Berkshire Hathaway's landmark deal which, if finalised, will bring finality for Lloyd's Names reinsured by Equitas, and could lead to future reinsurance deals, Insurance Times has learned.
It is understood that in future the Warren Buffet-led investment group may look to invest not just in other reinsurance companies, but also in reinsurance trading platforms.
A senior industry source told Insurance Times that the market's move toward a more electronic trading exchange could prove tempting for the US insurance group. Berkshire Hathaway was unavailable for comment.
The £3.8bn agreement between Equitas and Berkshire Hathaway has been described as "a significant milestone" in Lloyd's history as it will finally draw a line under liabilities for individual members.
The so-called Names, of which 34,000 former and present members reinsured liabilities with Equitas from policies written in 1992 and prior years, retained the legal liability to pay valid policyholders' claims.
Hugh Stevenson, chairman of Equitas, said: "Equitas has achieved a great deal since it was set up in 1996 but we still face many threats and uncertainties."
Warren Buffet, chairman of Berkshire Hathaway, added: "Putting Berkshire Hathaway's Gibraltar-like strength behind the remaining problem, which will take many decades to resolve, eliminates any remaining worries for all concerned."
As part of the deal National Indemnity Company, a member of the Berkshire Hathaway Group of insurance companies, will reinsure all Equitas' liabilities and provide up to a further £3.8bn of reinsurance cover to Equitas, which will nearly double the assets available for the run-off of the company.
Staff and operations of Equitas and the run-off of its liabilities will also be taken on by the American company.
The transaction will occur in two phases and require High Court approval to transfer all liabilities of reinsured Names into Equitas or a subsidiary of Berkshire Hathaway.
Lloyd's, which is likely to receive a ratings boost as a result of the deal, will also contribute £90m to the agreement.
Approval is still needed from the FSA, US regulators and Equitas trustees.