Date
26 September 2017
Warren Buffett established his commercial insurance business last year, poaching top AIG executives to run it. Photo: Bloomberg
Warren Buffett established his commercial insurance business last year, poaching top AIG executives to run it. Photo: Bloomberg

Berkshire lands foothold in Singapore

Berkshire Hathaway has won a permit from Singaporean regulators to operate its newly formed commercial insurance unit, its first outside the United States.

Berkshire Hathaway Specialty Insurance was established by Warren Buffett last year to sell property, liability and other types of cover to companies.

The license is the first of several the insurer is expecting in Asia where it is hoping to capitalise on relatively buoyant economies, according to the Financial Times.

Insurance has been the basis of Berkshire’s extraordinary growth from a modest investment company into the world’s largest conglomerate but until recently it had largely avoided making an aggressive push into large scale specialist cover.

The Omaha-based group has focused on selling cover to consumers, such as through the motor underwriter Geico, and reinsurance or insurance for insurers.

Investment returns generated from insurance premiums provide Berkshire with a “float” to spend on other ventures.

The group’s interests span railways, utilities, manufacturing, retail and newspapers. 

Berkshire’s reinsurance operation, among the world’s largest, has a reputation for opportunism and taking on risks that other underwriters eschew.

After floods devastated Thailand in 2011, Berkshire took advantage of the retreat of rivals that had suffered heavy losses by moving into the market.

Buffett has cut back on reinsurance underwriting in recent years as intensifying competition dents pricing across the industry, although he has continued to expand in other areas of insurance.

In the first nine months of this year, Berkshire made US$1.5 billion in underwriting profit and US$2.7 billion in investment gains in the division.

Buffett is putting Berkshire’s balance sheet to work with a push into commercial insurance. He has poached several executives from rivals, notably AIG, to run the new insurance business

The company will sell a full range of commercial insurance in Singapore, from energy and construction projects to financial institutions.

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