The “super-cat” insurance referred to below by Warren Buffett is the part of the reinsurance business that insures other insurance companies against the occurrence of very large (super) catastrophes (cat).
(p. A9) Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely–though far from certain–effect on Berkshire’s insurance business would be to make it larger and more profitable.
As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.
Source of quote from Warren Buffett’s annual shareholder letter:
“Notable & Quotable: Warren Buffett on Climate.” The Wall Street Journal (Tues., March 1, 2016): A9.
(Note: the online version of the quotes from Buffett has the date Feb. 29, 2016.)
Warren Buffett’s annual letter to Berkshire Hathaway stockholders can be found at: