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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Wednesday, January 09, 2008
Credit market fears open the way for Buffett
Thursday, August 30, 2007
How Berkshire Built a Super-Cat Powerhouse
As of 2006, Berkshire Hathaway wrote the third-largest amount of net premiums in the reinsurance industry -- an amazing feat for a firm that started out making textiles. One of the key foundations of Berkshire's reinsurance business is its super-catastrophe line, and the company's annual shareholder letters offer an incredibly valuable case study of that segment's success. Let's take a closer look at the integral components of Berkshire's reinsurance division.
Against all oddsBerkshire's success in super-cat reinsurance, which insures very large catastrophic loss events, becomes more impressive in light of the challenges it faced. Capable reinsurers such a RenaissanceRe , XL Capital, and Montpelier Re compete fiercely for market share. In addition, barriers to entry are minimal, with recently formed reinsurers such as Flagstone Re and Greenlight Re almost constantly emerging. Lastly, reinsurance is a commodity to some extent.
Thus, Berkshire boss Warren Buffett had to overcome considerable obstacles to build his reinsurance operations into the juggernaut they are today. Since day one, Buffett based his strategy on three simple strengths: speed, size, and security.
Monday, July 17, 2006
Ajit Jain, Potential Buffett Successor
Jain, who was born in India and holds a master's in business administration from Harvard University in Cambridge, Massachusetts, has been on investors' lists of potential successors the longest, says Tom Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania.
Jain specializes in so-called mega-catastrophe coverage, taking on risks rivals shun. He insured Chicago's Sears Tower, North America's tallest building; the 2002 Winter Olympics in Salt Lake City after the terrorist attacks on Sept. 11, 2001; slugger Alex Rodriguez's health after he signed the biggest contract in Major League Baseball history in 2000 at $252 million over 10 years; and a sweepstakes by Purchase, New York-based PepsiCo Inc. in which a contestant had a chance to win $1 billion.
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