CNA Financial has said that its principal operating subsidiary, Continental Casualty Company, together with several of its other insurance subsidiaries, have entered into an agreement with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway, under which the CNA companies’ legacy asbestos and environmental pollution liabilities will be transferred to NICO.

Under the terms of the transaction, effective January 1, 2010 the CNA companies will cede approximately $1.6bn of net asbestos and environmental pollution liabilities to NICO under a retroactive reinsurance agreement with an aggregate limit of $4bn.

The aggregate reinsurance limit will also cover credit risk on existing third party reinsurance related to these liabilities.

The CNA companies will pay to NICO a reinsurance premium of $2bn and also transfer to NICO the right to collect billed third party reinsurance receivables with a net book value of approximately $200m.

To secure its obligations, NICO will deposit $2.2bn in a collateral trust for the benefit of the CNA companies. In addition, Berkshire Hathaway has guaranteed the payment obligations of NICO up to the full aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement.

Thomas Motamed, chairman and CEO of CNA Financial, said: “We believe this transaction is consistent with our focus on financial stability and delivering improved levels of operating consistency as we effectively eliminate a significant source of uncertainty from these legacy liabilities.

This transaction will allow us to sharpen our focus even further on the execution of strategies to improve and grow our on-going core businesses.”