The greatest unknown in Berkshire’s balance sheet and income statement is the AIG LPT deal, where the accretion of loss reserve discounts is punitive, yet expected. But the level of rate inadequacies yet to emerge is unknown. No one expects it to be helpful until a distant in time year from now. Otherwise, why would AIG dump it? OK, maybe their poor condition forced the deal, but only the worse segments would have been transferred.
Now that the Nat Cat impacts are close to being estimable, the BH financial people & actuaries should get an understanding of how much ‘float’ they can tolerate adding in the next year or two. I expect much fewer reserve portfolio deals in the near future, but I may be missing the potential for them in the next year due to interest rate increases that the Fed balked on this week.
Finally, why would cedants happily return to BH for Gen Re reinsurance covers after BH backed away from the competitive market and other res provided the cedants the support they badly needed, at reduced prices? I expect some insurers will buy Gen Re covers, but not as much as some analysts might be projecting for their volume growth numbers. But, then again, what do I know? I’m just a bit smarter than the average polar bear. ;)
@noname… the root beer FLOAT is a clever pun for the monetary FLOAT achieved by premiums received but not paid out in claim payments until much later. The second use of ‘float’ means delay, time-wise, in payback of money loaned. Get it? Float?
The greatest unknown in Berkshire’s balance sheet and income statement is the AIG LPT deal, where the accretion of loss reserve discounts is punitive, yet expected. But the level of rate inadequacies yet to emerge is unknown. No one expects it to be helpful until a distant in time year from now. Otherwise, why would AIG dump it? OK, maybe their poor condition forced the deal, but only the worse segments would have been transferred.
Now that the Nat Cat impacts are close to being estimable, the BH financial people & actuaries should get an understanding of how much ‘float’ they can tolerate adding in the next year or two. I expect much fewer reserve portfolio deals in the near future, but I may be missing the potential for them in the next year due to interest rate increases that the Fed balked on this week.
Finally, why would cedants happily return to BH for Gen Re reinsurance covers after BH backed away from the competitive market and other res provided the cedants the support they badly needed, at reduced prices? I expect some insurers will buy Gen Re covers, but not as much as some analysts might be projecting for their volume growth numbers. But, then again, what do I know? I’m just a bit smarter than the average polar bear. ;)
‘worst’ not ‘worse’. Bear culpa. Bear needs more caffeine.
An ice cream float is the best graphic the author or editor could find for this story?
It’s Warren Buffet’s favorite root beer float.
OK, thanks. I vaguely recall that now.
… and I now understand the clever pun intended.
Better than a pic of a Fruit-of-the-Loom item! Does Dairy Queen offer Root Beer Floats anymore? (DQ didn’t have the best news today either).
@noname… the root beer FLOAT is a clever pun for the monetary FLOAT achieved by premiums received but not paid out in claim payments until much later. The second use of ‘float’ means delay, time-wise, in payback of money loaned. Get it? Float?
Polar, noname will not get it no matter how you try to explain it.
Yummy, Root Beer floats. A & W was the best.
Even “Old Testament” style underwriting can’t withstand biblical flooding! Berkshire is an insurer, insurers pay out when there are catastrophes