The Hartford has inked a pact with National Indemnity Co. for a $1.5 billion reinsurance agreement that covers some of the insurer’s exposure to asbestos and environmental liability.
The Hartford will pay NICO, a subsidiary of Berkshire Hathaway Inc., a $650 million reinsurance premium that will hit its fourth quarter financials.
The agreement covers potential adverse development on The Hartford’s existing asbestos and environmental reserves as of Dec. 31, 2016. That excludes those held by the company’s U.K. Property and Casualty (P&C) run-off subsidiaries, which the company is under contract to sell and currently expects to close in first quarter 2017.
The Hartford will continue to handle claims, subject to certain conditions, and will retain the risk of recoveries under third-party reinsurance contracts for these exposures.
Chief Financial Officer Beth Bombara noted: “The agreement announced today is consistent with our stated objective of evaluating options that had favorable economics, while taking into consideration our expertise in handling these complex claims.”
The reinsurance premium does not affect the company’s expectation to execute its previously announced 2017 capital management plan including equity repurchases of $1.3 billion, the company said.
