Warren Buffett holds back cash for catastrophes

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In an interview with CNBC news Warren Buffett, chairman of Berkshire Hathaway, said that his company will sell less catastrophe reinsurance this year and aims to keep cash back to protect his business interests. He said the aim is to keep an absolute minimum of $10b in available capital on hand in case of a major disaster such as a Florida hurricane.

Does this herald a new era in rational risk transfer as players realise that by reinsuring others they risk leaving themselves over exposed should a disaster strike and their cash flow is tied up?

Of course the other options, which I’m sure Warren Buffett will have considered, are purchasing catastrophe or hurricane futures or issuing a catastrophe bond.

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