XL said it had agreed to pay 388p in cash for each Catlin share and its remaining stock in the £2.7bn deal.
The Bermuda-based insurer's shareholders will own about 13 per cent of the merged business.
It will still need to get shareholder approval at a meeting scheduled for the second half of this year.
Catlin's shares surged as much as 17 per cent when it confirmed talks with XL last month. This followed criticism that the insurer pursued international expansion over returning equity to shareholders.
Mike McGavick, chief executive officer of XL, said:
The combination will add immediate scale in specialty insurance, it will create a more efficient and more capable global network by bringing our two infrastructures together, and it creates a top 10 reinsurer with expanded alternative capital capabilities.
The insurer's founder and eponymous chief executive Stephen Catlin will stay with the company serving on its board.
Catlin has built his business up from a two-person Lloyd's syndicate established in 1984 into a London-listed business with 55 offices in 21 countries.