The chairman of Berkshire Hathaway said that while his insurance units aren’t heavily exposed to underwriting losses from the COVID-19 pandemic, they would be willing to insure pandemics in the future.
“The answer is we insure a lot of things. Sure,” Warren Buffett said, responding to the question from a shareholder during the company’s annual meeting last Saturday. Berkshire is “famous” for offering unusual coverages, he said, noting that his insurance operations would have covered pandemics in the past, as well.
“We would have written pandemic insurance if people had come to us and offered us what we thought was the right price. We would have been wrong, probably, in doing it. But we have no reluctance to quote on very unusual things and [with] very big limits,” he said.
“We haven’t done that much of it in certain periods because the prices weren’t right,” he said, referring generally to large insurance bets on out of the ordinary risks. “But if you want to come [to] insure almost anything—we don’t want you to insure against fire if you happen to be a known arsonist or something—but if you come to us with any unusual coverages either in size or in the nature of what’s covered, Berkshire is a very good place to stop,” he said.
If someone wants to “dream up the coverage and they can tell us the price they’ll pay, [then] we will consider writing it,” he said, recalling that Berkshire and American International Group were among the few insurers that were willing to write a lot of terrorism risk insurance after the 9/11 terror attacks.
“We thought we knew that we were doing but we could have been surprised. There could have been some follow-on incidents from 9/11 that we wouldn’t have known about. You don’t know for sure the answer. That’s why people are buying insurance. But we would be willing to write pandemic coverage at the right price,” he said.
Berkshire Hathaway reported its first-quarter 2020 earnings on Saturday, and while the report disclosed a $230 million provision for COVID-19 related reinsurance losses and prior-year loss development of $212 million in its property/casualty reinsurance business, aggregated together, Berkshire Hathaway’s insurance and reinsurance operating units for P/C and life businesses recorded $1.7 billion of operating profit after taxes in the first quarter.
This is an excerpt from a more in-depth article first published by CarrierManagement.com.
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