By Erik Holm
June 9 (Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. agreed to guarantee insurance policies sold by XL Capital Ltd. to clients who want increased assurance their claims will be paid.
Berkshire’s National Indemnity unit will get as much as $250 million to back claims on coverage that protects corporate boards and executives against lawsuits if XL is unable to do so. The agreement is for 10 years, Bermuda-based XL said today in a regulatory filing.
The deal “addresses both client and broker need for a program that offers the utmost protection to directors and officers in the event that the client’s indemnity coverage fails to respond,” said David Duclos, the head of the firm’s XL Insurance unit, in a separate statement.
Berkshire and Goldman Sachs Group Inc. are among the financial firms that have assumed risk from smaller rivals after downgrades from rating firms dented confidence in the firms. Life insurer Lincoln National Corp. in March reached a reinsurance agreement with Goldman Sachs to free up $240 million in capital reserves.
Berkshire typically gets about half its profit from insurance. The Omaha, Nebraska-based firm has assumed risks from other carriers on perils including storm damage and terrorism.
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