Shares of Bermuda-based business insurer XL Capital Ltd. surged nearly nine percent yesterday after the company announced it would retain its place in the S&P 500 Index after its redomestication to Ireland.

XL shareholders have approved the company's plans to move its holding company from the Cayman Islands to Ireland, a move that is scheduled to happen in the next few weeks, pending the necessary approvals.

When Ace Ltd. moved its place of incorporation from the Caymans to Switzerland two years ago, it lost its place in the S&P 500, because Standard & Poor's felt the company no longer met its criteria.

But a change in the rules, announced by S&P on Tuesday, came in time to spare XL from the same fate.

Losing their place in the S&P 500 would likely have led to a sudden drop in XL's share price, as the institutions and funds who track the S&P 500 Index would have been forced to offload millions of XL shares.

For example, just one fund, the Vanguard 500 Index Fund owned 3.22 million XL shares at the end of last year, according to Bloomberg data.

According to the rules, for a company to remain in the index, only half of its fixed assets and revenue need to be primarily from the US, Keefe, Bruyette & Woods analyst Melissa Roberts told Reuters.

"It will remain under our definition a US company, given there's no reason to remove it from the S&P 500," David Blitzer, the chairman of the index committee at S&P, told Bloomberg.

XL shares rose 8.8 percent to $19.52 in New York Stock Exchange trading yesterday.

XL was the biggest climber on the S&P 500 Index in 2009, having risen about 400 percent in New York Stock Exchange trading to bounce back from a dismal 2008, during which it recorded a net loss of some $2.6 billion.

XL profits surged to more than $130 million in the first quarter of this year on improved investment results.