
stock insurance company was issued by the Insurance Department of the State of
New York (the "Department").

Approximately 56% of Realm was held by C.E Heath PLC ("C.E. Heath") and
certain affiliates at September 4, 1996. The remaining 44% of Realm was held
by individuals. Effective September 5, 1996, Realm was purchased by Stirling
Cooke North American Holdings Ltd. ("SCNAH"). See note 10. The accompanying
financial statements are historical pre-acquisition based for the period from
January 1, 1996 to September 4, 1996.

Realm is licensed by the Department to write Special Risk insurance. Special
Risk business represents business that is sold at rates that are not subject
to prior approval of the Department. The Department's rules and regulations
limit the amount of Special Risk business that a company may write, based on
the aggregate writings of the company. In 1994, Realm disposed of its
agricultural and ocean marine books of business as a condition precedent to
the sale of Realm to a prospective buyer. As a result, Realm was no longer in
compliance with the Department's limitation on Special Risk premium writings.
Realm has received a waiver of such limitations from the Department through
September 5, 1997. The current application for extension of the waiver is
pending approval from the Department.

Preparation of Financial Statements

(a) The financial statements have been prepared on the basis of generally
accepted accounting principles ("GAAP"). The preparation of financial
statements in conformity with these practices 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 financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.

(b) Realm accounts for investments under Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115).

Certain investments in fixed maturities are classified as held to maturity
and others are classified as available for sale. Held to maturity securities
are carried at amortized cost. All equity securities are classified as
available for sale. Investments classified as available for sale are carried
at market value. The difference between market value and cost is included as a
separate component of stockholders' equity, net of applicable deferred income
taxes. Bond discounts and premiums are amortized on the straight-line method
over the remaining term of the securities. Such amortization is included as a
component of net investment income in the statement of operations. Realized
gains and losses are determined on the basis of specific identification.
Investment income is recorded as earned.

(c) Premiums written are earned on a monthly pro rata basis over the terms
of the policies or reinsurance agreements to which they relate. Unearned
premium reserves represents the portion of premiums written which is
applicable to the unexpired terms of policies or reinsurance agreements in
force.

(d) Unpaid losses, including incurred but not reported losses, and unpaid
loss adjustment expenses include amounts determined on individual claims and
other estimates, primarily on the basis

F-38
<PAGE>

REALM NATIONAL INSURANCE COMPANY
(FORMERLY LLOYD'S NEW YORK INSURANCE COMPANY)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD FROM JANUARY 1, 1996 TO SEPTEMBER 4, 1996

of past experience. The methods of making such estimates and for establishing
the resulting liabilities are continually reviewed and updated by Realm, and
any adjustments resulting therefrom are reflected in income currently net of
the effects of applicable reinsurance. Unpaid losses and unpaid loss
adjustment expenses are reduced for anticipated salvage and subrogation.

(e) Costs incidental to acquiring business related to premiums written and
costs allowed by assuming reinsurers related to premiums ceded are deferred
and amortized over the periods covered by the underlying policies or
reinsurance agreements.

(f) Property and equipment, which include furniture and equipment,
electronic data processing equipment and leasehold improvements, are stated at
cost. Depreciation of furniture, equipment, and electronic data processing
equipment has been provided primarily by an accelerated method over the
estimated useful lives (five to seven years) of the assets. Amortization of
leasehold improvements has been provided by the straight-line method over the
shorter of the estimated useful lives of the assets or the remaining term of
the lease.

(g) Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.

(h) No investments are treated as cash equivalents for the purposes of the
statement of cash flows.

(2)INVESTMENTS

For the period January 1, 1996 through September 4, 1996 proceeds from sales
of investments in fixed maturity securities was $0, excluding proceeds from
maturities of $10,306,244. Proceeds from sales of investments in equity
securities were $1,410,834.

Net investment income by sources for the period January 1, 1996 through
September 4, 1996 is as follows:

<TABLE>
<S> <C>
Bonds........................................................... $323,370
Preferred stock................................................. 35,085
Common stock.................................................... 50,590
Cash and short-term investments................................. 28,271
Other........................................................... 45,339
--------
Total investment income..................................... 482,655
Less applicable expenses...................................... 47,651
--------
Net investment income......................................... $435,004
========
</TABLE>

F-39
<PAGE>

REALM NATIONAL INSURANCE COMPANY
(FORMERLY LLOYD'S NEW YORK INSURANCE COMPANY)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD FROM JANUARY 1, 1996 TO SEPTEMBER 4, 1996

(3)FEDERAL INCOME TAXES

Federal income taxes differ from the amounts computed by applying the
statutory Federal income tax rate of 34% to income before Federal income taxes
for the period of January 1, 1996 through September 4, 1996 as follows:

<TABLE>
<S> <C>
Income before income taxes..................................... $(98,782)
--------
Federal income tax expense (benefit) at statutory rates........ (33,586)
Dividend received deduction.................................... (19,254)
Change in valuation allowance.................................. 52,840
--------
Federal income tax........................................... $ 0
========

A valuation allowance was provided because management determined that it was
more likely than not that net deductible temporary differences will not be
realized.

For the period of January 1, 1996 through September 4, 1996, federal income
tax expense consists of the following:

Current........................................................ $ 0
Deferred....................................................... 0
--------
$ 0
========
</TABLE>

(4)REINSURANCE

Realm, in the ordinary course of business, reinsures certain risks with
other companies. Such arrangements serve to enhance Realm's capacity to write
business and limit Realm's maximum loss on large or unusually hazardous risks.
To the extent that any reinsuring company might be unable to meet its
obligations to Realm under the existing reinsurance agreements, Realm would be
liable for such defaulted amounts.

At September 4, 1996, there were no amounts due from any individual
reinsurer for reinsurance recoverables on paid losses in excess of 10% of
Realm's stockholder's equity.

Realm accounts for reinsurance in accordance with SFAS 113 "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts."

Premiums earned, as shown in the statement of operations, include
reinsurance assumed of approximately $289,653 from January 1, 1996 through
September 4, 1996, and exclude reinsurance ceded of approximately $7,483,105.
Ceded losses and loss adjustment expenses amounted to $2,654,379 from January
1, 1996 through September 4, 1996.

F-40
<PAGE>

REALM NATIONAL INSURANCE COMPANY
(FORMERLY LLOYD'S NEW YORK INSURANCE COMPANY)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD FROM JANUARY 1, 1996 TO SEPTEMBER 4, 1996

Realm has a stop loss reinsurance agreement in place relating to its ocean
marine business with C.E. Heath Casualty and General Insurance Ltd. This
agreement covers Realm's net ocean marine reserves as of June 30, 1993 for a
premium of $200,000. The initial reserve transferred under this retroactive
reinsurance agreement was $833,950 and amounts settled from the period January
1, 1996 through September 4, 1996 was $(168,216).

(5)OTHER UNDERWRITING COMMISSIONS

Realm reinsures a large portion of its risks and receives ceded commissions
from its reinsurers. Direct commissions incurred are offset by such ceded
commissions in the accompanying financial statements. Gross direct commissions
amounted to $2,462,861 and total ceded commissions amounted to $2,389,723.

(6)LEASES

Rent expense was $82,565 from January 1, 1996 to September 4, 1996.

There is a facilities agreement between Realm and World Trade Services
("WTS"), an affiliate whereby office space and related expenses are shared as
defined in the agreement. During the period January 1, 1996 through September
4, 1996, total expenses allocated to WTS under this agreement were $63,636.

(7)STATUTORY SURPLUS AND DIVIDEND RESTRICTION

Under New York law, Realm may pay cash dividends only from earned surplus
determined on a statutory basis. Further, Realm is restricted on the basis of
the lower of 10% of Realm's statutory surplus at the end of the preceding
twelve-month period or 100% of Realm's adjusted net investment income, as
defined by regulation, as to the amount of dividends it may declare or pay in
any twelve-month period without the approval of the Insurance Department of
the State of New York. By agreement with the Insurance Department of the State
of New York, Realm is restricted from declaring dividends until September 5,
1998.

