July 2015 – Page 3 – Mazor'sEdge

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New Zealand is the latest country for Berkshire Hathaway Specialty Insurance Company (BHSI). The insurer has received its license from the Reserve Bank of New Zealand and is underwriting property and casualty insurance through its new office in Auckland. BHSI can also offer Marine Cargo coverage in New Zealand, with Australia-based Mark Dixon also having New Zealand responsibility.

“We are pleased to bring the financially strong capacity and customer-centric underwriting and claims handling of BHSI to New Zealand. We open our doors in Auckland with a highly experienced team, a broad appetite for property and casualty risks, and a commitment to providing responsive and enduring solutions to the marketplace,” said Peter Eastwood, Global President and Chief Executive Officer of BHSI.

In April, BHSI received its insurance license to provide all lines of General Business in Australia, and established operations in Sydney. Chris Colahan was named President of BHSI’s Australasia Region. Four executives from AIG were also brought on board. In June, the company added casualty and executive and professional lines for hospitals and medical practices and facilities.

Country Manager for New Zealand Cameron McLisky said “I am delighted to introduce BHSI to the New Zealand marketplace. We have assembled an excellent team and look forward to collaborating with our brokers and insureds to provide stable, flexible solutions along with the quality service that is a hallmark of BHSI operations everywhere.”

Cameron comes to BHSI with two decades of industry experience. He was most recently Regional Financial Lines Manager at AIG Asia Pacific. Before that he was Regional Offices Manager at AIG UK Ltd; Australian Financial Lines Manager at AIG Australia; and Financial Lines Manager at AIG in New Zealand. He was also Casualty Manager at Gen Re in Auckland. He holds a Bachelor of Laws (LLB) degree from the University of Canterbury in Christchurch.

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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With a backlog of tank car orders at a record 52,000 units through March 31, 2015, prices for tanks that meet the new DOT 117/TC-117 standards could rise over 23-percent.

Tank car prices are expected to increase from $130,000 to $160,000.

Benefiting from the demand will be Berkshire Hathaway’s UTLX, which is a subsidiary of Berkshire’s Marmon Group, as well as other tank car makers, including Trinity Industries Inc. and Greenbrier Co.

UTLX builds tank cars at its Sheldon manufacturing plant in Houston, Texas, and at its UTLX manufacturing plant in Alexandria, Louisiana.

Communities Demand Safety

In July of 2014, in Lynchburg, Virginia, a derailment of 16 oil tanker cars caught America’s attention, as the fiery tank cars spilled into the James River. In the wake of this and several other high profile accidents, communities along oil train routes all over the country are demanding safer oil trains.

The good news is progress is being made, and according to BNSF internal data through December 31, 2014, as crude oil and ethanol shipments have increased, the number of derailments have decreased by 78% from 2011-2014.

As a common carrier, BNSF can’t refuse to carry petroleum, and the new tank cars will reduce the risk of carrying highly flammable cargo.

Petroleum, Ethanol and LPG make up roughly 7-percent of BNSF’s freight hauling. In 2014 BNSF moved enough petroleum to fill the gas tanks of 350 million vehicles.

Replacing the Entire Fleet

Under Enhanced Standards for New and Existing Tank Cars for use in an HHFT—New tank cars constructed after October 1, 2015, are required to meet the new DOT Specification 117 design or performance criteria. The standards will require replacing the entire fleet of DOT-111 tank cars for Packing Group I, which covers most crude shipped by rail, within three years and all non-jacketed CPC-1232s, in the same service, within approximately five years.

William A. Furman, Chairman and CEO, Greenbrier Co. said in a statement in May, “Railroads are the safest way to haul large volumes of freight long distances in America, but when it comes to oil, ethanol and other hazardous liquids, more robust tank cars are needed to ensure the safety of our communities. The health, property and general well-being of our citizens shouldn’t be at risk in the event of an accident and the design for the newly designated DOT-117/TC-117 tank car will help substantially mitigate risk.”

The prescribed car has a 9/16 inch tank shell, 11 gauge jacket, 1/2 inch full-height head shield, thermal protection, and improved pressure relief valves and bottom outlet valves.

A Big Market

While older DOT-111 tank cars, which first debuted in 1964, can be temporarily refurbished to bring them up to the new standards, they must be replaced by 2018. This puts the total market for the new DOT 117/TC-117 tank cars at around 160,000 units.

UTLX will certainly be busy the next few years.