Developments continue for asbestos litigation – and insurance coverage for asbestos claims. Warren Buffet’s companies already have been paid to take on an enormous share of the US asbestos risk, including for London insurers and for domestic insurance companies such as CNA, and for AIG. Buffet’s operations have been subject to fierce criticism for taking positions that boil down to “delay, deny, defend,” according to the critics, which include asbestos plaintiff’s lawyers, such as Steve Kazan. Now the Buffet companies are being paid to take on asbestos risk for Liberty Mutual. For Warren, it’s all about the float of taking in premium rapidly, and paying money out slowly.
As for the underlying litigation, one assumes the Liberty Mutual defense will now be folded into Resolute since one part of the article states: “NICO will assume responsibility for claims handling related to Liberty Mutual Insurance’s asbestos and environmental claims.”
The full article is pasted below:
Liberty Mutual Insurance Enters into Reinsurance Agreement with National Indemnity Company
“BOSTON, Jul 17, 2014 (BUSINESS WIRE) –On July 17, 2014, Liberty Mutual Insurance reached a definitive agreement with National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc., on a combined aggregate adverse development cover for substantially all of Liberty Mutual Insurance’s U.S. workers compensation, asbestos and environmental liabilities, attaching at approximately $12.5 billion of combined aggregate reserves with an aggregate limit of $6.5 billion.
At the closing of this transaction today, but effective as of January 1, 2014, Liberty Mutual Insurance ceded approximately $3.3 billion of existing liabilities under a retroactive reinsurance agreement. NICO will provide approximately $3.2 billion of additional aggregate adverse development cover. Liberty Mutual Insurance paid NICO total consideration of approximately $3.0 billion.
The agreement covers Liberty Mutual Insurance’s potentially volatile U.S. asbestos and environmental liabilities arising under policies of insurance and reinsurance with effective dates before January 1, 2005, as well as Commercial Insurance’s workers compensation liabilities as respects injuries or accidents occurring before January 1, 2014.
NICO will assume responsibility for claims handling related to Liberty Mutual Insurance’s asbestos and environmental claims. Liberty Mutual Insurance will continue to handle all workers compensation claims.
“We believe that this agreement further strengthens our financial position as it eliminates a substantial source of uncertainty in these liabilities and allows us to focus on execution in our core businesses,” said David H. Long, Liberty Mutual Insurance Chairman and Chief Executive Officer.
This transaction will be accounted for as retroactive reinsurance in Liberty Mutual Insurance’s GAAP consolidated financial statements and results in a pre-tax loss of approximately $130 million as of the effective date, which will be included in third quarter results.
TigerRisk Partners and Skadden, Arps, Slate, Meagher & Flom LLP acted as advisors to Liberty Mutual Insurance.”