(Bloomberg) – American International Group Inc. agreed to pay $9.8 billion to Warren Buffett's Berkshire Hathaway Inc. to take on long-term risks from commercial policies written in prior years.
The reinsurance deal transfers liabilities on certain U.S. policies from 2015 and earlier, representing reserves of about $34 billion as of Jan. 1, 2016, New York-based AIG said Friday in a statement. The coverage involves so-called long-tail policies, in which claims can emerge years after a policy is issued.
AIG has struggled with worse-than-expected losses on workers' compensation policies, commercial-vehicle coverage and insurance that protects companies or their executives against lawsuits. Third-quarter results were hurt by surprise expenses on contracts in which the insurer guarantees payments to accident victims. And a year ago the company reported more than $3 billion in costs to fill a reserve shortfall. AIG said Friday that it expects to report a "material" fourth-quarter charge tied to claims costs.
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