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LONDON-X.L. Insurance Co. Ltd. is planning to use a quota-share reinsurance arrangement to help it diversify its business and achieve growth this year.
Brian O'Hara, president and chief executive officer of the Bermuda-based excess liability insurer, announced X.L.'s plans in London last week. Under the terms of the agreement, the company will cede to one European and four U.S. reinsurers 20% of general liability risks with total limits up to $100 million and 25% of such risks with total limits in excess of $100 million, he said.
Mr. O'Hara spoke shortly after X.L.'s parent, EXEL Ltd., reported a strong rise in net income to $332.8 million for the year ending Nov. 30, 1995, up from $144 million the previous year. Most of the growth came from property and specialty reinsurance, he said.
Although X.L. is predominantly an excess liability insurer, a "very good spread of business leads to stability in our ratings and our ability to meet claims," Mr. O'Hara added.
Competition in the main U.S. and European general liability markets has been a driving force in X.L.'s efforts to further diversify into other lines and markets, he added.
Important to this diversification are X.L. Reinsurance Co. Ltd., a Bermuda-based company set up by EXEL last year with $250 million of capital "to take advantage of the restructuring of the U.S. insurance market" (BI, Oct. 9, 1995).
In providing large, multiyear programs, X.L. Re will work closely with Risk Capital Holdings Inc. This company, in which EXEL has a stake, is part investment bank and part insurer, putting it in the favored position of insuring companies in which it invests, Mr. O'Hara said (BI, Sept. 18, 1995).
Another example of diversification is X.L. Insurance's decision this month to offer for the first time primary as well as excess directors and officers coverage (BI, Jan. 15). This diversification will include several new lawyers professional liability products, as well.
While this represents a niche sector of the market, it has been quite profitable over the past few years, Mr. O'Hara said.