The City watchdog slapped General Reinsurance, the insurance arm of Mr Buffett's investment company Berkshire Hathaway, with a £1.2 million fine over two improper deals.

The fine is dwarfed by Mr Buffett's estimated £24 billion personal fortune, but the ruling comes at a sensitive time for GenRe, which is also being investigated in the US, Australia, Germany, Ireland and Canada.

Two electricity companies owned by Berkshire Hathaway also face fines running into millions of pounds after regulator Ofgem launched an investigation into possible licence breaches this month.

The two reinsurance deals investigated by the FSA were transactions which purported to transfer risk from two insurance clients to the reinsurer but were "designed without legitimate purpose and effect", the regulator said.

The FSA said the first transaction, signed in 1999 and renewed three times, allowed a German insurer to gain tax benefits by transferring money between Germany and Ireland.

The second, signed in 2004, was used to compensate for a premium reduction on a reinsurance programme agreed with a client insurer.

The FSA ruled that in both cases GenRe did not have controls in place to stop the deals being signed.

Margaret Cole, the FSA's director of enforcement, said: "Both conventional and finite reinsurance transactions should only be used where there is a legitimate commercial purpose and sufficient risk transfer.

"The FSA will take robust action against reinsurance firms and their staff who act in contravention of these basic principles."

The penalty would have been higher, but mitigating factors included the unit reporting the transactions to the regulator, co-operating and taking prompt remedial action. It also settled at an early stage, avoiding £1.75 million pounds, in the process.

Last week, Berkshire Hathaway announced that German regulators are investigating whether another reinsurance subsidiary and senior executives violated laws governing non-traditional insurance products.

Cologne Re, a GenRe subsidiary, is cooperating with a German Federal Financial Supervisory Authority order to produce documents regarding finite reinsurance and transactions with third parties.

Regulators in Australia are close to making a decision following an 18-month investigation into GenRe's dealing with Zurich Australian Insurance, New Cap Reinsurance and FAI.

FAI, dubbed "Australia's Enron", was subsequently taken over by HIH. The takoever was the subject of a Royal Commission and GenRe is being sued by HIH's liquidator.

In the US, GenRe is facing proceedings on several fronts. Berkshire Hathaway said in September that GenRe chief executive Joseph Brandon and other executives may face civil action over alleged securities law violations.

The Justice Department is also likely to announce further criminal charges over its probe into a 2000 transaction between GenRe and AIG.

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