Assured Guaranty

Exhibit 4.1

Replacement Capital Covenant, dated as of December 20, 2006 (this “ Replacement Capital Covenant ”), by Assured Guaranty U.S. Holdings Inc., a Delaware corporation (together with its successors and assigns, the “ Corporation ”), and Assured Guaranty Ltd., a Bermuda company (together with its successors and assigns, the “ Guarantor ”), in favor of and for the benefit of each Covered Debtholder (as defined below).

Recitals

A.            On the date hereof, the Corporation is issuing $150,000,000 aggregate principal amount of its Series A Enhanced Junior Subordinated Debentures due 2066 (the “ Capital Securities ”), which Capital Securities are being issued pursuant to, and fully and unconditionally guaranteed by the Guarantor in accordance with, the Subordinated Indenture, dated as of December 1, 2006, among the Corporation, the Guarantor and The Bank of New York, as subordinated indenture trustee (the “ Trustee ”), as supplemented by the First Supplemental Subordinated Indenture, dated as of December 20, 2006, among the Corporation, the Guarantor and the Trustee (the “ Supplemental Indenture ” and, together with the Subordinated Indenture, the “ Indenture ”).

B.            This Replacement Capital Covenant is the “ Replacement Capital Covenant ” referred to in the Prospectus Supplement, dated  December 13, 2006, relating to the Capital Securities (together with the accompanying Prospectus, dated June 30, 2005, the “ Prospectus ”).

C.            The Corporation and the Guarantor are entering into and disclosing the contents of this Replacement Capital Covenant in the manner provided below with the intent that the covenants provided for in this Replacement Capital Covenant be enforceable by each Covered Debtholder and that the Corporation and the Guarantor be stopped from disregarding the covenants in this Replacement Capital Covenant, in each case to the fullest extent permitted by applicable law.

D.            The Corporation and the Guarantor acknowledge that reliance by each Covered Debtholder upon the covenants in this Replacement Capital Covenant is reasonable and foreseeable by the Corporation and the Guarantor and that, were the Corporation or the Guarantor to disregard their respective covenants in this Replacement Capital Covenant, each Covered Debtholder would have sustained an injury as a result of its reliance on such covenants.

NOW, THEREFORE, the Corporation and the Guarantor hereby covenant and agree as follows in favor of and for the benefit of each Covered Debtholder.

Section 1 .  Definitions.  Capitalized terms used in this Replacement Capital Covenant (including the Recitals) have the meanings set forth in Schedule I hereto.

Section 2 .  Limitations on Redemption, Repurchase, or Purchase of Capital Securities.  The Corporation and the Guarantor hereby promise and covenant to and for the benefit of each Covered Debtholder that the Corporation shall not redeem or repurchase all or any part of the Capital Securities, and the Guarantor shall not, and shall cause its Subsidiaries not to, purchase all or any part of the Capital Securities, on or before December 15, 2046 except to the extent that the applicable redemption, repurchase or purchase price does not exceed the sum of the following amounts:

(a)       the Applicable Percentage of the aggregate amount of net cash proceeds received by the Guarantor, the Corporation and their Subsidiaries since the most recent Measurement Date from the sale of Common Shares and rights to acquire Common Shares to Persons other than the Guarantor, the Corporation and their Subsidiaries; plus

(b)      100% of the aggregate amount of net cash proceeds received by the Guarantor, the Corporation and their Subsidiaries since the most recent Measurement Date from the sale of Qualifying Capital Securities to Persons other than the Guarantor, the Corporation and their Subsidiaries.

Section 3 .  Covered Debt.  (a) The Corporation and the Guarantor represent and warrant that the Initial Covered Debt is Eligible Debt.

