Tapping a team of insurance industry veterans, Robert Clements, on behalf of Arch Capital Group Ltd., a Bermuda-based insurance and financial services company (Nasdaq: ACGL), today announced that Arch Capital will launch a new underwriting initiative to meet current and future demand in the global insurance marketplace. Simultaneously, Mr. Clements announced that Warburg Pincus and Hellman & Friedman together would invest $750 million in the company to support Arch's underwriting activities.

The firm's senior management team now will include Paul Ingrey, formerly Chairman of F&G Re; Dwight Evans, formerly Executive Vice President, North American Property for St. Paul Re and F&G Re; and Marc Grandisson, Vice President and Actuary of the reinsurance division of Berkshire Hathaway. The new senior Arch reinsurance group team represents more than 70 years of management experience in the reinsurance business.

Warburg Pincus will invest $500 million and Hellman & Friedman will invest $250 million to purchase Series A Convertible Preference Shares and Class A warrants of Arch Capital. The company's Board of Directors has approved the transaction unanimously and the financing will raise the company's total invested capital to over $1 billion.

Peter Appel, President and CEO of Arch Capital, said: "Our strategy over the last year and a half has been to build a specialty insurance business with a platform that allows us to generate both premium and fee income. The recent acceleration of the already improving pricing conditions in the marketplace has led us to conclude that we should pursue the underwriting opportunities that currently are before us, provided we could access significant capital and pair it with great underwriting talent. We are especially pleased to be able to link the advantages of our platform with this extraordinary underwriting team and two of the most highly regarded private equity investors in the world."

"We're pleased to be partnering with this proven and talented management team in order to take this company to the next level and enable it to provide insurance capacity on a global basis," said Kewsong Lee, a Managing Director at Warburg Pincus, which previously launched RenaissanceRe Holdings Ltd., a Bermuda-based reinsurance company founded in 1993. "We were able to move extremely quickly to structure this investment because of our prior experience and success in this industry, the track record of Bob Clements, and his and our historical relationship with Paul Ingrey. This investment will provide Arch Capital with the balance sheet strength necessary to help satisfy today's critical need for reinsurance and insurance products," Mr. Lee said.

Added Jack Bunce, a Managing Director of Hellman & Friedman, which invested in Mid Ocean Reinsurance, a Bermuda-based reinsurance company founded in 1992: "The combination of Arch's great management, lots of clean capital and a good market opportunity makes this investment very attractive to us. We believe Arch is well positioned to provide reinsurance capacity in a market where capacity has shrunk and demand may have risen as a result of a higher awareness of risk in the global insurance marketplace."

The company also announced the appointment of John Pasquesi to the Board of Directors and to the position of Vice Chairman. Mr. Pasquesi, a former Managing Director of Hellman & Friedman, is a private investor based in San Francisco. He was formerly a director of Mid Ocean Reinsurance and chairman of its finance committee. Mr. Clements will remain Chairman of the Board, and Mr. Appel will continue as President and CEO of Arch Capital Group Ltd.

"We enthusiastically welcome the new members of our reinsurance management team, who will play a pivotal role in the company's immediate and longer-term success," added Mr. Appel of Arch.

Mr. Ingrey has been appointed to the board and will become the Chairman and CEO of Arch Reinsurance Ltd., the company's reinsurance subsidiary. He will have management responsibility for the overall insurance and reinsurance operations of the Arch Capital organization. Mr. Ingrey has 36 years of experience in the insurance industry. He was the founder of F&G Re and served as its chairman and chief executive officer. Prior to that, he was senior vice president of Prudential Reinsurance (now Everest Re). He has also served as a director of USF&G and E.W. Blanch and is currently on the board of Fairfax Financial Holdings.

Commenting on the investment, Mr. Ingrey said: "We are extremely excited by the opportunities in front of us. Arch is a terrific platform on which to build because it places us in the market immediately with the capacity to write January renewal business. The security of $1 billion of clean capital will be highly attractive to the market. Furthermore, we will continue to build our reinsurance team in order to become a significant player in this segment of the insurance industry."

Mr. Evans will become the President of Arch Reinsurance. With 26 years of experience in the insurance industry, he has served in senior management positions at St. Paul Re and F&G Re.

Mr. Grandisson will become Senior Vice President and Chief Actuary of Arch Reinsurance. In addition to his positions at Berkshire Hathaway, he also held various posts at F&G Re.

