Berkshire’s Commercial Insurance Arm Grabs Market Share

(BRK.A), (BRK.B)

Berkshire Hathaway’s continued push into commercial insurance lines in the U. S. market is grabbing market share from smaller insurers.

According to a new report by Fitch Ratings, Berkshire Hathaway Homestate Companies (BHHC) was the 10th largest U.S. commercial lines insurer in 2014 based on direct premium volume, with direct premium reaching $5.6 billion through a combination of organic growth and acquisitions.

From Regional to National

Based in Omaha, Nebraska, BHHC was originally incorporated in 1970 as Cornhusker Casualty. In 1981, the company added the Insurance Company of Iowa–an affiliated Iowa-domiciled insurance company. Through further acquisitions it grew into eight separately managed regional insurance companies located across the United States, each with its own local underwriting and management presence in its respective territories–a core value BHHC continues to embody. In the late 1990s, as it gained a national presence, the remaining six companies began operating under the shared brand identity of Berkshire Hathaway Homestate Companies.

Fitch notes that Workers compensation insurance has been a big part of Berkshire’s growth in this area, with the company becoming the seventh largest U.S. writer in 2014.

An Impact on Smaller Insurers

Fitch also reported that Berkshire’s growth could impact smaller insurers.

“Diverse commercial business segments and substantial capital resources position BRK for further market share growth that could marginalize smaller commercial lines underwriters that have less favorable market position.”

Consistently Outperforming the Industry

Berkshire’s track record in commercial lines underwriting has been very positive, and Fitch took note of that fact.

“BRK’s commercial lines’ underwriting results have consistently outperformed the property/casualty industry and most peers and loss reserve experience is historically favorable. Maintaining underwriting profitability with a greatly expanded premium base in a competitive market environment may provide future challenges.”

© 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.