US financier Warren Buffet, through his Nebraska-based Berkshire Hathaway Inc., will provide $1.5 billion in reinsurance for the $10.5 billion California Earthquake Authority (CEA).

The CEA had planned to offer $1.5 billion in earthquake risk bonds, but Mr.

Buffet "offered us traditional reinsurance,'' CEA chief executive officer Greg Butler said yesterday.

With the move, Mr. Buffet is betting that a devastating California quake is at least four years away, Lloyd's List, in its Insurance Day publication, said.

Mr. Buffet stands to make $590 million profit if there is no major quake before March 31, 2001.

The CEA is a state agency which will operate as a primary insurer selling earthquake coverage for residential property risks.

Bermuda property catastrophe reinsurers have provided $572.5 million of the CEA's $1.9 billion reinsurance company portion, Mr. Butler said.

"The Bermuda market was the first to sign on. It showed leadership and faith that led the rest of the market,'' he said.

When California Insurance Commissioner Charles Quackenbush began setting up the CEA in 1995, Bermuda was the fist place he visited, Mr. Butler added.

In its first year, the CEA will have enough resources to handle all claims from a quake twice the size of Northridge, the CDI said.

Had the CEA been in operation in 1985, it would have paid all claims from the Loma Prieta, Northridge and smaller quakes causing property damage over the last ten years and still have $12 billion in reserve today. Northridge cause $12.5 billion in insured losses.

The CEA is to start writing policies December 2.

Mr. Buffet's investment is only jeopardised if the CEA faces $7 billion in claims over four years.