Hartford, Berkshire unit in asbestos reinsurance agreementReprints
Hartford Financial Services Group Inc. on Tuesday said it has entered a $1.5 billion aggregate excess of loss reinsurance agreement with a Berkshire Hathaway Inc. unit that will provide coverage for certain of its asbestos and environmental liability exposures.
There is a $650 million premium for the agreement with Omaha, Nebraska-based Berkshire unit National Indemnity Co., which will result in about a $423 million after-tax charge to Hartford’s fourth-quarter earnings, the Hartford said in its statement.
The agreement provides for up to $1.5 billion of reinsurance for adverse net loss reserve development above estimated net loss reserves of $1.7 billion, Hartford said.
Hartford said it will continue to handle claims, subject to certain conditions, and retain the risk of recoveries under third-party reinsurance contracts for these exposures.
“Our asbestos and environmental exposures have generated adverse loss reserve development over time, creating uncertainty for investors and others about the ultimate cost of these policy liabilities, most of which were underwritten prior to 1985,” Hartford Chief Financial Officer Beth Bombara said in the statement.
“The agreement announced today is consistent with our stated objective of evaluating options that had favorable economics, while taking into consideration our expertise in handling these complex claims.”
Ms. Bombara said National Indemnity “is a very strong counterparty, and this agreement reduces uncertainty about potential adverse development while allowing us to continue to handle both claims and reinsurance recoveries, which we believe will enable us to achieve the best possible resolution for these long-tail exposures.”