Realm did not have any earned surplus available for the payment of dividends
through September 4, 1996 due to its statutory-basis accumulated deficit.
Additionally, $114,900 of statutory surplus has been segregated as special
funds as of September 4, 1996 and will not become available for dividend
payments until earned.

Realm's total surplus and net income determined on a statutory basis are as
follows:

<TABLE>
<S> <C>
Total surplus as of September 4, 1996.......................... $7,716,931
Net income from January 1, 1996 through September 4, 1996...... $ 27,503
</TABLE>

(8)RISK-BASED CAPITAL

The NAIC has a model law which establishes certain minimum risk-based
capital (RBC) requirements for property-casualty insurance companies. The RBC
calculation serves as a benchmark for the regulation of insurance companies by
state insurance regulators. The calculation specifies various formulas and
weighting factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk and are set forth in the RBC
requirements. The capital of Realm as of September 4, 1996 exceeds the amount
calculated using the RBC requirements.

F-41
<PAGE>

REALM NATIONAL INSURANCE COMPANY
(FORMERLY LLOYD'S NEW YORK INSURANCE COMPANY)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD FROM JANUARY 1, 1996 TO SEPTEMBER 4, 1996

(9)LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

Activity in the liability for unpaid losses and loss adjustment expenses is
summarized as follows (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 4,
1996
------------
<S> <C>
Balance at January 1, 1996...................................... $15,573
Less reinsurance recoverables................................. 13,433
-------
Net balance at January 1, 1996.............................. 2,140
-------
Incurred related to:
Current year.................................................. 1,459
Prior years................................................... (35)
-------
Total incurred.............................................. 1,424
-------
Paid related to:
Current year.................................................. 685
Prior years................................................... 1,193
-------
Total paid.................................................. 1,878
-------
Net balance................................................. 1,686
-------
Plus reinsurance recoverable................................ 10,623
-------
Balance September 4, 1996....................................... $12,309
=======
</TABLE>

(10) SUBSEQUENT EVENT

On September 5, 1996, Stirling Cooke North American Holdings, Ltd. completed
the acquisition of 100% of Lloyd's New York Insurance Company which
subsequently changed its name to Realm effective September 26, 1996.

F-42
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of

Realm Investments Ltd.

We have audited the accompanying consolidated statements of operations,
changes in shareholder's equity and cash flows of Realm Investments Ltd. for
the year ended December 31, 1995. These consolidated financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations of Realm
Investments Ltd. and subsidiaries and their cash flows for the year ended
December 31, 1995 in conformity with United States generally accepted
accounting principles.

KPMG Peat Marwick

Chartered Accountants

Hamilton, Bermuda

June 7, 1996

F-43
<PAGE>

REALM INVESTMENTS LTD.

CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1995

(EXPRESSED IN UNITED STATES DOLLARS)

<TABLE>
<S> <C>
INCOME
Premiums assumed.................................................. $ 7,774,266
Change in unearned premiums....................................... (4,090,249)
-----------
Premiums earned................................................... 3,684,017
-----------
Premiums ceded.................................................... 1,130,356
Change in deferred premiums....................................... (599,919)
-----------
Premiums ceded.................................................... 530,437
-----------
Net premiums earned............................................... 3,153,580
Risk management fees.............................................. 7,008,738
Interest income................................................... 424,663
-----------
Total income.................................................. 10,586,981
-----------
EXPENSES
Losses and loss expenses incurred................................. 2,191,095
Reinsurance recoveries............................................ (805,793)
-----------
Net losses and loss expenses incurred............................. 1,385,302
Underwriting expenses............................................. 1,344,489
Depreciation and amortization..................................... 106,582
Amortization of goodwill.......................................... 54,640
Salaries and benefits............................................. 1,981,207
General and administrative expenses............................... 2,416,801
-----------
Total expenses................................................ 7,289,021
-----------
Net income before taxation........................................ 3,297,960
Taxation.......................................................... (42,853)
-----------
Net income........................................................ $ 3,255,107
===========
</TABLE>

See accompanying notes to consolidated financial statements

F-44
<PAGE>

REALM INVESTMENTS LTD.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

YEAR ENDED DECEMBER 31, 1995

(EXPRESSED IN UNITED STATES DOLLARS)

<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
-------- ---------- ----------
<S> <C> <C> <C>
Balance as of January 1, 1995.................... $100,000 $1,992,142 $2,092,142
Net income....................................... -- 3,255,107 3,255,107
-------- ---------- ----------
Balance as of December 31, 1995.................. $100,000 $5,247,249 $5,347,249
======== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements

F-45
<PAGE>

REALM INVESTMENTS LTD.

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1995

(EXPRESSED IN UNITED STATES DOLLARS)

<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income...................................................... $ 3,255,107
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 106,582
Amortization of goodwill...................................... 54,640
Changes in non cash operating assets and liabilities:
Fiduciary funds--restricted................................... (6,431,598)
Insurance balances receivable................................. 407,598
Insurance balances receivable from affiliates................. (15,593,372)
Outstanding losses recoverable................................ (2,286,101)
Deferred acquisition expenses................................. (1,581,735)
Deferred reinsurance premiums................................. (599,919)
Other assets and prepayments.................................. (388,692)
Deferred tax asset............................................ (54,930)
Assets related to deposit liabilities......................... (2,781,061)
Outstanding losses and loss expenses.......................... 2,076,175
Unearned premiums............................................. 4,090,249
Insurance balances payable to affiliates...................... 8,497,985
Insurance and reinsurance balances payable.................... 7,928,703
Accounts payable and accrued liabilities...................... 971,790
Deposit liabilities........................................... 2,781,061
Deferred income............................................... 578,802
------------
Net cash provided by operating activities..................... 1,031,284
------------
INVESTING ACTIVITIES
Purchase of capital assets...................................... (576,990)
------------
Cash used by investing activities............................. (576,990)
------------
Increase in cash and cash equivalents........................... 454,294
Cash and cash equivalents at beginning of year.................. 6,438,366
------------
Cash and cash equivalents at end of year........................ $ 6,892,660
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for income taxes.................... $ 130,000
============
</TABLE>

See accompanying notes to consolidated financial statements

F-46
<PAGE>

REALM INVESTMENTS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995

1. GENERAL

Realm Investments Ltd. (the "Company") was incorporated in Bermuda and
carries on business as a holding company for a number of wholly owned
subsidiaries operating in the United States and Bermuda. These subsidiaries
carry on business in the insurance industry as managing general agents, third
party administrators, brokers and an insurance company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements are prepared in
accordance with United States generally accepted accounting principles which
require 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 financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The following are the significant accounting
policies adopted by the Company:

a) Basis of presentation

These financial statements have been prepared on a consolidated basis and
include the financial statements of the Company and all of its majority owned
subsidiaries (collectively referred to as the "Company"). All significant
intercompany balances and transactions have been eliminated on consolidation.
The results of a number of subsidiaries have been included from the dates of
their incorporation.

b) Premiums

Premiums assumed are recorded on the accruals basis and included in income
on a pro-rated basis over the life of the treaties with the unearned portion
deferred in the balance sheet. Reinsurance premiums ceded are similarly pro-
rated over the terms of the treaties with the unearned portion being deferred
in the balance sheet as deferred reinsurance premiums ceded.

c) Underwriting expenses

Underwriting expenses, mainly commissions and brokerage, related to unearned
premiums are deferred and amortised to income over the periods in which the
premiums are earned. The method followed in determining the deferred
acquisition expenses limits the amount of the deferral to its realizable value
by giving consideration to losses and expenses expected to be incurred as
premiums are earned. Future investment income is anticipated in determining
whether a premium deficiency exists.

d) Outstanding losses and loss expenses

Losses and loss expenses paid are recorded when advised by the ceding
insurance company or claims handlers, as applicable. Outstanding losses
comprise estimates of the amount of reported losses and loss expenses plus a
provision for losses incurred but not reported based on industry loss
development factors and management judgment.

Amounts recoverable from reinsurers are estimated in a manner consistent
with the underlying liabilities.

