netnet Posted January 19, 2010 Posted January 19, 2010 Would anyone care to give a detailed explanation of the retrocession deal between Swiss Re? So BRK gave Swiss Re: 1.3 billion for which BRK will assume the reinsurance of a block of term life policies. Presumably the original insurer will be paying BRK annually on the insurance. Now, Swiss will have freed up 300mm in capital. For Swiss this business does not meet its hurdle rate, obviously for BRK it does. Would any insurance experts care to expound?
shalab Posted January 19, 2010 Posted January 19, 2010 Smells like the equitas deal to me. Increases float for BRK and frees up the reserves for Swiss Re. Looks like a win-win situation for both.
twacowfca Posted January 20, 2010 Posted January 20, 2010 Smells like the equitas deal to me. Increases float for BRK and frees up the reserves for Swiss Re. Looks like a win-win situation for both. Yup. "Swiss Re will reinsure a closed block of yearly renewable term life insurance, written before 2004, with Berkshire Hathaway Life Insurance Corporation of Omaha Nebraska."
shalab Posted January 20, 2010 Posted January 20, 2010 WSJ carried an article on this yesterday. It said the block was profitable but wasn't earning the hurdle rate of 14% the other groups within Swiss-Re were. It is long tailed insurance and looks exactly like the equitas deal.
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