Ajit Jain, Vice Chairman of Insurance Operations at Berkshire Hathaway, has actually recommended that the company’s property cat direct exposure is almost 50% more than it was half a year back, including, “We have written as much as our capacity will allow us to write,” amidst “attractive” April 1 costs.
“This December 31st, which is a big renewal date for cat reinsurance, we were hoping that we would get a few days in the sun, and we’d be able to deploy capital and be able to write some fairly attractive business.”
He continued, “As it took place, towards completion of December, about the 3rd week of December, I was extremely positive that we would get an opportunity to put a number of billion dollars on the books.
“In the last 10 days of December, regrettably, a great deal of capability came out of the woodwork. Pricing that we were anticipating to understand didn’t actually come and satisfy our prices requirements.
“As a result, January 1 was a big disappointment. We did not write as much as we were hoping to write.”
However, according to Jain, this served to benefit April 1 renewals, as Berkshire Hathaway had “a lot of powder dry” as costs “zoomed up again.”
Indeed, Jain recommended that April 1 costs began to “look attractive”, and were a lot greater than what they were at January 1.
Jain said, “We have a portfolio that is extremely greatly exposed to property disaster. To put that in point of view, our direct exposure today is almost 50% more than what it was 5 or 6 months back.
“I think we have written as much as our capacity will allow us to write. We are very happy with what we’ve written, the margins have been healthy.”
Despite having actually observed the margins as robust, Jain likewise kept in mind that Berkshire Hathaway has a really “unbalanced portfolio.”
He continued, “What that implies is, if there’s a huge cyclone in Florida, we will have a really considerable loss.
“As opposed to that, if we have a huge loss anywhere aside from Florida, relative to our competitors we will have a much smaller sized loss.
“Net web, I’m extremely happy with the portfolio. It is a lot much better than what it’s remained in the past.
“I don’t know how long it will last and of course, if the hurricane happens in Florida we could lose, across all the units, we could lose as much as $15 billion and if there isn’t a loss we will make several billion dollars in profit.”
Jain went on to state that Berkshire Hathaway has around $300 billion of capital and when they think about property disaster dangers as a direct exposure, they want to use up around 5% of the capital with property cat.
Jain included that he had actually called Warren Buffett a couple of weeks back and explained, on property cat direct exposure, “Warren, we depend on $13bn, it would be good if we might increase to $15bn. That’s a good round number.
“That was less than a 30 second phone call. I think Warren said yes without even listening to what the numbers were.”
Berkshire Hathaway reported a strong Q1 of development for its P&C reinsurance operations, with premiums composed increasing by 30% in the duration, with the addition of TransRe a substantial driver of that development.
On this, Jain commented, “In regards to Alleghany, we treat our running systems independent of each other and as far as Alleghany is worried, they have a significant existence in the reinsurance business under the brand of Transatlantic Re.
“That business will run the method it’s been running in the past, there will be no modification in regards to technique or management and they will keep doing what they do.
“They’ve been very successful and hopefully they’ll keep being successful.”