F-47
<PAGE>

REALM INVESTMENTS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

d) Outstanding losses and loss expenses (continued)

Management believes that the provision for outstanding losses and loss
expenses will be adequate to cover the ultimate net cost of losses incurred to
the balance sheet date but the provision is necessarily an estimate and may
ultimately be settled for a greater or lesser amount. In particular the
Company has limited historical loss data that can be utilized in the
projection of ultimate losses. It is at least reasonably possible that
management will revise the estimate of outstanding losses and loss expenses
significantly in the near term. Any subsequent differences arising are
recorded in the period in which they are determined.

All losses incurred relate to the current fiscal year, since 1995 was the
first year that the insurance company commenced operations.

e) Risk management fees

Commission and management fee income are reported net of commission expense
to agents and are initially recorded as of the effective date of the related
insurance policy, except for fee income on installment premiums which is
recorded periodically as billed. Such fees are recognized in income over the
period that services are performed in accordance with the Company's
contractual obligations, typically ranging up to 5 years, based on the
Company's estimation of expected claims handling requirements in each
accounting period. Any subsequent adjustments, including policy cancellations
and premium rate adjustments, are recorded when advised by the client or
agents. The portion of commissions and fees that will be earned in the future
are deferred and reported as deferred income in the accompanying balance
sheet.

f) Expenses

Expenses are recorded on the accruals basis.

g) Cash and cash equivalents

The Company considers time deposits with original maturity dates of ninety
days or less to be considered cash. Fiduciary funds are restricted from use
and are not considered cash equivalents.

h) Goodwill

Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally 15 years. The Company assesses the
recoverability of this intangible asset by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation.
The amount of goodwill impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate reflecting the
Company's average cost of funds. The assessment of the recoverability of
goodwill will be impacted if estimated future operating cash flows are not
achieved.

F-48
<PAGE>

REALM INVESTMENTS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

i) Capital assets and depreciation

j) Interest income

Interest income is accrued to the balance sheet date.

k) Fair value of financial instruments

The fair value of financial instruments, approximates their carrying value
due to the relatively short period of time between origination of the
instruments and their expected realization.

l) Income taxes

Under the asset and liability method used by the Company, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax
bases. A valuation allowance is provided for a portion or all of the deferred
tax assets when it is more likely than not that such portion or all such
deferred assets will not be realized.

3. RELATED PARTY TRANSACTIONS

a) A significant portion of the Company's commission and management fee
income is derived from business produced by brokers who are affiliated through
common ownership and directors.

b) Amounts due from/to affiliates are interest free and unsecured with no
fixed terms of repayment.

4. PLEDGED TIME DEPOSITS

In the normal course of reinsurance operations the Company's bankers have
issued letters of credit totaling $2,118,000 in favor of the ceding insurance
companies. At December 31, 1995 $2,144,114 of time deposits were pledged as
collateral for these letters of credit.

5. DEPOSIT LIABILITIES AND RELATED ASSETS

Certain of the Company's reinsurance contracts, referred to as rent-a-
captive programs, do not satisfy the conditions for reinsurance accounting as
the maximum exposure to loss is fully funded by premium, cash and other
collateral and indemnity agreements with the insureds. Accordingly these
contracts are accounted for as deposit liabilities. The Company agrees to
return the underwriting and investment earnings realized on the programs to
the insured. Premiums and other consideration received, together with net
investment income earned on the underlying assets, are recorded as a deposit
liability and loss payments made under the contracts are recorded as a
deduction from the deposit. The assets related to these programs represent
funds under management as the insured retains the risks and rewards of
ownership. Such assets are recorded as assets related to deposit liabilities
in the balance sheet. These assets comprised cash and short-term deposits. The
Company receives a fee based on a percentage of premiums written and
investment income earned for structuring and providing ongoing management of
the programs.

F-49
<PAGE>

REALM INVESTMENTS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

In addition deposit liabilities and related assets include $1,679,797 of
deposits received from customers as security for the timely payment of
premiums for workers' compensation insurance. The deposit is restricted from
use by the Company, and is the property of the customer. The deposit is
refunded to the customer after the policy expires or is canceled and all
claims have been settled related to the insurance policy. The interest income
earned by these restricted deposit accounts is the property of the customer,
and is therefore excluded from the Company's operating results.

6. FIDUCIARY CASH AND CUSTOMER DEPOSITS

7. REINSURANCE

The Company's insurance subsidiary assumes various quota shares of workers'
compensation, employers' liability on both a primary and excess basis, bodily
injury, difference in conditions and general liability risks written on a
treaty basis. The Company's exposure under the reinsurance contracts assumed
is limited in most instances to $250,000 and $1,000,000 per occurrence for
workers' compensation and employer's liability, respectively and is subject to
an annual aggregate limit based on various percentages of original gross
written premium income. The Company further limits its exposure through the
purchase of reinsurance protection for certain risks covering losses in excess
of $10,000 and $50,000 per occurrence for workers' compensation and employers'
liability, respectively, and on one particular program losses in excess of
$3,000,000 per occurrence.

F-50
<PAGE>

REALM INVESTMENTS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

8. COMMITMENTS

Future minimum lease payments under non cancellable operating leases as at
December 31, 1995 are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
<S> <C>
1996............................................................. $201,049
1997............................................................. 185,210
1998............................................................. 134,765
1999............................................................. 1,423
--------
$522,447
========
</TABLE>

Total rental expense for the year ended December 31, 1995 was $225,208.

9. CONCENTRATION OF CREDIT RISK

The Company's financial instruments exposed to concentrations of credit risk
consist primarily of its cash equivalents and receivables. The Company
maintains cash and cash equivalents in excess of the insured limit by the
Federal Deposit Insurance Corporation ("FDIC") in one financial institution
which the Company considers of high credit quality.

Concentrations of credit risk with respect to insurance balances receivable
from agents and customers are limited due to the large number of agents and
customers comprising the Company's receivable base. Management does not
anticipate significant credit losses from such financial instruments.

10. STATUTORY REQUIREMENTS

One of the subsidiaries is required by its licence to maintain capital and
surplus greater than a minimum statutory amount determined as the greater of a
percentage of outstanding losses (net of reinsurance recoverable) or a given
fraction of net written premiums. At December 31, 1995 the subsidiary is
required to maintain a minimum statutory capital and surplus of $1,296,587.
Actual statutory capital and surplus was a deficit of $248,139 and accordingly
the minimum capital and surplus requirements have not been met. Retained
earnings of the subsidiary in the amount of $432,033 are not available for the
payment of dividends to the Company.

The subsidiary is also required to maintain a minimum liquidity ratio
whereby the value of its relevant assets is not less than 75% of the amount of
its relevant liabilities. Relevant assets include cash and deposits,
investment income accrued and insurance balances receivable. Certain
categories of assets do not qualify as relevant assets under the statute. The
relevant liabilities are total general business insurance reserves (net of
reinsurance recoverable) and total other liabilities. At December 31, 1995 the
subsidiary was required to maintain relevant assets of at least $4,142,000. At
that date relevant assets were approximately $5,277,000 and the minimum
liquidity ratio was therefore met.

Subsequent to year end, the Company has provided the subsidiary with
additional capital to enable it to meet its solvency margin requirements.

F-51
<PAGE>

REALM INVESTMENTS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

11. TAXATION

Under current Bermuda law the Company is not required to pay any taxes in
Bermuda on either income or capital gains. The Company has received an
undertaking from the Minister of Finance in Bermuda that in the event of any
such taxes being imposed the Company will be exempted from taxation until the
year 2016.

The components of total income tax expense for the year ended December 31,
1995 relate to the subsidiaries in the United States and are as follows:

<TABLE>
<S> <C>
Current......................................................... $ 97,783
Deferred........................................................ (54,930)
--------
$ 42,853
========
</TABLE>

Income taxes differ from the federal income tax rate of 34% primarily
because of non-deductible meal and entertainment expenses, utilization of net
operating loss carry-forwards, foreign income not expected to be taxed in the
United States and the change in the valuation allowance of $63,010 for the
year ended December 31, 1995.

