The world’s second-richest man has come to the rescue of about 34,000 private investors with a stake in the run-off liabilities of Lloyd’s vehicle Equitas.

Through his Berkshire Hathaway investment firm, Warren Buffett has agreed to take on the claim risk that has worried investors and policyholders for the past decade or more.

Equitas was set up by Lloyd’s to handle thousands of pre-1993 policies still within its area of responsibility. They include a host of potential claims ranging from natural disasters to pollution and asbestos-related illnesses.

The run-off of the liabilities was proving long and painful for the 34,000 Lloyd’s investors, or “Names”, whose own assets were at risk if the claims got too heavy.

The US Government reportedly kept track of each claim to ensure there was no attempt by Lloyd’s to avoid its responsibilities to American policyholders – something it has never done.

Now the liabilities will be transferred to Berkshire Hathaway’s National Indemnity Company. It has agreed to provide a further $US7 billion ($9.2 billion) of back-up capital, in addition to the $US8.7 billion ($11.44 billion) Equitas had set aside. It will also take on the staff and management of the run-off operation.

In return, Berkshire Hathaway will receive all Equitas assets and a one-off contribution from Lloyd’s of £72 million ($178 million). Lloyd’s will provide a further £18 million ($44.5 million) once the transfer of liabilities is fully approved by the UK High Court.

Mr Buffett says Equitas management handled the run-off well, allowing a third party to find value in taking on the remaining liabilities.

“Their skill in resolving complicated and contentious matters allows the transaction announced today,” he said. “Putting Berkshire Hathaway’s Gibraltar-like strength behind the remaining problems – which will take many decades to resolve – eliminates any remaining worries for all concerned.”

Lloyd’s Chairman Lord Levene says the agreement is a milestone for the long-standing insurance market.

“We have always had every confidence in the management of Equitas and their ability to achieve a solvent run-off. This additional protection, however, is very valuable to Names who were originally reinsured by Equitas and who will now achieve finality post-transfer.”