Just two weeks after the Australian Prudential Regulation Authority (APRA) asked US-based reinsurer General Re to show why it shouldn’t be investigated over its dealings in Australia, a unit of Berkshire Hathaway has unwound a reinsurance deal it made with HIH Insurance.

In a brief response to APRA, General Re is believed to have insisted that any further inquiry into its 1998 dealing with FAI over financial reinsurance would not uncover any new material.

The matter is understood to have embarrassed Berkshire Hathaway Chairman and CEO Warren Buffett, who is already under pressure from US regulators examining financial reinsurance deals carried out by General Re with insurance giant AIG. Some reports have contradicted Berkshire Hathaway’s statement that Mr Buffett knew nothing of “side letters” that effectively negated the AIG contracts.

The company has indicated it will co-operate fully with any APRA investigation.

If the investigation goes ahead it will relate to a financial reinsurance policy that FAI bought from General Re in June 1998 – six months before Berkshire Hathaway took control of the former General & Cologne Re.

Meanwhile, the Wall Street Journal has reported that another Berkshire Hathaway unit, National Indemnity, has returned a $2 million premium payment to HIH liquidator Tony McGrath, unwinding the deal under an agreement finalised earlier this year.

The deal was not publicly reported by Berkshire Hathaway.

The transaction was handled by Ajit Jain, an associate who Mr Buffett has often described as a risk management genius.