It seems that everyone is doing it and frankly Warren's schtick is best appreciated in the portion size one would allow any insurance salesman from Omaha.
Who's piled up $72.3 Billion.
Buffett bemoans reinsurance becoming a “fashionable asset class”
Warren Buffett is none too happy that reinsurance has become what he termed a “fashionable asset class”, as the fact that investors are increasingly attracted to the space has damaged his insurance and reinsurance businesses returns.
At the Berkshire Hathaway annual meeting held this weekend, Buffett discussed the difficulties that even his insurance and reinsurance empire has in the current, softened and competitive reinsurance market environment.
Competition on price has hit both of his main reinsurance companies, General Re and Berkshire Hathaway Reinsurance Group, with first-quarter results showing a pull-back on premiums written as the firms constrain themselves on underwriting of catastrophe risks.
General Re’s premiums written in property declined 16% in Q1 and the reinsurer actually fell to an underwriting loss, partly due to the impact of competition and falling prices, but also claims rates and currency effects.
“Insurance industry capacity to write business remains high and price competition for most property/casualty markets persists,” the Q1 earnings statement explains.
“We continue to decline business when we believe prices are inadequate. However, we remain prepared to write more business when appropriate prices can be attained relative to the risks assumed.”
Berkshire Hathaway Reinsurance, meanwhile, continues to constrain its capacity and volume for many property & casualty lines and especially for property catastrophe reinsurance underwriting.
“Rates, in our view, are generally inadequate,” the firm explained. “However, we have the capacity and desire to write substantially more business when appropriate pricing can be obtained.”
So Berkshire clearly stands ready to increase its reinsurance underwriting if and when pricing rebounds or the firm can find the opportunities that it finds attractive and well-priced.
During the Berkshire Hathaway annual meeting shareholders, analysts and journalists get to ask Warren Buffett questions about the business, its investments and what might be coming in the future.
On reinsurance in particular Buffett was fairly negative and clearly showed that his firm is cognisant that it faces a threat from new entrants with lower-cost capital, including insurance-linked securities (ILS).
Reinsurance is “a business whose prospects have turned for the worse,” Buffett commented, adding that there’s “not much we can do about it.”...MOREA couple of our BRK posts that may be of interest:
Insurance: "CEO FORUM: Gen Re's Tad Montross on model dependency" (BRK.A)
"Re/insurance. The engine of Berkshire Hathaway: Warren Buffett" (BRK) Plus a Special Bonus!
Insuring the Apocalypse: Warren Buffett on Global Warming (BRK.B)
In addition to See's Candies where cocoa would be a global warming canary in the coal mine, Mr. Buffett's Berkshire Hathaway owns a major property/casualty insurer, GEICO and the reinsurer of last resort, GenRe.And many more.
The utility operation owns the largest fleet of windmills in the U.S. while his railroad, Burlington Northern, is the largest hauler of coal in the country and the largest transporter of oil out of the Bakken field. There are a couple other tie-ins to climate that we've looked at over the years, some links below....
...Of the reinsurers Munich Re is the first to blame climate change for their weather related claims with industry #2 Swiss Re often following suit. The smaller Hannover Re doesn't do this. Zurich Re, along with the rest of the industry, is less vocal. Buffet's Re operations rank #3 in the world and is much better managed than Munich and Zurich so he often ends up taking risk off their hands or even lending them money.
Insuring weather over the last decade has been extremely profitable as premiums charged have been high-although declining as hedge funds and other non-traditional funders "want to get me some of that action"-and payouts on claims have been very agreeable....