Category Archives: Insurance

Berkshire Hathaway Specialty Insurance Opens London Office

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance Company (BHSI), in coordination with its affiliate Berkshire Hathaway International Insurance Limited (BHIIL), has established a new office in London and filled key executive roles.

The company named Richard Nathan as Head of Property Lines; Patrick Brown as Head of Executive & Professional Liability; and Andrew Walker as Head of Claims, for BHSI in the UK and Southern Europe.

“We are pleased to expand our specialty insurance operations with a new London office and a growing team of professionals with excellent capabilities and character,” said Tom Bolt, President, UK and Southern Europe, BHSI. “Richard and Patrick will deliver bespoke specialty solutions backed by financial strength, while Andrew will ensure that excellent in-house claims expertise is available for customers from day one.”

The new office will serve brokers and customers in the UK and Southern European countries, including Ireland, Spain, France and Italy.

© 2017 David Mazor

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.

Berkshire Hathaway Travel Protection Report Identifies a Potential 4.9% Increase for Travel Insurance Sales to Americans

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Berkshire Hathaway Travel Protection’s (BHTP) second-annual benchmark white paper report released today identifies a potential 4.9% increase for travel insurance sales to Americans traveling this year.

The Report uses surveys and a predictive global-travel model to produce its findings, which reveal that 36% of consumers expect to buy more travel insurance in 2017, and nearly 61% of travel agents predict that 2017 will be a better year for travel insurance.

The Report’s 10 most influential factors impacting travel insurance sales in 2017:

1. Travel on the rise means more trips to insure in 2017

41% of BHTP travelers indicate they plan to take more international leisure trips in 2017. Significantly more international leisure trips are covered by travel insurance (39%) than domestic leisure trips (16%), which appears to lead to an expected increase in travel insurance sales.

2. Increase in trip costs leads to higher travel insurance revenues

45% of travelers stated they would buy more travel insurance in 2017 because of the cost of the trip. The expected 4% increase in trip costs due to currency fluctuations, increases in lodging costs, airfares, cruise costs and ground transportation can lead to higher travel-insurance premiums and eventually higher travel insurance revenues.

3. Flight issues like cancellations and delays are among the top reason why consumers intend to buy more travel insurance

71% of travelers bought more travel insurance in 2016 because of flight issues like cancellations and delays. Innovative travel insurers seeking to provide benefits related to flight interruptions may succeed by meeting the needs of this segment with flight-protection coverage such as AirCare.

4. Increased knowledge of how travel insurance works

40% of consumers said they were buying more travel insurance because they had better knowledge of how travel insurance products works.1

5. Increased use of travel agents leads to increased travel insurance sales

More than 18% of travelers use a travel agent to book travel and 94% of travel agents said they offer travel insurance with every travel sale.

6. Family health ranks among the top reason to buy more travel insurance

32% of respondents said they bought more travel insurance in 2016 due to family health reasons. Consumers’ concerns over the health of family members appears to make “cancel for any reason” coverage more appealing.

7. Rising interest in cruise travel for 2017 will be a key driver of travel insurance sales

Nearly 38% of agencies said river cruises have been the top type of trip in 2016, and 67% expect river cruises to be the top driver of improved business performance in 2017. European river cruises ranked third on travel agent’s list of top destinations for 2017.

For consumers, 39% expect to take more river cruises, and 36% expect to take more ocean cruises in 2017. When these facts are viewed with an increase in cruise-ship capacity of more than 17,000 in 2017, travel insurance sales may see an increase, since most cruise vacations are insured.

8. Bucket-list and adventure travel hot travel types in 2017

76% of agents listed bucket-list travel as a hot trend for 2017, and 53% of travelers said they traveled to cross something off of their bucket list. 36% of travelers said they are planning more adventure trips in 2017, and 41% of agents said adventure travel will be a top driver of improved business.

9. International terrorism is a threat to travel and a reason to buy more travel insurance 60% of travel agencies and 25% of travelers told BHTP that international terrorism was a threat to traveling, and 12% of travelers stated that fear of terrorism is a reason for buying more travel insurance.

10. Zika no longer a top-of-mind threat, leading to an increase in travel to the Caribbean

A possible 12% increase in travel to the Caribbean could be realized in 2017, as Zika has been declared by the World Health Organization to no longer be a “global health emergency.” Caribbean and Central America travel may also see a 10% increase in travel insurance sales, the largest increase of any region given the current data. Only 4% of respondents, however, said fears of disease epidemics are leading them to buy more travel insurance.

