An agreement has been struck between two of the giant of the US insurance industry – marking reportedly the biggest legacy deal in the history of the property and casualty market.
It has been announced today that American International Group (
AIG) has made a binding agreement with National Indemnity Company (NICO), a subsidiary of Warren Buffett’s
Berkshire Hathaway, to take on 80% of the risk relating to $34 billion of the insurer’s commercial reserves in the US.
The deal became effective on January 01 and covers AIG’s US commercial long-tail exposures for accident years 2015 and prior with AIG retaining the authority to handle and resolve claims, with NICO gaining consultation rights and other access.
According to a
Yahoo report, the consideration for the agreement is $9.8 billion, which is payable in full by June 30 this year with interest at 4% per annum until the date of payment.
“This decisive step enables us to focus firmly on the future and build on the progress we’ve made in transforming AIG,” said Peter D. Hancock, AIG president and chief executive officer. “The agreement supports our stated strategy and gives us additional risk capacity to serve our clients and return capital to shareholders.”
As part of the agreement, NICO will assume 80% of net losses and loss adjustment expenses on subject reserves in excess of the first $25 billion. The deal will be accounted for as part of the first quarter 2017 financial reports and will be referred to as a retroactive reinsurance agreement.
The deal will be subject to regulatory approval.
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