The bulk of Chartis’ legacy asbestos liabilities will be transferred to National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., as part of Chartis’ ongoing strategy to de-risk, Chartis announced.
The transaction with NICO covers potentially volatile U.S.-related asbestos exposures. The transaction does not cover asbestos accounts that Chartis believes have already been reserved to their limit of liability or certain other ancillary asbestos exposure assumed by Chartis affiliates.
Chartis will cede the bulk of its net asbestos liabilities to NICO under a retroactive reinsurance agreement with an aggregate limit of $3.5 billion. Chartis will pay NICO approximately $1.65 billion in respect of the cession.
For those asbestos claims subject to the reinsurance from NICO, NICO will assume responsibility for claims handling. It will also assume collection responsibility and collectability risk for third-party reinsurance related to those claims.
This transaction will be accounted for as retroactive reinsurance in Chartis’ consolidated financial statements and is expected to result in a deferred pre-tax gain of approximately $200 million in the second quarter of 2011.
Source: Chartis
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