The two companies had previously come to an agreement, but the latter has failed to uphold its side.
The Berkshire Group has made insurance news as it just revealed that it is pulling out of a deal that it had with General Insurance Corporation (GIC), a company from India, ending an agreement that was supposed to continue for a period of three years.
However, GIC has paid the premiums for only two quarters, losing the reinsurance business at Berkshire.
The three year contract made insurance news when GIC failed to pay its full premium, causing Berkshire Group to terminate the agreement. The deal was that GIC was supposed to pay $90 million over a period of three years, but as the Indian company paid its premiums for only two quarters, Warren Buffet’s company chose to end that relationship.
This insurance news may not reflect well on GIC, though that company does not expect that it will create problems.
According to the GIC chairman and managing director, A.K. Roy, in an insurance news statement, “It is a call Berkshire has taken.” He went on to say that “Berkshire pullout does not affect our business as there are many people eager to do business with us. Having Berkshire adds value to our programme as they are a AAA-rated company.”
The insurance news regarding the cessation of the contracted has withdrawn the reinsurance coverage that Berkshire has been providing to GIC, which is a form of coverage upon which the latter company relies in order to manage the growing number of terrorism claims. That said, while GIC will no longer be receiving reinsurance cover from Berkshire, it still has the opportunity to obtain the protection from other reinsurers such as Lloyd’s of London, Munich Re, Swiss Re, and Hannover Re.
The first insurance news of the deal between the two companies was in August 2012, between National Indemnity Berkshire Hathaway Reinsurer and GIC. The protection had been purchased in order to help to cover future losses after GIC suffered considerable losses (Rs 2,469 crore) during the difficult span of 2011-12 in which there were a large number of natural catastrophes in Thailand, New Zealand, and Japan, and GIC found itself with inadequate retro cover.