The question is whether such an acquisition would bring any value outside of scale to Berkshire's existing Gen Re operation, said Fred Loeloff, director of Standard & Poor's in New York.

A representative for Employers Re said the company does not comment on market rumors. Sources agree that it is logical the two companies have been talking, but talking does not mean an acquisition is in the works, despite press reports that a deal has been made.

Mr. Loeloff believes the two companies would face an immense integration and cultural risk, which would require a lot of management attention. Further, he said he doesn't think that ERC fit well into Berkshire's acquisition strategy.

Berkshire acquires companies with strong management in place because Berkshire's chief executive officer, Warren Buffett, doesn't provide the management team, said Mr. Loeloff. He noted that the ERC management team has been in transition over the last couple of years, which might limit its appeal.

Mr. Buffett also would look at the long-term value of a company, he continued. Although Berkshire would get a sizable float from such an acquisition, Mr. Buffett "wants a company that has proven earnings consistency, and he doesn't want a turnaround situation," he said.

S&P has publicly stated its concerns about the reserve adequacy of ERC, which has taken hits this year in terms of reserve strengthening, Mr. Loeloff noted, "so that could be a sizable concern going forward."

"There is an enormous amount of pressure on Berkshire to make Gen Re work," said Mr. Dreyer. "That's outside pressure and internal pressure as well." Mr. Dreyer said that adding ERC to the mix might derail that effort.

After the amount of money that Mr. Buffett has had to funnel into Gen Re over the past year-and-a-half, "I can't imagine he would take an open-ended sale," said a reinsurance broker who didn't want to be identified. "GE would have to provide some guarantee on the reserves. That probably would stymie the deal."

Several brokers speculated how an acquisition of such magnitude would affect the market.

Steve Bolland, senior vice president with Gill and Roeser, a New York reinsurance broker, speculated that a Berkshire acquisition of ERC could limit the choices for buyers. "Insurance companies over the last few years have shortened their approved security list because reinsurance recoverables have become a big issue," particularly for long-tail liability coverages, he said.

"It's a short list already. But when you get consolidation among the tier-one reinsurers, that really shortens up the tier-one security list," Mr. Bolland said.

Some insurance companies that want long-tail coverage aren't willing to drop below tier one, and therefore, to an extent, "it's a little anti-competitive because there aren't very many other markets you can go to if somebody is demanding a tier-one product," Mr. Bolland said.

"If the deal does happen, from a client perspective, I don't think they'll be overly enthusiastic about it," said a reinsurance broker who didn't want to be identified. "It reduces the choices, particularly in the U.S."

"I think the clients again will say, ?one plus one is not going to equal two,'" he added, explaining that clients won't want to put all their eggs in that one basket. "They're going to continue to look for alternative choices."

"There is still a wide and varied global reinsurance market," said Mike Koziol, senior director and counsel for the National Association of Independent Insurers in Des Plaines, Ill. "This [deal] perhaps could rearrange the hierarchy of who is number one, two, three and four, but there are hundreds of reinsurers worldwide."

For example, he noted, "the top 150 global reinsurers in 2001 had net premium of nearly $100 billion, backed by $245 billion in surplus, so that should give perspective as to the width and breadth of the global market."