As part of its announcement that it had lost more than $1 billion in the third quarter, XL Capital has said that it agreed in principle to enter into a quota share reinsurance treaty with a newly formed reinsurance company. This company will be funded with $500 million to $1 billion of dedicated capital from its parent holding company. Under this agreement, XLCA expects to cede to this company specified portions of its property catastrophe and retrocessional lines of business. The lead investor in this company is expected to be investment funds managed by an alternative asset manager with which XLCA has had a long-standing relationship. XLCA will not be an equity investor in this new company.
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