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corresp

February 26, 2008

BY EDGAR

Securities and Exchange Commission

Division of Corporation Finance

450 Fifth Street, N.W. Mail Stop 6010

Washington, D.C. 20549

    Attention:

    Mr. Jim B. Rosenberg, Senior Assistant Chief Accountant

Mr. Frank Wyman, Staff Accountant

Mr. Don Abbott, Senior Staff Accountant

    Re:

    Fairfax Financial Holdings Limited (“Fairfax”)

Form 40-F for fiscal year ended December 31, 2006

File No. 1-31556

Dear Sirs/Mesdames:

We hereby acknowledge receipt of the comment letter dated February 12, 2008 (the “Comment Letter”)
from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange
Commission (the “Commission”) concerning the above captioned Form 40-F (the “Form 40-F”). We
submit this letter in response to the Comment Letter. For ease of reference, we have reproduced
the text of the comments in bold-faced type below, followed by Fairfax’s responses. The responses
to each of the comments are set forth in numbered paragraphs that correspond to the numbers of the
Staff comments. Page number references herein refer to the page numbers of the Annual Report
appearing as Exhibits 2, 3 and 4 of the Form 40-F, unless otherwise noted. Terms used but not
defined herein have the meanings set forth in the Form 40-F. Shaded text reflects proposed changes
from the disclosure in the Form 40-F as filed. Fairfax (sometimes herein called “the Company”)
intends to include such revised disclosure with respect to financial periods covered by its Form
40-F, as applicable, beginning with the Company’s Annual Report on Form 40-F for the year ended
December 31, 2007 to be filed on March 7, 2008.

Form 40-F for fiscal year ended December 31, 2006

Exhibit 2 — Consolidated Financial Statements

Notes to Consolidated Financial Statements

Note 20 US GAAP Reconciliation, page 52

    1.

    We have reviewed your response to prior comment two. It is difficult to determine the impact
of reinsurance from the proposed narrative disclosure for Note 7. We suggest that this
proposed disclosure be revised to show the effect of ceded reinsurance transactions by
including a presentation similar to the first tabular presentation in your response to comment
two. Also, please provide revised disclosure to be included in MD&A that quantifies the
effect of ceded reinsurance transactions on each year presented in your consolidated
statements of earnings and cash flows and that explains the reasons for period-to-period
fluctuations. The explanations of the fluctuations should cover each component included in
the above tabular presentation.

    In order to enhance our disclosure of the effect of ceded reinsurance transactions on our
operations, we propose replacing the paragraph included in Note 7 to our 2006 consolidated
financial statements in a manner consistent with the table set out below, which shows how we
would have revised that note in our 2006 consolidated financial statements:

    The net impact of ceded reinsurance transactions for each of the fiscal years 2006, 2005 and
2004 is as follows:

    2006

    2005

    2004

    Earned premiums ceded to reinsurers

    (747.2
    )

    (860.1
    )

    (862.7
    )

    Commissions earned on ceded reinsurance premiums

    143.7

    145.2

    156.9

    Claims incurred ceded to reinsurers(1)(2)

    (98.0
    )

    1,522.9

    1,166.9

    Provision for uncollectible reinsurance

    (46.5
    )

    (51.1
    )

    (62.8
    )

    Net impact of ceded reinsurance transactions
(pre-tax)

    (748.0
    )

    756.9

    398.3

    (1)

    In 2006 included a $412.6 loss on the commutation of the Swiss Re
corporate adverse development cover. In 2005 included a $103.1 loss on the
commutation of the Chubb Re adverse development cover by U.S. runoff.

    (2)

    In 2005 and 2004, included significant claims related to U.S. Gulf
hurricanes.

