Berkshire Hathaway - Insurance Operations

[John Hjorth]

What are my fellow CoBF board members' opinion / stance on Mr. Buffett giving a "go" to Mr. Jain for taking further USD 15 B in CAT risk related to Florida, as mentioned at the AGM,  in what is perceived an El Niño year?

 

-Thank you in advance for your response.

Edited May 20, 2023 by John Hjorth
Rephrased the question

[cubsfan]

31 minutes ago, John Hjorth said:

What are my fellow CoBF board members' opinion / stance on Mr. Buffett giving a "go" to Mr. Jain for taking further USD 15 B in CAT risk related to Florida, as mentioned at the AGM,  in what is perceived an El Niño year?

 

-Thank you in advance for your response.

Trust in Ajit. Wasn’t the deal we could have a max loss at $15B, but make $7B?

 

Talk about high stakes betting. Pretty cool if you ask me…

 

I wonder where Berkshire falls in the line of liabilities?  After who pays out, etc?

[Charlie]

Look at/think about the track record of Ajit Jain. That's probably all you need to consider. 

(Buffett or Munger said that Track record is everything)

[John Hjorth]

Thank you, @cubsfan & @Charlie,

 

To me, just pretty amazing to be presented by the lines of decision making in the Berkshire Insurance sphere like this, involving economic risks of friggin' [estimated] USD 15 B. [Berkshire will be hit by a dent, and will eventually get over it, if the bet goes wrong.] Thinking about that whole process from proposal to accept is just mind boggling.

 

Where the hell do you place the balls of these gents, when they are no longer among the people alive on Earth? Tjernobyl [J/K]?

Edited May 20, 2023 by John Hjorth

[nwoodman]

13 hours ago, John Hjorth said:

What are my fellow CoBF board members' opinion / stance on Mr. Buffett giving a "go" to Mr. Jain for taking further USD 15 B in CAT risk related to Florida, as mentioned at the AGM,  in what is perceived an El Niño year?

 

-Thank you in advance for your response.

Interesting question I was thinking about this over the last couple of days too.  It does appear that we are moving into an El Niño cycle

 

https://www.jpl.nasa.gov/news/international-sea-level-satellite-spots-early-signs-of-el-nino

 

An El Niño cycle typically reduces Hurricane formation due to an increase in wind shear.  

 

https://www.weather.gov/jan/el_nino_and_la_nina#:~:text=El Niño events generally suppress,high in the atmosphere weaken.

 

So my humble take is that it improves the probability that it could work out well.  

 

Edit:  Some impressive graphics in this article https://www.usatoday.com/in-depth/graphics/2023/05/20/graphics-el-nino-is-building-what-this-means-for-the-worlds-weather/70211954007/

 

Transcript

https://www.artemis.bm/news/berkshire-hathaway-property-cat-book-unbalanced-towards-florida-ajit-jain/

Edited May 21, 2023 by nwoodman

[Dynamic]

When I first bought Berkshire 20 years ago, lumpy but honest results from insurance were part of the deal, and to me far preferable long term to the artificially smoothed Jack Welch era GE results and the high multiple they generated.

 

Catastrophe losses are still there but are usually proportionately smaller for Berkshire now it has grown so much.

 

I tend to think that a bad year tends to weaken competitors and strengthen Berkshire's future position as well as industry pricing hardness when they demonstrate that Berkshire is always prudent and ready with the cash to pay up promptly when insured mega-cats happen.

 

They also prudently cap their correlated reinsurance losses to something affordable, which $15bn is, and when you consider the other streams of income from non insurance operations, dividends received and interest & T-bill coupons, Berkshire is not going to be financially hampered in covering its short term liabilities even if they bag an elephant acquisition at the same time as a major loss event. The cash will still be on hand to act swiftly and decisively for actions that make sound financial sense.

[longterminvestor]

Here is some more chatter on what Berkshire is doing in Florida marketplace.  

Berkshire - Florida Citizens program.pdf

[longterminvestor]

Interview with Kara Raiguel - CEO of GenRe