Exhibit 10.21

September 21, 2009

Mr. Douglas C. Renfield-Miller

888 Park Avenue

New York, NY 10075

Dear Doug:

This agreement (the “Agreement”) sets forth our agreement concerning the terms and conditions of your Retirement from employment at Ambac Financial Group, Inc. (“Ambac” or the “Company”).

Your last day of employment with Ambac (the “Retirement Date”) will be December 31, 2009.

1

Ambac will pay or reimburse you for up to a total of $25,000 for (i) legal expenses in reviewing this document and (ii) outplacement, career counseling and/or coaching services to be provided to you until the date on which you secure new employment. You must engage at least the initial provider of such outplacement, career counseling and/or coaching services by March 15, 2010 otherwise you forfeit the right to the payment arrangement set forth in clause (ii) of the preceding sentence. The selection of the service providers, dates and scope of services will be as you elect. All invoices for legal fees and/or outplacement must be provide detail of the services provided and must note that the services are for Douglas Renfield-Miller.

Ambac’s obligations under this Agreement, including its obligation to provide you with the payments set forth in sections 2 and 3, are contingent on the execution, delivery and non-revocation of this Agreement and the Waiver and General Release Agreement in the form set forth as Exhibit A hereto and, in addition, the execution, delivery and non-revocation, on or as of the Retirement Date, of a second Waiver and General Release Agreement in the form set forth as Exhibit A hereto in respect of the period from the date you initially sign the Waiver and General Release Agreement through the Retirement Date. In the event the agreement described in the preceding sentence is not executed and delivered, or revoked, (a) any option and/or restricted stock unit award that has vested from the date hereof through the Retirement Date will be forfeited and (b) you will be required to reimburse Ambac the entire amount of the payments set forth in paragraphs 2 and 3 within ten business days of the revocation date.

Ambac, for and on behalf of itself and the other Released Parties (as such term is defined in the form of Waiver and General Release Agreement attached hereto as Exhibit A) further hereby waives and releases you and the other Releasors (as such term is also defined in the form of Waiver and General Release Agreement attached hereto as Exhibit A), from any and all Claims related to any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof that Ambac is aware of, or should have been aware of, that it or any other Released Party has, may have or in the future may possess against you or any other such Releasor, arising or accruing on or prior to the date hereof, and Ambac shall, concurrent with your execution and delivery to Ambac on, after or as of the Retirement Date of the additional Waiver and General Release Agreement, execute and deliver to you a second release in your favor, in a form consistent with and no less favorable to you than the forgoing release set forth in this paragraph, covering the period between the date Ambac executes this Agreement and the date you execute such second release in favor of Ambac.

2

Ambac will timely pay you for any unreimbursed business expenses incurred by you for the period through the Retirement Date in accordance with its normal business expense reimbursement policy, provided, that all of your reimbursable business expenses are submitted in accordance with Ambac’s business expense reimbursement policy. Such reimbursement(s), if any, shall be paid in accordance with Ambac’s normal practices and procedures.

Ambac will continue to provide you with and timely pay for all tax consulting and return preparation services of Grant Thornton for both U.K. and U.S. income tax purposes in respect of all periods through and/or which include December 31, 2009, in connection with your employment in both the U.K. and the U.S. As previously agreed, Ambac will also cover the cost (by timely paying or reimbursing you) for your own accountants’ review of Grant Thornton’s work up to $25,000, with such obligation to survive the date of December 31, 2009 and any revocation or cancellation of this Agreement.

3

Through and including the Retirement Date, Company-match and profit-sharing contributions will be credited on your behalf to the Ambac Savings Incentive Plan in accordance with the terms and conditions of such plan at substantially the same time(s) that the Company funds such contributions for its other employees, regardless of when paid (it being understood that all or a portion of such contributions may be funded on your behalf after the Retirement Date).

Ambac will pay you all vested amounts, if any, due but not previously paid to you, pursuant to the terms of any welfare, deferred compensation or other benefit plan as of the Retirement Date, or which by their terms extend to or beyond the Retirement Date. Notwithstanding the foregoing, any amount due under the Non-Qualified Savings Incentive Plan will be paid to you no sooner than six months and one day from the Retirement Date.