Travel insurance sales by destination

BHTP’s Report also looked at travel demand and travel insurance sales on a region-by-region basis. The highlights are:

Insurance sales for travel to the Caribbean and Central America are expected to increase by almost 10%, driven by a strong rebound in travel to the region;

Europe remains a polarizing destination for travelers and travel agents, though river cruises and low airfares will help contribute to increased European travel and a 4% increase in travel insurance sales; and
A post-Olympics decline in South American travel will lead to a 7% decline in travel insurance sales for the region.

About the State of Travel Insurance

The State of Travel Insurance includes responses from 573 travelers and 96 travel agencies about their travel habits, their travel business, their experiences in 2016 and/or their expectations for 2017. The confidence levels in both surveys are sufficient to draw large-scale conclusions from the results. Sources consulted in preparing this report included travel-trend reports from the Global Business Travel Association, Sojern, IATA, Cruise Lines International Association, and cruisemarketwatch.com. MMGY Global’s Portrait of American Travelers was particularly helpful. Data from these sources were used to create detailed models of trip costs to various regions, to extrapolate out the Commerce Department statistics, and to make projections on percentage of covered trips, traveler ages, and travel-insurance cost as a percentage of trip cost. These projections were used to calculate total 2017 travel-insurance sales, and then those figures were compared against last year’s figures to chart percentage change.

About Berkshire Hathaway Travel Protection

Berkshire Hathaway Travel Protection is the trade name for the travel protection services of Berkshire Hathaway Specialty Concierge, LLC, a subsidiary of Berkshire Hathaway Specialty Insurance Company, part of the National Indemnity group of insurance companies. Berkshire Hathaway Travel Protection created AirCare flight and other travel related protections. The AirCare product is provided by Berkshire Hathaway Specialty Insurance Company or National Liability & Fire Insurance Company.

© 2017 David Mazor

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.

GEICO Hiring in Georgia

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One Hundred new jobs are coming to the Peach State, as GEICO continues to grow its operations in Macon, Georgia.

GEICO’s Macon regional office is looking for local Georgians interested in joining its team of claims representatives.

“In the event of an accident, GEICO’s claims representatives are the first to assist our policyholders when they need it the most,” said Shawn Burklin, senior vice president. “That’s why it’s so important for us to have a great team of associates ready and willing to serve our customers. If you are up to the challenge, we want to hear from you.”

Qualified candidates who have excellent customer service, communication and decision making skills, experience with computers, a good work ethic, and are comfortable working in a fast-paced environment are encouraged to apply.

© 2017 David Mazor

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.

AIG Partners with Berkshire Hathaway’s National Indemnity on Reinsurance Agreement

(BRK.A), (BRK.B)

American International Group, Inc. (AIG) has entered into a binding term sheet for an adverse development reinsurance agreement, effective January 1, 2016, with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc.

The agreement covers 80% of substantially all of AIG’s U.S. Commercial long-tail exposures for accident years 2015 and prior, which includes the largest part of AIG’s U.S. casualty exposures during that period. AIG will retain sole authority to handle and resolve claims, and NICO has various access, association and consultation rights.

“This decisive step enables us to focus firmly on the future and build on the progress we’ve made in transforming AIG,” said Peter D. Hancock, AIG President and Chief Executive Officer. “The agreement supports our stated strategy and gives us additional risk capacity to serve our clients and return capital to shareholders.”

The consideration for this agreement is $9.8 billion payable in full by June 30, 2017, with interest at 4% per annum from January 1, 2016 to date of payment. The consideration paid to NICO will be placed into a collateral trust account as security for NICO’s claim payment obligations to the AIG operating subsidiaries, and Berkshire Hathaway will provide a parental guarantee to secure the obligations of NICO under the agreement.

NICO is assuming 80% of the net losses and net allocated loss adjustment expenses on the subject reserves in excess of the first $25 billion and NICO’s overall limit of liability under the agreement is $20 billion. This provides material protection to policyholders against adverse developments beyond current reserve levels.

AIG’s fourth quarter reserve review is being finalized and the results of this review will be included in the company’s year-end financial results. AIG currently expects a material prior year adverse development charge in the fourth quarter.