The financing transaction and addition of new executives is designed to position the company to address the current and anticipated future needs for capacity in the global insurance marketplace. With the newly announced investment from Warburg Pincus and Hellman & Friedman, the company is expected to significantly expand underwriting activities this quarter, initially with a primary focus on reinsurance.

The preference shares purchased by Warburg Pincus and Hellman & Friedman will be convertible into the company's common shares. The purchase price of the preference shares will be equal to the company's book value per share on June 30, 2001, adjusted for transaction-related expenses and to reflect a mark-to-market on the company's investment portfolio (excluding non-public securities) as of closing. The purchase price is subject to adjustment based on a post-closing audit and would be reduced by $1.50 per share if the company's outstanding Class B warrants vest. The purchase price may be adjusted based on actual loss experience on the company's existing book of business and on values realized on disposition of non-core assets, as well as for certain contingent tax- and litigation-related liabilities.

After the consummation of the transaction, the company will hold a shareholders meeting in order to obtain shareholder approval for an amendment of the company's by-laws. The by-laws generally prohibit any shareholder from voting more than 9.9% of the voting power of all shares of the company. Under the proposed amendment, Warburg Pincus and Hellman & Friedman will not generally be subject to this restriction. In addition, in order to comply with the rules of the Nasdaq Stock Market, the company also will seek shareholder approval to permit convertibility of all of the preference shares into common shares.

The closing of the transaction will be subject to satisfaction of customary conditions.

About Arch Capital Group Ltd.

Arch Capital Group Ltd. is a Bermuda-based, diversified financial services company that is engaged in a range of insurance and financial service activities through subsidiaries comprising its Arch Insurance Services division and the ownership of intermediaries, underwriting agencies, service providers and insurance companies. Upon the closing of this transaction, Arch Capital will have more than $1 billion in equity capital.

About Hellman & Friedman LLC

Hellman & Friedman LLC is a San Francisco-based private equity investment firm. Since its founding in 1984, the firm has raised and managed more than $4.9 billion of committed capital that it has invested in over 40 companies. The firm's strategy is to invest in superior business franchises and to be a knowledgeable, value-added, and flexible investor in select service industries such as financial services, media, professional services, information services and communications. Representative investments include Mid Ocean Reinsurance; The Nasdaq Stock Market, Inc.; Franklin Resources, Inc.; Young & Rubicam, Inc.; Formula One Holdings, Ltd.; Western Wireless Corporation (Nasdaq: WWCA); VoiceStream Wireless Corporation; Eller Media Company, Inc.; and others. For more information on Hellman & Friedman, visit www.hf.com.

About Warburg Pincus

Warburg Pincus is one of the largest private equity investment firms in the world. Working in partnership with management teams, Warburg Pincus has taken an active role in building businesses, including companies such as RenaissanceRe Holdings Ltd. (NYSE: RNR), Dime Bancorp, Inc. (NYSE: DME), Mellon Bank Corporation (NYSE: MEL), Knoll, Inc., BEA Systems (Nasdaq:BEAS) and VERITAS Software Corp. (Nasdaq:VRTS). Since 1971, Warburg Pincus has invested approximately $12 billion in 450 companies in 29 countries. The firm currently has $10 billion under management, with an additional $5 billion available for investment in a range of industries including: financial services, communications, healthcare and life sciences, information technology, media and natural resources. Throughout its 30-year history in private equity, Warburg Pincus has invested at all stages of a company's life cycle, from founding start-ups and providing growth capital to leading restructurings, recapitalizations and buy-outs. Further information is available at www.warburgpincus.com.

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. may include forward-looking statements that reflect the company's current views with respect to future events and financial performance. All statements other than statements of historical fact included in this release are forward-looking statements. Forward-looking statements involve the company's current assessment of risks and uncertainties, including statements regarding the completion of the proposed financing transaction, expected benefits of the transaction, anticipated future financial results and prospects for the reinsurance markets generally. Actual events and results and prospects for the reinsurance markets may differ materially from those expressed or implied in these statements. In addition to risks and uncertainties related to the company's business described in filings by the company with the Securities Exchange Commission, the transactions described in this release are subject to various risks and uncertainties including, but not limited to, the risks that the conditions to closing will not be satisfied, as well as risks relating to the successful integration of new management personnel into the company's existing structure and conditions in the insurance and reinsurance markets. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contacts:

Contacts: