NU Online News Service, April 20, 11:41 a.m. EDT
Chartis, the property and casualty unit of American International Group Inc. (AIG), says it will transfer a bulk of its asbestos liability to Berkshire Hathaway's National Indemnity Co. (NICO).
Chartis will pay NICO about $1.65 billion to take its "potentially volatile U.S.-related asbestos exposures," Chartis says in a statement.
The transfer will "reduce the risk of future adverse development of U.S. asbestos exposures, including the risk associated with the recoverability of related reinsurance," says Peter Hancock, Chartis' new CEO.
In February, AIG gave Chartis $4.1 billion to bolster loss reserves. About 80 percent of the funds were put toward four classes of business: asbestos, excess casualty, excess workers' compensation and primary workers' compensation.
Chartis' net asbestos liabilities as of January 1, 2011 will be ceded to NICO under a retroactive reinsurance agreement with an aggregate limit of $3.5 billion once the transaction closes.
A deferred pretax gain of $200 million is expected in the second quarter as a result of the transfer, Chartis says.
Last September CNA Financial Corp.'s Continental Casualty Company and several other insurance subsidiaries transferred its legacy asbestos and environmental pollution liabilities to NICO for a reinsurance premium of $2 billion.
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