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred liabilities at December 31,
1995, are presented below:

<TABLE>
<S> <C>
Deferred tax assets:
Deferred revenue.............................................. $117,940
Less valuation allowances....................................... (63,010)
--------
Net deferred tax assets....................................... $ 54,930
========
</TABLE>

Valuation allowances of $63,010 have been established against the deferred
tax asset as of December 31, 1995. The ultimate realization of this deferred
tax asset depends on the ability of the Company and its subsidiaries to
generate sufficient taxable income during the periods in which those temporary
differences become deductible.

F-52
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Shareholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman,
Sachs & Co., CIBC Oppenheimer Corp. and SBC Warburg Dillon Read Inc. are
acting as representatives, has severally agreed to purchase from the Company
and the Selling Shareholders, the respective number of Ordinary Shares set
forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
ORDINARY
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Goldman, Sachs & Co.............................................
CIBC Oppenheimer Corp. .........................................
SBC Warburg Dillon Read Inc. ...................................
---------
Total....................................................... 2,500,000
=========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Ordinary Shares
offered hereby, if any are taken. Pursuant to the Underwriting Agreement, the
representatives of the Underwriters will purchase, on an equal basis, the
Ordinary Shares offered on behalf of the GS Funds in the Offering immediately
following the execution of the Underwriting Agreement, in exchange for notes
of the representatives of the Underwriters. The notes to be issued to the GS
Funds will be payable on the earlier of the closing of the Offering and 15
days from the date of this Prospectus. The number of Ordinary Shares each
respective Underwriter is severally obligated to purchase, as set forth above,
will not be affected by the foregoing arrangements. Each of the GS Funds has
granted to the representatives of the Underwriters the right to require it to
purchase, in the event that the Offering is not consummated, the Ordinary
Shares being purchased by the representatives of the Underwriters from such GS
Fund in the Offering, for a purchase price consisting of the cancellation of
the note issued to such GS Fund.

The Underwriters propose to offer the Ordinary Shares in part directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus, and in part to certain securities dealers at such price less
a concession of $ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the Ordinary Shares are released for sale
to the public, the offering price and other selling terms may from time to
time be varied by the representatives.

Certain of the Selling Shareholders have granted the Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 375,000 additional Ordinary Shares to cover over-allotments, if
any. If the Underwriters exercise their over-allotment option, the
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of Ordinary Shares
to be purchased by each of them, as shown in the foregoing table, bears to the
375,000 Ordinary Shares offered.

The Company, the Selling Shareholders and each director and executive
officer of the Company have agreed that, during the period beginning from the
date of this Prospectus and continuing to and including the date 180 days
after the date of this Prospectus, they will not offer, sell, contract to sell
or otherwise dispose of any other securities of the Company that are
substantially similar to the Ordinary

U-1
<PAGE>

Shares, including but not limited to any securities of the Company that are
convertible into or exchangeable for, or that represent the right to receive,
Ordinary Shares or any substantially similar securities, without the prior
written consent of Goldman, Sachs & Co. on behalf of the Underwriters, except
for the Ordinary Shares offered in connection with the Offering and except, in
the Company's case, for the issuance of options pursuant to employee benefit
plans existing on the date of this Prospectus or the issuance of shares upon
the exercise of employee options outstanding on the date of this Prospectus.
The GS Funds which are affiliates of Goldman, Sachs & Co. will have
registration rights relating to the Ordinary Shares, but such rights will not
be exercisable until after such 180-day period. For a discussion of these
matters, see "Certain Relationships and Related Party Transactions",
"Description of Capital Shares--Registration Rights" and "Shares Eligible for
Future Sale".

The GS Funds, which are affiliates of Goldman, Sachs & Co., own 2,888,888
Ordinary Shares representing approximately 34.0% of the Ordinary Shares of the
Company and, upon completion of the Offering, will own approximately 24.0% of
the Ordinary Shares. See "Principal and Selling Shareholders". The GS Funds
are subject to the 180-day lock-up that applies to other shareholders as
described above. Notwithstanding such restriction, however, Goldman, Sachs &
Co. and their affiliates will be permitted to engage in stabilization,
brokerage and ordinary course of business transactions and will be permitted,
pursuant to a registration statement under the Securities Act maintained by
the Company, to sell Ordinary Shares and related securities in connection with
market-making transactions from time to time, both during and after the 180-
day period. See "Market for Ordinary Shares" and "Shares Eligible for Future
Sale".

Goldman, Sachs & Co. or certain of their affiliates maintain certain
contractual relationships with the Company and have provided, and currently
provide, investment banking services to the Company. Goldman, Sachs & Co. also
provide investment management services to Realm pursuant to a Corporate
Account Agreement dated December 24, 1996. See "Certain Relationships and
Related Party Transactions". In addition, two directors of the Company, Reuben
Jeffery III and Sanjay Patel, are Managing Directors of Goldman, Sachs & Co.,
and were elected as directors of the Company pursuant to the rights of one of
the GS Funds under the Shareholders Agreement. After consummation of the
Offering, such directors are expected to continue in office, but the
Shareholders Agreement will terminate and Goldman, Sachs & Co. and their
affiliates will not have any right to designate directors of the Company. See
"Management" and "Certain Relationships and Related Party Transactions".

Under Rule 2720 of the NASD, the Company may be deemed an affiliate of
Goldman, Sachs & Co. The Offering is being conducted in accordance with Rule
2720, which provides that, among other things, when an NASD member
participates in the underwriting of an affiliate's equity securities, the
initial public offering price can be no higher than that recommended by a
"qualified independent underwriter" meeting certain standards. In accordance
with this requirement, SBC Warburg Dillon Read Inc. will serve in such role
and will recommend a price in compliance with the requirements of Rule 2720.
In connection with the Offering, SBC Warburg Dillon Read Inc. in its role as
qualified independent underwriter (the "Independent Underwriter") has
performed due diligence investigations and reviewed and participated in the
preparation of this Prospectus and the Registration Statement of which this
Prospectus forms a part. In addition, the Underwriters may not confirm sales
to any discretionary account without the prior specific written approval of
the customer.

Prior to the Offering, there has been no public market for the Ordinary
Shares. The initial public offering price will be negotiated among the
Company, the Selling Shareholders and the representatives of the Underwriters.
Among the factors to be considered in determining the initial public offering
price of the Ordinary Shares, in addition to prevailing market conditions, are
the Company's historical performance, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.

Application has been made to have the Ordinary Shares quoted on the Nasdaq
National Market under the symbol "SCBHF".

U-2
<PAGE>

In connection with the Offering, the Underwriters may purchase and sell
Ordinary Shares in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover syndicate short
positions created in connection with the Offering. Stabilizing transactions
consist of certain bids or purchases for the purpose of preventing or
retarding a decline in the market price of the Ordinary Shares; and syndicate
short positions involve the sale by the Underwriters of a greater number of
Ordinary Shares than they are required to purchase from the Company and the
Selling Shareholders in the Offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the securities sold in the Offering for their
account may be reclaimed by the syndicate if such Ordinary Shares are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Ordinary Shares, which may be higher than the price that might otherwise
prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be affected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

The Company has been advised by Goldman, Sachs & Co. that, subject to
applicable laws and regulations, Goldman, Sachs & Co. currently intend to make
a market in the Ordinary Shares following completion of the Offering. However,
they are not obligated to do so and any market-making may be discontinued at
any time without notice. In addition, such market-making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act.
There can be no assurance that an active trading market will develop or be
sustained following the completion of the Offering. See "Risk Factors--No
Prior Market for Ordinary Shares; Possible Volatility of Ordinary Shares Price
and the Securities Markets".

The Underwriting Agreement contains certain provisions with respect to such
market-making activities. Because Goldman, Sachs & Co. may be deemed to be an
affiliate of the Company, Goldman, Sachs & Co. will be required to deliver a
current prospectus to any purchaser in connection with any such market-making
transactions. The Company has agreed to make from time to time certain
amendments or supplements to the Prospectus and to pay certain expenses
relating to such amendments or supplements.

The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters and the Independent Underwriter against certain
liabilities, including liabilities under the Securities Act.

