INVESTMENT legend Warren Buffett's Dublin-based insurance giant wants to extend on its €700m deal with VHI – if it can hammer out assurances about the future of the market here with the Government.
Berkshire Hathaway Reinsurance, which already covers half of VHI's €1.4bn book, wants to do a three-year deal with the State-owned insurer, but needs assurances from the Minister for Health James Reilly and on the future of health insurance in Ireland, it is understood.
The uncertain future of VHI itself could hinder ongoing discussions on a further deal – such as whether it will continue to be a State-owned company in the long term, whether it will be sold outright, broken up and sold in parts, or restructured, particularly if a Universal Health Insurance model is introduced here.
VHI chief executive John O'Dwyer plans to propose a Universal Insurance pilot scheme when he speaks at an industry event this week. It is believed he will suggest that the scheme, which is the model that exists in the Netherlands and has been favoured by the health minister, be trialled with school-age children here.
A serious sticking point to a bigger Berkshire deal for VHI is risk equalisation – the system that compensates VHI for taking on older and riskier clients, which is the 'anti-cherrypicking' move brought in by the European Commission earlier this year.
"A risk equalisation pathway needs to be nailed down to get Warren Buffett's Berkshire to sign a longer deal with VHI," a source said. However, private players like Laya and GloHealth maintain that this levy has triggered soaring premium prices, which have risen in double digits.
The hugely controversial attempt to charge health insurance companies for beds in public hospitals earlier this year nearly put the kibosh on the first VHI deal with Berkshire, the Sunday Independent has learned.
More certainty about the future of the market would also improve VHI's marketability if it is to be sold, another industry source suggested. "VHI can be built up into a saleable business if the way is clear on risk equalisation."
The current one-year deal between Berkshire and VHI – which is saving taxpayers up to €150m in terms of recapitalisation from the Central Bank before an end-of-year deadline – needs to be extended to three years for full capital minimising effect.
Berkshire Hathaway Reinsurance's Dublin 2 base is headed by Viviana Pascoletti, an Italian actuary with a US and Irish reinsurance industry background. Although it has had an Irish office for many years, this is the company's first major deal here. Buffett gets both a fee and a premium income, it is understood.
"We don't talk to newspapers," an executive at the Mount Street office said when telephoned last week.
International consultants McKinsey had a hand in advising on strategy and cost-cutting at VHI over the past year.