|Chartis to Transfer Asbestos Liabilities to National Indemnity Company|
NEW YORK – April 20, 2011 – Chartis today 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.
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.
Chartis is the marketing name for the worldwide property-casualty and general insurance operations of Chartis Inc. For additional information, please visit our website at http://www.chartisinsurance.com. All products are written by insurance company subsidiaries or affiliates of Chartis Inc. Coverage may not be available in all jurisdictions and is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.