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

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.              )

 

 

March   , 2007

Dear Shareholder:

You are cordially invited to attend the 2007 Annual General Meeting of Shareholders of AXIS Capital Holdings Limited (“AXIS”), to be held at our offices located at AXIS House, 92 Pitts Bay Road, Pembroke HM 08, Bermuda, on Friday, May 11, 2007 at 8:30 a.m. local time.

The attached Notice of Annual General Meeting of Shareholders and proxy statement describe the formal business to be transacted at the annual meeting. During the annual meeting, we will make available information relating to the operations of AXIS during the past year. Representatives from our independent registered public accounting firm, Deloitte & Touche, will be present to respond to appropriate questions from shareholders.

Please mark, date, sign and return your proxy card in the enclosed envelope by following the instructions on the proxy card at your earliest convenience. This will assure that your shares will be represented and voted at the meeting, even if you do not attend.

 

 

AXIS CAPITAL HOLDINGS LIMITED

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 11, 2007

Notice is hereby given that the Annual General Meeting of Shareholders of AXIS Capital Holdings Limited will be held at our offices located at AXIS House, 92 Pitts Bay Road, Pembroke HM 08, Bermuda, on Friday, May 11, 2007 at 8:30 a.m. local time for the following purposes:

1.                To elect four Class III Directors to hold office until 2010;

2.                To approve the AXIS Capital Holdings Limited 2007 Long-Term Equity Compensation Plan;

3.                To adopt amended and restated Bye-laws as described in the attached proxy statement;

4.                To appoint Deloitte & Touche, Hamilton, Bermuda, to act as our independent registered public accounting firm for the fiscal year ending December 31, 2007 and to authorize the Board of Directors, acting through the Audit Committee, to set the fees for the independent registered public accounting firm; and

5.                To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.

Only shareholders of record, as shown by the AXIS transfer books at the close of business on March 9, 2007, are entitled to notice of and to vote at the meeting.

Our financial statements for the year ended December 31, 2006 together with the report of our independent registered public accounting firm in respect of these financial statements will be presented at the meeting.

 

Pembroke, Bermuda
March   , 2007

PLEASE COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY CARD IN THE RETURN ENVELOPE FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. YOU MAY ALSO VOTE OVER THE INTERNET OR BY TELEPHONE BY FOLLOWING THE VOTING INSTRUCTIONS PRINTED ON THE ACCOMPANYING PROXY CARD.

AXIS CAPITAL HOLDINGS LIMITED
92 PITTS BAY ROAD, PEMBROKE HM 08, BERMUDA

PROXY STATEMENT

FOR

THE ANNUAL GENERAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 11, 2007

March   , 2007

We are furnishing this proxy statement to the shareholders of AXIS Capital Holdings Limited in connection with the solicitation of proxies by the Board of Directors of AXIS Capital Holdings Limited to be voted at the 2007 Annual General Meeting of Shareholders to be held at our offices located at AXIS House, 92 Pitts Bay Road, Pembroke HM 08, Bermuda, on Friday, May 11, 2007 at 8:30 a.m. local time, and at any postponements or adjournments of that meeting.

When used in this Proxy Statement, the terms “we,” “us,” “our,” “the Company” and “AXIS Capital” refer to AXIS Capital Holdings Limited.

The approximate date on which we are first sending this proxy statement and the accompanying proxy card is March __, 2007.

When the accompanying proxy card is properly executed and returned, the proxies named on the proxy card will vote the common shares, par value U.S. $0.0125 per share, of the Company that it represents as specified at the meeting on the following proposals:

·                    the election of the four nominees for the Class III Directors as identified in this proxy statement;

·                    the approval of the AXIS Capital Holdings Limited 2007 Long-Term Equity Compensation Plan;

·                    the approval of amended and restated Bye-laws to amend the director and officer indemnity provisions and to allow acquired shares of our capital stock to be held in treasury;

·                    the appointment of Deloitte & Touche, Hamilton, Bermuda, to act as our independent registered public accounting firm for the fiscal year ending December 31, 2007 and the authorization of our Board of Directors, acting through the Audit Committee, to set the fees for the independent registered public accounting firm; and

·                    such other business as may properly come before the meeting or any postponements or adjournments thereof.

Shareholders of record as of the close of business on March 9, 2007 are entitled to vote at the meeting. As of March 9, 2007, there were 153,715,446 outstanding common shares entitled to vote at the meeting. Except as set forth in our bye-laws, each common share entitles the holder of record to one vote. In accordance with our bye-laws, shareholders whose shares constitute 9.5% or more of the voting power of our common shares are entitled to less than one vote for each common share held by them, and we will notify them of their voting power prior to the meeting.

Election of the directors and approval of the other proposals requires the affirmative vote of a majority of the votes cast at the meeting by the holders of shares represented in person or by proxy at the meeting, provided that there is a quorum consisting of two or more persons present in person and

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representing in person or by proxy shares representing more than fifty percent (50%) of the aggregate voting power of the Company. We will count common shares held by shareholders who are present in person or by proxy at the meeting and who elect to withhold authority to vote on any director nominee or who elect to abstain from voting on any proposal, as well as broker non-votes, towards the presence of a quorum but will not count those shares as a vote for any director or for any proposal. We will count common shares held by shareholders who have signed their proxy cards but have not specified how their shares are to be voted towards the presence of a quorum, and we will vote those shares for the election of directors and for any proposal.

Any shareholder giving a proxy has the power to revoke it prior to its exercise by sending notice of revocation to our Secretary in writing, by executing and delivering a subsequent proxy card or by voting in person at the meeting.

Our financial statements for the year ended December 31, 2006 together with the report of our independent registered public accounting firm in respect of these financial statements will be presented at the meeting.

PROPOSAL NO. 1—ELECTION OF DIRECTORS

Our Board of Directors is divided into three classes designated Class I, Class II and Class III. The term of office for each Class III director expires at the annual general meeting in 2007; the term of office for each Class II director expires at the annual general meeting in 2008; and the term of office for each Class I director expires at the annual general meeting in 2009. At each annual general meeting, the successors of the class of directors whose term expires at that meeting will be elected to hold office for a term expiring at the annual general meeting to be held in the third year following the year of their election.

Four Class III directors are to be elected at the meeting to hold office until the annual general meeting in 2010. All of the nominees currently are directors. Our Corporate Governance and Nominating Committee recommended all of the nominees to our Board of Directors for election at the meeting. All nominees have consented to serve if elected. We do not expect that any of the nominees will become unavailable for election as a director, but if any nominee should become unavailable prior to the meeting, proxy cards authorizing the proxies to vote for the nominees will instead be voted for substitute nominees recommended by our Board of Directors.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES.

The table below sets forth the names, ages, class and positions of the nominees who are standing for election at the meeting:

 

Geoffrey Bell has served as a director since September 2006. He is currently President of Geoffrey Bell and Company formed in 1982 as a consultant to major corporations and banks internationally providing advice on capital market transactions as well as undertaking economic, financial and country risk analysis. He is also the Founder and is a member of the Board of Directors of the Consultative Group of International Economic and Monetary Affairs known as the Group of 30.

Christopher V. Greetham has served as a director since October 2006. He retired from his position as Chief Investment Officer of XL Capital Ltd. in September 2006. From 1982 to 1996, Mr. Greetham was

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Chief Financial Officer of OIL Insurance Ltd. and President of OIL Investment Corporation Ltd. Between 1975 and 1982, he served as an investment analyst and a portfolio manager at Bankers Trust Company.

Maurice A. Keane has served as a director since September 2002. He is also Chairman of the Board of AXIS Specialty Holdings Ireland Limited and a director of AXIS Specialty Europe Limited. Mr. Keane was formerly the Group Chief Executive Officer of the Bank of Ireland, a position he held from 1998 until his retirement in 2002. He was Deputy Group Chief Executive Officer from 1991 through 1997, having been a Managing Director since 1983. He is currently Chairman of University College Dublin Foundation Limited and BUPA Ireland Limited and a director of DCC plc.

Henry B. Smith has served on our Board of Directors since May 2004. Mr. Smith served as the Chief Executive Officer and President of W.P. Stewart & Co., Ltd. from May 2005 to March 2006. He has served as a director of W.P. Stewart & Co., Ltd. since June 1988. Mr. Smith is the former Chief Executive Officer of the Bank of Bermuda Limited, a position he held from March 1997 until March 2004. He joined the Bank of Bermuda in 1973 as a management trainee and held various senior positions within the Bank of Bermuda, including Executive Vice President and Chief Operation Officer, Executive Vice President, Europe and Senior Vice President and General Manager, Retail Banking. He is a director of the Bank of Bermuda and W.P. Stewart & Co., Ltd.

The table below sets forth the names, ages, class and positions of the directors who are not standing for election at the meeting:

 

Michael A. Butt has been Chairman of the Board since September 2002. Mr. Butt is also Chairman of the Board of AXIS Specialty Limited. Mr. Butt has over 40 years of insurance industry experience. From 1982 to 1986, Mr. Butt was the Chairman of Sedgwick Limited and Vice Chairman of the Sedgwick Group plc. From 1987 to 1992, Mr. Butt served as Chairman and Chief Executive Officer of Eagle Star Holdings plc and Eagle Star Insurance Company. From 1993 to 1998, Mr. Butt was Chief Executive Officer and President of Mid Ocean Limited. From 1998 to August 2002, Mr. Butt was a director of XL Capital Ltd. Mr. Butt is also a former director of the Farmers Insurance Group, BAT Industries and Instituto Nazionale delle Assicuranzioni.

John R. Charman has been Chief Executive Officer and President and a director since our inception. Mr. Charman is also Chief Executive Officer and President of AXIS Specialty Limited. Mr. Charman has over 36 years of experience in the insurance industry and has been in a senior underwriting position since 1975. From 2000 to 2001, he served as deputy chairman of ACE INA Holdings and President of ACE International. Mr. Charman was also Chief Executive Officer at ACE Global Markets from 1998 to 2001. Prior to that, Mr. Charman was the Chief Executive Officer of Tarquin plc (a joint venture company among Insurance Partners, Harvard University and the Charman Group), the parent company of the Charman Underwriting Agencies at Lloyd’s. He was also a deputy chairman of the Council of Lloyd’s and a member of the Lloyd’s Core Management Group and Lloyd’s Market Board between 1995 and 1997. Mr. Charman has informed us that he intends to retire at the end of December 2008.

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Charles A. Davis has served as a director since our inception. Since June 2005, Mr. Davis has been a member and the Chief Executive Officer of Stone Point Capital LLC. From 1998 until May 2005, he was with MMC Capital, Inc., a subsidiary of Marsh & McLennan Companies, Inc., serving as the Chief Executive Officer from 1999 to 2005 and Chairman from 2002 to 2005. He also served as a Vice Chairman of Marsh & McLennan Companies, Inc. from 1999 to November 2004. Prior to joining MMC Capital in 1998, Mr. Davis spent 23 years at Goldman, Sachs & Co., where, among other positions, he served as head of Investment Banking Services worldwide, head of the Financial Services Industry Group, a General Partner, a Senior Director and a Limited Partner. Mr. Davis is also a director of Media General, Inc., Merchants Bancshares Corporation and The Progressive Corporation.

Robert L. Friedman has served as a director since our inception. Since 1999, Mr. Friedman has been a Senior Managing Director of The Blackstone Group, L.P., and since February 2003 he has also been that firm’s Chief Administrative Officer and Chief Legal Officer. Prior to joining Blackstone, Mr. Friedman was a partner at Simpson Thacher & Bartlett for 25 years, where he served as a senior member of that law firm’s mergers and acquisitions practice. Mr. Friedman currently serves as a director of Northwest Airlines, Inc. and TRW Automotive Holdings Corp.

