Berkshire's success in super-cat reinsurance, which insures very large catastrophic loss events, becomes more impressive in light of the challenges it faced. Capable reinsurers such as RenaissanceRe (NYSE: RNR), XL Capital (NYSE: XL), and Montpelier Re (NYSE: MRH) compete fiercely for market share. In addition, barriers to entry are minimal, with recently formed reinsurers such as Flagstone Re (NYSE: FSR) and Greenlight Re (Nasdaq: GLRE) almost constantly emerging. Lastly, reinsurance is a commodity to some extent.
Thursday, August 30, 2007
How Berkshire Built a Super-Cat Powerhouse
As of 2006, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) wrote the third-largest amount of net premiums in the reinsurance industry -- an amazing feat for a firm that started out making textiles. One of the key foundations of Berkshire's reinsurance business is its super-catastrophe line, and the company's annual shareholder letters offer an incredibly valuable case study of that segment's success. Let's take a closer look at the integral components of Berkshire's reinsurance division.
Berkshire's success in super-cat reinsurance, which insures very large catastrophic loss events, becomes more impressive in light of the challenges it faced. Capable reinsurers such as RenaissanceRe (NYSE: RNR), XL Capital (NYSE: XL), and Montpelier Re (NYSE: MRH) compete fiercely for market share. In addition, barriers to entry are minimal, with recently formed reinsurers such as Flagstone Re (NYSE: FSR) and Greenlight Re (Nasdaq: GLRE) almost constantly emerging. Lastly, reinsurance is a commodity to some extent.
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Berkshire's success in super-cat reinsurance, which insures very large catastrophic loss events, becomes more impressive in light of the challenges it faced. Capable reinsurers such as RenaissanceRe (NYSE: RNR), XL Capital (NYSE: XL), and Montpelier Re (NYSE: MRH) compete fiercely for market share. In addition, barriers to entry are minimal, with recently formed reinsurers such as Flagstone Re (NYSE: FSR) and Greenlight Re (Nasdaq: GLRE) almost constantly emerging. Lastly, reinsurance is a commodity to some extent.
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