Despite nonstop alarm bells from the media about the future costs of global warming, Warren Buffett downplayed its impact on Berkshire Hathaway’s insurance units during his 5-hour question and answer period at the Berkshire Hathaway annual meeting on May 2, 2015.
It’s not that Buffett thinks that climate change isn’t real, it’s just that its long term impacts are not an immediate concern in the insurance business because prices reset annually, and can always be adjusted upward after a bad year.
“We set it one year at a time. I find nothing on a yearly basis that makes me change my prices,” Buffett noted.
No 50-Year Policies
“That doesn’t mean it isn’t a threat to humanity and isn’t terribly important,” he added. “If I was writing a 50-year windstorm policy in Florida…”
What is of more immediate impact to insurers is the quality of the policyholders. It’s something that insurance companies can’t ignore just to rack great sales figures.
“You insure “Marvin the Torch,” you are going to have a lot more risk than global warming,” Buffett explained. “That building’s going to go!”
© 2015 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.