Donald J. Greene has served as a director since our inception. Mr. Greene was a name partner of LeBoeuf, Lamb, Greene & MacRae LLP, where he practiced from 1964 until his retirement in 2001. Mr. Greene is also a director of Associated Electric & Gas Insurance Services Limited and of its wholly-owned Lloyd’s syndicate management company, AEGIS Managing Agency Limited. He is a former director of Equitable Life Assurance Company. He was a founding director and former Chairman of the International Insurance Foundation and a former director of the International Insurance Council. He is a member of the board of overseers of the School of Risk Management of St. John’s University (which school was formerly the College of Insurance) and a director of the Risk Foundation. In addition, he is an invested Commander of the Most Excellent Order of the British Empire by order of Her Majesty’s Government for service to Lloyd’s, the British insurance industry and the community of international insurance and law.

Jurgen Grupe has served on our Board of Directors since May 2004. He is also a director of AXIS Specialty Holdings Ireland Limited and AXIS Re Limited. From 1998 until 2002, Mr. Grupe was a director of Aon Reinsurance Worldwide and Chairman of the Board of Aon Reinsurance Europe. Prior to Aon’s acquisition of Jauch & Hubener Gmbh in 1997, he was a partner at Jauch & Hubener and Chairman of its reinsurance brokerage company.

Sir Andrew Large has served as a director since December 2006. He retired as Deputy Governor for Financial Stability at the Bank of England and member of the Bank’s Monetary Policy Committee in 2006. Prior to his appointment to the Bank of England in September 2002, he was Deputy Chairman of the Board of Barclays Bank plc from May 1998 when he also chaired the Group of 30 Project on Clearing and Settlement. From 1992 to 1997, he chaired the Securities and Investments Board in the United Kingdom. He was an investment banker from 1970 through 1990 at Orion Bank and Swiss Bank Corporation of which he was a member of the Management Board from 1987 through 1989. He began his career at British Petroleum in 1964.

Frank J. Tasco has served as a director since our inception. Mr. Tasco retired in 1992 as Chairman of the Board and Chief Executive Officer of Marsh & McLennan Companies, Inc., a position he held since 1986. From December 1992 to December 1994, Mr. Tasco served as Chairman of Borden, Inc.

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CORPORATE GOVERNANCE

Independence of Directors

Our Board of Directors consists of 12 directors, of which ten are non-management directors. The board has determined that all ten of our non-management directors are independent as defined in the listing standards of the New York Stock Exchange. The board has made this determination based primarily on a review of the responses of the directors to questions regarding employment and compensation history, family relationships and affiliations, and discussions with the directors. With respect to Mr. Charles A. Davis, the board reviewed his current relationship with Stone Point Capital, LLC and the amount of our common shares and warrants owned by entities that are managed by or affiliated with Stone Point. The board determined that neither this relationship nor the amount of common shares and warrants that may be deemed to be beneficially owned by Stone Point or its affiliates constituted a material relationship with us as defined in the listing standards of the New York Stock Exchange. With respect to Mr. Robert L. Friedman, the board reviewed his relationship with Blackstone Group, L.P. and various investments held by us that are managed by affiliates of Blackstone. The board determined that these transactions did not constitute a material relationship with us as defined in the listing standards of the New York Stock Exchange. For more details about these transactions and our share ownership, see “Certain Relationships and Related Transactions” and “Principal Shareholders” in this proxy statement.

Meetings of the Board of Directors and its Committees

Pursuant to our Corporate Governance Guidelines, we expect directors to attend all meetings of our Board of Directors, all meetings of all committees of the board on which they serve and each annual general meeting of shareholders, absent exigent circumstances. Our Board of Directors met five times during the year ended December 31, 2006. No director attended fewer than 75% of the aggregate of the total number of meetings of the board and the total number of meetings of all committees of the board on which the director served. Eight of the ten directors then serving attended the 2006 annual general meeting of shareholders. Our non-management directors meet quarterly at executive sessions without management. They have selected Mr. Greene as the presiding director.

Our Board of Directors currently maintains Executive, Audit, Compensation, Corporate Governance and Nominating, and Finance Committees. Current copies of the charter for each of these committees, as well as our Corporate Governance Guidelines and Code of Business Conduct, are available on our website at www.axiscapital.com and are available, without charge, in print to any shareholder who requests them by contacting our Secretary at 92 Pitts Bay Road, Pembroke, Bermuda, HM 08.

Executive Committee.   The Executive Committee is composed of Messrs. Butt, Charman and Davis and is chaired by Mr. Greene. This committee may exercise the authority of the Board of Directors when the entire Board of Directors is not available to meet, except in cases where the action of the entire Board of Directors is required by our memorandum of association, our bye-laws or applicable law. The Executive Committee did not meet during the year ended December 31, 2006.

Audit Committee.   The Audit Committee is composed of Messrs. Greene, Keane and Smith, with Mr. Smith serving as Chairman. This committee has general responsibility for the oversight of the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent auditors’ qualifications and independence and the performance of our internal audit functions and independent auditors. The committee appoints, retains and determines the compensation for our independent auditors, pre-approves fees and services of the independent auditors and reviews the scope and results of their audit. The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). Each member of the Audit Committee is a non-management director and is independent as defined in the listing standards of the New York Stock Exchange and under the Exchange Act. Our Board of Directors has

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determined that each of Messrs. Greene, Keane and Smith qualify as audit committee financial experts pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Audit Committee met nine times during the year ended December 31, 2006.

Compensation Committee.   The Compensation Committee is composed of Messrs. Greene, Grupe and Smith and is chaired by Mr. Tasco. This committee establishes our Chief Executive Officer’s and our other executive officers’ compensation in light of our established corporate performance goals and makes recommendations to our Board of Directors with respect to overall officer, management and employee compensation policies, incentive compensation plans, equity-based plans and director compensation. Each member of this committee is a non-management director and is independent as defined in the listing standards of the New York Stock Exchange. The Compensation Committee met four times during the year ended December 31, 2006.

Compensation Committee Process

Under our Compensation Committee’s charter, the Committee has the power and duty to set the Chief Executive Officer’s annual compensation after evaluating his performance under corporate goals and objectives that the Compensation Committee sets each year. The Compensation Committee also has the authority to make recommendations to the Board regarding compensation programs and policies affecting other employees, including the other executive officers, and the form and amount of director compensation. The Compensation Committee is empowered to approve initial offers of employment, salary increases, bonuses and other incentive payments for our highest salary grade level employees, including our executive officers, and must approve all equity awards to our executive officers. The Compensation Committee is also responsible for the design of our incentive and equity compensation plans and any changes or amendments to those plans. The Compensation Committee is permitted to delegate any of its responsibilities to subcommittees in its discretion, but to date has not done so.

Our Compensation Committee generally receives proposals and information from our human resources department and from our Chief Executive Officer for their consideration regarding executive and director compensation. Our Chief Executive Officer makes recommendations regarding salary increases, annual cash incentives and equity awards for all of our executive officers other than himself. Our Compensation Committee receives input and recommendations from our chief human resources officer, in consultation with third-party consultants and senior management, as required, regarding director compensation. However, the Compensation Committee is responsible for recommendations to the Board regarding director compensation. The Committee also approves salary increases, incentive payments and equity awards for our executive officers.

Our Compensation Committee has sole authority to retain and terminate any consultants used to evaluate executive compensation, and may retain other advisors if and when it deems necessary. The Compensation Committee employs compensation consultants to assist in establishing compensation policies and programs, and considers reports prepared by compensation consultants engaged by management. The consultants prepare reports comparing our compensation programs to those of peer companies, to aid the Compensation Committee in ensuring the competitiveness and appropriateness of our compensation programs. During 2006, our human resources department engaged Mercer Human Resources Consulting on behalf of the Compensation Committee to provide an analysis of our executive compensation programs. In 2005, management engaged the firm of Pearl Meyer & Partners on behalf of the Compensation Committee to analyze our director compensation program. Pearl Meyer & Partners provided a report in January of 2006 that the Compensation Committee used in 2006 to determine adjustments to our director compensation program.

At the beginning of each calendar year, our Compensation Committee generally reviews the incentive plan results from the prior year, establishes the performance goals under the incentive plan for the current

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year, approves the Compensation Committee’s report for our proxy statement and conducts a self-assessment. Mid-year the Compensation Committee generally reviews the compensation consultant’s report, if any, regarding our executive compensation program and generally reviews our compensation programs. In the fall of each year, the Compensation Committee reviews our director compensation program, approves any needed changes to the director compensation program, and conducts a preliminary assessment of our performance for the year. Our Compensation Committee generally meets at the end of each calendar year to make decisions regarding the salaries for the next calendar year, and to determine the equity awards and incentive cash payments that will be made at the beginning of the next calendar year, subject to final year-end results.

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 2006, none of our executive officers served as a member of the compensation committee or as a director of another entity, one of whose executive officers served on our Compensation Committee or as one of our directors.

Corporate Governance and Nominating Committee.   The Corporate Governance and Nominating Committee is composed of Messrs. Davis and Friedman and is chaired by Mr. Greene. This committee takes a leadership role in shaping our corporate governance by identifying and proposing qualified director nominees, overseeing the purpose, structure and composition of the board committees, overseeing the annual evaluation of the Board of Directors and the committees and periodically reviewing our Code of Business Conduct and Corporate Governance Guidelines. Each member of this committee is a non-management director and is independent as defined in the listing standards of the New York Stock Exchange. The Corporate Governance and Nominating Committee met four times during the year ended December 31, 2006.

Consideration of Director Nominees

The Corporate Governance and Nominating Committee will consider candidates recommended by shareholders to be nominated to our Board of Directors for election at the annual general meeting of shareholders. A shareholder who wishes to submit a candidate for consideration must be a shareholder of record at the time that it submits a candidate for nomination and must be entitled to vote for the candidate at the meeting. A shareholder must give written notice of the submission to our Secretary not less than 90 days nor more than 120 days prior to the anniversary of the annual general meeting of shareholders for the preceding year. The notice must include:

·       the name, age and business and residence addresses of the candidate,

·       the principal occupation or employment of the candidate,

·       the number of common shares or other securities of the Company beneficially owned by the candidate,

·       all other information relating to the candidate that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act, and

·       the candidate’s written consent to be named in the proxy statement and to serve as a director if elected.

The notice must also include information on the shareholder submitting the nomination, including the shareholder’s name and address as it appears on our books and the number of our common shares beneficially owned by the shareholder.

The Corporate Governance and Nominating Committee believes that directors should be persons who combine the highest standards of integrity and significant accomplishments in their chosen field of

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endeavor. Directors should bring a diversity of experiences, skills and perspectives to our Board of Directors. The committee considers qualities of intelligence, honesty, perceptiveness, good judgment, high ethics and standards, integrity and fairness to be of paramount importance. It also examines experience, knowledge and skills in business judgment, leadership, strategic planning, general management practices and crisis response. In addition, the committee looks for candidates with financial expertise and a willingness and ability to commit the time required to fully discharge their responsibilities to the board. The committee evaluates candidates on the basis of their qualifications and not on the basis of the manner in which they were submitted for consideration.

Finance Committee.   The Finance Committee is composed of Messrs. Bell, Butt, Friedman and Greetham and is chaired by Mr. Davis. This committee generally approves and monitors the investment of funds and financing facilities. It is also responsible for establishing our investment guidelines, approving the selection and terms of investment managers, evaluating the performance of investment managers, monitoring the need for additional financing and ensuring compliance with outstanding debt facility covenants. The Finance Committee met four times during the year ended December 31, 2006.

Code of Business Conduct

We have adopted a Code of Business Conduct that applies to all of our directors and employees, including our Chief Executive Officer and President, our Chief Financial Officer and our Controller. Copies of our Code of Business Conduct and our Corporate Governance Guidelines are available on our website at www.axiscapital.com and are available, without charge, in print to any shareholder who requests them by contacting our Secretary at 92 Pitts Bay Road, Pembroke, Bermuda, HM 08. We intend to disclose on our website any required amendment to, or waiver of, a provision of the Code of Business Conduct that applies to our Chief Executive Officer and President, our Chief Financial Officer or our Controller. In addition, waivers of the Code of Business Conduct for our directors and executive officers may be made only by our Board of Directors or the Corporate Governance and Nominating Committee and will be promptly disclosed to shareholders on our website in accordance with the listing standards of the New York Stock Exchange.

