XL Capital said it has completed its claims audit and regularly scheduled year end reserve review.
As a result XL said it expected its fourth quarter results for 2003 to be hit by a pretax reserve charge of US$694m.
Full results for the fourth quarter of 2003 are expected to be announced on 10 February.
It said $663m of the charge related to adverse developments in the company's North American reinsurance operations for casualty business written during the 1997 to 2001 underwriting years.
XL president and chief executive Brian M O'Hara said: "The review that we have undertaken included an extraordinary claims audit review of our North American reinsurance operations going well beyond our long established processes.
"This was driven by an acceleration in claims in the third quarter relating to business underwritten during the 1997 to 2001 years.
"This trend continued in the fourth quarter, in response to which we have changed the actuarial development patterns that normally would have applied to the expected loss development of this business."
XL said it has also completed its customary year end review of reserves, resulting in a further net increase of approximately $31m to its pretax property and casualty reserves during the fourth quarter.
