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> We may in time experience a decline in float. If so, the decline will be very gradual – at the outside no more than 3% in any year. The nature of our insuran
by ambicapter 10y ago
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We may in time experience a decline in float. If so, the decline will be very gradual – at the outside no more than 3% in any year. The nature of our insurance contracts is such that we can never be subject to immediate or near-term demands for sums that are of significance to our cash resources. This structure is by design and is a key component in the unequaled financial strength of our insurance companies. It will never be compromised.
Is he basically saying that the insurance business is structured in such a way to never payout catastrophic amounts? Is this a harmful thing for the insurance claimants?
- MarkMc 10y agoI think he's saying that Berkshire's insurance is so large and diversified that even something like a earthquake in California would not have a big impact on its cash position. I'm surprised it would be capped at 3% though.
- nikdaheratik 10y agoI believe he's saying that the year-over-year float won't go below 3%, not that a very big impact event won't hurt the float for a period of a few months. Part of this is because policies are re-issued every year which means that they can increase premiums if needed and drop high risk customers as he's pointed out in previous letters.
- tehlike 10y agoBlackswan events are probably contained through diversification. His thinking on the surface is very solid: insurance business is a cash cow in some regard, and if the market is down, it is actually an opportunity to move that money into equities.