Fitch Rates XL Capital Ltd Equity Security Units 'A-'.

CHICAGO -- Fitch Ratings has assigned a rating of 'A-' to XL Capital Ltd's (XL) proposed offering of $650 million of equity security units. The rating is equivalent to XL's long term issuer rating and the rating on XL's existing senior debt obligations. All XL related ratings are affirmed with a Stable Rating Outlook and are listed below.

The equity security units are considered similar to three-year mandatory convertible debt. The units consist of forward purchase contracts to purchase and XL common stock and debt securities. Besides these securities, XL is concurrently issuing $2.15 billion of common stock. This capital raising effort is intended to offset losses of approximately $1.7 billion from the unprecedented 2005 Atlantic hurricane season and the expected $830 million loss from the recently announced unfavorable draft report of the independent actuarial review of the net reserve seasoning amount in XL's 2001 acquisition of certain Winterthur International insurance operations.

Fitch downgraded XL's long-term issuer, debt, and preferred securities ratings as well as the IFS ratings of its property/casualty (re)insurance subsidiaries by one notch on Oct. 26, 2005. This action followed XL's announcement that net losses from third quarter 2005 catastrophe events, including Hurricane Katrina, were approximately $1.47 billion and was based largely on longer term operating returns on capital and earnings volatility, which were not consistent with the previous rating category. This volatility was primarily attributable to catastrophe losses and adverse loss reserve development through the last several years.

At the time of the downgrade, Fitch had an expectation that XL would execute capital raising actions to offset the impact of the recent catastrophe-related losses and the potential loss from an unfavorable outcome in the independent actuarial review process. Fitch also expected that XL's capital market activity would not materially increase holding company financial leverage, issuing largely common equity and equity-like hybrid securities. These expectations will be met with the completion of this securities offering.

Going forward, XL is taking some measures to reduce catastrophe exposures and earnings volatility. To sustain the current ratings, it is important for XL to return to more consistent operating profitability in the future. Given the current ownership structure of XL's financial guaranty entities and the perceived linkage between these companies and their majority-owner XL, the ratings of XL Capital Assurance Inc. (XLCA) and XL Financial Assurance Ltd. (XLFA) are susceptible to downward rating pressure in the event the ratings of XL, whose ratings are currently stable, are lowered further in the future.

XL is a Bermuda headquartered holding company with subsidiaries providing insurance, reinsurance, and specialty financial products and services on a worldwide basis. The company reported consolidated GAAP assets of $54.9 billion and shareholders equity of approximately $7.0 billion at Sept. 30, 2005.

Fitch assigns the following rating with a Stable Outlook:

XL Capital Ltd

--$650 million equity security units 'A-'.

Fitch affirms the following ratings with a Stable Outlook:

XL Capital Ltd

--Long-term issuer rating at 'A-';

--$100 million 7.15% Senior Notes Due 2005 at 'A-';

--$594 million 5.25% Senior Notes Due 2014 at 'A-';

--$825 million 2.53% Senior Notes Due 2009 at 'A-';

--$350 million 6.375% Senior Notes Due 2024 at 'A-';

--8% series A preference ordinary shares at 'BBB+';

--7.625% Series B preference ordinary shares at 'BBB+'.

XL Capital Finance (Europe) PLC

--$255 million 6.58% senior notes due 2011 at 'A-';

--$600 million 6.50% guaranteed senior notes due 2012 at 'A-'.

Fitch also affirms the following XL subsidiaries' insurer financial strength ratings (IFS) at 'AA-' with a Stable Outlook:

XL Insurance (Bermuda) Ltd

XL Re Ltd

XL Insurance Switzerland

XL Re Latin America Ltd

XL Europe Ltd

XL America Pool

XL Reinsurance America Inc.

XL Insurance Company of New York, Inc.

XL Specialty Insurance Company

Indian Harbor Insurance Company

Greenwich Insurance Company

XL Insurance Company Limited

XL Select Insurance Company

Additionally, Fitch affirms the following XL financial guaranty related ratings with a Stable Outlook:

XL Capital Assurance Inc.

--IFS 'AAA'.

XL Financial Assurance Ltd.

--IFS 'AAA'.

Twin Reefs-Pass Through Trust

--Long-term 'AA'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.