Berkshire Hathaway European Insurance DAC Assigned 'AA+' Ratings On Core Group Status; Outlook Is Stable

  • Berkshire Hathaway European Insurance DAC (BHEI), a newly created operating entity domiciled in Ireland, provides Berkshire Hathaway Inc.'s insurance group (BRKIS) continuity of access to European markets post Brexit.
  • We view BHEI as a core subsidiary of BRKIS.
  • As a result, we are assigning BHEI our 'AA+' financial strength and issuer credit ratings.
  • The stable outlook on BHEI reflects the outlook on core entities of BRKIS.
TORONTO (S&P Global Ratings) May 17, 2019--S&P Global Ratings said today it assigned its 'AA+' financial strength and issuer credit ratings to Ireland-domiciled Berkshire Hathaway European Insurance Designated Activity Co. (BHEI). The outlook is stable.
The ratings on BHEI are based on our assessment of the company as a core entity of Berkshire Hathaway Inc.'s insurance operations (BRKIS). BHEI's establishment enables BRKIS to retain access to European markets and manage its existing business, thereby mitigating risks from Brexit while supporting its expansion efforts in continental Europe. BHEI will assume a portion of existing business (primarily sourced from Europe) currently underwritten by U.K.-based Berkshire Hathaway International Insurance Ltd. (BHIIL) in addition to writing new business from the region. In an arrangement similar to that for BHIIL, BHEI will manage business for a number of BRKIS' operating segments including Berkshire Specialty, BRKIS' reinsurance operations, and MedPro.
BHEI benefits from an 80% quota share reinsurance arrangement with National Indemnity Co (NICO; AA+/Stable), which also provides per event excess-of-loss and stop-loss protection, reflecting strong support from the group. Both NICO and BHIIL are core subsidiaries of BRKIS. Furthermore, BHEI is well integrated with the insurance group, leveraging its existing management, underwriting, risk management, and operational infrastructure.
The stable outlook reflects the outlook on the parent. Because BHEI is a core subsidiary, the ratings on it will move in tandem with those on the core operating subsidiaries of BRKIS. Although not our base-case scenario, we could lower the ratings over the next two years if we no longer view BHEI as a core subsidiary.
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