The agreement will be accounted for in the first quarter of 2017 as a retroactive reinsurance agreement. AIG will recognize a loss or a deferred gain at inception of the agreement equal to the difference between the consideration paid and the ceded reserves as of December 31, 2016. Had this agreement been entered into on January 1, 2016, AIG would have recognized a loss of approximately $2.9 billion, based on carried reserves of approximately $34 billion, net of discount at that time. This loss would be reduced by AIG’s expected reinsurance recoveries from NICO’s 80% share of any 2016 calendar year adverse prior year development covered by the contract. If that share exceeds $2.9 billion, then a deferred gain is established, which will be amortized into the income statement in line with expected cash reinsurance recoveries from NICO.

The closing of the transaction contemplated by this agreement is subject to receipt of any required regulatory approvals, execution of definitive transaction documentation and satisfaction of other conditions.

© 2017 David Mazor

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.

Berkshire Hathaway Specialty Insurance to Offer Reinsurance in Malaysia

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Berkshire Hathaway Specialty Insurance Company (BHSI) has received a license from Labuan FSA to provide non-life reinsurance to the Malaysian market.

The company also established a new office in Kuala Lumpur and named Gaithrie Nandrajog as Branch Manager and Koo Kang Wuu as Executive & Professional Lines and Business Development Manager in Malaysia.

After putting down roots in Singapore, Hong Kong, and Macau, we are pleased to further expand our operations in Asia and bring facultative reinsurance capacity and new products with the backing of our strong balance sheet to selected Malaysian insurance partners,” said Marc Breuil, President, Asia, BHSI. “With the opening of our Malaysian office, we continue to deepen our underwriting and claims capabilities in the region.”

Gaithrie, who will oversee BHSI’s new Malaysian reinsurance operation, holds a bachelor’s degree in law from the University of West England, Bristol. Koo holds an MBA from RMIT University plus a B. A. (Hons) from the University of Hertfordshire (UK). Both come to BHSI with more than a decade of experience in the Malaysian insurance industry.

© 2017 David Mazor

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.

GEICO Creates Virtual Assistant “Kate” to Answer Insurance Questions

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If you have an insurance question just ask Kate, GEICO’s new virtual assistant. Available through the GEICO Mobile app, you can ask Kate a question and she will respond with quick, personalized answers.

“Interactive voice assistant technology has altered the way customers interact with their mobile devices,” said Pete Meoli, GEICO mobile and digital experience director. “Kate is very intuitive and has been programmed to connect with policyholders at a deeper level.”

Kate is available 24/7 to policyholders and makes self-service easier by answering questions and helping with their policy needs. She has been programmed to know about insurance and can provide customers with specific policy information. Customers can also initiate conversations with Kate by typing or speaking to her.

Meoli notes that Kate has a personal side and will reveal details about herself if asked. “We wanted her to be friendly with a natural interaction,” said Meoli. “She is always learning from our customers and will be an integral part of enhancing their experiences with GEICO.”

Kate is currently available within the mobile app for iOS, with plans to introduce her to Android policyholders in early 2017.

© 2017 David Mazor

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.

Berkshire to Sell Marine Insurance in Canada

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Berkshire Hathaway Specialty Insurance (BHSI) is introducing Inland and Ocean Marine Insurance in Canada and has named Gord Rider as Senior Marine Underwriter.

“We are pleased to welcome Gord to our team of marine specialists,” said John Evans, Vice President of Marine, BHSI. “With Gord at the helm, BHSI in Canada has launched ocean marine products — including ocean cargo, stock throughput and project cargo insurance — as well as a full line of inland marine products. All of these products come with BHSI’s hallmark clarity of coverage and formidable financial strength.”

Gord joins BHSI from Chubb Insurance Company of Canada, where he was most recently Senior Marine Underwriter. Before that, he was a Marine Underwriter at Chubb and at Coast Underwriters Ltd. He received a Bachelor of Commerce degree from Dalhousie University in Halifax.

© 2017 David Mazor

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.

The Hartford Makes Major Asbestos Reinsurance Deal with Berkshire Hathaway

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Berkshire Hathaway’s National Indemnity Company will provide up to $1.5 billion in reinsurance coverage for insurer The Hartford to cover for asbestos liability losses.

Under the terms of the transaction, The Hartford will pay NICO a reinsurance premium of $650 million in exchange for an aggregate adverse development cover for A&E losses beyond Dec. 31, 2016, aggregate net carried reserves, up to a limit of $1.5 billion.

