Bermuda-based XL Capital has discontinued placement service agreements following a probe of the insurance industry by New York Attorney General Elliot Spitzer.

Speaking during the company?s earnings call yesterday, chief executive Brian O?Hara said yesterday: ?We have discontinued all such agreements. To provide some context through September 30, 2004, XL had net total estimated PSAs (placement service agreements) with brokers of $47 million of which $29 million was related to Marsh Inc. Of this amount less than $2 million was related to their US placed excess casualty business reflecting our relatively minor participation in that market.?

The Attorney General is suing Marsh & McLennan alleging the insurance broker rigged bids and accepted payments in return for steering business to favoured insurers.

The probe involves some of the largest companies in the industry, including Bermuda-based ACE as well as American International Group. XL?s American subsidiary became involved in the investigation last week when it was subpoenaed by the Attorney General.

Mr. O?Hara said: ?The request was general in scope and sought information on the sales tactics of the brokers. We take these issues seriously and are co-operating fully with the investigation.

? I would like to emphasise that XL has always been committed to maintaining the highest standards of ethical conduct. As a matter of prudence, directly after learning about the suit against Marsh two weeks ago we commenced an internal review of the issues raised in the Attorney General?s complaint.

?This review is in progress and it is premature to make any comment at this point.?

Mr. O?Hara said that no employees had been suspended and that the values at XL of ethics, teamwork, excellence and respect, led him to believe that ?the culture of XL would not tolerate the kind of behaviour which lies at core of Attorney General?s investigation?.

Mr. O?Hara says that the probe will most certainly have an impact on the distribution environment but it is too early to tell how it will be reconfigured.

On Monday evening, XL reported a third-quarter operating loss of $15.4 million, or 11 cents a share, due to a $420.1 million, after-tax charge related to hurricane claims.