U-3
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA-
TIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICI-
TATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECU-
RITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN-
DER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Enforceability of Civil Liabilities Under United States Laws.............. 3
Forward-Looking Statements................................................ 4
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 11
The Company............................................................... 16
Use of Proceeds........................................................... 17
Market for Ordinary Shares................................................ 17
Dividend Policy........................................................... 18
Dilution.................................................................. 18
Capitalization............................................................ 19
Selected Consolidated Financial and Operating Data........................ 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 30
Management................................................................ 45
Principal and Selling Shareholders........................................ 53
Certain Relationships and Related Party Transactions...................... 55
Description of Capital Shares............................................. 57
Shares Eligible for Future Sale........................................... 62
Certain Tax Considerations................................................ 63
Experts................................................................... 72
Legal Matters............................................................. 73
Additional Information.................................................... 73
Glossary of Selected Insurance Terms...................................... 74
Index to Consolidated Financial Statements................................ F-1
Underwriting.............................................................. U-1
</TABLE>

-----------

THROUGH AND INCLUDING , 1997 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE ORDINARY SHARES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

2,500,000 SHARES

LOGO

STIRLING COOKE BROWN
HOLDINGS LIMITED

ORDINARY SHARES
(PAR VALUE $.25 PER SHARE)

-----------

PROSPECTUS

-----------

GOLDMAN, SACHS & CO.

CIBC OPPENHEIMER

SBC WARBURG DILLON READ INC.

REPRESENTATIVES OF THE UNDERWRITERS

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

[ALTERNATE PAGE]

SUBJECT TO COMPLETION, DATED NOVEMBER 5, 1997

STIRLING COOKE BROWN HOLDINGS LIMITED

ORDINARY SHARES
(PAR VALUE $.25 PER SHARE)

-----------

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE ORDINARY SHARES.

Application has been made for the quotation of the Ordinary Shares on the
Nasdaq National Market under the symbol "SCBHF".

-----------

This Prospectus has been prepared for and is to be used by Goldman, Sachs &
Co. in connection with offers and sales of the Ordinary Shares related to
market-making transactions, at prevailing market prices, related prices or
negotiated prices. The Company will not receive any of the proceeds of such
sales. Goldman, Sachs & Co. may act as a principal or agent in such
transactions. The closing of the offering referred to herein, which will
constitute the initial public offering of the Ordinary Shares of the Company,
is expected to occur on , 1997. See "Plan of Distribution".

GOLDMAN, SACHS & CO.

-----------

The date of this Prospectus is , 1997.
<PAGE>

[ALTERNATE PAGE]

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Ordinary Shares after giving effect to the
Offering, by: (i) each of the Company's directors and executive officers; (ii)
all directors and executive officers as a group; and (iii) each person known
by the Company to own beneficially more than 5% of the Ordinary Shares
outstanding. Except as otherwise noted, each of the holders listed below has
sole voting and investment power over the shares beneficially owned.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OWNED(1) PERCENT
---- ------------ -------
<S> <C> <C>
The Goldman Sachs Group, L.P.(2).................... 2,367,500 24.0
Nicholas Brown(4)................................... 998,385 10.1
Penelope Atteline Cooke(6).......................... 926,257 9.4
Nicholas Mark Cooke(3).............................. 653,398 6.6
George William Jones(5)............................. 506,570 5.1
Sanjay H. Patel(7).................................. -- *
Reuben Jeffery III(8)............................... -- *
Warren W. Cabral.................................... -- *
All executive officers and directors as a group (6
persons)........................................... 2,158,353 21.9
</TABLE>
- --------
* Less than 1%.
(1) In accordance with Securities and Exchange Commission rules, each
beneficial owner's holdings have been calculated assuming full exercise of
outstanding options exercisable by such owner within 60 days after the
date of this Prospectus, but no exercise of outstanding options held by
any other person. The table set forth above assumes that the over-
allotment option is not exercised by the Underwriters. For further
information about the calculation of beneficial ownership, see the
footnotes below.
(2) Represents shares owned by the GS Funds, which are affiliated with The
Goldman Sachs Group, L.P. (the "GS Group"). Includes 1,518,448 shares
beneficially owned by GS Capital Partners II, L.P.; 100,286 shares
beneficially owned by Bridge Street Fund 1995, L.P.; 89,115 shares
beneficially owned by Stone Street Fund 1995, L.P.; 603,648 shares
beneficially owned by GS Capital Partners II Offshore, L.P.; and 56,003
shares beneficially owned by GS Capital Partners II Germany Civil Law
Partnership. The GS Group disclaims beneficial ownership of the shares
owned by the GS Funds to the extent attributable to equity interests
therein held by persons other than the GS Group and its affiliates. Each
of the GS Funds shares voting and investment power with certain of its
respective affiliates. The address of the GS Group is 85 Broad Street, New
York, New York 10004.
(3) Mr. Cooke is the Chairman, President and Chief Executive Officer and a
Director of the Company and his address is c/o the Company at Victoria
Hall, Third Floor, 11 Victoria Street, Hamilton, HM-11, Bermuda. Mr. Cooke
is married to Penelope Atteline Cooke. Mr. Cooke disclaims beneficial
ownership of 926,257 Ordinary Shares beneficially owned by Penelope
Atteline Cooke.
(4) Mr. Brown is the Director of Reinsurance of the Company and is a Director
of the Company. Mr. Brown's address is c/o the Company at Victoria Hall,
Third Floor, 11 Victoria Street, Hamilton, HM-11, Bermuda.
(5) Mr. Jones is Chief Financial Officer and a Director of the Company and his
address is c/o the Company at Victoria Hall, Third Floor, 11 Victoria
Street, Hamilton, HM-11, Bermuda.
(6) Ms. Cooke is Secretary of the Company and her address is c/o the Company
at Victoria Hall, Third Floor, 11 Victoria Street, Hamilton, HM-11,
Bermuda. Ms. Cooke is married to Nicholas Mark Cooke. Ms. Cooke disclaims
beneficial ownership of 653,398 Ordinary Shares beneficially owned by
Nicholas Mark Cooke.
(7) Mr. Patel, who is a Managing Director of Goldman, Sachs & Co., disclaims
beneficial ownership of the 2,367,500 Ordinary Shares owned by the GS
Funds, except to the extent of his pecuniary interest therein.
(8) Mr. Jeffery, who is a Managing Director of Goldman, Sachs & Co., disclaims
beneficial ownership of the 2,367,500 Ordinary Shares owned by the GS
Funds, except to the extent of his pecuniary interest therein.
<PAGE>

[ALTERNATE PAGE]

PLAN OF DISTRIBUTION

This Prospectus may be used by Goldman, Sachs & Co. in connection with
offers and sales related to market-making transactions in the Ordinary Shares
effected from time to time. Goldman, Sachs & Co. may act as principal or agent
in such transactions, including as agent for the counterparty when acting as
principal or as agent for both counterparties, and may receive compensation in
the form of discounts and commissions, including from both counterparties when
it acts as agent for both. Such sales will be made at prevailing market prices
at the time of sale, at prices related thereto or at negotiated prices.

For a description of certain relationships and transactions between Goldman,
Sachs & Co. and their affiliates and the Company, see "Management", "Certain
Relationships and Related Party Transactions" and "Principal Shareholders".

Goldman, Sachs & Co. have informed the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority
without the prior specific written approval of such transactions by the
customer.

