Equitas' $7bn reinsurance deal with Berkshire Hathaway has been hailed as a “win-win” deal.

Warren Buffett has come forward as an unlikely saviour for Equitas, the vehicle created to reinsure and run-off Lloyd's 1992 and prior non-life liabilities. The recent announcement that Berkshire Hathaway would reinsure all Equitas liabilities and provide a further $7bn in reinsurance cover, above its existing reserves, has been greeted with much fanfare. Equitas has long been a thorn in the market's side despite cutting its liabilities from $28bn in the mid-1990s (when it was on the verge of collapse) to $8.3bn.

Hailed as “a significant milestone” by Lloyd's chairman Lord Levene, the deal is expected to end the residual liabilities of Lloyd's and bring security for around 28,000 Names reinsured by Equitas. Hugh Stevenson, chairman of Equitas, said: “This is wonderful news for reinsured Names. Equitas has achieved a great deal since it was set up in 1996 but we still face many threats and uncertainties. This agreement… will transform the outlook for Equitas and for reinsured Names.”

In addition to the $7bn in reinsurance, which has been provided by National Indemnity, Berkshire Hathaway will also take on the staff and operations of Equitas and conduct the run-off of its liabilities. Lloyd's will contribute £90m to the transaction.

Taking on a mass of long-tail asbestos liabilities seems an unlikely choice for the somewhat cautious “Oracle of Omaha”, so dubbed for his savvy and careful investment decisions. Since the 1970s, 700,000 asbestos claims have been filed in the US and more than $70bn has been spent on asbestos litigation, according to the RAND Institute for Civil Justice. But Buffett appears unfazed. “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,” he said in a statement.

Equitas has long been viewed by the rating agencies as having an offsetting impact on Lloyd's financial strength. Upon news of the announcement Standard & Poor's quickly revised its outlook on the market from stable to positive. Lloyd's CEO Richard Ward said: “Despite the outstanding performance of Equitas since its inception, the rating agencies sometimes cite it as having a potentially negative impact on the market's ongoing financial strength. The successful completion of this transaction should end that once and for all.”According to S&P analyst Marcus Rivaldi the deal may see some new opportunities for Lloyd's if it successfully allays concerns on legacy issues. He said it “could help the market regain its position as the preferred European destination for businesses considering expansion overseas” with a specific emphasis on interest from Bermuda. Lloyd's has increasingly been competing with other European markets for new business. In October, Arch Capital announced it was opening a branch in Zurich and XL chose Dublin for its European reinsurance platform.