National Indemnity Insures $1 Billion Lottery
Warren Buffett’s National Indemnity is up to the challenge of insuring a $1 billion lottery, the world’s largest ever. It could be less risky than it sounds, though. Experts say the chances of National having to pay out are slim.
National Indemnity has written a policy for Grab.com, an Internet lottery launched Monday, covering the possibility of a $1 billion payout. The coverage cost Grab.com “several million dollars,” according to Grab.com co-founder and President Andrew Warner. The insurer will pay the enormous prize if any players match seven randomly selected numbers from 1 to 77. The drawing is to be held Dec. 29.
But the likelihood that National will have to pay is about 2.4 billion to one. Should someone happen to win the lottery, the winner would have a cash option, receiving $175 million right away, or an installment option over 40 years. The non-interest installments would start with 20 annual payments of $5 million, followed by 10 installments of $10 million, nine payments of $20 million and a final balloon payment of $620 million in the 40th year.
Berkshire Hathaway will likely make money on the deal as Grab.com will pay National a small sum for every player who enters the contest.
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