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    In our MD&A, we will include a discussion of the impact of ceded reinsurance
transactions as follows:

    The company’s insurance and reinsurance operating companies purchase reinsurance for
various reasons including risk diversification and mitigation and protection of
capital. As set out in note 7 to the consolidated financial statements, ceded
reinsurance transactions had a net negative impact in 2006 of $748.0 pre-tax,
including the effect of the $412.6 pre-tax loss on the commutation of the Swiss Re
corporate adverse development cover. Ceded reinsurance transactions had a net positive
impact of $756.9 pre-tax in 2005 and $398.3 pre-tax in 2004. Earned premiums ceded to
reinsurers in 2006 decreased to $747.2 compared to $860.1 in 2005 and $862.7 in 2004.
Earned premiums ceded to reinsurers in 2006 decreased as a result of greater retention
of premiums written by the insurance and reinsurance operating companies and the
effect of declines in gross premiums written from 2005 to 2006 and from 2004 to 2005
related to intensifying competition and deteriorating pricing associated with
underwriting cycle softening. The declines in earned premiums ceded to reinsurers in
2005 and 2004 due to the aforementioned factors were partially offset by the effects
of reinstatement premiums paid to reinsurers to reinstate catastrophe protection
against additional catastrophe events. Commissions earned on ceded reinsurance
premiums declined from 2005 to 2006 and from 2004 to 2005 due to the insurance and
reinsurance operating companies’ increased retention of written premiums and as a
result of the declines in written premiums associated with the softening underwriting
cycle. Claims incurred ceded to reinsurers in 2006 were reduced by $412.6,
representing the pre-tax loss on the commutation of the Swiss Re corporate adverse
development cover, but were increased by additional cessions by Northbridge related to
2005 hurricane losses. Claims incurred ceded to reinsurers in 2005 and 2004 included
significant cessions to reinsurers of incurred losses related to hurricane losses.
Claims incurred ceded to reinsurers in 2005 were reduced by $103.1, representing the
pre-tax loss on the commutation of the Chubb Re adverse development cover by U.S.
runoff. The provision for uncollectible reinsurance declined in 2006 relative to 2005
and in 2005 relative to 2004, primarily reflecting effective credit risk management
and improved credit experience with the company’s reinsurers.

    Cash provided by operating activities was increased significantly in 2006 by
reinsurance recoveries, with the $1,154.2 decline during 2006 in amounts recoverable
from reinsurers reflecting collections by the insurance and reinsurance operating
companies from reinsurers of paid claims related to 2005 and 2004 hurricanes. The
$437.1 decline during 2005 in amounts recoverable from reinsurers included collections
from reinsurers related to paid claims on 2004 hurricane losses. Cash provided by
operating activities was increased in 2006 and in 2005 by the $412.6 pre-tax non-cash
loss on the 2006 commutation of the Swiss Re corporate adverse development cover and
the $103.1 pre-tax non-cash loss on the 2005 commutation of the Chubb Re adverse
development cover by U.S. runoff, respectively.

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    We also propose amending Note 20 paragraph (a) as follows:

    Under Canadian GAAP, recoveries on certain stop loss reinsurance treaties (including the former
Swiss Re corporate adverse development cover) which in 2006 (or in prior years in the case of
other commuted treaties) protected Fairfax, Crum & Forster and TIG are recorded at the same
time as the claims incurred are ceded. Under US GAAP, these recoveries, which are considered
to be retroactive reinsurance, are recorded up to the amount of the premium paid with the
excess of the ceded liabilities over the premium paid recorded as a deferred gain. The deferred
gain is amortized to income over the estimated settlement period over which the company expects
to receive the recoveries and is recorded in accounts payable and accrued liabilities. The
Swiss Re corporate adverse development cover was commuted as described in note 6 in July 2006.
The loss of $412.6 recorded under Canadian GAAP has been reversed and the related deferred gain
of $429.9 at that date under US GAAP was eliminated. On a US GAAP basis, the pre-tax gain
related to the commutation of the Swiss Re corporate adverse development cover was $17.3.
During 2005, the Canadian GAAP loss on commutation of the Chubb Re adverse development cover of
$88.7 was eliminated for US GAAP purposes. These adjustments for retroactive reinsurance, when
considered with the pre-tax impact of ceded reinsurance transactions as set out in Note 7,
provide disclosure of the net impact of ceded reinsurance transactions on a US GAAP basis. At
December 31, 2006, the deferred gain included in accounts payable and accrued liabilities was
$168.0 (2005 — $633.8).

