XL Capital was put on review with negative implications by ratings agency AM Best.
The move followed Best's decision to downgrade XL's $2.4bn of debt after the insurer's announcement of a fourth quarter pre-tax reserving charge of $694m.
The charge relates to North American casualty reinsurance business acquired in 1999 through a merger with NAC Re.
This charged followed another pre-tax hit of $184m also on the North American reserves in the third quarter.
AM Best said the total had exceeded its expectations and caused the company's risk-adjusted capital to fall too far to sustain its financial strength ratings.
XL plans to raise additional capital in the first half of 2004 and AM Best said that unless this was done "within a reasonable timeframe", XL's financial strength rating would be downgraded to `excellent' from its current `A+ (superior)'.
