Wednesday, January 09, 2008

Credit market fears open the way for Buffett

For nearly two decades, Ajit Jain, head of the reinsurance unit of Warren Buffett’s Berkshire Hathaway, has been looking to get into the business of insuring bonds issued by municipalities.

This week, Mr Jain took his first “baby step” into this multi-billion dollar industry, and agreed to insure the payments on a bond issued by a US municipal borrower in the secondary market.

The premium Berkshire Hathaway charged was higher than its rivals’, yet it still got the business. With the insurance group getting ready to insure deals in the primary market, whether it can continue to command a higher price than others will be the key.

In a rare interview in his office in Stamford, Connecticut, this week Mr Jain said: “Having talked to some of the issuers and having talked to some of the dealers on [Wall] Street, it became clear to us that if we got into the market with our name, we’d be able to command a premium price”.

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