XL Capital Ltd. could pay out up to $270 million in claims for Hurricanes Gustav and Ike, the Bermuda-based insurer revealed yesterday.

The insurance giant also announced that less than one-quarter of one percent of its investment portfolio was exposed to Lehman Brothers Holdings Inc., as of June 30.

But the amortised cost of its fixed income holdings of Washington Mutual Inc. was $4 million and the cost of its common and preferred equity of Fannie Mae and Freddie Mac stood at $9 million, as of September 25.

The company's preliminary loss estimates, pretax and net of reinsurance and reinstatement premium, related to Gustav range from approximately $30 million to $35 million, which are attributable in roughly equal proportions to its re/insurance operations.

Its preliminary loss estimates, pre-tax and net of reinsurance and reinstatement premium, in relation to Ike are between approximately $165 million and $235 million, of which $65 million to $85 million is attributable to insurance and $100 million to $150 million to reinsurance.

The company's preliminary loss estimates are based on its review of individual treaties and policies expected to be impacted and client data received to date and has taken into account current industry loss estimates, both from published sources and its own internal analysis.

XL's cost and market value of its current holdings of equity of Lehman Brothers was $2 million and $1 million, respectively, as of the end of June.

Also as of that date, XL's current holdings of subordinated debt of Lehman Brothers had an amortised cost and market value of approximately $34 million and $29 million, respectively, and XL's holdings of senior debt of Lehman Brothers had an amortised cost and market value of $66 million and $63 million, respectively.

XL has made no purchases of Lehman Brothers securities since June 30, 2008 and has no derivative counterparty exposure to Lehman Brothers.

XL's CEO, Michael McGavick, said: "We believe that today's announcements demonstrate disciplined underwriting as well as our care in managing exposures to individual credits."