(Bloomberg) - XL Capital may cancel an insurance policy for the directors and executivies of an Italian firm currently embroiled in scandal, according to media reports.

Bermuda-based XL, along with American International and Chubb, underwrote a $50 million liability policy for board members and executives of Parmalat Finanziaria SpA, the maker of Parmalat long-life milk and Mr. Day muffins which collapsed last month after revealing that a $4.9 billion bank account did not exist.

Insurance Insider, a London-based newsletter, said the companies may try to void the policy, without saying where it got the information.

The insurers may cancel the policy, designed to cover legal costs and other liabilities of Parmalat?s executives, if the company provided false or misleading financial settlements to underwriters when they sold the policies, the newsletter said.

XL spokesman Roger Scotton did not return calls yesterday. Chubb spokesman Mark Greenberg told Bloomberg News the company does not comment on individual clients. He declined to confirm if Parmalat is a client. American International spokesman Andrew Silver said no one was immediately available to comment on the report.

The Parmalat scandal could make insurance for European executives more expensive, insurers including Hiscox Plc and Brit Insurance Holdings Plc told Bloomberg this week.

?Parmalat shows the risks are great for every company,? said Bronek Masojada, chief executive officer of Hiscox, a Lloyd?s of London insurer. ?It should accelerate rates for European companies. In Europe there?s not been that much history of claims except for companies with US exposure.?

US executives pay as much as three times more for their insurance than two years ago after the collapse of technology, media and telecommunications stocks in 2000 and financial scandals involving Enron Corp. and WorldCom Inc., said Masojada.

Founder Calisto Tanzi, former Chief Financial Officer Fausto Tonna and seven others have been jailed in connection with a fraud probe into the company?s finances.

Parmalat ?ought to have a firming effect on prices?, said Brit Chief Executive Neil Eckert in a telephone interview. ?It will make people extremely wary of credit risks.?

American International Group Inc. charges Geneva-based bond brokerage Bridport & Cie. ?14,750 ($27,180) for ?1 million of cover and the company must pay the first ?20,000 of any claim, said Chief Executive Alex Bridport. Previously his company paid ?25,000 for ?5 million pounds of cover.

?It?s fiendishly expensive, but you have to have it,? said Bridport. ?We don?t think it?s worth the paper it?s written on. If you look at the exclusions, they?re outrageous.?

Liability policies for executives typically insure against incompetence and exclude fraud, said Masojada.

Liability insurance for UK executives with operations in the US has increased to ?16,000 for ?1 million of cover this year from ?2,500 in 2001, according to a person familiar with industry rates who asked not to be identified.

The London-based Association of Insurance Risk Managers, which represents about 900 executives in the UK responsible for arranging insurance for their companies, also said rates may rise following the collapse of Milan-based Parmalat.

?Inevitably it will give underwriters pause for thought, just at a time when we were seeing a leveling off of rates,? said the association?s Executive Director David Gamble.

?This kind of problem will make underwriters consider the need to look again at the risks they are running.?

Parmalat?s collapse makes Italy appear ?neither a serious nor a safe place to do business?, Marco Tronchetti Provera, the chairman of Telecom Italia SpA, wrote in the Financial Times. Consob, Italy?s stock market regulator, needs more powers to expose wrongdoing, while auditors should be regulated, he said.