The reinsurance will cover adverse development on substantially all of the company’s A&E reserves, excluding those held by the company’s U.K. property and casualty run-off subsidiaries (under contract to be sold with a closing projected for the first quarter 2017), as well as other non-U.S. operations with less than $3 million in A&E reserves. NICO will provide a collateral trust account as security for NICO’s claim payment obligations to the Hartford Insurance Pool. Berkshire will guarantee certain payment and performance obligations of NICO. The Hartford will retain responsibility for claims handling and other administrative services, subject to certain conditions.

The Hartford expects to recognize an after-tax GAAP loss of $423 million in the fourth quarter of 2016 as a result of this transaction.

Over the longer term, ratings agency A.M. Best believes the reinsurance transaction is credit positive for The Hartford and its subsidiaries as it significantly reduces the uncertainty of the group’s legacy A&E liabilities and will enhance the group’s risk-adjusted capitalization. Near term, however, The Hartford’s ratings will not be affected as risk-adjusted capitalization was comfortably supportive of its ratings and the variability in performance due to the adverse development of the A&E liabilities was not viewed as a substantial negative credit factor.

Chief Financial Officer Beth Bombara of The Hartford notes the company is trying to reduce “uncertainty for investors and others about the ultimate cost of these policy liabilities.”

© 2017 David Mazor

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.

Berkshire Hathaway Specialty Insurance Rolls Out Civil Liability Insurance for Financial Institutions in Australia and New Zealand

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Berkshire Hathaway Specialty Insurance Company (BHSI) has launched Professional First Financial Institutions Civil Liability Insurance in Australia and New Zealand.

“Many forces have shifted the risk landscape for financial institutions, from the lessons learned from the complex litigation of the global financial crisis, to the rise of new disruptive technologies and novel ways of conducting business,” said Vincent Barker, Manager, Financial Institutions, BHSI, Australia. “We’re pleased to offer a market-leading civil liability policy wording that keeps pace with these changes and provides clarity of coverage and flexibility for financial institutions.”

BHSI’s new policy expressly addresses the broad range of claims financial institutions can face as they provide diverse services to many different parties. It uses an expansive ‘professional services’ trigger not linked to a client, fee or specified service. The policy also covers bail bond costs, deprivation of assets expenses, court attendance and prosecution costs, providing peace of mind to insured professionals.

BHSI’s new Civil Liability policy also includes pre-investigation loss coverage. Contractual liability and mandatory contractual terms coverage is provided as well.

BHSI has a broad appetite for mid-size and large financial institutions of all types—from insurance companies and banks, to financial administrators, financial technology providers, and M&A/corporate advisory firms.

“Our new Civil Liability policy wording for financial institutions provides certainty for the often complex risks of the financial institutions space,” said Karen Poching, Senior Underwriter, Executive and Professional Lines, BHSI, New Zealand. “We are pleased to add this essential coverage to our growing suite of policies for financial institutions.”

© 2016 David Mazor

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.

Credit Ratings Upgraded for Berkshire Hathaway’s Insurance Companies

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A.M. Best has upgraded the Financial Strength Rating (FSR) to A++ (Superior) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to aa+ from a- of Mount Vernon Specialty Insurance Company and Radnor Specialty Insurance Company (both domiciled in Omaha, NE), strategic affiliates of United States Liability Insurance Company (USLI) (Wayne, PA) that are branded as Devon Park Specialty.

Concurrently, A.M. Best has affirmed the FSR of A++ (Superior) and the Long-Term ICRs of “aa+” of USLI and its subsidiaries: Mount Vernon Fire Insurance Company (MVF) (Wayne, PA) and U.S. Underwriters Insurance Company (USU) (Bismarck, ND). The outlook of these Credit Ratings (ratings) is stable.

According to A.M. Best, the ratings of the insurance operating companies reflect their superior risk-adjusted capital position, extended trends of underwriting and operating profitability, very strong market presence and conservative reserve positions. Additional favorable factors include a proactive claims management philosophy, exceptional diversification in their book of business as it regards limiting concentrations, commitment to customer service, and extensive employee training and retention programs that translate into a culture of success.

Furthermore, these ratings continue to benefit from implicit and explicit support provided to USLI and its subsidiaries by their ultimate parent, Berkshire Hathaway Inc.

This support, for some of the operating companies, is in the form of significant reinsurance treaties with National Indemnity Company, a Berkshire subsidiary. In addition to this agreement, Berkshire has established an extended track record of supporting its member companies.

These positive rating factors are partially offset by the above average investment leverage recorded by the group. A.M. Best also continues to monitor the organizational structure and market changes implemented at USLI as it regards the Devon Park Specialty branded companies.

© 2016 David Mazor

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.