Former Quanta chief executive Tobey Russ could be paid $3.5 million in severance pay after resigning on November 21.

The troubled Bermuda-based insurer said in a regulatory filing with the US Securities and Exchange Commission this week that the company was negotiating and intends to enter into a separation and general release agreement with Mr. Russ.

Under the agreement, Mr. Russ may be paid the lump sum as well as see his options for Quanta shares vest early.

Mr. Russ, a founder of the two-year-old company, was replaced by interim chief executive Robert Lipincott. The company did not give any reason for the departure of Mr. Russ, which came on the heels of Quanta posting large third-quarter losses, and the stock subsequently losing more than half its value.

The company is understood to be looking at ways to raise capital, with pressure from leading ratings firm A.M. Best to boost the coffers or see a downgrade.

It has said it will raise capital and must do so before the end of the year.

The fledgling company, formed in 2003, has been hit by losses from Atlantic hurricane activity for two years running. It posted a net loss of $59.1 million in the third quarter and a loss of $37.4 million in the year-prior period.

Quanta shareholders' equity at the end of September was $372.2 million. Separately, Quanta said on November 18 it transferred its property reinsurance and most of its technical risk property business to Arch Reinsurance Ltd. under a special agreement.

Quanta had previously announced it was bowing out of selling property policies, at least until it was sure the contracts could be priced profitably. And on November 21 several Quanta units also entered into an arrangement with the Houston Casualty Company, commuting two of its casualty reinsurance contracts to HCC.

Under the transaction, Quanta is released from any obligations related to these two contracts.