    In our responses dated December 2, 2007 and September 28, 2007, respectively, on this issue, we
had included additional proposed disclosure. We repeat this proposed disclosure below for your
convenience and will include it in the Issues and Risks section of our future Annual Reports,
with updates for factual changes as appropriate.

    In the Issues and Risks section of the Company’s Annual Report, the Company discloses that the
“availability and cost of reinsurance are subject to prevailing market conditions, both in
terms of price and available capacity, which can affect the company’s business volume and
profitability”. This disclosure in the risk factor entitled “Cost of Reinsurance and Adequate
Protection” will be revised as follows: “The availability of reinsurance and the rates charged
by reinsurers are subject to prevailing market conditions, both in terms of price and available
capacity, which can affect the company’s business volume and profitability”.

    The rates charged by reinsurers applied to the amount of reinsurance purchased by our operating
subsidiaries represents the cost of reinsurance to the Company, and this cost is appropriately
measured, in the Company’s view, by the amount of ceded premiums earned during a period. The
net impact of reinsurance utilization on the Company’s profitability during a period includes
earned premiums ceded to reinsurers, commissions earned on ceded reinsurance premiums
(principally related to proportional reinsurance treaties), claims incurred ceded to
reinsurers, and provisions for uncollectible reinsurance.

- 4 -

    The following proposed disclosure will be added to the risk factor entitled “Cost of
Reinsurance and Adequate Protection” in the Issues and Risks section of the Annual Report:

    The rates charged by reinsurers and the availability of reinsurance to the Company’s
subsidiaries will generally reflect the recent loss experience of the Company and of the
industry in general. For example, the significant hurricane losses in 2004 and 2005 caused the
prices for catastrophe reinsurance protection in the U.S. Gulf region to increase significantly
in 2006. However, rather than the Company incurring increased costs of reinsurance as a result
of purchasing more reinsurance or as a result of these higher rates, in the following year the
Company elected to decrease its direct catastrophe exposure in that region, therefore requiring
the purchase of a reduced amount of catastrophe reinsurance.

    The following proposed disclosure will be added to the risk factor entitled “Recoverable from
Reinsurers” in the Issues and Risks section of the Annual Report:

    Although the relative magnitude of the Company’s reinsurance recoverable balance is
significant, this is primarily the result of past acquisitions of companies that relied heavily
on reinsurance and greater reliance on reinsurance in prior years, and is not necessarily
indicative of the extent that the Company has utilized reinsurance more recently. The credit
risk associated with reinsurance recoverable balances is addressed in the Reinsurance
Recoverable section of Management’s Discussion and Analysis of Financial Condition and Results
of Operation in the Annual Report.

    2.

    Please provide revised disclosure to be included in Note 2 Summary of Significant Accounting
Policies — Reinsurance that describes your accounting policies for ceded reinsurance,
including your policies for each component included in the above tabular presentation. We
would presume that these accounting policies comply with U.S. GAAP other than as disclosed in
Note 20.

    We propose amending Note 1 Summary of Significant Accounting Policies — Reinsurance as
follows:

    ..........The company records the premium charge (earned premiums ceded to reinsurers), commissions
earned on ceded reinsurance premiums and the related reinsurance recovery (claims incurred
ceded to reinsurers) in its consolidated statement of earnings in the period in which the
adverse development is incurred and ceded to the reinsurer. Provisions for uncollectible
reinsurance are recorded in the consolidated statement of earnings in the period in which the
company determines that it is unlikely that the full amount or disputed amounts due from
reinsurers on an individual basis are not collectible.

* * * * * * * * * * * * * * * *

- 5 -

We appreciate your assistance in reviewing this response letter, and we look forward to including
the revised disclosure in the Company’s Annual Report on Form 40-F to be filed on March 7, 2008.
Please direct all questions or comments regarding this filing to the undersigned at (416) 367-4942
or p_rivett@fairfax.ca.

Yours very truly,

/s/  Paul Rivett

Paul Rivett

Vice President and Chief Legal Officer

    cc:

    V. Prem Watsa, Chairman and Chief Executive Officer,

Fairfax Financial Holdings Limited

Bill
McFarland, National Managing Partner Canada

PricewaterhouseCoopers LLP

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