Berkshire Hathaway and Tokio Marine Holdings have formed a “strategic partnership” in which the US conglomerate’s National Indemnity Company takes a 2.49% stake in the Japanese insurance group.

National Indemnity, a property and casualty reinsurance business, will buy the holding for about $US1.8 billion ($1.45 billion) and assume a portion of Tokio Marine’s portfolio through whole account quota share reinsurance.

“This strategic partnership is based upon strategic equity investment in Tokio Marine, collaboration in reinsurance, and strategic collaboration in [mergers and acquisitions] with National Indemnity,” the Japanese group said.

Tokio Marine group CEO Masahiro Koike says the partnership “represents a major step forward in advancing our insurance business and delivering sustainable value creation by combining the strengths of both organisations”.

The whole account quota share reinsurance arrangement will make Tokio Marine “less susceptible” to cycles in the reinsurance market, according to the Japanese insurer.

“In addition, it will further strengthen our earnings stability and strategic flexibility by mitigating underwriting volatility, particularly in relation to increasingly severe natural catastrophe risks,” Tokio Marine said.

“The long-term and stable risk capacity generated through this strategic partnership is expected to be deployed towards growth areas, particularly new strategic opportunities centred on our primary insurance business, with the aim of achieving further profit growth.”