XL Capital Ltd. has invested an additional $100 million in its financial-guaranty business.

The three-year-old unit, called XL Capital Assurance Inc., will see its capital injection increase to about $225 million, the company said in a statement yesterday.

“Our financial guaranty business has grown steadily in its first three years and has reached the stage where it requires additional capital to support additional growth,” said XL Capital chief executive officer Brian O'Hara. “This additional capital is indicative not only of our commitment to the sector but also to XLCA's continued development and its ability to contribute non-correlated earnings to XL.” Bloomberg Business News reported that the unit accounted for less than four percent of XL's $5.8 billion of sales during the first nine months of 2003.

Financial guaranty insurers, also called bond insurers, protect debt holders against default. XL is investing in the business as its Bermuda-based rival ACE Ltd. is preparing to sell as much of 75 percent of its bond-insurance unit.

And late last year, RenaissanceRe and Partner Re announced that they were joining with two US corporations to set up financial guaranty reinsurer Channel Re.

Channel Re, now in the process of hiring staff, is being set up with leading financial guaranty insurers MBIA and Koch Financial, and will reinsure other bond insurers, including MBIA. RenaissanceRe has said it will invest between $115 million and $125 million in the new venture. XL may seek to “to give more confidence to clients that they are committed to the business”, said Deutsche Bank Securities Inc. analyst Alain Karaoglan, who rates XL shares a “buy”.

The company's stock rose eight cents, or 0.1 percent, to $77.82 in New York Stock Exchange composite trading.