Bermuda-based insurer XL has had the AAA financial strength rating for two subsidiaries - XL Financial Assurance (XLFA) and XL Capital Assurance (XLCA) - reaffirmed.

Rating agency Fitch last week announced that it has affirmed the rating for both companies following the administration of a stress test that simulates an economic depression.

Fitch found: "XLCA and XLFA have enough capital to meet all insured bondholder claims and maintain adequate capital and reserves to write business in the future. "

XLCA is a New York-domiciled specialised financial guarantor providing direct insurance on asset-backed securities, mortgage-backed securities, collateralised debt obligations and structured single-risk transactions including essential infrastructure project finance, future flow-backed transactions and select municipal obligations.

XLCA limits its involvement in US municipal finance to lower risk transactions, particularly those that other AAA rated financial guarantors cannot insure due to capacity constraints.

XLCA cedes up to 90 percent of the exposure and premiums of each transaction it insures to XL Financial Assurance; a Bermuda-based company that also carries an AAA rating from Fitch.

XLFA, which is majority-controlled by XL Insurance, assumes financial guaranty reinsurance from other monolines, as well as XL Insurance and other multiline insurers.

At the end of the third quarter, which ended on September 30, 2001, XLCA and XLFA had aggregate net par in force of $390 million and $12.2 billion respectively.

This is supported by approximately $123 million and $551 million in claims-paying resources respectively.