Mr Buffett's Berkshire Hathaway will also assume 20 per cent of its property and casualty business for the next five years, Swiss Re revealed in a statement.
Using the capital from the investment, Swiss Re will be able to increase its share buyback by as much as $1.6 billion.
But analysts have been surprised by the move and think that Mr Buffet may know something they don't as prior to the deal Swiss Re lost around a quarter of its value after it announced a loss of over $1 billion in derivatives in November.
"I was stunned. Berkshire Hathaway isn't known to give anything away and it implies that reinsurance earnings are undervalued by the market,'' Michael Huttner, an analyst with JPMorgan told Bloomberg.
"Confidence is being expressed in the fundamentals of this company, which are quite opaque at present,'' Brian Shea, a Merrill Lynch analyst wrote in a note.
It seems that other investors agree with the analysts, as shares in Swiss Re rose the most since March 2003 following the news, jumping 9.3 per cent and wiping out the reinsurer's losses.