Buffett's comments about the Property and Casualty industry in this years Letter to Investors (His comments about Underwriters are Hilarious!)

[shawnmwalker]

"Enough about problems: Our insurance business performed exceptionally well last year, setting records in sales, float and underwriting profits. Property-casualty insurance (“P/C”) provides the core of Berkshire’s well-being and growth. We have been in the business for 57 years and despite our nearly 5,000-fold increase in volume – from $17 million to $83 billion – we have much room to grow.

Beyond that, we have learned – too often, painfully – a good deal about what types of insurance business and what sort of people to avoid. The most important lesson is that our underwriters can be thin, fat, male, female, young, old, foreign or domestic. But they can’t be optimists at the office, however desirable that quality may generally be in life.

Surprises in the P/C business – which can occur decades after six-month or one-year policies have expired – are almost always negative. The industry’s accounting is designed to recognize this reality, but estimation mistakes can be huge. And when charlatans are involved, detection is often both slow and costly. Berkshire will always attempt to be accurate in its estimates of future loss payments but inflation – both monetary and the “legal” variety – is a wild card."

 

[Al3x Lee]

Surprises in the P/C business – which can occur decades after six-month or one-year policies have expired – are almost always negative. The industry’s accounting is designed to recognize this reality, but estimation mistakes can be huge. And when charlatans are involved, detection is often both slow and costly. Berkshire will always attempt to be accurate in its estimates of future loss payments but inflation – both monetary and the “legal” variety – is a wild card."

This is the type of stuff that keeps insurance companies up at night

 

[AZDave]

"Surprises in the P/C business – which can occur decades after six-month or one-year policies have expired – are almost always negative. The industry’s accounting is designed to recognize this reality, but estimation mistakes can be huge. And when charlatans are involved, detection is often both slow and costly. Berkshire will always attempt to be accurate in its estimates of future loss payments but inflation – both monetary and the “legal” variety – is a wild card."



Here's a current hit from the Supremes:

CONSTRUCTION DEFECTS

Another state supreme court finds coverage under a CGL he court reasoned that, by applying dictionary definitions to certain terms

roughnotes.com

"court finds coverage under a CGL"

Exclusions really don't mean exluded anymore!

 

[shawnmwalker]

@AZDave,

Often it is better to offer a nominal amount of coverage. (10k) so if you have to pay, you just pay the stated limit.

 

[Gulliver]

@AZDave,

Often it is better to offer a nominal amount of coverage. (10k) so if you have to pay, you just pay the stated limit.

MO is getting hit with a lot of "bad faith" settlements on policies that are low limit. The courts are hitting companies with settlements 10-20x the limits and companies are paying out. MO better wake up or some carriers might leave.