Premium Growth Insurance

Marginal Revolution in addition to the Wall Street Journal both transcend on a bully quote from Warren Buffett:

It’s understandable that the sponsor of the proxy proposal believes Berkshire is peculiarly threatened yesteryear climate alter because nosotros are a huge insurer, roofing all sorts of risks. The sponsor may worry that belongings losses volition skyrocket because of weather condition changes. And such worries might, inwards fact, endure warranted if nosotros wrote ten- or twenty-year policies at fixed prices. But insurance policies are customarily written for ane yr in addition to repriced annually to reverberate changing exposures. Increased possibilities of loss interpret promptly into increased premiums. . . .

Up to now, climate alter has non produced to a greater extent than frequent nor to a greater extent than costly hurricanes nor other weather-related events covered yesteryear insurance. As a consequence, USA super-cat rates conduct hold fallen steadily inwards recent years, which is why nosotros conduct hold backed away from that business. If super-cats decease costlier in addition to to a greater extent than frequent, the likely—though far from certain—effect on Berkshire’s insurance describe of piece of employment organisation would endure to operate into larger in addition to to a greater extent than profitable.

As a citizen, y'all may understandably abide by climate alter keeping y'all upwards nights. As a homeowner inwards a low-lying area, y'all may wishing to watch moving. But when y'all are thinking exclusively every bit a shareholder of a major insurer, climate alter should non endure on your listing of worries.

The puzzle to me is, why doesn't Berkshire Hathaway write ten- or twenty-year policies at fixed prices? Or, better, why does it non offering a minute contract, that ensures y'all against the trial that your regular insurance volition endure repriced every half-dozen months? If people are worried almost it, in addition to nobody else is doing it, it would appear they could accuse a huge premium.

You may nation BH doesn't desire the risk, just inwards a previous missive of the alphabet Buffett explained that BH was selling 99 yr seat options. And beingness hugely diversified is exactly what allows a society similar this to accept about risk.

If it doesn't desire to concord the jeopardy it could sell it. Surely in that place are lots of investors who are  skeptics of climate alter -- non warming, just the claim that warming volition laissez passer on rising to to a greater extent than extreme weather condition in addition to higher insurance payouts; people who cheered at that quote inwards the WSG -- in addition to would endure happy to seat their coin where their mouths are inwards the reinsurance market.  

(These thoughts are evidently related to health insurance,  premium increment insurance in addition to long-term guaranteed renewable contracts that solve the preexisting conditions problem.)