Inasmuch as it is and has been the expressed mutual intention of the parties that your entering into this Agreement shall not affect any or all of your rights under that certain Amended and Restated Management Retention Agreement, dated as of 2007, between you and Ambac (the “Management Retention Agreement”), it is agreed that notwithstanding anything to the contrary contained in this Agreement, in the event that there shall be a Change of Control of Ambac on or prior to the Retirement Date, as such term “Change in Control” is defined in the Management Retention Agreement, or there shall be a proposed or pending Change in Control of Ambac reported in any newspaper of general circulation or business publication on or before the Retirement Date, you shall have the right (but not the obligation) to rescind and cancel your retirement and this Agreement, together with the related Waiver and General Release Agreement (the form of which is set forth in Exhibit A), as if neither such document had ever been executed (i.e., and such that you shall have no further obligations hereunder or thereunder), and as if your employment had continued in the ordinary course through such date, whereupon the parties hereto shall then promptly cooperate and negotiate, in good faith, a written agreement between them, effective as of such date, such that your employment with Ambac shall further continue in a manner substantially consistent with past practice and so as to afford you the ability to fully participate in (i.e., and not deprive you from) all of the benefits to which you would otherwise be entitled under the Change in Control Agreement should the Change in Control be (or have been) consummated. In furtherance of the foregoing, it is understood and agreed that the forfeiture and reimbursement provisions of the first paragraph of Section 4 above would not apply to or with respect to any rescission and/or cancellation by you of this Agreement pursuant to the provisions of this paragraph.

4

In the event of your death or disability prior to the date any or all payments or benefits under this Agreement shall be paid or become payable to you, all such benefits and payments shall instead be paid by Ambac to your heirs, executors, administrators, trustees, legal representatives, successors or assigns, as applicable.

All of your outstanding stock options, as set forth in Exhibit C hereto, will vest on the Retirement Date. The terms of the 1997 Equity Plan as Amended and the General Terms and Conditions of the respective stock option grants shall govern. Any vested options not exercised within the time frame(s) set forth in the above documents will be forfeited.

All restricted stock units, as set forth in Exhibit C hereto, will vest on the Retirement Date. All restricted stock units will be settled six months and one day following the Retirement Date. The terms of the 1997 Equity Plan as Amended and the General Terms and Conditions of the respective restricted stock unit grants shall govern.

The parties hereby mutually acknowledge that any Ambac property in your possession and any property made available to you in connection with your employment relationship with Ambac has heretofore been returned by you to Ambac.

In consideration for the payments described above, you agree to the following:

5

Paragraph 11(c) and the associated restrictions contained herein shall supersede and cancel any similar restrictions contained in any and all documents relating to Ambac’s stock options and/or restricted stock units, and Ambac hereby waives any objections thereto.

If you breach the terms of this Section 11(c), you forfeit your right to future payments provided for herein from the date of such breach, and, to the extent any payments have been made, you agree to return all payments made pursuant to this Agreement including, but not limited to, the gross payments provided for in paragraph 2. The return of the aforementioned payments must be made within ten business days of the breach of this Section 11(c).

6

7

Any payments made or benefits provided to you under this Agreement will be reduced by any applicable legally required withholding taxes.

8

You and Ambac each agree with respect to the other to refrain from making, directly or indirectly, now or at any time in the future, whether in writing, orally or electronically: (i) any defamatory or product disparaging comment concerning the you and Ambac or any of its current or former directors, officers or employees, or (ii) any other comment that could reasonably be expected to be detrimental to you or Ambac’s business or financial prospects or reputation. In furtherance of the foregoing, Ambac additionally agrees to cause its affiliates to be bound by the provisions of this Section 14 (i.e., as if they were Ambac under the provisions of this Section 14).

9

This Agreement sets forth the entire agreement and understanding of the parties hereto and supersedes and replaces all prior or contemporaneous agreements or understandings, oral or written, negotiations, or discussions relating to the subject matter of this Agreement. This Agreement may be amended only by written document signed by the parties hereto. It is understood that you shall have no further obligations to Ambac from and after the date hereof except as otherwise expressly set forth herein.

In the event that any one or more of the provisions of this Agreement shall be held invalid, illegal or unenforceable, the validity and enforceability of the remainder of the Agreement shall not in any way be affected or impaired thereby.

This Agreement will be governed by, and construed in accordance with, the laws of the State of New York.