The Company has agreed to indemnify Goldman, Sachs & Co. against certain
liabilities in connection with this Prospectus, including liabilities under
the Securities Act.
<PAGE>

[ALTERNATE PAGE]

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA-
TIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITA-
TION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURI-
TIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Enforceability of Civil Liabilities Under
United States Laws........................................................ 3
Forward-Looking Statements................................................. 4
Prospectus Summary......................................................... 5
Risk Factors............................................................... 11
The Company................................................................ 16
Use of Proceeds............................................................ 17
Market for Ordinary Shares................................................. 17
Dividend Policy............................................................ 18
Dilution................................................................... 18
Capitalization............................................................. 19
Selected Consolidated Financial and Operating Data......................... 20
Management's Discussion and Analysis of
Financial Condition and Results
of Operations............................................................. 22
Business................................................................... 30
Management................................................................. 45
Principal Shareholders..................................................... 53
Certain Relationships and Related Party Transactions....................... 55
Description of Capital Shares.............................................. 57
Shares Eligible for Future Sale............................................ 62
Certain Tax Considerations................................................. 63
Plan of Distribution.......................................................
Experts.................................................................... 72
Legal Matters.............................................................. 73
Additional Information..................................................... 73
Glossary of Selected Insurance Terms....................................... 74
Index to Financial Statements.............................................. F-1
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

STIRLING COOKE BROWN
HOLDINGS LIMITED

ORDINARY SHARES
(PAR VALUE $.25 PER SHARE)

-----------

PROSPECTUS

-----------

GOLDMAN, SACHS & CO.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Securities and Exchange Commission filing fee................. $ 18,296
Nasdaq National Market listing fee............................ 39,000
NASD fees..................................................... 6,250
Blue sky fees (including legal fees) and expenses............. 15,000
Transfer agent fees and expenses.............................. 15,000
Printing and engraving........................................ 200,000
Accountants' fees and expenses................................ 300,000
Legal fees and expenses....................................... 400,000
Miscellaneous................................................. 56,454
----------
Total..................................................... $1,050,000
==========
</TABLE>

The foregoing costs and expenses will be paid by the Company. Other than the
Securities and Exchange Commission filing fee, the Nasdaq National Market
listing fee, and the NASD fee, all fees and expenses are estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Bye-Laws provide that the Company shall indemnify, subject to
the proviso below, every director, officer of the Company and member of a
committee thereof out of the funds of the Company against all civil
liabilities, loss, damage or expense (including but not limited to liabilities
under contract, tort and statute or any applicable foreign law or regulation
and all reasonable legal and other costs and expenses properly payable)
incurred or suffered by him as such director, officer or committee member and
any person acting as a director, officer or committee member in the reasonable
belief that he has been so appointed or elected notwithstanding any defect in
such appointment or election provided always that the indemnity contained by
the Bye-Laws shall not extend to any matter which would render it void
pursuant to the Bermuda Companies Act 1981. Every director, officer and member
of a committee thereof will be indemnified out of funds of the Company against
all liabilities incurred by him as such director, officer or committee member
in defending any proceedings, whether civil or criminal, in which judgment is
given in his favor, or in which he is acquitted, or in connection with any
application under the Bermuda Companies Act 1981 in which relief from
liability is granted to him by the court. To the extent that any director,
officer or member of a committee duly constituted under the Bye-Laws is
entitled to claim an indemnity pursuant to the Bye-Laws in respect of amounts
paid or discharged by him, the relative indemnity shall take effect as an
obligation of the Company to reimburse the person making such payment or
effecting such discharge.

The Company intends to provide insurance coverage for its directors and
officers that may extend to, among other things, liability arising under the
Securities Act of 1933, as amended.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

All of the share information contained in this Item 15. is adjusted to
reflect the four for one stock split effected by the Company on June 30, 1997.

On January 23, 1996 the Company was capitalized and assumed its holding
company structure through the issuance of a total of 6,000,000 Ordinary Shares
to the shareholders of Stirling Cooke Brown Holdings (UK) Ltd. and Realm
Investments Limited in exchange for all of such shareholders' shares of such
corporations. Such exchanges occurred outside the United States among non-U.S.
corporations and persons and were therefore not subject to the Securities Act.

II-1
<PAGE>

On January 23, 1996 the Company sold 2,000,000 Ordinary Shares and 25 Class
"A" non-voting shares to certain investment funds affiliated with the Goldman
Sachs Group, L.P. for an aggregate consideration of $14,747,147. Such sales
were exempt from registration under the Securities Act pursuant to Section
4(2) thereof.

On May 16, 1997 the Company sold 8,000 Ordinary Shares to David M. Tarsh, an
existing shareholder of the Company, for an aggregate consideration of $30,600
plus a contingent payment of $12,850 due if the Company completes an initial
public offering of its Ordinary Shares within two years of such date. Such
sale was exempt from registration under the Securities Act pursuant to Section
4(2) thereof.

On June 30, 1997 the Company sold 8,000 Ordinary Shares to Paul Murray, an
existing shareholder of the Company, for an aggregate consideration of $30,600
plus a contingent payment of $12,850 due if the Company completes an initial
public offering of its Ordinary Shares within two years of such date. Such
sale was exempt from registration pursuant to Section 4(2) thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits. The exhibits filed herewith are as specified on the Exhibit
Index included herein.

(b) Financial Statement Schedules. The schedules filed herewith are as
specified on the Index to Schedules included herein.

ITEM 17. UNDERTAKINGS.

The undersigned 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 for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, 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 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, 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 Act and will be governed by
the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, 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
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed 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.

II-2
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED, IN THE CITY OF
HAMILTON, IN BERMUDA, ON THIS 4TH DAY OF NOVEMBER, 1997.

Stirling Cooke Brown Holdings
Limited

/s/ George Jones
By _________________________________
George Jones
Chief Financial Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW AS OF THIS 4TH DAY OF
NOVEMBER, 1997 BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ Nicholas Mark Cooke* Chairman, President, Chief Executive Officer
___________________________________________ and Director (Principal Executive Officer)
Nicholas Mark Cooke

/s/ George Jones* Chief Financial Officer and Director
___________________________________________ (Principal Financial and Accounting Officer)
George Jones

/s/ Nicholas Brown* Director
___________________________________________
Nicholas Brown

/s/ Warren Cabral* Director
___________________________________________
Warren Cabral

/s/ Reuben Jeffery III* Director
___________________________________________
Reuben Jeffery III

/s/ Sanjay Patel* Director
___________________________________________
Sanjay Patel

</TABLE>

Authorized Representative in the
United States:

Stirling Cooke Brown North American
Reinsurance Intermediaries Inc.

/s/ Patrick Whalen*
By___________________________________
Patrick Whalen
Senior Vice President

/s/ George Jones
* By ________________________________
George Jones
Attorney-in-Fact

II-3
<PAGE>

INDEX TO SCHEDULES

<TABLE>
<CAPTION>
SCHEDULE PAGE
-------- ----
<C> <S> <C>
I Investments excluding investments in related parties as of
December 31, 1996.............................................. S-2
II Condensed Financial Information of Registrant as of and for the
years ended December 31, 1994, 1995 and 1996................... S-3
III Supplementary Insurance Information as of and for the year
ended December 31, 1996........................................ S-6
IV Reinsurance for the year ended December 31, 1996............... S-7
</TABLE>

Schedules other than those listed above are omitted for the reason that they
are not applicable.

S-1
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

SCHEDULE OF INVESTMENTS EXCLUDING INVESTMENTS IN RELATED PARTIES

SCHEDULE I

<TABLE>
<CAPTION>
AMOUNT AT WHICH
SHOWN IN THE
FAIR BALANCE SHEET
COST VALUE DECEMBER 31, 1996
------- ------- -----------------
<S> <C> <C> <C>
Fixed maturities
Bonds:
United States Government and government
agencies and authorities................ $ 6,963 $ 7,038 $ 7,038
States, municipalities and political
subdivisions............................ 1,063 1,061 1,061
Foreign governments...................... 1,090 1,090 1,090
All other corporate bonds................ 9,866 9,844 9,844
------- ------- -------
Total fixed maturities................. 18,982 19,033 19,033
Equity securities
Common stocks:
Banks, trust and insurance companies..... 241 276 276
Industrial, miscellaneous and all other.. 2,290 2,410 2,410
Nonredeemable preferred stocks............. 764 780 780
------- ------- -------
Total equity securities................ 3,295 3,466 3,466
Short-term investments....................... 120 120 120
------- ------- -------
Total investments...................... $22,397 $22,619 $22,619
======= ======= =======
</TABLE>

S-2
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY BALANCE SHEETS--SCHEDULE II

DECEMBER 31, 1995 AND 1996
(Expressed in thousands of United States Dollars, except share and per share
data)

