UPDATE 1-XL Chairman Michael Esposito resigns from board

(Adds other appointments, background on SCA, byline)

By Ed Leefeldt

NEW YORK, Dec 28 (Reuters) - XL Capital Ltd (XL.N), the largest Bermuda-based reinsurer, said on Friday that Chairman Michael Esposito resigned from its board but would continue as chairman of bond insurer Security Capital Assurance Ltd SCA.N.

XL owns 46 percent of SCA, which along with other bond insurers, has been hurt by the subprime crisis.

Esposito had said earlier this year he would step down from the XL board in 2008, where he earned $2.33 million in salary and benefits last year, according to federal filings.

In a statement on Friday, Esposito said SCA's current need "outweighed his desire to adhere to his original retirement schedule."

SCA, which operates through two XL units, has been hurt by the decline in the mortgage bond market due to the subprime crisis. It closed today at $3.96, up 10 cents, but has fallen from a high of $34.44 in May and is near its year low of $3.56 on the New York Stock Exchange.

Fitch Ratings said this week that it may cut its ratings on some residential mortgage-backed securities insured by SCA and three other bond insurers because of their deteriorating investments.

Brian O'Hara, XL's chief executive officer, is acting chairman of XL. He stepped down from the SCA board last month. Also resigning as a director of SCA is Alan Senter, who also serves as a director of XL.

Both O'Hara and Senter had served on the SCA board as part of an earlier agreement. XL plans to appoint directors to the SCA board, the company said. XL officials could not be reached for comment.

XL is the largest Bermuda-based reinsurer, according to A.M Best & Co., which rates insurers. Reinsurers provide backup coverage to property and casualty insurers in case of catastrophe.