26 February 2018Insurance

Berkshire raises liability estimate on AIG reinsurance deal

Berkshire Hathaway has increased the estimated claim liabilities under a major reinsurance contract with American International Group (AIG) by approximately $1.8 billion.

In 2017, Berkshire subsidiary National Indemnity Company (NICO) entered a $9.8 billion adverse development reinsurance agreement with various subsidiaries of AIG.

NICO agreed to indemnify AIG for 80 percent of up to $25 billion of losses and allocated loss adjustment expenses in excess of $25 billion retained by AIG, with respect to certain commercial insurance loss events occurring prior to 2016.

Since then, Berkshire recorded premiums earned of $10.2 billion, and also recorded a liability for unpaid losses and loss adjustment expenses of $16.4 billion and a deferred charge reinsurance assumed asset of $6.2 billion.

As a result, in the fourth quarter of 2017, Berkshire increased its estimated ultimate claim liabilities under the AIG contract by approximately $1.8 billion based on higher than expected loss payments reported by AIG under the contractual retention, according to the annual report.

Berkshire also increased the related deferred charge asset by $1.7 billion based on its re-estimation of the amounts and timing of future claim payments. As of yearend 2017, Berkshire’s net liability from this contract was approximately $10.7 billion, representing the excess of the estimated ultimate claim liabilities of approximately $18.2 billion over the remaining deferred charge asset balance of approximately $7.5 billion.

Join us at Intelligent Automation in Insurance - London 2018.  Book Now.

More of today's news

Swiss Re CEO discusses benefits of Softbank deal

 ‘I told you so’ says Buffett as 2017 cats hurt Berkshire’s profits

Zurich acquires QBE Latin American operations

QBE records $1.2 billion loss for 2017

Retail focus stabilizes Hiscox

China takes control of Anbang Insurance, chairman prosecuted

Standard Life Aberdeen sells £3.24bn insurance business to Phoenix

Singapore insurtech attracts $1m investment from France

Lockton appoints risk practices leader

Don't miss our insurtech email newsletter - sign up today

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk

More on this story

12 February 2018   Berkshire Hathaway Specialty Insurance Company (BHSI) has opened a new office in the Dubai International Financial Centre (DIFC), while naming Alessandro Cerase as its senior executive officer (SEO) and Neeraj Yadvendu as deputy SEO and head of third party lines for the Middle East.
26 February 2018   Catastrophe losses stemming mainly from the three the hurricanes and wildfires that hit the US last year cost Berkshire Hathaway some $3 billion and led to heavy underwriting losses in its re/insurance units. But Warren Buffett, the company’s chairman, was quick to stress that such years are rare and prior to 2017 the company had recorded 14 consecutive years of underwriting profits.
26 February 2018   Warren Buffett’s Berkshire Hathaway, which owns substantial insurance and reinsurance operations, posted record quarterly and annual results for 2017 – mainly fuelled by the big cuts to US corporate income tax, signed in by President Donald Trump last year.