Berkshire Hathaway has closed down the Euclidian Underwriting operation on Birchin Lane and made "99.9%" of its staff redundant.
Sources said the decision was made on Monday this week and shocked staff were told to "clear the offices" by Tuesday morning.
The source said: "It looks like Berkshire Hathaway has done a deal quickly with AIG to bring the operation to a close. But it seems there are on-going negotiations with Lloyd's, which is desperate to protect the Central Fund from another major hit."
Reports over the weekend suggested that the long-running dispute with the Stop Loss Recovery Group, representing 500 Lloyd's Names, against Euclidian over alleged mis-selling of stop loss policies was close to a resolution. A settlement of £30m to cover their losses was mooted and reports said mediation had begun between the two parties.
However, the events this week could have scuppered any resolution. "Warren Buffett will have ripped up any agreements and it looks like the Names don't have much chance now of winning," said the source.
Berkshire Hathaway has officially placed Euclidian's Syndicate 1243 into run-off, which will be overseen by Malborough Underwriting.
A Lloyd's source said: "The franchise board is keeping a watchful eye over events."