Warren Buffett’s Berkshire Hathaway is setting up shop in Adelaide, as its reinsurance division takes over management of the Motor Accident Commission’s (MAC) “back book” of compulsory third-party vehicle insurance claims.
The move will take effect on January 01, “as a natural consequence of the former Labor government’s decision in 2014 to privatise the provision of CTP vehicle insurance in South Australia,” which had been a core function of MAC, Treasurer Rob Lucas said in a statement.
MAC ceased writing new policies from July 01, 2016 but continued to manage a “back book” of claims issued up to and including June 30, 2016.
“Put simply, assets and liabilities from MAC will be transferred to Berkshire Hathaway’s National Indemnity Company, so that all the risks of managing MAC’s liabilities will be transferred to Berkshire Hathaway,” Lucas said. “Part of the arrangement will see $300 million of the reinsurance premium retained in South Australia – with at least $100 million retained for five years – for local funds management. The government will consider a range of options to help implement a key election commitment to grow local funds management activity.”
The existing Allianz claims-management contract will remain in place until it expires on June 30. Berkshire Hathaway will explore long-term arrangements with Allianz. Claimants will not be impacted by the change.
After the deal is concluded, budgeted returns from MAC to the budget will reduce by up to an estimated $68 million over the three-year period from 2019-20.