XL’s Financial Guarantee Subs Rated Triple A

Standard & Poor’s rating Services and Fitch, Inc. gave XL’s financial guarantee insurance operations a big endorsement with Triple A ratings for both XL Capital Assurance, the primary insurer, and XL Financial Assurance Ltd., the reinsurer.

S&P commented that XLCA was “considered strategically important to its parent, XL Capital Ltd., representing the parent’s North American financial guaranty insurance platform.” 90 percent of its business is reinsured with XLFA.

“As a start-up, XLCA will need to build market acceptance and product demand as well as develop sustainable earnings. Standard & Poor’s believes it will take XLCA one to three years to gain good client relationships and development of a diversified global risk portfolio,” the report stated.

Commenting on the announcements, Robert A. Lusardi, CEO of XL’s Financial Products and Services division, stated, “XL expects to become a market leader in providing AAA-rated credit enhancement, capital markets and financial structuring solutions. XLFA plays an important role in the parent company’s strategy by providing AAA-rated international reinsurance execution capability, embedded within a blue-chip AA multiline insurance organization with consolidated equity of $5.6 billion.”

S&P sees XL’s financial guaranty business as having “growth opportunities in the asset-backed sector, new products, and emerging markets.”