Exel Ltd. has entered a joint venture with Financial Security Assurance Holdings Ltd. (FSA) to create two new Bermuda-based financial guaranty insurance companies.

The two new companies will each have a minimum capitalisation of $100 million.

One company, Financial Security Assurance International Ltd., will be a FSA subsidiary and its policies are expected to carry FSA's triple A ratings.

The other, X.L. Financial Assurance Ltd., will be a subsidiary of X.L.

Insurance Co. and its policies are expected to carry Exel's double A rating.

Exel and FSA will have equity interest in each other's subsidiaries.

In addition Exel will swap about $80 million of its shares for a similar amount of FSA common stock.

Exel president and chief executive officer Brian O'Hara said the joint ventures will help propel the company into the forefront of the financial guaranty and credit insurance business in Bermuda.

"This is an area that we identified some time ago as providing strong growth potential for our organisation and builds on Exel's structural advantages and considerable experience in the long-tailed risk business,'' he stated in a press release.

Last week Exel announced the formation of XL Financial Products & Services as a means of consolidating its expertise in risk securitisation -- the convergence of the insurance and financial markets.

Exel's chief financial officer Robert Lusardi said the two new companies would give Exel and FSA the ability to offer a larger array of financial and integrated products and attract new business to Bermuda.

"The combined expertise of Exel and FSA provides unique capabilities in financial risk management and places Bermuda once again at the forefront of new product development in the insurance industry,'' he stated.

Exel has worked with FSA in the past, providing reinsurance to the company.

FSA provides financial guaranty insurance on asset-backed and municipal bond payments to investors. According to Fitch Ibca the company ranked second in holding 22 percent of the municipal bond market.

The two companies are subject to regulatory approval.