(b)        On or during the 30-day period immediately preceding any Redesignation Date with respect to the Covered Debt then in effect, the Corporation shall identify the series, if any, of Eligible Debt that will become the Covered Debt on and after such Redesignation Date in accordance with the following procedures:

(i)    the Corporation shall identify each series of its then outstanding long-term indebtedness for money borrowed that is Eligible Debt;

(ii)   if only one series of the Corporation’s then outstanding long-term indebtedness for money borrowed is Eligible Debt, such series shall become the Covered Debt commencing on the related Redesignation Date;

(iii)  if the Corporation has more than one outstanding series of long-term indebtedness for money borrowed that is Eligible Debt, then the Corporation shall identify the series that has the latest occurring final maturity date as of the date the Corporation is applying the procedures in this Section 3(b) and such series shall become the Covered Debt commencing on the related Redesignation Date;

(iv)  if the Corporation has no outstanding series of long-term indebtedness for money borrowed that is Eligible Debt, and the Guarantor

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has only one outstanding series of long-term indebtedness for money borrowed that is Eligible Debt, such series shall become the Covered Debt commencing on the related Redesignation Date;

(v)   if the Corporation has no outstanding series of long-term indebtedness for money borrowed that is Eligible Debt, but the Guarantor has more than one outstanding series of long-term indebtedness for money borrowed that is Eligible Debt, then the Corporation shall identify the series that has the latest occurring final maturity date as of the date the Corporation is applying the procedures in this Section 3(b) and such series shall become the Covered Debt commencing on the related Redesignation Date;

(vi)  the series of outstanding long-term indebtedness for money borrowed that is determined to be Covered Debt pursuant to clause (ii), (iii), (iv) or (v) above shall be the Covered Debt for purposes of this Replacement Capital Covenant for the period commencing on the related Redesignation Date and continuing to but not including the Redesignation Date as of which a new series of outstanding long-term indebtedness is next determined to be the Covered Debt pursuant to the procedures set forth in this Section 3(b); and

(vii) in connection with such identification of a new series of Covered Debt, the Corporation shall give the notice provided for in Section 3(c) within the time frame provided for in such section.

(c)   Notice . In order to give effect to the intent of the Corporation and the Guarantor described in Recital C, the Corporation and the Guarantor covenant that (i) simultaneously with the execution of this Replacement Capital Covenant or as soon as practicable after the date hereof, notice shall be given to the Holders of the Initial Covered Debt, in the manner provided in the indenture relating to the Initial Covered Debt, of this Replacement Capital Covenant and the rights granted to such Holders hereunder; (ii) so long as the Guarantor or the Corporation is a reporting company under the Securities Exchange Act, the Guarantor or the Corporation, as applicable, will include, or cause to be included, in each annual report filed with the Commission on Form 10-K under the Securities Exchange Act a description of the covenant set forth in Section 2 and identify the series of long-term indebtedness for borrowed money that is Covered Debt as of the date such Form 10-K is filed with the Commission; (iii) if a series of the Guarantor’s or the Corporation’s long-term indebtedness for money borrowed (1) becomes Covered Debt or (2) ceases to be Covered Debt, notice of such occurrence will be given within 30 days to the holders of such long-term indebtedness for money borrowed in the manner provided for in the indenture, fiscal agency agreement or other instrument under which such long-term indebtedness for money borrowed was issued and such change shall be reported in the Guarantor’s or the Corporation’s next quarterly report on Form 10-Q or annual report on Form 10-K, as applicable; (iv) if, and only if, neither the Guarantor nor the Corporation is a

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reporting company under the Securities Exchange Act, the Guarantor will post on its website (or the Corporation’s website if the Guarantor does not maintain a website at that time) the information otherwise required to be included in Securities Exchange Act filings pursuant to clauses (ii) and (iii) of this Section 3(c); and (v) promptly upon request by any Holder of Covered Debt, the Corporation and the Guarantor will provide such Holder with an executed copy of this Replacement Capital Covenant.

Section 4 .  Termination, Amendment and Waiver.  (a) The obligations of the Guarantor and the Corporation pursuant to this Replacement Capital Covenant shall remain in full force and effect until the earliest date (the “ Termination Date ”) to occur of (i) December 15, 2046, (ii) the date, if any, on which the Holders of at least a majority of the outstanding principal amount of the then-effective series of Covered Debt consent or agree in writing to the termination of this Replacement Capital Covenant and the obligations of the Guarantor and the Corporation hereunder and (iii) the date on which neither the Corporation nor the Guarantor has any series of outstanding Eligible Senior Debt or Eligible Subordinated Debt (in each case without giving effect to the rating requirement in clause (b) of the definition of each such term). From and after the Termination Date, the obligations of the Guarantor and the Corporation pursuant to this Replacement Capital Covenant shall be of no further force and effect.