<TABLE>
<CAPTION>
1995 1996
------ -------
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................... $ -- $ 20
Due from subsidiaries........................................ -- 5,638
Investments in subsidiaries.................................. 7,055 38,009
------ -------
Total Assets............................................... $7,055 $43,667
====== =======
LIABILITIES
Accounts payable and accrued liabilities .................... -- 16
Due to subsidiaries.......................................... -- 193
------ -------
Total Liabilities.......................................... 0 209
------ -------
Ordinary Shares subject to redemption.......................... 0 14,457
SHAREHOLDERS' EQUITY
Share capital
Authorized 8,048,000 Ordinary Shares of par value $0.25
each issued and fully paid 4,000,020 and 6,000,000
Ordinary Shares........................................... 1,000 1,500
Additional paid in capital................................... -- 12,319
Equity in unrealized gain on marketable securities of
subsidiaries................................................ -- 147
Retained earnings............................................ 6,055 15,973
------ -------
7,055 29,939
Less: 202,784 ordinary shares in treasury, at cost .......... -- (938)
------ -------
Total shareholders' equity................................. 7,055 29,001
------ -------
Total Liabilities, Ordinary shares subject to redemption, and
Shareholders' equity.......................................... $7,055 $43,667
====== =======
</TABLE>

S-3
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY STATEMENTS OF INCOME--SCHEDULE II

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(Expressed in thousands of United States Dollars, except share and per share
data)

<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
REVENUES
Net investment income....................................... -- -- 489
Other income................................................ -- -- 465
----- ----- -----
Total Revenues................................................ 0 0 954
EXPENSES
Other operating expenses -- -- 59
----- ----- -----
Total Expenses................................................ 0 0 59
NET INCOME BEFORE EQUITY IN INCOME OF SUBSIDIARIES............ 0 0 895
Equity in income of subsidiaries.............................. 2,833 4,594 9,023
----- ----- -----
NET INCOME.................................................... 2,833 4,594 9,918
===== ===== =====
</TABLE>

S-4
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS--SCHEDULE II

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(Expressed in thousands of United States Dollars, except share and per share
data)

<TABLE>
<CAPTION>
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.......................................... 2,833 4,594 9,918
ITEMS NOT EFFECTING CASH
Equity in income of subsidiaries.................... (2,833) (4,594) (9,023)
Changes in non cash operating assets and liabilities
Accounts payable and accrued liabilities.......... 0 0 16
Due to subsidiaries............................... 0 0 193
------ ------ -------
Net cash provided by operating activities....... 0 0 1,104
------ ------ -------
INVESTING ACTIVITIES
Investments in subsidiaries......................... 0 0 (8,965)
Due from subsidiaries............................... 0 0 (5,638)
Dividends received from subsidiaries................ 769 2,135 0
------ ------ -------
Cash provided (used) by investing activities.... 769 2,135 (14,603)
------ ------ -------
FINANCING ACTIVITIES
Dividends........................................... (769) (2,135) 0
Net proceeds of subscription to share capital
subject to redemption.............................. 0 0 14,457
Purchase of ordinary shares in treasury............. 0 0 (938)
------ ------ -------
Cash (used) provided by financing activities.... (769) (2,135) 13,519
------ ------ -------
INCREASE IN CASH AND CASH EQUIVALENTS................. 0 0 20
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........ 0 0 0
------ ------ -------
CASH AND CASH EQUIVALENTS AT END OF YEAR.............. 0 0 20
====== ====== =======
</TABLE>
All dividends received were from consolidated subsidiaries.

S-5
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

SUPPLEMENTARY INSURANCE INFORMATION--SCHEDULE III
(Expressed in thousands of United States Dollars)

<TABLE>
<CAPTION>
FUTURE
POLICY
BENEFITS, AMORTISA-
LOSSES, OTHER BENEFITS, TION OF
DEFERRED CLAIMS POLICY CLAIMS, DEFERRED
POLICY AND CLAIMS NET LOSSES AND POLICY OTHER
ACQUISITION LOSS UNEARNED AND PREMIUM INVESTMENT SETTLEMENT ACQUISITION OPERATING PREMIUMS
COSTS EXPENSES PREMIUMS BENEFITS REVENUE INCOME EXPENSES COSTS EXPENSES WRITTEN
----------- --------- -------- -------- ------- ---------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended
December 31, 1996
Underwriting .... $171 $24,301 $12,515 $ 0 $8,754 $ 640 $6,765 $1,618 $ 760 $8,930
Risk/Management.. 0 0 0 0 0 2,765 0 0 25,500 0
---- ------- ------- --- ------ ------ ------ ------ ------- ------
$171 $24,301 $12,515 $ 0 $8,754 $3,405 $6,765 $1,618 $26,260 $8,930
==== ======= ======= === ====== ====== ====== ====== ======= ======
</TABLE>

S-6
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

REINSURANCE--SCHEDULE IV
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<TABLE>
<CAPTION>
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED TO
AMOUNT COMPANIES COMPANIES AMOUNT NET
------ --------- --------- ------ ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996....... $4,493 $6,784 $11,045 $8,754 126%
</TABLE>

S-7
<PAGE>

STIRLING COOKE BROWN HOLDINGS LIMITED

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1 Form of Underwriting Agreement among the Company, the Selling
Shareholders and the Underwriters
*3.1 Memorandum of Association of the Company
*3.2 Bye-Laws of the Company
*4.1 Shareholders Agreement, dated as of January 24, 1996, among the
Management Shareholders (as defined therein), Bridge Street Fund 1995,
L.P., Goldman Sachs & Co. Verwaltungs GmbH (for GS Capital Partners II
German Civil Law Partnership), GS Capital Partners II, L.P., GS
Capital Partners Offshore, L.P., Stone Street Fund 1995, L.P. and the
Company
*4.2 Registration Rights Agreement, dated January 24, 1996, between the
Company, the Management Shareholders (as defined therein) and the
Investors (as defined therein)
*5 Opinion of Appleby, Spurling & Kempe
8.1 Opinion of Foley & Lardner with respect to U.S. tax matters
*8.2 Opinion of Appleby, Spurling & Kempe with respect to Bermuda tax
matters
8.3 Opinion of Richards Butler with respect to U.K. tax matters
*8.4 Assurance Certificate from the Bermuda Ministry of Finance under
Exempted Undertakings Tax Protection Act 1996 (as amended)
*10.1 Stirling Cooke Brown Holdings Limited 1997 Equity Incentive Plan
*10.2 Employment Agreement dated September 1, 1997 between Realm Investments
Limited and Nicholas Mark Cooke
*10.3 Employment Agreement dated September 1, 1997 between Stirling Cooke
Brown Holdings Limited and Nicholas Brown
*10.4 Employment Agreement dated September 1, 1997 between Stirling Cooke
Brown Holdings Limited and George W. Jones
*10.5 Agency Agreement dated as of June 1, 1995 between Clarendon National
Insurance Company and Stirling Cooke Insurance Services Inc.
*10.6 Amendment Number One to Agency Agreement dated as of June 1, 1995
between Clarendon National Insurance Company and Stirling Cooke
Insurance Services Inc.
*10.7 Amendment Number Two to Agency Agreement dated as of June 1, 1995
between Clarendon National Insurance Company and Stirling Cooke
Insurance Services Inc.
*10.8 Addendum dated April 1, 1997 to Agency Agreement dated as of June 1,
1995 between Clarendon National Insurance Company and Stirling Cooke
Insurance Services Inc.
*10.9 Agency Agreement dated as of October 1, 1995 between Clarendon
National Insurance Company and Stirling Cooke Texas, Inc.
*10.10 Management Agreement dated as of August 1, 1995 between Legion
Insurance Company and Stirling Cooke Insurance Services Inc.
11 Statement Re Computation of Per Share Earnings
*21 Subsidiaries of the Company
*23.1 Consents of Appleby, Spurling & Kempe (included in their opinions
filed as Exhibits 5 and 8.2)
23.2 Consent of KPMG Peat Marwick
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Richards Butler (included in their opinion filed as Exhibit
8.3)
23.5 Consent of Foley & Lardner (included in their opinion filed as Exhibit
8.1)
*24 Powers of Attorney (included on the signature page to the Registration
Statement)
</TABLE>
- --------
* Previously filed.