Shareholder Communications with the Board of Directors

Shareholders and other interested parties may send communications to our Board of Directors by sending written notice to our Secretary. The notice may specify whether the communication is directed to the entire board, to the non-management directors, to the presiding director of the non-management directors or to a particular board committee or other director. Our Secretary will handle routine inquiries and requests for information or will otherwise determine whether the communication is made for a valid purpose and is relevant to the Company and its business and, if he so determines, will forward the communication to the Chairman of the Board, to the non-management directors or to the appropriate committee chairman or director. At each meeting of our Board of Directors, our Secretary presents a summary of all communications received since the last meeting that were not forwarded and makes those communications available to the directors on request.

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PRINCIPAL SHAREHOLDERS

The following table sets forth information as of February 23, 2007 regarding beneficial ownership of our common shares by each of the following, in each case based on information provided to us by these individuals:

·       each person or group known to us to be the beneficial owner of more than 5% of our common shares;

·       each of our directors;

·       each of our named executive officers; and

·       all of our directors and executive officers as a group.

                 * Less than 1%

       (1) Number of common shares beneficially owned and percentage ownership are based on common shares outstanding as of February 23, 2007, adjusted as required by rules promulgated by the SEC. Beneficial ownership is determined in accordance with the rules of the SEC and includes sole or shared voting or investment power with respect to such shares. All outstanding warrants for common shares and options for common shares currently exercisable or exercisable within 60 days after February 23, 2007 are deemed to be outstanding and to be beneficially owned by the person holding such warrants or options for the purpose of computing the number of common shares beneficially

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owned and the percentage ownership of such person, but are not deemed to be outstanding and to be beneficially owned for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnotes to the table, based on information provided by the persons named in the table, such persons have sole voting and investment power with respect to all common shares shown as beneficially owned by them. Our bye-laws reduce the total voting power of any shareholder owning 9.5% or more of our common shares to less than 9.5% of the voting power of our capital stock.

       (2) Includes 563,130 common shares held directly by Mr. Butt and options to acquire 211,667 common shares.

       (3) Includes 502,064 common shares held directly by Mr. Charman, 1,804,908 common shares owned by Dragon Holdings Trust (“Dragon Trust”), 497,704 common shares owned by JR Charman Children’s Settlement (“Children’s Settlement”) and options to acquire 2,441,779 common shares. It also includes 1,132,978 common shares issuable upon exercise of warrants of the Company held by Dragon Trust and 377,657 common shares issuable upon exercise of warrants of the Company held by Children’s Settlement. Does not include 300,000 series B preferred shares owned by Children’s Settlement. Mr. Charman may be deemed to share voting and/or dispositive power with respect to the common shares and common shares issuable upon exercise of the warrants held by Dragon Trust and Children’s Settlement, but he disclaims beneficial ownership of all such common shares. The trustee of Dragon Trust and of Children’s Settlement is Codan Trust Company Limited (“Codan”) whose registered office is at Richmond House, 12 Par-La-Ville Road, Hamilton HM08, Bermuda. Any two directors or one director and one officer of Codan hold the power to exercise dispositive power over the common shares and common shares issuable upon the exercise of warrants of the Company held by Dragon Trust and Children’s Settlement. Mr. Charman has a discretionary and contingent interest in the trust property of Dragon Trust. He also has the power to appoint and remove new or successor trustees. The Trustee has absolute discretion as to whether to make any distributions to him or not and there are other family beneficiaries. Mr. Charman’s contingent interest is subject to him surviving to the end of the trust period, which is expected to be at least 80 years. Mr. Charman has no beneficial interest in the trust property of Children’s Settlement, although he has the power to appoint new or successor trustees.

       (4) Mr. Davis is a member and the Chief Executive Officer of Stone Point Capital LLC and one of the members of Stone Point LLC who participates in the management of Trident II, L.P. and Marsh and McLennan Capital Professional Fund, L.P. Mr. Davis may be deemed to share voting and dispositive power with respect to the common shares and common shares issuable upon exercise of the warrants of the Company that are, or may be deemed to be, beneficially owned by Trident II, L.P., Marsh & McLennan Capital Professional Fund, L.P. and Marsh & McLennan Employees’ Securities Company, L.P. Mr. Davis disclaims beneficial ownership of all such common shares, except to the extent of any pecuniary interest therein. See footnote 13 below.

       (5) Includes 72,608 common shares held directly by Mr. Greene and options to acquire 21,333 common shares. Does not include 25,169 phantom shares issued in lieu of director’s fees.

       (6) Includes 40,737 common shares held directly by Mr. Keane and options to acquire 21,333 common shares.

       (7) Includes 12,346 common shares held directly by Mr. Smith and options to acquire 5,333 common shares.

       (8) Includes 60,648 common shares held directly by Mr. Tasco and options to acquire 21,333 common shares. Does not include 24,696 phantom shares issued in lieu of director’s fees.

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       (9) Includes 216,000 common shares held directly by Mr. Fischer and options to acquire 226,667 common shares.

(10) Includes 336,639 common shares held directly by Mr. Gressier and options to acquire 206,667 common shares.

(11) Mr. Cook’s employment with the Company terminated on April 1, 2006.

(12) Includes 5,461,000 commons shares, warrants to acquire 1,510,635 common shares and options to acquire 3,986,780 common shares.

(13) Based solely on information contained in Amendment No. 4 to the Schedule 13G filed on February 6, 2007 by Trident II, L.P. (“Trident II”), Trident Capital II, L.P. (“Trident GP”), Stone Point Capital LLC (“Stone Point”), Marsh & McLennan Capital Professional Fund, L.P. (“Trident PF”) and Marsh & McLennan Employees’ Securities Company, L.P. (“Trident ESC”) and includes common shares beneficially held as of December 31, 2006 by such entities. Trident II and Trident GP have shared voting and dispositive power over 24,801,949 common shares. Trident PF has shared voting and dispositive power over 693,970 common shares. Trident ESC has shared voting and dispositive power over 698,454 common shares. Stone Point has shared voting power over 25,495,919 common shares. The sole general partner of Trident II is Trident GP. Trident II is the direct beneficial owner of 7,883,637 common shares and 16,918,312 common shares issuable upon exercise of warrants of AXIS Capital. As the general partner, Trident GP holds voting and investment power with respect to the securities of AXIS Capital that are, or may be deemed to be, beneficially owned by Trident II. The manager of Trident II is Stone Point, and the members of Stone Point are Charles A. Davis, Meryl D. Hartzband, James D. Carey, Nicolas D. Zerbib and David J. Wermuth. The general partners of Trident GP are four single member limited liability companies that are owned by individuals who are members of Stone Point (Messrs. Davis, Carey and Wermuth and Ms. Hartzband). Each of the single member limited liability companies that is a general partner of Trident GP has disclaimed beneficial ownership of the common shares and warrants that are, or may be deemed to be, beneficially owned by Trident II. The sole general partner of Trident PF is a company controlled by the four individuals who are members of Stone Point. The sole general partner of Trident ESC is a company that is a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“MMC”). Trident PF has agreed that it will not dispose of its holdings in AXIS prior to Trident II and to the extent that it elects to divest of its interest in AXIS Capital at the same time as Trident II, Trident PF will divest its holdings in AXIS Capital in parallel with Trident II. Trident ESC has agreed that it will divest its holdings in AXIS Capital in parallel with Trident II. As a result of this agreement, Trident II may be deemed to beneficially own 442,632 common shares directly held by Trident PF and Trident ESC and warrants to purchase 949,792 common shares held by Trident PF and Trident ESC, and Trident PF and Trident ESC may be deemed to beneficially own 7,883,637 common shares directly held by Trident II and warrants to purchase 16,918,312 common shares held by Trident II. Trident II disclaims beneficial ownership of all common shares and warrants beneficially owned by Trident PF and Trident ESC, and Trident PF and Trident ESC each disclaims beneficial ownership of all common shares and warrants beneficially owned by Trident II and each other. Stone Point has authority to execute documents on behalf of the general partner of Trident ESC pursuant to a limited power of attorney. The principal address for Trident II, Trident GP, Trident PF and Trident ESC is c/o Maples & Calder, Ugland House, Box 309, South Church Street, George Town, Grand Cayman, Cayman Islands. The principal address for Stone Point is 20 Horseneck Lane, Greenwich, Connecticut 06830.

(14) Based solely on information contained in Amendment No. 2 to the Schedule 13G filed on February 14, 2007 by FMR Corp. (“FMR”) and Edward C. Johnson 3d. FMR has sole voting power over 839,354 common shares and sole dispositive power over 14,493,604 common shares. Fidelity Management & Research Company, a wholly owned subsidiary of FMR and a registered investment

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adviser, is the beneficial owner of 13,884,123 of the common shares; Pyramis Global Advisors Trust Company, 53 State Street, Boston, Massachusetts, 02109, an indirect wholly-owned subsidiary of FMR Corp. and a bank, is the beneficial owner of 49,981 of the common shares. The Schedule 13G also indicates that each of Mr. Johnson and FMR has sole power to vote or to direct the voting of the 13,884,123 common shares beneficially owned by Fidelity Management & Research Company. Each of Mr. Johnson and FMR through its control of Pyramis Global Advisors Trust Company has sole power to vote or to direct the voting of the 49,981 common shares beneficially owned by Pyramis Global Advisors Trust Company. The address for FMR and Fidelity Management & Research Company is 82 Devonshire Street, Boston, Massachusetts 02109.

(15) Based solely on information contained in Amendment No. 2 to the Schedule 13G filed on February 13, 2007 by AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA Courtage Assurance Mutuelle, AXA and AXA Financial, Inc. and includes common shares beneficially held as of December 31, 2006 by such entities. These entities have sole voting power over 11,806,852 common shares, shared voting power over 548,824 common shares, sole dispositive power over 13,754,831 common shares and shared dispositive power over 391 common shares. Alliance Capital Management L.P. is a subsidiary of AXA Financial, Inc. and is a registered investment adviser. The address for AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle and AXA Courtage Assurance Mutuelle is 26, rue Drouot, 750009 Paris, France; the address for AXA is 25, avenue Matignon, 75008 Paris, France; and the address for AXA Financial, Inc. is 1290 Avenue of the Americas, New York, New York 10104. AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA Courtage Assurance Mutuelle and AXA disclaim beneficial ownership of all of the common shares reported in the Schedule 13G.

(16) Based solely on information contained in the Schedule 13G filed on January 23, 2007 by Barclays Global Investors, NA. (“Barclays Global Investors”) and certain of its affiliates, and includes common shares beneficially held as of December 31, 2006. Barclays Global Investors and the other beneficial owners listed below, as a group, are the beneficial owners of an aggregate of 11,876,887 common shares. Barclays Global Investors holds sole voting power over 8,632,630 of the common shares and sole dispositive power over 9,399,508 common shares. Barclays Global Fund Advisors, a registered investment adviser, holds sole voting and dispositive power over 163,868 of the common shares. Barclays Global Investors, LTD, a bank, holds sole voting and dispositive power over 1,678,418 of the common shares. Barclays Global Investors Japan Trust and Banking Company LTD, a bank, holds sole voting and dispositive power over 143,917 of the common shares. Barclays Global Investors Japan LTD, a registered investment adviser, holds sole voting and dispositive power over 491,176 of the common shares. The address for Barclays Global Investors and Barclays Global Fund Advisors is 45 Fremont Street, San Francisco, California, 94105. The address for Barclays Global Investors, LTD is 1 Royal Mint Court, London, EC3N 4HH. The address for Barclays Global Investors Japan Trust and Banking Company LTD and Barclays Global Investors Japan LTD is Ebisu Prime Square Tower, 8th Floor, 1-1-39 Hiroo Shibuya-Ku, Tokyo, 150-0012, Japan.

