CNA Financial Corporation subsidiary Continental Casualty Company (CNA) has entered an agreement with Quantum Industrial Partners for a stake in Bermuda-based residual value insurance company RVI Guaranty Co., Ltd. and its subsidiaries, CNA said.

Under the agreement, expected to close in the current quarter, Quantum Industrial Partners and CNA will have equal ownership of RVI.

The transaction will increase RVI shareholders equity to over $100 million from the present $75 million.

Quantum Industrial Partners is operating subsidiary of Quantum Industrial Holdings, one of seven Quantum funds. Soros Fund Management, whose chairman is George Soros, is the principal investment advisory company of the Quantum group of funds.

RVI, set up in 1990 by telecommunications company US West and later acquired by Quantum Industrial Partners, is the largest monoline residual value insurance company in the world. RVI is managed by Bermuda-based Independent Management Group Ltd.

Residual value insurance protects against catastrophic decrease in asset value. It offers asset owners insurance on the market value of certain insured assets at specified points in time. If the market value of these assets cannot be achieved through liquidation, a residual value insurance policy indemnifies the owner for the shortfall.

Chicago-based CNA, one of the world's largest insurance organisations and the third largest US property casualty company by premium in 1995, has reinsured RVI on several transactions since 1995.

CNA Financial Insurance president Thomas Taylor said the investment in RVI is a logical extension of the existing relationship.

Strategically, this product is extremely useful to bankers and leasing companies, RVI senior vice president, underwriting Tony Forster said.

RVI's clients include some of the largest leasing companies in the world, he said.

RVI offers residual value insurance products for assets like automobiles, commercial equipment and real estate financed by banks and other financial institutions.

Purchasers of residual value insurance are lessors and lenders wanting protection against the possibility that assets might be worth less than projected when returned at the end of a financing arrangement.

This kind of insurance is also used by leasing companies comfortable with residual value risks they accept but want the more favourable accounting treatment they receive when part of their residual risk is guaranteed by a third party.

"RVI is a good partner because its specialty underwriters have extensive experience and an in depth understanding of leasing and asset insurance,'' Mr.

Taylor added. "That, combined with CNA's financial strength and size, will provide a stable platform from which to launch growth in this relatively untapped segment of the commercial insurance market.'' Dr. Purnendu Chatterjee, chairman of RVI and The Chatterjee Group, said: "An association with CNA will help Quantum realise the full potential of this investment more rapidly and could lead to other opportunities.'' Under the agreement, The Chatterjee Group will continue to supervise Quantum Industrial Partners' investment in RVI.