Warren Buffett

Warren Buffett’s reinsurer Berkshire Hathaway has entered into an agreement to provide insurer AIG with an adverse development reinsurance cover for 80% of the firm’s long-tail U.S. commercial liabilities, costing AIG $9.8 billion.

No, it probably doesn’t mean Berkshire Hathaway is going to sponsor a catastrophe bond anytime soon, but the news that ILS legal expert Robert Underhill has been hired to the firm could certainly provide Warren Buffett’s insurance and reinsurance unit with interesting options.

Interesting news last night as an announcement came out from Alleghany owned TransRe to explain that the reinsurance firm has entered into an agreement with Warren Buffett’s Gen Re which will effectively see it produce business for the firm.

Analysts at Bernstein have highlighted continued pressures in the global reinsurance marketplace, noting recent divestment in the sector by Warren Buffett. However, as evidenced by the continued influx of ILS capacity in the reinsurance space, just because it’s not right for Buffett doesn’t mean it’s not a desirable asset.

Australian insurance group IAG has reported its results, revealing continued deterioration of its Canterbury, New Zealand earthquake claims, challenging commercial market conditions and new reinsurance arrangements with Warren Buffett’s Berkshire Hathaway.

Warren Buffett has again reduced his investment in the reinsurance industry by cutting his share holdings in the world’s largest reinsurer Munich Re, as the ‘Sage of Omaha’ continues to dial back on his firm Berkshire Hathaway’s interest in reinsurance underwriting.

Fosun International Limited has now completed its acquisition of the remaining 80% of Ironshore that it did not already own, helping it to grow its footprint in insurance and reinsurance, as it becomes a more insurance-oriented investment group.

When the reinsurance market is challenging, competitive and underwriting opportunities seem less attractive so you pull back on premiums underwritten, wouldn’t it be nice to still make a decent return on your investments?

Warren Buffett’s Berkshire Hathaway Inc. and National Indemnity Company have reduced their shareholdings in reinsurance firm Munich Re to 9.7%. Previously, the two firms held around 12% of the share capital of Munich Re.

Warren Buffett had previously bemoaned the fact that reinsurance had become a “fashionable asset class”. Now, his own business model is being blamed for creating further pressure on reinsurance prices, as new entrants look to operate with a reduced cost-of-capital.