XL Capital Assurance Inc. has launched a UK subsidiary - XL Capital Assurance (UK) Ltd. - with $20 million in capital.

The company, which is fully owned by XLCA, will focus on insuring asset-backed securities, project finance, and private/public partnership transactions in the United Kingdom.

Fitch Ratings yesterday assigned an `AAA' insurer financial strength rating to XLCA-UK.

Fitch said XLCA was formed in 1999 and began operations in 2000 as an indirect, wholly owned subsidiary of Bermuda-based XL Capital Ltd.

The agency said that in addition to the $20 million in funding, XLCA-UK would receive three arrangements from XLCA.

These included cession of 97 percent of its net exposure and a guarantee to cover losses in excess of ten percent XLCA-UK's capital and surplus, subject to a $50 million limit of liability.

XLCA-UK currently has no outstanding exposures and all of its insured transactions will be underwritten to an investment-grade, remote-expected loss standard similar to other `AAA'-rated monoline financial guarantors.