$1.6bn of asbestos claims taken over for $2bn fee
Warren Buffett's Berkshire Hathaway will take over asbestos and environmental pollution risks held by CNA Financial in exchange for a $2bn fee, Reuters reports.
Berkshire's National Indemnity will take over $1.6bn of net liabilities retroactive to 1 January and handle claims, CNA said. The accord has a $4bn limit and gives National Indemnity the right to collect $200m of receivables.
Buffett "understands insurance risks well, and can use the 'float' from the $2bn to boost investment returns, perhaps before any claims would need to be paid," said Brian Schneider, a senior director at Fitch Ratings. "For CNA, transferring risk gives it more certainty."
Loss for CNA
CNA said it expected to incur a $375m after-tax loss when the Berkshire transaction closes later this quarter. Chief executive Thomas Motamed said in a statement that the transaction would "effectively eliminate a significant source of uncertainty" for the Chicago-based company.
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