King & Wood Mallesons (KWM) has advised Insurance Australia Group (IAG) on a long-term strategic relationship with Berkshire Hathaway.

The strategic relationship is underpinned by a 10 year 20% quota share arrangement across IAG’s consolidated insurance business and an approximately 3.7% investment in IAG by Berkshire Hathaway via a $500million share placement.  It is the first investment in an Australian company for Berkshire Hathaway.

The relationship brings together Australia’s leading insurer (IAG) with Berkshire Hathaway, one of the world’s largest and most successful companies. The 2 companies have had a successful reinsurance relationship since 2000.  Under the expanded relationship, the companies will work together exclusively to enhance their customer offerings.

KWM’s M&A team worked across all aspects of the deal and drew on expertise from practitioners across the firm to ensure that the transaction was a success within the tight timeframes involved.

Commenting on the deal, KWM partner, Patrick Gunning said, “It was a privilege for the firm to assist IAG to enter into this strategic relationship.  Everyone involved had a sense of the significance of the transaction and worked tirelessly to finalise negotiations over a very short period of time.  It is not every day that Australian lawyers get to help a client consummate an investment by one of the world’s most admired investors.”

IAG estimates that the 10 year quota share arrangement – possibly the largest insurance contract ever written – will result in a reduced capital requirement of approximately $700 million over the next 5 years.