(17) Based solely on information contained in Amendment No. 1 to the Schedule 13G filed on February 13, 2007 by Neuberger Berman Inc. and includes common shares beneficially held as of December 31, 2006. Neuberger Berman Inc. and the other beneficial owners listed below, as a group, are the beneficial owners of an aggregate of 8,711,403 common shares. Neuberger Berman Inc. has sole voting power over 5,575,028 common shares and shared dispositive power over 8,711,403 common shares. Neuberger Berman, LLC has sole voting power over 5,575,028 common shares and shared dispositive power over 8,711,403 common shares. Neuberger Berman Management, Inc. is deemed to beneficially own the common shares. Neuberger Berman Inc. is the 100% owner of Neuberger Berman, LLC and Neuberger Berman Management, Inc. The address for Neuberger

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Berman Inc., Neuberger Berman, LLC and Neuberger Berman Management, Inc. is 605 Third Avenue, New York, New York 10158.

(18) Based solely on information contained in Amendment No. 1 to the Schedule 13G filed on February 14, 2007 by T. Rowe Price Associates, Inc. and includes common shares beneficially held as of December 31, 2006. This entity has sole voting power over 1,375,730 common shares and sole dispositive power over 7,257,354 common shares. T. Rowe Price Associates, Inc. is a registered investment adviser. The address for T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland  21202.

EXECUTIVE OFFICERS

The table below sets forth certain information concerning our executive officers:

(1)          Biography available under “Board of Directors.”

David B. Greenfield joined AXIS Capital in August 2006. Prior to joining AXIS, Mr. Greenfield was a partner with KPMG LLP, which he joined in 1984, serving clients in the financial services industry. In addition, Mr. Greenfield was KPMG’s Global Sector Chair for Insurance and a member of KPMG’s Global Financial Services Leadership Team. Mr. Greenfield was the lead partner for several of KPMG’s largest insurance clients. His leadership responsibilities at KPMG included international client development and management over teams of partners and staff globally.

Dennis B. Reding was appointed Chief Operating Officer of AXIS Capital in January 2007 and, prior to that appointment, served as Chairman of AXIS Insurance since January 2005. From January 2003 until December 2004, he was Chief Executive Officer of AXIS U.S. Insurance. He is also Chief Executive Officer and President of our subsidiaries, AXIS Specialty U.S. Holdings, Inc. and AXIS Specialty U.S. Services, Inc., and an Executive Vice President of our subsidiaries, AXIS Specialty Insurance Company, AXIS Reinsurance Company, AXIS Surplus Insurance Company and AXIS Insurance Company. Mr. Reding has 36 years of industry experience. Mr. Reding was President and Chief Executive Officer of Westchester Specialty Group from 1992 to 1998. He then served as President and Chief Executive Officer of ACE USA, Inc. from 1998 to 2001 and President of ACE INA Holdings, Inc. from 2001 to 2002. Mr. Reding was Chairman and Chief Executive Officer of Combined Specialty Group, Inc., an Aon subsidiary, in 2002.

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William A. Fischer has been Chief Executive Officer and President of AXIS Re Bermuda since our inception. He is also Executive Vice President of our subsidiary, AXIS Specialty Limited. Mr. Fischer has 20 years of industry experience. Mr. Fischer began his career at Skandia America Reinsurance in 1987 as a treaty underwriter, where he served until November 1991. From November 1991 to October 1994, he served as Vice President of Treaty Property Underwriting at Transatlantic Reinsurance Company. Mr. Fischer then served as Executive Vice President with responsibilities for property, accident and health, and financial products at Everest Re Group, Ltd. from October 1994 to May 2001. He then served as a Senior Vice President of the Brokered Group of American Re, where he was responsible for all property business, until joining us in late 2001.

John Gressier was appointed Chairman of AXIS Insurance in January 2007. Prior to that appointment, he served as Deputy Chairman of AXIS Insurance since January 2005 and Chief Executive Officer and President of AXIS Global Insurance since April 2002. He is also Chairman of the Board of our subsidiary, AXIS Specialty Europe Limited, a director of our subsidiary, AXIS Specialty Holdings Ireland Limited, and Executive Vice President of our subsidiary, AXIS Specialty Limited. Mr. Gressier has over 20 years of experience in the insurance industry. Mr. Gressier served as an underwriter at Charman Underwriting Agencies from 1989 until ACE Limited acquired Charman in 1998. Mr. Gressier then served as Deputy Underwriter of Syndicates 488/2488, Director of ACE Global Markets Underwriting Limited and Director of Marine and Specialty Lines for Syndicate 2488. He was also a member of ACE Global Markets Executive Underwriting Committee. In February 2001, Mr. Gressier was appointed Joint Active Underwriter of Syndicate 2488 and director of the ACE Agency Board, where he served until joining us in 2002.

Dr. Karl Mayr has been Chief Executive Officer and President of AXIS Re Europe since August 2003. He is also Chairman of the Board of our subsidiary, AXIS Re Limited, and a director of our subsidiary, AXIS Specialty Holdings Ireland Limited. Mr. Mayr has 26 years of reinsurance experience. He joined Frankona Ruckversicherungs-AG in 1980, where he was appointed a member of the Board of Management in 1992. From 1988 to 1992, he held senior officer positions at the U.S. branch of Frankona in Kansas City, Missouri, which he led from 1990. After the acquisition of Frankona by ERC, he served on various boards of management in the German companies as well as a director on the boards of several European affiliates. From 2002 until July 2003, Mr. Mayr was Chief Executive Officer of GE Frankona Re.

Michael E. Morrill has been Chief Executive Officer and President of AXIS Re U.S. since August 2002. He is also a director and an Executive Vice President of our subsidiaries AXIS Specialty U.S. Holdings, Inc. and AXIS Specialty U.S. Services, Inc., Chairman, Chief Executive Officer and President of our subsidiary, AXIS Reinsurance Company, and an Executive Vice President of AXIS Specialty Insurance Company, AXIS Surplus Insurance Company and AXIS Insurance Company. Mr. Morrill has over 20 years of experience in the insurance and reinsurance industry. From 2001 to 2002, Mr. Morrill was the President and Chief Executive Officer of Gerling Global Reinsurance Corporation of America. From 1996 to 2001, he served as Chief Underwriting Officer for North America and Senior Vice President at Transatlantic Reinsurance Company. He has also held senior management and underwriting positions at Munich American Reinsurance Company, Cologne Reinsurance Company of America and Christiania General Insurance Company.

F. Marshall Turner, II was appointed President of AXIS Insurance in January 2007 and, prior to that appointment, served as the Chief Executive Officer of AXIS U.S. Insurance since January 2005 and the President of AXIS U.S. Insurance since January 2004. He is also a director and an Executive Vice President of our subsidiaries, AXIS Specialty U.S. Holdings, Inc. and AXIS Specialty U.S. Services, Inc., Chairman, Chief Executive Officer and President of our subsidiaries, AXIS Specialty Insurance Company and AXIS Insurance Company, Chairman and Executive Vice President of our subsidiary, AXIS Surplus Insurance Company, and a director and an Executive Vice President of our subsidiary, AXIS Reinsurance Company. He joined the Company in November 2002 as Executive Vice President and Chief Operating

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Officer of AXIS U.S. Insurance. Prior to that, Mr. Turner was President of the Specialty Property & Casualty Group of Aon Corporation’s Combined Specialty Group from February 2002. From 1996 to 2002, he served in various senior positions, including President, with the Westchester Specialty Group/ACE USA. Mr. Turner also served as Vice President, Specialty Property Director for Zurich American Insurance Group after holding several property/package underwriting and managerial positions with the Hartford Insurance Group, where he began his insurance career in 1980.

Brian Goshen has been the Chief Human Resources Officer since January 2006. Mr. Goshen has over 20 years of professional human resources experience. From March 2004 to January 2006, he served as a Vice President of Human Resources at Fifth Third Bank. From May 1996 to March 2004, he was a Managing Director with Marsh, Inc., a global insurance and brokerage and risk management company. While at Marsh, he served in various senior human resource positions, including the Head of Human Resources for North America and the Head of Human Resources for their Asia and Pacific operations. From February 1994 to June 1996,  he was Vice President of Human Resources with the Hong Kong and Shanghai Banking Corporation. Mr. Goshen started his corporate career with Goldman Sachs following a period of service as a Personnel Officer with the United States Army.

Richard T. Gieryn, Jr. has been General Counsel since April 2006. He joined AXIS Capital from Combined Specialty Group, Inc. in January 2003 with over 20 years of experience in the insurance industry. Prior to AXIS Capital, Mr. Gieryn was General Counsel and Secretary at Combined Specialty Group, Inc from 2002 to January 2003. From 2001 to 2002 he was Executive Vice President and General Counsel at ACE INA, Holdings, Inc. Mr. Gieryn was Executive Vice President and General Counsel at ACE USA, Inc. from 1998 to 2002. He served in the same capacity at Westchester Specialty Group from 1996 to 1998. Mr. Gieryn began his career at Drew, Eckl & Farnham where he became an equity partner.

John J. Murray has been Chief Operations Officer since November 2001. He is also an Executive Vice President of Operations of our subsidiary, AXIS Specialty Limited. Mr. Murray, a chartered accountant, has 15 years of industry experience. From 1995 to 2000, he was the Head of Operations for ACE Global Markets Limited. He then served as a Finance Director of Newmarket Underwriting Limited during 2000 and 2001.

Richard Strachan has been Chief Claims Officer since April 2002. He is also a director of our subsidiaries, AXIS Re Limited and AXIS Specialty Europe Limited. Mr. Strachan has 21 years of experience in the insurance and reinsurance industry. From 1985 to 1997, he managed claims for Syndicates 488 and 2488 at both Charman Underwriting Agencies and Tarquin plc. From 1997 to 1999, Mr. Strachan served as a claims adjuster at ACE Global Markets. From 1999 to 2001, he served as claims team leader for ACE Global Markets.

EXECUTIVE COMPENSATION

Compensation Discussion And Analysis

Objectives of AXIS’s Executive Compensation Programs:

At AXIS, our stated mission is to become the leading diversified global specialty insurance and reinsurance company as measured by quality, sustainability and profitability. We strive to achieve favorable results through disciplined underwriting, earning an overall return on equity of 15% or better over an underwriting cycle. In order to fulfill this mission, it is imperative that we hire and retain the best talent available in the global marketplace.

We have designed our executive compensation program with a goal of attracting, retaining and motivating superior talent globally and maximizing shareholder value in the long term. The overall combination of executive compensation and benefits that we pay our executive officers is designed to reward above median performance with above median levels of compensation as compared to our

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competitive universe. Further, the programs are designed to provide enough of a mix between fixed and variable components of compensation that below-median performance can be appropriately addressed with commensurate reductions in levels of compensation.

Because of the unpredictable nature of our business, flexibility is of utmost importance in our compensation programs. Events that are out of our executive officers’ control can have an extreme impact on our business results on an absolute basis from year to year, even when our executive officers outperform the leaders of similar businesses and achieve a result for our shareholders that is beneficial under the circumstances. In such cases, our compensation programs need to be designed to respond appropriately to the potentially volatile nature of our business, taking into account all of the circumstances, and provide competitive compensation to attract, reward, motivate and retain our executive officers. As a result, we seek to avoid incentive compensation that is overly formulaic.

Individual performance also plays a role in our decisions regarding executive officers’ compensation, but, consistent with our emphasis on flexibility, we do not generally have structured individual goals for our executive officers. Instead, our Compensation Committee reviews the performance of the portion of our business for which the executive officer is responsible, reviews the individual performance of the executive officer in achieving the objectives for his or her business segment, considers the opinion of Mr. Charman, our Chief Executive Officer (except with regard to his own individual performance), considers the overall performance of the Company, and considers any other factors it deems relevant in evaluating the individual performance of our top executive officers.

