Strategic Priorities: Where Are Today’s Insurer’s Placing Their Bets?
March 25, 2020 by Denise Garth
March 5, 2020 — Insurance is a completely unique and interesting business when one considers that insurers make a profit by hedging their bets against risk. Insurers hold assets. They hope that claims aren’t high. Yet, they don’t really know the outcome of the coming year. They place their bets when they create their products and they may not know the complete results of their bets until years have gone by.
Living in Omaha where the “Oracle of Omaha” lives, Warren Buffett’s statements are well known and followed. In this year’s annual shareholder meeting, he highlighted the risk aspects for insurance:
“Danger always lurks. Mistakes in assessing insurance risks can be huge and can take many years – even decades – to surface and ripen. (Think asbestos.) A major catastrophe that will dwarf hurricanes Katrina and Michael will occur – perhaps tomorrow, perhaps many decades from now. “The Big One” may come from a traditional source, such as wind or earthquake, or it may be a total surprise involving, say, a cyberattack having disastrous consequences beyond anything insurers now contemplate. When such a mega-catastrophe strikes, Berkshire will get its share of the losses and they will be big – very big. Unlike many other insurers, however, handling the loss will not come close to straining our resources, and we will be eager to add to our business the next day.”
Click HERE to read the full story via Advisor Magazine
