Fairfax Financial’s runoff division to pay up to £191m for Brit Insurance

Brit Insurance, which wrote UK domestic as well some international insurance and reinsurance, was placed in runoff earlier this year. “We continue to look for opportunities to grow profitably in the runoff area,” Fairfax’s chief executive Prem Watsa said.

In a runoff, an insurance company stops writing new business and only manages the existing book until all the policies in that book expire.

Prem Watsa, an Indian-born Canadian, has built a reputation as a shrewd contrarian investor by moves such as betting against the US housing market in the last decade and reaping billions when the market collapsed.

Watsa, known as the ‘Warren Buffett of the North’, took control of Fairfax in 1985. The Canadian property and casualty insurer said Brit Insurance had net reserves of about $1.3bn and cash and invested assets of about $1.9bn at March 31.

RiverStone will buy Brit Insurance at a discount to its book value, said Fairfax, which put the UK insurer’s book value at about $530m. The deal, likely to be funded by internal resources at RiverStone, is expected to close in the fourth quarter of 2012.