Furthermore, our Chief Executive Officer’s compensation program is designed to reflect our Chief Executive Officer’s significant level of responsibility. At AXIS, our Chief Executive Officer coordinates our insurance and reinsurance businesses, which are separate leading global businesses that our Chief Executive Officer was instrumental in building into highly successful enterprises under his leadership. We believe that he has a higher level of risk management, marketing and client service responsibility than is often the case at comparable companies. Our Chief Executive Officer is responsible for the day-to-day coordination of both businesses from a risk-management perspective. At AXIS, the balance between the two lines of business provides diversification in our products and risks, which we believe ultimately serves to preserve our capital and drive long-term shareholder returns. Therefore, we have designed our Chief Executive Officer’s compensation to reflect this situation, both to compensate him for the functions he performs, and to ensure that his compensation is connected to the successes attributable to his skills and responsibilities.

While AXIS gives careful consideration to each element of total compensation, we evaluate our competitive position with respect to our named executive officers on a total direct compensation basis, which consists of base salary, annual bonus and long-term incentives, because these are the most important elements of compensation, and also because other elements vary greatly from company to company and are difficult to compare. The Compensation Committee engages an outside consultant to periodically review the appropriateness of our executive compensation program so that the Committee can make adjustments as needed. The consultant provides AXIS with a competitive market perspective of total direct compensation based on an analysis of proxy disclosures of publicly-traded insurance companies that we consider to be our peers and/or competitors. In designing a competitive executive compensation program, we take into account the need to attract qualified executives in geographic areas where we operate that have a relatively higher cost of living, such as Bermuda, as well as the costs associated with relocating executives to those areas.

In May of 2006, Mercer Human Resource Consulting, an outside consulting firm, reviewed our 2005 executive compensation program and company performance. Mr. Charman’s compensation was compared to that of chief executive officers at our peer companies. Because executive job functions at our peer companies vary, we compared our executive officers’ compensation (other than Mr. Charman’s) to that of

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executive officers at the peer companies who have the most similar positions to those of our named executive officers. However, to address in part the variation in business structures and because consistent information regarding comparable officers at other companies is difficult to obtain, the consultant also compared our executive officers’ compensation, other than Mr. Charman’s, to that of the third through fifth highest-paid officers at the peer companies. Although our Chief Financial Officer was not a named executive officer in 2005, the consultant’s analysis also included an analysis of our Chief Financial Officer’s compensation.

The components of total compensation that were included in this analysis were:

·       Salary

·       Bonus

·       Total Cash Compensation (salary plus bonus)

·       Long-Term Incentives (which for AXIS consisted solely of restricted stock grants)

·       Total Direct Compensation (consisting of total cash compensation plus long-term incentives)

The AXIS peer group consisted of:

·       ACE Limited

·       XL Capital Ltd

·       Everest Re Group, Ltd.

·       PartnerRe Ltd.

·       Transatlantic Holdings, Inc.

·       Arch Capital Group Ltd.

·       Endurance Specialty Holdings Ltd.

·       Platinum Underwriters Holdings, Ltd.

·       RenaissanceRe Holdings Ltd.

·       Montpelier Re Holdings Ltd.

Base salaries for our executive officers ranged from between the 50th and 75th percentile to the highest end of the range of the peer group. Overall, salaries for this group generally were positioned in the 75th percentile. Annual incentive payments as a percentage of base salary fell just above the median of the peer group. This, combined with base salaries, resulted in total cash compensation that was at or above the 75th percentile for all 2005 named executive officers. Long-term incentives as a percentage of base salary fell between the 25th and 75th percentiles. The combination of total direct compensation (base salary, annual incentive and long-term incentives) placed the AXIS executive officers above the 75th percentile of the peer group. Based on 2005 performance as measured by the percentage change in gross premiums written, net income or loss, total shareholder return and return on average equity, our performance was in the 75th percentile of the peer group. Therefore, we achieved our stated objective of paying above median total compensation for above median performance in 2005. As a result, we determined that our program did not need to be adjusted in 2006, and we continued with the compensation structure that was used in prior years.

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation in excess of $1.0 million paid to certain executive officers, although performance-based compensation arrangements may qualify for an exemption from the deduction limit if they satisfy various

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requirements under Section 162(m). For AXIS, this rule has limited effect because our company is headquartered in Bermuda and U.S. tax law only affects a portion of our income. Therefore, although we are aware of and consider the impact of this rule when developing and implementing our executive compensation programs, compliance with the requirements of Section 162(m) requires a somewhat formulaic approach, and we believe that flexibility is more important in our compensation programs. Therefore, this has not been a driving factor in the operation of any of our compensation programs.

2006 Performance:

Our performance in 2006, as led by Mr. Charman, President and Chief Executive Officer of AXIS, and our other executive officers, was extremely strong by any standard. For the year ended December 31, 2006:

·       Net premiums written increased by 12.4%.

·                     Our combined ratio, which is the sum of our net loss and loss expense, acquisition cost, and general and administrative expense ratios, was 77.3%.

·       Total shareholders’ equity increased 25.6% from December 31, 2005 to $4.4 billion.

·       Return on average common shareholders’ equity was 26.7%.

·                     Net income available to common shareholders for the year was $925.8 million up from net income of $90.1 million for 2005.

Immediately following the catastrophic hurricane season of 2005, under Mr. Charman’s direct leadership, AXIS took proactive steps to adjust to anticipated changes in the marketplace. AXIS adjusted upwards its pricing models and was a market leader with respect to pricing adequacy in catastrophe exposed lines of business, not only in the reinsurance business but also in the insurance business. AXIS leadership accurately predicted that significant changes to catastrophe pricing models and rating agency capital adequacy requirements would occur and, in response, initiated a pricing strategy and an aggregate loss reduction program throughout the organization in advance of the overall market to address these changes and maximize expected returns.

Early in 2006, the overall market did not respond to the fundamental changes that we foresaw in the capital requirements for catastrophe-related business. However, we maintained underwriting discipline throughout the Company and declined to write business that had not been re-priced to take these changes into account. As the catastrophe models were updated and rating agencies applied more stringent capital requirements, the pricing in the market over the course of 2006 became significantly more attractive. As a result of the steps we took at the end of 2005 and into 2006, AXIS was well positioned and indeed did take advantage of more attractively priced business later in the fiscal year. The result was that we received significantly greater premium dollars for less exposure with regard to catastrophe exposed business. With respect to our peer group, AXIS performed at or above the median in the following categories for 2006:

·       Our combined ratio was 77.3% compared to a median of 86.6%.

·                     Our return on average common shareholders’ equity was 26.7% compared to a median of 21.8%.

·       Our book value per share growth for 2006 was 28.9% compared to a median of 23.8%.

·       Our annual growth in net premiums written was 12.4% compared to a median of (2.3)%.

This outstanding performance in 2006 was a primary driver of the Compensation Committee’s decisions regarding annual incentives and equity grants.

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Elements of Compensation:

Executive compensation at AXIS is primarily a combination of base salary, annual cash bonus paid under our annual incentive plan, long-term incentive awards made under our 2003 Long-Term Equity Compensation Plan, and supplemental retirement programs. We also provide general employee benefits and certain perquisites to our executive officers.

In 2003, we established basic guidelines as a starting point for determining the mix of salary, annual incentives and long-term equity incentives, with the assistance of Mercer, based on data for our peer companies. We initially sought a combination of one-third of the executive officers’ compensation in long-term equity awards and two-thirds in annual cash awards. However, as discussed above, flexibility is vital in our compensation program, and, as a result, we have varied from this combination so that it is no longer the baseline for our compensation decisions.

Compensation of our executive officers is governed in part by the employment agreements we have entered into with each of our executive officers. The terms and conditions of the employment agreements are described in detail under the narrative to the Summary Compensation Table and in the section entitled “Potential Payments Upon Termination or Change in Control” below. Because our employment agreements with Messrs. Charman and Butt were both scheduled to expire at the end of 2008, we decided to extend the term of Mr. Butt’s employment agreement to increase the prospect for continuity in our most senior management. Therefore, in 2006, Mr. Butt’s employment agreement was amended, and some elements of his compensation were increased, as noted below, in connection with the extension of his employment contract to reflect his increased commitment to AXIS.

Base Salary:

Base salaries are the most basic form of compensation and are integral to any employment arrangement. Our main consideration in determining base salaries is to remain competitive. We also seek to balance a logical salary structure within the Company globally with the demands of the market for executive talent. A competitive base salary allows us to attract individuals from other organizations, both within our industry and outside our industry. Paying our existing employees a competitive base salary that is updated to compete with market pressures helps retain key staff by minimizing their need or desire to leave us to increase their level of basic compensation. In addition, base salary helps our executive officers maintain a sufficient standard of living in the locations where we operate, and, accordingly, base salaries differ by geographic location.

AXIS has developed a salary grade structure utilizing the assistance of Mercer Human Resource Consulting. Each of our 14 salary grades has a minimum, midpoint and maximum salary that were established with a midpoint at the 60th to 65th percentile compared to similar positions at comparable companies. The ranges of permitted salaries for each grade were established utilizing approximately the top third of the salary range for our industry based on the data provided by the outside consulting firm. Our executive officers are generally in the highest salary grade because they have the highest level of responsibility among our employees, but their placement within the range of salaries in that grade is based on the individual’s type of position, historical factors, geographic location, individual performance, and the Compensation Committee’s determination of competitiveness and appropriate levels based on the Chief Executive Officer’s recommendations.

Messrs. Charman and Butt are not graded, and their initial annual base salaries were established per their employment contracts at the time of hire based on then-current market conditions. The Compensation Committee bases salary adjustments for Messrs. Charman and Butt on the same factors used to determine the other executive officers’ salaries within their pay grade. Mr. Charman’s salary also reflects, in part, his substantial contribution to our company and his high level of responsibility as discussed above, and thus is higher than the salaries of our other executive officers.

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Base salaries are generally reviewed annually at the end of each calendar year. We review external salary survey data to determine the total budget for salary increases company-wide. This total amount includes annual merit increases, increases due to promotions and any increases needed for market adjustments to remain competitive. A merit increase guideline is then expressed in terms of a percentage of current annual base salary for each geographic location. We intend the merit increase guidelines to ensure that our salaries remain competitive and reflect cost of living adjustments and average pay increases for the geographic location as reported in surveys.

The Chief Executive Officer recommends annual salary increases for our named executive officers (except for himself). The Compensation Committee reviews and approves those increases using the guidelines described above. The Compensation Committee reviews and evaluates the performance of the Chief Executive Officer and approves any changes to his base salary.

Following the procedures described above, in December 2005, the Compensation Committee determined not to increase base salaries for our executive officers for 2006 in part because their salaries were determined to be sufficiently competitive, but also to reflect the fact that our financial performance in 2005 was severely impacted by our net losses incurred due to hurricanes Katrina, Rita and Wilma. However, Mr. Butt received an increase in his base annual salary from $750,000 to $850,000 effective January 1, 2006, when his contract was extended, to reflect his increased commitment to AXIS. In September of 2006, when Mr. Gressier transferred to Bermuda, his annual base salary was adjusted from £500,000 ($940,600, based on the exchange rate on September 8, 2006, his last day of work in the United Kingdom) to $800,000, to take into account local market conditions and internal equity. Also following the procedures described above, in December 2006, the Compensation Committee increased Mr. Greenfield’s base annual salary for 2007 from $475,000 to $500,000 to make his salary more competitive.

Annual Incentive Plan:

Annual incentive compensation, which we refer to as the annual bonus, for our named executive officers is provided under our 2004 Annual Incentive Plan, which is described below in the narrative to the Summary Compensation Table. The annual incentive plan is a critical tool for rewarding the achievement of corporate goals while providing us with the flexibility to reduce or eliminate the incentive amount if those goals are not met. The annual incentive plan also provides a retention tool, as executive officers must generally remain with us through the date of payment to receive their annual incentive payment, which may be a significant portion of their overall compensation.

