US-based diversified conglomerate Berkshire Hathaway has agreed to reimburse $610m to Swiss Re, a re/insurance group, over a life retrocession agreement that was completed in 2010.
After the completion of the agreement, the total protection provided by the US underwriter to Swiss Re will decrease from $1.5bn to $1.05bn.
Berkshire Hathaway will now assume total losses of up to $1.05bn under the amended contract, against $1.5bn as per terms of the original agreement.
Swiss Re entered into a retrocession transaction with Berkshire Hathaway for a portfolio of the former's pre-2004 yearly renewable term life business, in January 2010.
Under the commitments and contingent liabilities note to recent Swiss Re consolidated financial statements, Berkshire Hathaway served a notice claiming loses, following which both parties finalised the settlement.
As part of the deal, the Swiss company will take back some of the risks covered by the contract, apart from the settlement amount from Berkshire Hathaway.
It is expected that the settlement will lead to a gain of nearly $100m for Swiss Re for the first quarter of 2013, due to the integration of the payment received for recapturing the treaties, re-establishing reserves and unwinding the reinsurance recoverable.
In addition to the recaptured treaties, the life retrocession agreement for the pre-2004 yearly renewable term life business, as completed during 2010 will be effective.
Total recoveries from Berkshire Hathaway until now, including the recapture payments agreed as part of this settlement, are $815m, according to the Swiss insurer.
Established in Zurich, Switzerland, in 1863, Swiss Re serves clients through a network of over 60 offices across the world, and caters reinsurance, insurance and other insurance-based forms of risk transfer.
