XL Capital Group Ratings Placed On Watch Negative

NEW YORK Sept. 20, 2005--Standard & Poor's Ratings Services said today that it placed its ratings on XL Capital Group (XL) on CreditWatch with negative implications due to the uncertainty around Hurricane Katrina's ultimate impact on XL's capital adequacy ratio as measured by Standard & Poor's capital model. The ratings and outlook on XL's 'AAA' rated financial guaranty companies (i.e., XL Capital Assurance and XL Financial Assurance) remain unaffected. This action is part of a process begun one week ago when 10 other insurers and reinsurers were placed on CreditWatch.  
  
"We elected to place these companies on CreditWatch due to the rapidly rising estimates for total insurance losses--currently about $60 billion--and due to the admission by several primary and reinsurance companies that their original loss estimates were on the low side," explained Standard & Poor's credit analyst Mohammed Ashab. "In general, the companies placed on CreditWatch are judged to have exposures to this event proportionately higher than other companies."  
  
Like the companies placed on CreditWatch Sept. 9, we believe that the companies of the XL Capital Group have sufficient risk-management and risk-mitigation skills, capital, and liquidity to accommodate the losses they are likely to incur. Although the models used in the industry for predicting catastrophic losses from hurricane scenarios are still being upgraded to measure more risk--notably subsequent flood risk--insurers and reinsurers with the greatest exposure generally are not currently able to fully assess the magnitude of their potential losses.  
  
Today's placements highlight the continued material uncertainty in accurately quantifying the insurance industry's ultimate exposure, but as we mentioned in our Sept. 9th announcement, downgrades of these ratings are not inevitable. The circumstances that would result in a rating downgrade will be particular to each situation, but might include material adverse changes in capital that could not be readily replaced, or perhaps material risk management and control deficiencies that remain unremedied. On the other hand, those companies with risk management that has been so effective as to minimize net losses despite disproportionately high exposures, or whose financial flexibility is such that any lost capital is readily replaced, will be affirmed (see media release on Montpelier Re). Standard & Poor's will be meeting shortly with the managements of all the companies placed on CreditWatch and expect to resolve the status of most of the listings within 90 days.  
  
Still, the status of the ratings on several companies could take longer to resolve. Although the overall situation remains sufficiently uncertain that further exposure to unforeseen risks could develop, Standard & Poor's does not currently expect to place any additional ratings on CreditWatch as a direct result of this event.  
  
Please refer to RatingsDirect, Standard & Poor's Web-based credit analysis system, for details on all related entities affected by these actions.  
  
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search.