To further our goal of keeping the long-term best interests of shareholders at the forefront of decision-making for our staff and executive officers, the total bonus pool for the annual incentive plan is tied to our return on average shareholders’ common equity, or ROACE. For 2006, the Compensation Committee determined that if AXIS achieved a designated minimum ROACE, the target bonus pool would be equal to 100% of the total target bonus amount for all employees. The Compensation Committee set the minimum ROACE performance target in early 2006. At that time, given the elements of uncertainty in the marketplace, the frequency and severity of catastrophic loss activity in 2005, the influx of capital into the insurance and reinsurance sectors following the activity and the predictions for similar storm activity in 2006, the Committee believed that achieving the minimum ROACE would be possible, but challenging. The Compensation Committee further determined that if AXIS were to achieve ROACE of at least 115% of the minimum ROACE performance target, designated as “superior performance”, the bonus pool would be 150% of the total target pool amount. Because flexibility is critical to our compensation program, in the event of performance below the target level or above the superior level, the Compensation Committee also retained the discretion to approve a downward or upward adjustment to any bonus pool amount.

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In order to achieve a competitive total compensation package, in consultation with its outside consultant, AXIS in 2003 established the individual target annual bonuses expressed as a percentage of annual salary for each salary grade. Target amounts represent a starting point for the Compensation Committee to use in allocating bonuses among the executive officers, and are not guaranteed for executive officers even if AXIS meets its performance goals, except with regard to Messrs. Charman and Butt, whose employment agreement require that they receive the target bonus if performance targets are met. Our executive officers’ target bonuses are generally 100% of their annual base salaries, except for Messrs. Charman and Butt. Mr. Charman’s annual incentive target award is set under his employment contract at a minimum of 150% of his annual base salary. During 2006, in accordance with an increase in his overall compensation to reflect his increased commitment to AXIS, Mr. Butt’s employment contract was amended to increase his minimum target annual bonus percentage to 125% of his annual base salary. These target bonus levels for Messrs. Charman and Butt were individually negotiated with the officers as part of their employment contracts.

Even if the bonus pool is fully funded, each individual executive officer’s actual incentive award is subject to the discretion of the Compensation Committee. Each executive may receive no bonus for an unsatisfactory individual performance, may receive a bonus based on the level of pool funding if they meet expectations, or may receive a higher bonus at the discretion of the Compensation Committee, which would be taken from the total bonus pool available for other executive officers and employees.

In 2006, our ROACE was considerably higher than the superior performance level. The Compensation Committee consequently funded the total annual incentive plan pool at 186% of the target pool amount. Also, the Compensation Committee determined that each of the executive officers met expectations individually and contributed to the above-superior ROACE performance. Therefore, the Compensation Committee allocated to the named executive officers a portion of the annual incentive plan bonus pool equal to the executive officer’s target percentage of annual salary, multiplied by 200% for above superior performance. In addition, the executive officers, including the named executive officers, received a portion of the amount of the bonus pool that exceeded 150% of the target pool amount, as a result of the ROACE exceeding superior performance. The Committee determined an amount for Mr. Greenfield in its discretion, based on his contributions for his partial year of employment for 2006.

Long-Term Equity Plan:

We provide long-term incentive compensation through equity awards under our 2003 Long-Term Equity Compensation Plan, or LTEP. Equity awards are an especially valuable tool in linking the personal interests of executive officers to those of our shareholders, because the amount the executive officers will ultimately receive under these awards is determined by our stock price. A higher stock price benefits our shareholders and increases the value of the executive officers’ equity awards. In addition, the vesting requirement for our equity awards is a valuable retention tool that we consider very important in retaining our executive officers in a competitive industry. Furthermore, because other employers with whom we compete for executive talent grant equity as part of their compensation packages, we need to include this element as part of our executive officers’ compensation in order to be competitive.

In 2003, with the help of our outside consultant, we established a target annual award of stock options and restricted stock for each executive. The targets were designed to provide an above median total compensation package for above median performance when compared to our industry peer group, when the equity awards are combined with base salary and annual incentive payments. In 2005, we modified the guidelines to discontinue the grants of stock options and increase the grants of restricted stock because we desired a more effective equity vehicle for rewarding executive performance and retaining valuable executive talent. We believe that the use of restricted stock provides executive officers with the motivation to meet or exceed individual goals and make decisions that add to longer-term shareholder value.

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Under our equity award guidelines, the standard annual award for Mr. Charman would be 90,000 shares of restricted stock, the standard annual award for Mr. Butt would be 45,000 shares of restricted stock, and the standard annual awards for our other named executive officers would be 30,000 shares of restricted stock. These guidelines, however, only represent the starting point for determining an executive officer’s actual award each year. At the end of each fiscal year, the Compensation Committee determines the actual awards to be made in its discretion, considering competitiveness, retention needs, Company and individual performance, and any other factors it deems relevant. The awards are granted in January of the next year.

At the end of 2005, the Compensation Committee determined that each of our named executive officers met expectations regarding individual performance. We were concerned about retention because the annual incentive amounts paid to executive officers for 2005 were below target level, and because there were a significant number of new entrants into our market, which created an even more competitive market for top talent. Consequently, the Compensation Committee granted the restricted stock awards shown in the Grant of Plan-Based Awards table below to each of our named executive officers at the beginning of 2006. Mr. Cook received a restricted stock award that was negotiated as part of his departure rather than receiving an award determined under the usual methodology, because he was transitioning out of his position at the time the equity awards were granted. In addition, Mr. Greenfield received a grant upon hire as part of his engagement package.

At the end of 2006, the Compensation Committee determined that equity awards at twice the standard level were appropriate because the Compensation Committee wanted to reward the executive officers for an exceptional year for AXIS, with an award at 150% of the standard level for Mr. Greenfield based on his contributions during his partial year of employment in 2006. The need for retention was also a significant consideration in the Compensation Committee’s determination of the higher awards. These awards reflect 2006 performance but were granted early in 2007, and thus are not reflected on the Summary Compensation Table or the Grant of Plan-Based Awards table for the 2006 fiscal year.

Deferred Compensation and Supplemental Retirement Plans:

The AXIS Specialty U.S. Services, Inc. Supplemental Retirement Plan, referred to as the “U.S. Supplemental Plan”, is designed to permit eligible U.S.-based employees to accumulate additional retirement income through a nonqualified deferred compensation plan. The U.S. Supplemental Plan is described below under the Nonqualified Deferred Compensation table. We maintain this plan because U.S. tax law strictly limits the benefits that we are able to provide to U.S.-based executive officers under our tax-qualified plan, the AXIS 401(k) & Savings Plan. The U.S. Supplemental Plan is relatively inexpensive to provide in relation to the valuable benefits it provides to the participants that help us attract and retain key executive officers.

In January 2004, AXIS implemented supplemental retirement plans for Messrs. Charman and Butt. The plans are described more fully below under the Pension Plan table, but generally require us to make annual payments to Mr. Charman upon retirement for a period of twenty years and Mr. Butt upon retirement for a period of ten years. If the executive dies, is permanently disabled or a change of control of the Company occurs, the remaining benefits become fully vested and are payable in a lump sum. Payments and vesting are accelerated upon these events because these are circumstances where the executive and his family would likely need additional security. These plans were established to provide competitive retirement benefits for our most senior leaders and to increase retention.

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Severance Benefits:

Although we do not maintain a general severance plan for our executive officers, each of our executive officers has rights upon termination of his employment under his employment agreement. The terms and conditions of the separation benefits and payments are described in detail in the section entitled “Potential Payments Upon Termination or Change in Control.”  We provide these benefits in order to be competitive as an employer. We generally provide certain benefits upon an executive officer’s death or disability in part because these are circumstances where the executive officer and his family would likely need additional security, and we wish to reward loyal service with benefits at the time they are most needed. We also provide various benefits in connection with a change in control, in part because a change in control situation often undermines our executive officers’ job security, and it is to our benefit to encourage the executive officers to seek out beneficial business transactions and to remain with us through the closing of the transaction, even though their futures may be uncertain as a result.

We provide executive officers with benefits and severance payments if we terminate them without cause, and in some cases if they voluntarily leave under certain circumstances. These benefits add a level of security to the executive officer’s position. We believe that they are needed to attract and retain talented executive officers in our industry. These provisions encourage individuals to move from more established firms in the industry to our firm, which has less history, and help attract individuals from outside of the industry to take a position in our industry, which is generally more volatile. In addition, we face significant competition within our industry for experienced leaders, and we believe that these benefits are needed to remain competitive as an employer. Furthermore, we provide these benefits in part so that we can obtain valuable agreements from the executive officers to assign to us certain intellectual property rights, not to compete with us for a certain period of time after leaving, not to solicit our employees or customers, and to maintain the confidentiality of our information. Moreover, providing termination payments allows us to obtain a release of claims from the executive officer upon their departure from AXIS, which we consider a valuable benefit to us.

In 2006, in connection with Mr. Cook’s termination of employment, we entered into a separation agreement with him that included (i) the payments and benefits provided under his employment agreement, (ii) a customary general release, (iii) a renewal of his agreements to assign to us certain intellectual property rights, not to solicit our employees or customers, and to maintain the confidentiality of our information, and (iv) an agreement not to make disparaging statements about us. We also entered into a short-term consulting agreement with Mr. Cook to obtain his assistance with the transition of his duties for a period of time after his termination date while we searched for his replacement.

Other Compensation:

Because our business is global and we are headquartered in Bermuda, many of our executive officers are required to relocate or to maintain a second residence in order to work for us. To reduce the likelihood that this factor will prevent talented executive officers from joining AXIS, we provide reimbursements for a certain amount of personal travel for return trips home to executive officers who work away from their home countries, as well as in some cases housing and/or automobile allowances to help defray the cost of maintaining a second residence or working in multiple locations. We also provide certain other perquisites and benefits, as well as the general health plan and other benefits provided to all employees, which make us a competitive employer and do not represent a significant cost to us. These benefits also provide our executive officers with the security and convenience that allows them to focus their attention on carrying out their responsibilities to AXIS.

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Compensation Committee Report

The following report is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules or the liabilities of Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by the Company under the Securities Act or the Exchange Act.

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement. Based on the review and discussions referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

 

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Summary Compensation Table

The following table sets forth compensation earned by (i) each individual who served as a Chief Executive Officer of AXIS in 2006, (ii) each individual who served as a Chief Financial Officer of AXIS in 2006, and (iii) the other three most highly compensated executive officers for the year ended December 31, 2006. These individuals are referred to as the “named executive officers.”

(1)             The assumptions made in the valuation of the stock awards are located in note 14 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

(2)             The assumptions made in the valuation of the option awards are located in note 14 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

(3)             Mr. Greenfield joined the Company on August 1, 2006.

(4)             Mr. Cook’s employment with the Company terminated on April 1, 2006. The amount shown in the Option Awards column for Mr. Cook includes the value of acceleration of option vesting in connection with his separation agreement. The amount shown in the Stock Awards column for Mr. Cook includes the value of acceleration of vesting for previous restricted stock awards in connection with his separation agreement.

(5)             Mr. Gressier’s annual base salary in effect through September 8, 2006, when he was based in the United Kingdom, was £500,000, which yielded actual salary payments of £344,872. This amount is converted to U.S. Dollars using the average of the daily rates of exchange from January 1, 2006 through and including September 29, 2006. The total amount shown is the sum of his salary while based in the United Kingdom, as converted to U.S. Dollars, plus $246,154, his salary in U.S. dollars from and after September 11, 2006, when he was based in Bermuda and received an annual base salary of $800,000.

