The reinsurance branch of Berkshire Hathaway is amending its investment policies to avoid the more riskier aspects of the business, according to the Wall Street Journal. The firm is edging away from catastrophe insurance policies, having taken in far fewer premiums for such high-risk vehicles in recent months.
With less cash on hand, Berkshire’s reinsurance business has begun to retreat from providing ‘cat’ reinsurance policies, such as hurricanes and other natural disasters. Said Berkshire Chairman Warren Buffett at the company’s annual meeting in May, the company is “doing less natural risk in terms of hurricanes because…we don’t have as much excess capital as we had a couple years ago.”
Berkshire’s cash levels after Q1 2009 were at $20 billion.
Some view the move away from cat reinsurance as a bid to improve the firm’s credit rating, which has dipped through the recession. Moody’s docked Berkshire from Aaa to Aa2 in April.
Berkshire took in $955 million in cat reinsurance premiums last year, down from $1.6 billion in 2007. This stands in contrast from Buffett’s assurance in 2006 that, “If prices seem appropriate…we continue to have both the ability and the appetite to be the largest writer of mega-cat coverage in the world.”