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Member, Beacon International Group, Ltd.
NEW YORK—American International Group Inc.'s Chartis Inc. unit has entered into an agreement with National Indemnity Co. that will transfer the bulk of Chartis' legacy asbestos liabilities to the Berkshire Hathaway Inc. unit, Chartis announced Wednesday.
According to a filing with the Securities and Exchange Commission, AIG's Eaglestone Reinsurance Co. unit will pay National Indemnity about $1.65 billion for a retroactive reinsurance agreement with an aggregate limit of $3.5 billion.
New York-based Chartis said in a statement that the transaction “covers potentially volatile U.S.-related asbestos exposures” but does not cover accounts Chartis believes have been fully reserved or “certain other ancillary asbestos exposure assumed by Chartis affiliates.”
Recoverability risk
Under the agreement, which takes effect Jan. 1, 2011, National Indemnity will assume responsibility for claims handling for those asbestos claims subject to reinsurance from the Berkshire unit. National Indemnity will also assume collection responsibility and “collectability risk” for third-party reinsurance related to those claims, Chartis said.
“We believe this transaction is beneficial for Chartis, as it will reduce the risk of future adverse development of U.S. asbestos exposures, including the risk associated with the recoverability of related reinsurance,” Chartis CEO Peter Hancock said in the statement.
Chartis said that the transaction, which is subject to regulatory approval and other conditions, will be accounted for as retroactive reinsurance in Charts' consolidated financial statements.
Latest Berkshire deal
Chicago-based CNA Financial Corp. completed a similar deal with Berkshire last August.
NEW YORK—American International Group Inc. said Wednesday that it expects to boost reserves at its Chartis Inc. property/casualty subsidiaries by $4.6 billion, which will result in a $4.1 billion reserve charge when it posts its fourth-quarter results on Feb. 24.