Buffett's Risky Bet on Reinsurance

National Indemnity has yet to file a statutory statement for the second quarter, so it's not clear whether the company has paid out any claims assumed from Sompo yet.

There is a set limit of $482 million to pay for claims; $174 million is earmarked for claim liabilities, and an extra $308 million is available to meet reserve deterioration. Transfercom also has $43 million in share capital. This means it has a total of $525 million in total resources available to meet claims liabilities.

You have to wonder what lies ahead when we see an insurer such as National Indemnity record a loss of this magnitude for a retroactive reinsurance agreement. We can only hope reinsurers are not taking on more liabilities than they can really afford.