(b)   This Replacement Capital Covenant may be amended or supplemented from time to time by a written instrument signed by the Guarantor and the Corporation with the consent of the Holders of at least a majority of the outstanding principal amount of the then-effective series of Covered Debt, provided that this Replacement Capital Covenant may be amended or supplemented from time to time by a written instrument signed by the Guarantor and the Corporation (and without the consent of the Holders of the then-effective series of Covered Debt) if (i) the effect of such amendment or supplement is solely to impose additional restrictions on the ability of (x) the Corporation to redeem or repurchase Capital Securities or (y) the Guarantor or its Subsidiaries to purchase Capital Securities, or (ii) such amendment or supplement is not adverse to the Holders of the then-effective series of Covered Debt and an officer of the Guarantor or the Corporation has delivered to the Holders of the then-effective series of Covered Debt in the manner provided for in the indenture, fiscal agency agreement or other instrument with respect to such Covered Debt a written certificate stating that, in his or her determination, such amendment or supplement is not adverse to the Holders of the then-effective series of Covered Debt.

(c)   For purposes of Sections 4(a) and 4(b), the Holders whose consent or agreement is required to terminate, amend or supplement the obligations of the Guarantor and the Corporation under this Replacement Capital Covenant shall be the Holders of the then-effective Covered Debt as of a record date established by the Guarantor and the Corporation that is not more than 30 days prior to the date on which the Guarantor and the Corporation propose that such termination, amendment or supplement becomes effective.

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Section 5 .  Miscellaneous.  (a) This Replacement Capital Covenant shall be governed by and construed in accordance with the laws of the State of New York .

(b)   This Replacement Capital Covenant shall be binding upon the Guarantor and the Corporation and their successors and assigns and shall inure to the benefit of the Covered Debtholders as they exist from time-to-time (it being understood and agreed by the Guarantor and the Corporation that any Person who is a Covered Debtholder at the time such Person acquires, holds or sells Covered Debt shall retain its status as a Covered Debtholder for so long as the series of long-term indebtedness for borrowed money owned by such Person is Covered Debt and, if such Person initiates a claim or proceeding to enforce its rights under this Replacement Capital Covenant after the Guarantor or the Corporation has violated their respective covenants in Section 2 and before the series of long-term indebtedness for money borrowed held by such Person is no longer Covered Debt, such Person’s rights under this Replacement Capital Covenant shall not terminate by reason of such series of long-term indebtedness for money borrowed no longer being Covered Debt).

(c)   All demands, notices, requests and other communications to the Guarantor or the Corporation under this Replacement Capital Covenant shall be deemed to have been duly given and made if in writing and (i) if served by personal delivery upon the Guarantor or the Corporation, on the day so delivered (or, if such day is not a Business Day, the next succeeding Business Day), (ii) if delivered by registered post or certified mail, return receipt requested, or sent to the Guarantor or the Corporation by a national or international courier service, on the date of receipt by the Guarantor or the Corporation, as applicable (or, if such date of receipt is not a Business Day, the next succeeding Business Day), or (iii) if sent by telecopier, on the day telecopied, or if not a Business Day, the next succeeding Business Day, provided that the telecopy is promptly confirmed by telephone confirmation thereof, and in each case to the Guarantor and the Corporation at the address set forth below, or at such other address as the Guarantor and the Corporation may thereafter notify Covered Debtholders of or post on its website as the address for notices under this Replacement Capital Covenant:

Assured Guaranty US Holdings Inc.
1325 Avenue of the Americas
New York, NY  10019
Facsimile:  (212) 445-8701
Attention:  General Counsel

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Assured Guaranty Ltd.
30 Woodbourne Avenue
Hamilton, HM 08 Bermuda 
Facsimile:  (441) 296-1083
Attention:  General Counsel

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IN WITNESS WHEREOF, the Guarantor and the Corporation have each caused this Replacement Capital Covenant to be executed by a duly authorized officer, as of the day and year first above written.

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