Asbestos Liabilities
Chartis to Transfer Asbestos Liabilities to National Indemnity Co.
April 28, 2011
Chartis announced that it has entered into an agreement with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which the bulk of Chartis' legacy asbestos liabilities will be transferred to NICO as part of Chartis' ongoing strategy to de-risk.
The transaction with NICO covers potentially volatile U.S.-related asbestos exposures. The transaction does not cover asbestos accounts that Chartis believes have already been reserved to their limit of liability or certain other ancillary asbestos exposure assumed by Chartis affiliates.
At the closing of this transaction, but effective as of January 1, 2011, Chartis will cede the bulk of its net asbestos liabilities to NICO under a retroactive reinsurance agreement with an aggregate limit of $3.5 billion. Chartis will pay NICO approximately $1.65 billion in respect of the cession.
For those asbestos claims subject to the reinsurance from NICO, NICO will assume responsibility for claims handling. It will also assume collection responsibility and collectability risk for third-party reinsurance related to those claims.
Peter Hancock, Chief Executive Officer of Chartis, said, "We believe that 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."
This transaction will be accounted for as retroactive reinsurance in Chartis' consolidated financial statements and is expected to result in a deferred pre-tax gain of approximately $200 million in the second quarter of 2011.
The closing of the transaction is subject to receipt of required regulatory approvals, execution of definitive transaction documentation, and satisfaction of other conditions. About Chartis Chartis is a world leading property-casualty and general insurance organization serving more than 70 million clients around the world. With one of the industry's most extensive ranges of products and services, deep claims expertise and excellent financial strength, Chartis enables its commercial and personal insurance clients alike to manage virtually any risk with confidence.