(6)             The amount for Mr. Charman includes reimbursement for the cost of personal travel between the U.S., Bermuda and the United Kingdom, as provided in his employment agreement, $85,000 for club membership fees, payment for financial and tax planning services, $180,000 in housing allowances, payment for a personal Internet account, $25,777 in premiums we paid for term life insurance (£14,700 converted to U.S. dollars using an exchange rate of 1.7535), $17,049 for Bermuda employee payroll taxes paid by the Company, company-paid premiums for additional medical coverage for Mr. Charman and his children in the United Kingdom (converted from British Pounds to U.S. Dollars based on the exchange rate on June 6, 2006, the date the premium was paid), $12,547 in interest on unpaid dividends accrued for restricted stock, $125,000 in Company contributions to the International retirement plan and $180,987 reflecting the incremental cost to us for personal use of aircraft that we lease. The incremental cost to us for personal use of corporate aircraft is based on the variable operating costs, including fuel costs, hourly costs, landing fees, and other miscellaneous variable costs. Fixed costs that do not change based on usage, such as the

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lease costs for the aircraft, are not included. On certain occasions, an executive officer’s family member or other guest may accompany the executive on a flight. The additional direct operation cost incurred in these situations is included.

(7)             The amount for Mr. Butt includes reimbursement for car maintenance, license and insurance, club membership fees, payment for financial and tax planning services, reimbursement for the cost of personal travel between Bermuda and Europe, as provided in his service agreement, reimbursements for an executive physical, $17,049 for Bermuda employee payroll taxes paid by the Company, $180,000 in housing allowances, $85,000 in Company contributions to the International retirement plan and $47,647 reflecting the incremental cost to us for personal use of aircraft that we lease. The incremental cost to us for personal use of corporate aircraft is based on the variable operating costs, including fuel costs, hourly costs, landing fees, and other miscellaneous variable costs. Fixed costs that do not change based on usage, such as the lease costs for the aircraft, are not included. On certain occasions, an executive officer’s family member or other guest may accompany the executive on a flight. The additional direct operation cost incurred in these situations is included.

(8)             The amount for Mr. Greenfield includes $19,913 in Company contributions under the AXIS 401(k) & Savings Plan.

(9)             The amount for Mr. Gressier includes club membership fees, an automobile allowance, payment for personal income tax and planning services (which is converted from British Pounds to U.S. Dollars using an exchange rate of 1.907 and from Euros to U.S. Dollars using an exchange rate of 1.276), $60,000 in housing allowances, $47,707 for relocation costs (£24,351 converted to U.S. dollars using the rate of exchange on December 31, 2006), $24,615 for Company contributions to the International retirement plan, $67,166 for Company contributions to the United Kingdom retirement plan (£36,941, converted to U.S. dollars based on the average of the daily exchange rates from January 1, 2006 through and including September 23, 2006), and $25,920 in additional cash payments we made to Mr. Gressier to compensate him for a limitation on Company contributions to the United Kingdom retirement plan imposed by United Kingdom law (£14,790, converted to U.S. dollars based on the average of the daily exchange rates from January 1, 2006 through and including March 31, 2006).

    (10) The amount for Mr. Fischer includes an automobile allowance, club dues, payment for personal income tax and planning services, $31,053 in reimbursements for home trips, as provided in his employment agreement, payment for a personal Internet account, $204,000 in housing allowances, $103,420 in tax gross-up payments related to his housing allowance, $53,000 in Company contributions under the U.S. Supplemental Retirement Plan, $17,049 for Bermuda employee payroll taxes paid by the Company, and $22,000 in Company contributions to the AXIS 401(k) & Savings Plan.

    (11) The amount for Mr. Cook includes an automobile allowance, club dues, payment for a personal Internet account, $90,000 in housing allowances and a $14,056 security deposit we paid for his housing in Bermuda that has not yet been refunded to us, although we are pursuing return of this security deposit, and $11,813 for Company contributions to the International retirement plan. The amount for Mr. Cook also includes $472,500 in severance paid pursuant to his separation agreement and $25,000 for repatriation, as described in more detail under the section entitled “Potential Payments Upon Termination or Change in Control” below, and $118,125 paid pursuant to the consulting agreement that he entered into with us upon his termination of employment in April 2006.

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Grants of Plan-Based Awards in 2006

(1)             Grant of restricted stock under the 2003 Long-Term Equity Compensation Plan.

(2)             The assumptions made in the valuation of the awards are located in note 14 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

(3)             Prorated 50% to reflect Mr. Greenfield’s participation for two fiscal quarters during 2006.

Employment Agreements with Executive Officers

John R. Charman

Under Mr. Charman’s employment agreement, dated as of December 15, 2003, Mr. Charman serves as our Chief Executive Officer and President, a member of our Board of Directors and a member of the Executive Committee of our Board of Directors. Mr. Charman’s term of service under this agreement continues until December 31, 2008, at which time he has indicated that he intends to retire. Under the employment agreement, Mr. Charman is entitled to an annual base salary of at least $1,250,000, which was his annual salary during 2006, and an annual target incentive bonus opportunity of at least 150% of his base salary. Mr. Charman is entitled to participate in all incentive plans and all employee benefit plans in which our senior executives are eligible to participate.

Mr.  Charman is also entitled to: (i) reimbursement for membership in two clubs in London or Bermuda; (ii) reimbursement of first-class air fare for up to 14 personal trips per year for Mr. Charman or members of his family between London and Bermuda, Bermuda and New York, London and New York, Bermuda and Newark, or London and Newark; (iii) financial and tax planning and tax return preparation up to $10,000 per year; (iv) $15,000 per month housing allowance for residence in Bermuda; (v) use of a luxury automobile; and (vi) any other fringe benefits provided to our senior executives generally. In addition to his Bermuda medical benefits, which are the same as we provide to all of our Bermuda employees, we also provide Mr. Charman with medical coverage for him and his children in the United Kingdom. These benefits are reflected in the “All Other Compensation” column of the Summary Compensation Table and the related footnote.

The employment agreement also entitles Mr. Charman to a supplemental executive retirement benefit, which has been established and is the subject of a separate written agreement that is described under the Pension Plans table, below. Mr. Charman’s employment agreement provides for certain benefits

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upon termination of his employment for various reasons, as described below in the section entitled “Potential Payments Upon Termination or Change in Control.”

Michael A. Butt

Mr.  Butt serves as Chairman of our Board of Directors under a service agreement dated as of December 15, 2003, as amended January 1, 2006. Mr. Butt’s term of service under this agreement continues until December 31, 2009. Under the service agreement, Mr. Butt is entitled to an annual base salary of at least $850,000, which was his annual salary during 2006, and an annual target incentive bonus opportunity of no less than 125% of his base salary. Mr. Butt is entitled to participate in all incentive plans and all employee benefit plans in which our senior executives are eligible to participate.

Mr.  Butt is also entitled to: (i) reimbursement for membership in two clubs in Bermuda; (ii) reimbursement of first-class air fare for up to four personal trips per year for Mr. Butt or members of his family between Bermuda and Europe; (iii) financial and tax planning and tax return preparation up to $10,000 per year; and (iv) any other fringe benefits provided to our senior executives generally. These benefits are reflected in the “All Other Compensation” column of the Summary Compensation Table and the related footnote.

The service agreement also entitles Mr. Butt to a supplemental executive retirement benefit, which has been established and is the subject of a separate written agreement that is described under the Pension Plans table, below. Mr. Butt’s employment agreement provides for certain benefits upon termination of his employment for various reasons, as described below in the section entitled “Potential Payments Upon Termination or Change in Control.”

David B. Greenfield

On September 8, 2006, we entered into an employment agreement with Mr. Greenfield, our current Executive Vice President and Chief Financial Officer. Mr. Greenfield’s term of service under the agreement continues until September 8, 2009, and then renews each year for one-year terms unless either we or Mr. Greenfield provide written notice of termination at least six months prior to the end of the term. Under the employment agreement, Mr. Greenfield is entitled to an annual base salary of at least $475,000 and an annual bonus payable at our discretion. The employment agreement entitles Mr. Greenfield to a minimum annual bonus of $200,000 for 2006. In addition, the employment agreement required us to grant Mr. Greenfield 10,000 restricted shares of our common stock under our 2003 Long-Term Equity Compensation Plan, described below. These restricted shares are reflected in the Summary Compensation Table and the Grant of Plan-Based Awards Table above, and vest on the third anniversary of their date of grant.

Under the employment agreement, Mr. Greenfield is entitled to: (i) reimbursement on an after-tax basis for the cost of suitable accommodations and related expenses while Mr. Greenfield works in Bermuda; (ii) reimbursement for the use of an automobile, if necessary while he works in Bermuda; (iii) reimbursement for initiation fees and annual membership in one private club; (iv) up to $10,000 per year in costs of annual tax return preparation and tax planning services; and (v) other employee benefits we provide to senior executives generally. These benefits are reflected in the “All Other Compensation” column of the Summary Compensation Table and the related footnote. Under the employment agreement, Mr. Greenfield assigned to us certain intellectual property rights to which he might otherwise be entitled.

Mr.  Greenfield’s employment agreement provides for certain benefits upon termination of his employment for various reasons, as described below in the section entitled “Potential Payments Upon Termination or Change in Control.”

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John Gressier

Under Mr. Gressier’s employment agreement, dated November 21, 2002, he served as Chief Executive Officer and President of AXIS Global Insurance beginning January 4, 2002, and now serves as our Chairman of AXIS Insurance. Mr. Gressier’s employment was based in the United Kingdom for the first part of 2006. In September of 2006, Mr. Gressier transferred to Bermuda. Under the employment agreement, Mr. Gressier is entitled to an annual base salary of at least £250,000. Mr. Gressier’s annual base salary rate in effect for 2006 was £500,000 ($940,600, based on the exchange rate on September 8, 2006, his last day of work in the United Kingdom) for the portion of the year during which he worked in the United Kingdom, and $800,000 for the portion of the year during which he worked in Bermuda. Mr. Gressier is also entitled to an annual bonus and equity awards at our discretion.

Under the employment agreement, Mr. Gressier is also entitled to employee benefits, including long-term disability insurance and private medical insurance, and participation in a pension program with a company contribution equal to 15% of base salary. In addition, although not required under Mr. Gressier’s employment agreement, when Mr. Gressier transferred to Bermuda we paid his relocation expenses and began paying him a $15,000 per month housing allowance and an automobile allowance, as well as providing him with up to four trips home per year for him and his family. Mr. Gressier also receives reimbursement for income tax and financial planning services. These benefits are reflected in the “All Other Compensation” column of the Summary Compensation Table and the related footnote. Under the employment agreement, Mr. Gressier assigned to us certain intellectual property rights to which he might otherwise be entitled.

Mr.  Gressier’s employment agreement provides for certain benefits upon termination of his employment for various reasons, as described below in the section entitled “Potential Payments Upon Termination or Change in Control.”

William A. Fischer

Under Mr. Fischer’s employment agreement, dated as of January 1, 2004, Mr. Fischer has agreed to serve as Chief Executive Officer and President of AXIS Global Reinsurance, which we now refer to as AXIS Re Bermuda, or in such other position as we mutually agree upon. Mr. Fischer’s term of service under this agreement is automatically renewed each December 31 unless we or Mr. Fischer provide notice of termination of his employment at least six months prior to the end of the term. Mr. Fischer is entitled to an annual base salary of at least $575,000 under the employment agreement, and received an annual base salary of $750,000 during 2006.

Under the employment agreement, Mr. Fischer is also entitled to: (i) an annual bonus payable at our discretion; (ii) a housing allowance of up to $18,000 per month; (iii) a $900 per month automobile allowance; (iv) four return trips home for him and his family each calendar year; (v) reimbursement for membership in two private clubs; and (vi) costs of an accountant to prepare his personal tax returns in the United States. In addition, we reimburse Mr. Fischer for the cost of personal Internet service. These benefits are reflected in the “All Other Compensation” column of the Summary Compensation Table and the related footnote. Under the employment agreement, Mr. Fischer assigned to us certain intellectual property rights to which he might otherwise be entitled.

