Berkshire Hathaway reinsures AIG subsidiary
by David Masters
Story link: Berkshire Hathaway reinsures AIG subsidiary
Lexington Insurance Company, a subsidiary of AIG, has agreed terms with Berkshire Hathaway for reinsurance cover.
Berkshire Hathaway’s National Indemnity Company will provide contingent property reinsurance cover to Lexington’s Real Estate Portfolio, as well as to policies with limits of over $250 million, to policies with home/foreign exposure, and to the property sectors of the majority of Lexington’s homeowner business.
Buffett-owned Berkshire Hathaway now stands behind Lexington if it sustains a covered loss.
The deal will help Lexington to secure continued business with its major customers who require that their insurer as a top band rating.
AIG’s credit rating was slashed to single-A when it announced its problems following the collapse of the Lehman brothers, whilst Berkshire Hathaway has a triple-A credit rating.
AIG’s share price rose 2% following the announcement.
Billionaire investor Warren Buffett, who owns Berkshire Hathaway, is expected to keep an eye on AIG’s subsidiaries in case they come up for sale to pay off AIG’s debt.
Earlier this month Buffett invested $5 billion in troubled international investment bank Goldman Sachs.