"I'll pay you $1 million now. If anybody wins the prize, you're on the hook to give them the other $999 million. If nobody wins the prize, you get to keep the $1 million."
edit: And where I say $1 million, do some hand waving with the odds and figure out a number on which both parties agree
Buffet is the one (via one of Berkshire Hathaway's insurance companies) who is doing the insuring. Quicken loan is paying buffet/berkshire a, likely large, premium to pay the billion if someone wins. Given the odds are 1 in not gonna happen, it's likely an easy million or two for buffet, and free promotion. Buffet/Berkshire also insured the pepsi billion dollar prize thing a few years back.
If the chance of anyone winning is y and the prize is x, you can pay the insurer (x*y)+z dollars to pay out the x dollars in the event that someone wins. I'm sure z is probably tied to x in some way, but just know that z is the money that turns into the insurer's revenue in the long run.
You're basically paying the expected value(cost?) of the prize, plus a fee to the person who's insuring you. That way a billion dollar contest will not actually cost you a billion dollars, even in the event that someone wins.
Surely he'd also be indictable on fraud charges ... though it wouldn't surprise me if he has a lawyer who's made some way for him to wriggle out without making it a fraud.
You do realize that all Buffet is doing is providing the insurance through one of the many insurance companies he owns via Berkshire Hathaway, and that Quicken Loans is paying the premium. Berkshire Hathaway is one of the largest re-insurers in the world and specialize in multi billion dollar insurance policies. A quick glance at last years annual report shows they paid out $20 billion last year. The market cap of berkshire is almost $300 billion dollars. Do you really think they are worried about paying out $21 billion instead of $20 billion in insurance claims this year?
1: The head of state of one of the G8 would have a reputation easily worth half a billion dollars. Not in terms of personal income, but a damaged reputation could easily cause havoc in billions of dollars worth of various political deals.