Mr.  Fischer’s employment agreement provides for certain benefits upon termination of his employment for various reasons, as described below in the section entitled “Potential Payments Upon Termination or Change in Control.”

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Andrew Cook

Under Mr. Cook’s employment agreement, Mr. Cook served as our Chief Financial Officer. Mr. Cook terminated employment with us on April 1, 2006. Prior to his termination, Mr. Cook received an annual base salary of $472,500 and an annual bonus payable at our discretion. We also granted Mr. Cook options and restricted shares and provided Mr. Cook with general employee benefits, a $15,000 per month housing allowance, a $900 per month automobile allowance, four annual return trips home for him and his family, reimbursement for membership in two private clubs, and reimbursement for an accountant to prepare tax returns in Canada or the United Kingdom. We also reimbursed Mr. Cook for the cost of personal Internet service. The above benefits are reflected in the “All Other Compensation” column of the Summary Compensation Table and the related footnote.

Upon his termination, we entered into a separation agreement with Mr. Cook that provided for the benefits described below in the section entitled “Potential Payments Upon Termination or Change in Control.”  The amounts in the Summary Compensation Table include his termination payments.

Upon Mr. Cook’s termination of employment, we also entered into a consulting agreement with Mr. Cook, under which Mr. Cook acted as a finance advisor to assist us on finance matters through June 30, 2006. Mr. Cook received a total of $118,135 for his services under the consulting agreement, which is included in the amount shown in the “All Other Compensation” column for Mr. Cook in the Summary Compensation Table above. Mr. Cook was not entitled to any other compensation for his consulting services. Under the consulting agreement, Mr. Cook assigned to us certain intellectual property rights to which he might otherwise be entitled, agreed to ongoing confidentiality provisions, and agreed to a non-competition restriction through August 1, 2006.

2003 Long-Term Equity Compensation Plan

Our Board of Directors has adopted and our shareholders have approved the AXIS Capital Holdings Limited 2003 Long-Term Equity Compensation Plan, or “LTEP”. The LTEP provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, performance shares, performance unit awards and share purchase rights to our employees, directors and consultants. The Compensation Committee has broad authority to administer the plan, including the authority to select plan participants, determine when awards will be made, determine the type and amount of awards, determine the exercise price of options and stock appreciation rights, determine any limitations, restrictions or conditions applicable to each award, and determine the terms of any agreement or other document that evidences an award. During 2006, our executive officers received only restricted stock awards under this plan. However, pursuant to his separation agreement, Mr. Cook received accelerated vesting of his outstanding awards under this plan during 2006, which is included in the amounts shown in the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table. We are currently proposing to adopt a new 2007 Long-Term Equity Compensation Plan that will be used in place of the LTEP for granting equity awards in the future, as described in Proposal 2, below.

Restricted Stock

Restricted stock awards represent a grant of shares of our common stock, subject to restrictions on transfer of the shares, any other restrictions the Compensation Committee imposes, and forfeiture of the shares if the participant terminates employment before the shares vest. The restricted stock we granted during 2006 vests (and the restrictions lapse) with respect to 100% of the shares on the third anniversary of the date of grant. Vesting is fully accelerated upon the retirement, death or permanent disability of the participant or a change in control, as described below in the section entitled “Potential Payments Upon Termination or Change in Control.”  Holders of restricted stock may be credited with regular dividends paid with respect to the underlying shares while they are unvested, and the dividends may accrue interest

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until paid. In 2006, we credited restricted stockholders with dividends on unvested shares of restricted stock, and credited interest on those dividend amounts. The interest rate is based on the interest we receive from our corporate bank account, which for 2006 was 4.75% annual percentage yield. The dividends are held by the Company subject to forfeiture to the same extent as the shares to which they relate, and are paid when the restricted stock becomes vested.

Annual Incentive Plan

We fund annual incentive payments, which we refer to as the annual bonus, under our 2004 Annual Incentive Plan to provide performance-based annual bonuses for our employees. The funding for the Annual Incentive Plan for 2006 is tied directly to our return on average shareholders’ common equity, or “ROACE”, which is equal to our net income for the year, divided by our average common shareholders equity for the year. If ROACE performance targets are met or exceeded, we fund a total annual incentive plan pool equal to or greater than the aggregate of all target bonuses. If the performance is below target, our Compensation Committee reviews our performance with respect to our peer group to determine the level of payments to be made (if any) under the plan in its discretion.

Once the pool is established, individual awards are based on a portion of the total pool amount available, adjusted for the employee’s individual performance. The Chief Executive Officer determines the individual performance and the amount of annual incentive for each named executive officer, and makes a recommendation to the Compensation Committee. The Compensation Committee reviews the recommendations and determines the appropriate bonus amount, within the restrictions of the total pool, for the executive officers. The Compensation Committee also evaluates the Chief Executive Officer’s performance in its discretion and determines his incentive award under the plan. All individual awards for executive officers are at the discretion of the Compensation Committee, except that Mr. Charman’s and Mr. Butt’s individual awards must at least equal the target bonus amount if the performance goals are satisfied, per their employment agreements. The individual awards may range from 0% of their individual target for individuals whose performance was unsatisfactory during the year, to 100% or more of their individual target for those who met expectations for the year, to an uncapped percentage of salary for those who exceeded expectations for the year as determined by the annual performance review process. However, the total payments made under the plan to all employees, including executive officers, cannot exceed the overall pool funding level established by the Compensation Committee. Each eligible employee that is granted an incentive payment and that is employed on the date incentives are paid receives his or her bonus in cash early in the following year.

At the beginning of 2006, the Compensation Committee established the performance metrics for the Annual Incentive Plan. For 2006, the Compensation Committee determined that if AXIS achieved a designated target ROACE, the total bonus pool paid under the Annual Incentive Plan would be equal to 100% of the total target bonus amount for all employees. If AXIS were to achieve ROACE of at least 115% of the ROACE performance target, designated as “superior performance”, we would fund the Annual Incentive Plan at 150% of the total target pool amount. In the event of performance below the target level or over the superior level, the Compensation Committee retained the discretion to approve an incentive pool amount appropriate in its judgment. In 2006, our ROACE was well above the superior performance level. The Compensation Committee consequently funded the total Annual Incentive Plan pool at 186% of the target pool amount.

We previously established individual target annual bonuses expressed as a percentage of annual salary for each executive officer based on salary grade, and in accordance with the employment agreement requirements for Messrs. Charman and Butt. The previously established targets continued to apply in 2006, as follows:  Mr. Charman—150% of his base annual salary; Messrs. Greenfield, Gressier, Fischer, and Cook—100% of their respective base annual salaries. In addition, during 2006, Mr. Butt’s target percentage was increased from 100% to 125%, as reflected in an amendment to his employment

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agreement. At the end of the year, based on the level of Company performance, the Compensation Committee allocated to each of the named executive officers a portion of the Annual Incentive Plan bonus pool equal to the target percentage of annual salary, multiplied by 200%. In addition, the executive officers, including the named executive officers, received a portion of the amount of the bonus pool that exceeded 150% of the target pool amount, as a result of the ROACE exceeding superior performance. The Committee determined an amount for Mr. Greenfield in its discretion, based on his contributions during his partial year of employment for 2006.

Retirement Benefits

We maintain retirement plans for our employees, including executive officers, in Bermuda (an unregistered, international retirement plan), the United Kingdom, and the United States. Messrs. Charman, Butt and Cook participated in the AXIS Specialty Limited International Pension Plan, our International retirement plan, during 2006. Mr. Gressier participated in the United Kingdom plan for part of the year and the International plan for the remainder of the year, based on the portion of the year in which he worked in each location. Messrs. Greenfield and Fischer participated in the AXIS 401(k) & Savings Plan during 2006.

The International plan permits employees to make contributions to their own accounts in the plan, and requires us to contribute an amount equal to at least 10% of each participant’s earnings each year, reduced by any amounts that we are required to contribute to another plan, although we may contribute more in our discretion. For 2006, we contributed an amount equal to 10% of base salary to the International plan. Our contributions to the International plan vest fully after the employee has been in the plan for two years. Benefits are paid after termination of employment or at age 65, by purchase of an annuity or other method permitted by law and selected by the employee.

The United Kingdom stakeholder pension plan permits employees to make contributions to their own accounts in the plan, and requires us to contribute an amount equal to 15% of each participant’s pay each year. During the first three months of 2006, our 15% contribution could only be made on the first £105,000 of base salary due to legal limitations. For these months, we paid Mr. Gressier an additional cash payment in the amount that we would have contributed to the United Kingdom plan on his behalf if this limitation were not in effect. However, beginning in April of 2006, this limitation on salary taken into account under the United Kingdom plan was lifted, and contributions from April until Mr. Gressier’s transfer in September were equal to 15% of the full amount of base salary. Benefits are always fully vested, are payable after age 50, and will generally be paid as an annuity although the employee can elect to take a partial lump sum.

In the United States, we maintain the AXIS 401(k) & Savings Plan, under which employees may contribute a portion of their earnings on a tax-deferred basis and we make matching contributions. We may also make profit sharing contributions on a discretionary basis. For 2006, we made matching contribution equal to 100% of each employee’s contributions, subject to a maximum match of 4% of eligible earnings. We also made a profit sharing contribution equal to 6% of each participant’s eligible earnings. For purposes of calculating the matching and profit sharing contributions, only the first $220,000 of each executive officer’s earnings was taken into account, due to limitations imposed by the Internal Revenue Code. Executive officers are always fully vested in our matching contributions, and vest in our profit sharing contributions 25% per year, with full vesting in the plan after four years of service. Benefits are distributable upon termination of employment or upon reaching age 59½.

In addition, we provide non-tax-qualified retirement programs as described in detail below under the Pension Benefits table and the Nonqualified Deferred Compensation table.

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Additional Benefits

We maintain an Executive Health Exam Program, under which we pay for a bi-annual physical examination for each of our executive officers. Executive officers are required to participate in this program. Each of our executive officers was required to have a physical exam between June 1, 2004 and May 31, 2006, and each executive must have a physical exam between June 1, 2006 and May 31, 2008. The exam is customized for each executive to meet his needs, and thus the value varies from executive to executive, but the cost of the exam is approximately $2,000 on average. We pay the full cost of the physical examination, plus any travel-related expenses. We reimbursed Mr. Butt for a physical examination he received during 2006, which is included in the amount shown for Mr. Butt in the “All Other Compensation” column of the Summary Compensation Table above.

In addition, we provide Mr. Charman with an additional life insurance benefit that is not provided to our other executive officers or employees. This benefit is described below under the heading “Potential Payments Upon Termination or Change in Control,” and the premiums are included in the amounts shown in the “All Other Compensation” column of the Summary Compensation Table for Mr. Charman.

In 2005, our Compensation Committee adopted a formal practice permitting personal use of corporate aircraft by certain of our executive officers. We permit our Chairman to use corporate aircraft for up to 12 personal trips per year, and we allow our Chief Executive Officer 24 trips per year. A trip is defined as round-trip travel from Bermuda to the east coast of the United States, from Bermuda to Europe, or travel within Europe.

The Bermudan government imposes payroll taxes and social insurance taxes as a percentage of the employee’s salary, a portion of which is the employer’s responsibility and a portion of which may be charged to the employee. We pay the employee’s share of these taxes for all of our employees, including executive officers. This amount is included in the “All Other Compensation” column of the Summary Compensation Table above for all of our executive officers who are subject to these taxes.

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Outstanding Equity Awards at 2006 Fiscal Year-End

The following table sets forth information regarding all outstanding equity awards held by the named executive officers at December 31, 2006.

(1)        All options vest 1/3 on each anniversary of the date of grant.

(2)        All restricted stock grants vest in full on the third anniversary of the date of grant.

(3)        Based on the closing price of our common stock on December 29, 2006, which was $33.37.

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