Trenwick's share price leapt by 62.7% after it won an extension to discuss renewing its letter of credit.
This supports its Lloyd's operations.
It now has until 6 December to fix the terms and Lloyd's has agreed to give it more time. The old deadline to renew the letter of credit was 22 November.
The Bermuda-based insurer saw its stock jump 42 cents to $1.09 having sunk to 43 cents earlier this month.
Its difficulties had prompted worries about its financial strength.
Its security could be particularly crucial to sensitive markets such as for professional indemnity (PI).
Trenwick underwrites the Misys Insurance Manage-ment PI scheme for IFAs among other business.
Ian Boscoe, managing director of leading PI broker PYV, said any threat to Trenwick's involvement would make the tough market for PI, employers' liability (EL) and other lines worse.
But he forecast that a new player could enter the market in the new year.
He said that instability at Trenwick could generate even tougher prices and conditions before any improvement was felt.
St Paul has about 20% of the PI market and is writing only selected risks in the field.
Paul Cusition, St Paul general manager of professional financial and professional risks, said it had written cover only for a few new customers in November.
The insurer would not try to significantly expand its PI book even if another player dropped out of the market, he said.
