Aon-Berkshire Hathaway deal a challenge to reinsurers

Aon Risk Solutions has signed a co-insurance deal with Berkshire Hathaway that will enable the broker to extend Berkshire Hathaway capacity to Lloyd’s clients, challenging traditional reinsurers.

The deal “is globally available across all industry segments” and will be able to draw on Berkshire Hathaway’s AA+ rated capacity for “all eligible business placed by Aon Risk Solutions where the Lloyd’s market participates”.

The deal is the first of its kind in the insurance industry and will enable Aon to deploy capacity on behalf of Berkshire Hathaway, in what is believed to be a quota share arrangement.

Commenting on the deal, Steve McGill, group president of Aon and chairman and CEO of Aon Risk Solutions, said: “this landmark solution provides a unique way for them to access high quality capacity efficiently. No other firm has been able to deliver a solution of this scale to their retail clients across all industry segments on a full follow basis. We are proud to be able to offer our clients unprecedented access to the financial strength of Berkshire Hathaway through this transaction.”

The new sidecar appears to be of a rather more permanent nature than traditional, opportunistic structures, and will likely be regarded as competition by those reinsurers active at Lloyd’s. The potential scale of Berkshire Hathaway’s play and its involvement in a new co-insurance arrangement are likely to prompt significant interest in the deal, particularly in light of its potential to take the top off reinsurance pricing at Lloyd’s.