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Notes Payable and Debt and Financing Arrangements

6 Months Ended

Jun. 30, 2012

8. Notes Payable and Debt and Financing Arrangements

(a) Notes Payable and Debt

All outstanding debt of the Company at June 30, 2012 and December 31, 2011 was issued by XLIT Ltd. (“XL-Cayman”) except for the $600 million par value 6.5% Guaranteed Senior Notes (the “XLCFE Notes”), which were issued by XL Capital Finance (Europe) plc (“XLCFE”) and were repaid at maturity on January 15, 2012. Both XL-Cayman and XLCFE are wholly-owned subsidiaries of XL Group plc. The XLCFE Notes were fully and unconditionally guaranteed by XL Company Switzerland GmbH. XL-Cayman's outstanding debt is fully and unconditionally guaranteed by XL-Ireland. The Company's ability to obtain funds from its subsidiaries to satisfy any of its obligations under guarantees is subject to certain contractual restrictions, applicable laws and statutory requirements of the various countries in which the Company operates, including, among others, Bermuda, the United States, Ireland, Switzerland and the U.K. Aggregated required statutory capital and surplus for the principal operating subsidiaries of the Company was $6.7 billion at December 31, 2011.

(b) Letter of Credit Facilities and Other Sources of Collateral

The Company has several letter of credit facilities provided on a syndicated and bilateral basis from commercial banks. These facilities are utilized primarily to support non-admitted insurance and reinsurance operations in the U.S. and capital requirements at Lloyd's. The Company's letter of credit facilities and revolving credit facilities at June 30, 2012 and December 31, 2011 were as follows:

Letter of Credit Summary:	June 30,		December 31,
(U.S. dollars in thousands except percentages)	2012 (1)		2011 (1)
Revolving credit facility (2)	$	1,000,000	$	1,000,000
Available letter of credit facilities - commitments (3)	$	4,000,000	$	4,000,000
Available letter of credit facilities - in use	$	1,728,948	$	1,871,192
Collateralized by certain assets of the Company's investment portfolio		93.2%		93.8%

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(1) At June 30, 2012 and December 31, 2011, there were five available letter of credit facilities.

(2) At June 30, 2012 and December 31, 2011, the revolving credit facility was unutilized.

(3) The Company has the option to increase the size of the March 2011 Credit Agreement by an additional $500 million and the size of the facilities under the December 2011 Credit Agreements by an additional $500 million across both such facilities.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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