* * *

10

IN WITNESS WHEREOF, Ambac has executed this Agreement as of the date first set forth above and you have executed this Agreement as of the date set forth below (or, if you do not include a date under your signature line, the date set forth shall be the date this Agreement, signed by you, is received by the Ambac.

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EXHIBIT A

WAIVER AND GENERAL RELEASE AGREEMENT

This Waiver and General Release Agreement (this “Release”) is entered into as of the date indicated on the signature page of this Release by Douglas C. Renfield-Miller (“Executive”). Executive has been employed by Ambac Financial Group, Inc. (the “Company”), and in connection with Executive’s Retirement and for the consideration of the payments and benefits set forth in the Agreement between Executive and the Company dated as of September 21, 2009 (the “Agreement”), the receipt and adequacy of which are herein acknowledged, Executive agrees as follows:

Executive, on behalf of himself and Executive’s heirs, executors, administrators, trustees, legal representatives and assigns (hereinafter collectively referred to as the “Releasors”), hereby irrevocably and unconditionally release and forever discharge Ambac, and any and all of its parent corporations, shareholders, subsidiaries, divisions, affiliated and related entities, employee benefit and/or pension plans or funds, successors and assigns, and any and all of its or their past, present or future officers, directors, agents, stockholders, fiduciaries, administrators, employees or assigns (whether acting as agents for Ambac or in their individual capacities, but in any case not in their capacities, if applicable, as stockholders) (hereinafter collectively referred to as the “Released Parties”), of and from any and from any and all claims, actions, causes of action, rights, judgments, obligations, damages, demands, accountings or liabilities of whatever kind or character (collectively, “Claims”), including, without limitation, any Claims under any federal, state, local or foreign law, that the Releasors may have, or in the future may possess, arising out of (i) the Executive’s employment relationship with and service as an employee, officer or director of the Company, and the termination of such relationship or service, and (ii) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof; provided, however, that notwithstanding the foregoing, the Executive does not release, discharge or waive any rights: (i) under or to enforce the Agreement, or to payments and benefits provided under the Agreement that are contingent upon the execution, delivery and non-revocation by the Executive of this Release; (ii) any rights to vested pension or 401k benefits; or (iii) to indemnification, whether pursuant to (a) the Agreement or any other agreement between the parties, including, without limitation, the Change In Control Agreement, (b) the charter, by-laws or other governing documents of Ambac or any of its affiliates, (c) insurance policies, (d) applicable law, or (e) otherwise.

1

The Releasors hereby unconditionally release and forever discharge Ambac, its subsidiaries and affiliates and each of their respective officers, employees, directors, shareholders and agents from any and all Claims that the Releasors may have arising under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”). By signing this Release, you hereby acknowledge and confirm the following:

2

This Release shall not supersede any continuing obligations Executive may have under the terms of the Agreement or any other agreement between Executive and the Company.

This Release will be governed by, and construed in accordance with, the laws of the State of New York.

This Release shall not become effective until the day following the last day of the Revocation Period (as defined below) (the “Effective Date”).

* * *

Executive shall have the right to revoke this Release during the seven-day period (the “Revocation Period”) commencing immediately following the date Executive signs and delivers this Release to the Company. The Revocation Period shall expire at 5:00 p.m. New York City Time on the last day of the Revocation Period; provided, however, that if such seventh day is not a business day, the Revocation Period shall extend to 5:00 p.m. New York City Time on the next succeeding business day. In the event Executive revokes this Release, all obligations of the Company under the Agreement shall terminate and be of no further force and effect as of the date of such revocation. No such revocation by Executive shall be effective unless it is in writing and signed by Executive and received by the Company prior to the expiration of the Revocation Period.

3

EXHIBIT B

RETIREMENT HEALTHCARE BENEFIT*

As a retiree from Ambac, you have the option to elect to receive medical, dental and prescription drug coverage (“coverage” or “healthcare coverage”). The cost the retiree pays for that coverage is based on a formula that considers their years of service at Ambac beyond their fortieth birthday and the actual cost of such coverage. The actual formula is set forth below:

Monthly premium subject to change as Ambac’s premium changes.

4

EXHIBIT C

STOCK OPTIONS AND RESTRICTED STOCK UNITS

Stock Options:

5

Restricted Stock Units

6