Berkshire take on Equitas run-off

Well, this surprised me. A Lloyd’s press release today announced

a transaction between Equitas and Berkshire Hathaway Inc. [which] once completed…will end the residual legal liabilities of Lloyd’s and bring finality to Names reinsured by Equitas.

[emphasis added]

This is undoubtedly welcome news for Lloyd’s Names (hello, James) who have been plagued by worries over Equitas’ longevity and financial strength. However, while I don’t mean to pour cold water on the festivities, I should be rather surprised if it does indeed guarantee “finality” to Names, since nothing ever really can. The Names are ultimately still liable to their policy-holders and any security behind them in the form of reinsurance is only as good as the reinsurer. Now BH is plainly about as good as it gets, but it still isn’t “finality” in the strictest sense. Unless of course there is some sort of finality built into the mechanism, though I cannot immediately see how one would do this.

UPDATE [23 Oct 2006] – OK, they’re novating (i.e. the existing contracts between Names and re-/insureds will be replaced with, presumably, contracts between the policyholders and some Buffet entity). That could work.