<PAGE>

Exhibit 8.1
F O L E Y & L A R D N E R
<TABLE>
<CAPTION>

A T T O R N E Y S A T L A W

CHICAGO FIRSTAR CENTER SAN DIEGO
JACKSONVILLE 777 EAST WISCONSIN AVENUE SAN FRANCISCO
LOS ANGELES MILWAUKEE, WISCONSIN 53202-5367 TALLAHASSEE
MADISON TELEPHONE (414) 271-2400 TAMPA
ORLANDO FACSIMILE (414) 297-4900 WASHINGTON, D.C.
SACRAMENTO WEST PALM BEACH
</TABLE>

November 3, 1997

Stirling Cooke Brown Holdings Limited
Victoria Hall
Third Floor
11 Victoria Street
Hamilton HM 11, Bermuda

Re: Stirling Cooke Brown Holdings Limited
-------------------------------------

Ladies and Gentlemen:

We have acted as counsel to Stirling Cooke Brown Holdings Limited, a
Bermuda corporation (the "Company"), in connection with the corporate
proceedings taken and to be taken relating to the public offering of
Ordinary Shares (the "Ordinary Shares") of the Company. We have also
participated in the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of a registration
statement on Form S-1 (the "Registration Statement") relating to the
Ordinary Shares. In this connection, we have examined such corporate and
other records, instruments, certificates and documents as we considered
necessary to enable us to express this opinion.

In rendering the opinion set forth in the paragraph below, we have
relied upon the Internal Revenue Code of 1986, as amended (the "Code"),
legislative history, Treasury regulations, judicial authorities, published
positions of the Internal Revenue Service (the "IRS") and such other
authorities as we have considered to be relevant. No tax rulings will be
sought from the IRS with respect to any of the matters discussed herein.

Based on the foregoing, it is our opinion that, subject to the
limitations set forth therein, the discussion set forth under the captions
"Risk Factors -- Taxation of the Company and Certain of its Subsidiaries"
and "Certain Tax Considerations -- United States" constitutes the opinion
of Foley & Lardner, subject to the limitations set forth therein, regarding
the material U.S. federal income tax consequences that could result from
the purchase, ownership and disposition of the Ordinary Shares, and the
material U.S. federal income tax consequences applicable to the operations
of the Company and its subsidiaries.

We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the captions
"Certain Tax Considerations" and "Legal Matters".
<PAGE>

Stirling Cooke Brown Holdings Limited
November 3, 1997
Page 2

We are admitted to practice law in the State of Wisconsin. In connection
with the public offering of Ordinary Shares, we express no opinion as to
matters under or involving any laws other than the federal law of the
United States of America.

Very truly yours,

/s/ FOLEY & LARDNER
FOLEY & LARDNER

<PAGE>

EXHIBIT 8.3

[LETTERHEAD OF RICHARDS BUTLER]
DRAFT

Stirling Cooke Brown Holdings Limited
Victoria Hall
3rd Floor
11 Victoria Street
Hamilton HM11
BERMUDA

[ November 1997]

Ladies and Gentlemen

Re: Stirling Cooke Brown Holdings Limited

We are qualified to practice law in England and have acted as solicitors in
England to Stirling Cooke Brown Holdings Limited, a Bermuda Corporation (the
"Company"), in connection with the corporate proceedings taken and to be taken
relating to the public offering of Ordinary Shares (the "Ordinary Shares") of
the Company.

In rendering the opinion set forth in the paragraph below, we have relied upon
United Kingdom tax legislation, legislative history, United Kingdom statutory
instruments, judicial authority, Inland Revenue extra statutory concessions,
statements of practice and press releases and other such authorities as we have
considered to be relevant.

Based on the foregoing, the discussions set forth under the caption "Certain Tax
Considerations -- United Kingdom" constitutes the opinion of Richards Butler,
subject to the limitations set forth therein, regarding the material UK
Corporation Tax and Income Tax consequences of the Company's operations carried
on through and the ownership of UK resident subsidiaries and the extraction of
profits therefrom.

We consent to the filing of this opinion as an exhibit to the Registration
Statement in respect of the public offering of Ordinary Shares of the Company on
the Nasdaq National Market and to the reference to us under the caption "Certain
Tax Considerations".

The opinion set out in this letter is given subject to the following
reservations -

(a) it relates only to matters as at today's date;

<PAGE>

Stirling Cooke Brown Holdings Limited/ page 2 of 2

(b) we have made no investigation of the laws of any jurisdiction
outside England;

This opinion is given for the sole benefit of you filing this opinion as an
exhibit to the Registration Statement, and (without limiting the rights of any
person (to the extent that such rights may exist in relation to this opinion)
under federal securities laws of the United States of America) may not be relied
upon by anyone else, and this opinion is limited to the matters expressly stated
herein and does not extend to, and is not to be read as extending by implication
to, any other matter, nor is it to be quoted or made public in any way without
our prior written consent.

This opinion will be governed by and construed in accordance with the law of
England.

Yours faithfully

Richards Butler

<PAGE>

EXHIBIT 11

STIRLING COOKE BROWN HOLDINGS LIMITED

STATEMENT OF COMPUTATION OF NET INCOME PER ORDINARY SHARE

(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS,

EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS
AS OF OR FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------- -------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net income.............. $ 2,833 $ 4,594 $ 9,918 $ 8,122 $ 9,582
============= ============= ============= ========= =========
PRIMARY
Number of shares:
Weighted average shares
outstanding............ 4,000,020 4,000,020 7,879,121 7,838,828 8,066,495
Incremental shares of
outstanding stock
options (1)............ 0 15,190 205,828 191,341 173,825
Weighted average
treasury shares held
(2).................... 0 0 (67,227) (22,041) (187,861)
Shares issued in June,
1997 (3)............... 288,888 288,888 288,888 288,888 288,888
------------- ------------- ------------- --------- ---------
4,288,908 4,304,098 8,306,610 8,297,016 8,341,347
============= ============= ============= ========= =========
Primary earnings per
share: ................ 0.66 1.07 1.19 0.98 1.15
FULLY DILUTED
Number of shares:
Weighted average shares
outstanding............ 4,000,020 4,000,020 7,879,121 7,838,828 8,066,495
Incremental shares of
outstanding stock
options (1)............ 0 22,315 218,480 209,474 178,652
Weighted average
treasury shares held
(2).................... 0 0 (67,227) (22,041) (187,861)
Shares issued in June,
1997 (3)............... 288,888 288,888 288,888 288,888 288,888
------------- ------------- ------------- --------- ---------
4,288,908 4,311,223 8,319,262 8,315,149 8,346,174
============= ============= ============= ========= =========

Fully diluted earnings
per share: ............ $ 0.66 $ 1.07 $ 1.19 $ 0.98 $ 1.15
</TABLE>
- --------

(1) In June, 1995 the Company granted options to certain employee
stockholders. These options were exercised on June 30, 1997. The dilution
above has been calculated using the treasury stock method, based on the
Company's estimate of fair market value.

(2) In September, 1996 and April, 1997 the Company repurchased 202,784 and
213,732 respectively of its ordinary shares from certain of its founding
shareholders. The Company reissued 16,000 of these ordinary shares in
June, 1997 and cancelled the remaining 400,516 ordinary shares on June 30,
1997.

(3) Shares issued within one year prior to the registration statement are
deemed outstanding for all periods presented.

(4) All share data has been restated to reflect the four for one stock split
effected on June 30, 1997.

<PAGE>

Exhibit 23.2

The Board of Directors
of Stirling Cooke Brown Holdings Limited

The audits referred to in our report dated November 2, 1997 on the consolidated
financial statements of the Company, included the related financial statement
schedules as of December 31, 1996, and for each of the years in the three-year
period ended December 31, 1996, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.

We consent to the use of our reports relating to the consolidated financial
statements of the Company and Realm Investments Ltd., included herein and to the
reference to our firm under the heading "Experts" in the prospectus.

/s/ KPMG Peat Marwick

KPMG Peat Marwick
Hamilton, Bermuda
November 4, 1997

<PAGE>

Exhibit 23.3

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Realm National Insurance Company:

We consent to the use of our report dated October 1, 1997 included herein and to
the reference to our firm under the heading "Experts" in the prospectus.

/s/ KPMG Peat Marwick LLP

New York, New York
November 4, 1997