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Insurance is a core tenet of Buffett’s investing philosophy. He uses the “float” from premiums to plow into other investments and then he has the entire cash fl
by jonstewart 4y ago
Insurance is a core tenet of Buffett’s investing philosophy. He uses the “float” from premiums to plow into other investments and then he has the entire cash flow juggernaut of Berkshire to cope in the years when insurance has claims loss. And he’s gotten so amazing at it that he’s able to underwrite risky/exotic policies and profit handsomely from it.
Climate change is definitely a hot topic with insurers but it’s not going to cause them to go broke.
- nickpeterson 4y agoThey’ll just refuse to cover the cases when it would, easy peasy.
- ggm 4y agoThats kind-of what I mean: if Berkshire "invites" its RE investments to cease laying off climate change risks, or to make immense profit for the risk, then the worldwide re-insurance market is going to move, and everyone holding waterfront property is going to find premiums jump no matter what because Re-insurance spreads risk: everyone winds up paying for that spread, down at the coal face. "oh sorry, the cost of re-insurance jumped 10x, your premiums have to go up" is a hell of a signal.
- sangnoir 4y agoSee Florida property insurance.
- dr_dshiv 4y agoAren’t the reinsurers on the hook for the earthquake in Turkey?
- kurthr 4y agoSomeone maybe, and maybe they'll pay if they want to keep working in Turkey, but... many of the builders were given amnesty for violating construction rules, and then arrested after the earthquake. There's video of Erdogan boasting about how much more housing was put in from the amnesty. So maybe Reinsurers claim most of those buildings aren't covered, because of building violations? That's what they'd do in Florida. https://www.npr.org/2023/02/13/1156512284/turkey-earthquake-erdogan-building-safety https://www.npr.org/2023/02/13/1156512284/turkey-earthquake-...
- tinus_hn 4y agoI don’t know the rules in Turkey but in the Netherlands insurers cannot insure major disasters like earthquakes, war and nuclear explosions, because although the events are extremely rare a single one would bankrupt the companies.
- paulpauper 4y agoGeico is such a cash cow because unlike most insurance businesses, there is vary little variance. The average claim is low and it's smoothed out by having so many customers. There are no large ,discrete events. All it needs to do is raise premiums to ensure large annual , recurring profits no matter what.