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Warren Buffett: Reinsurance prospects have turned for the worse

Monday, May 04, 2015

Komfie Manalo, Opalesque Asia:

As more and more hedge funds are piling into the reinsurance market, Warren Buffett, chairman of Berkshire Hathaway Inc., predicted that the reinsurance industry is heading into a slump, reported Bloomberg.

Speaking at the annual meeting of Berkshire Hathaway Inc., said that within the next 10 years, the reinsurance industry "will not be as good as it has been in the last 30." He added, "It’s a business whose prospects have turned for the worse and there’s not much we can do about it."

He explained that hedge funds have been setting up reinsurance companies offshore to take advantage of tax benefits, underwriting a small amount of business as a "façade." But, he said, the stiff competition in the industry has driven prices down while low interest rates weight on bond portfolios.

But Buffett thinks Berkshire still is in a strong position in the reinsurance industry because of its ability to take on large risks. Separately, according to Risk.net last month, the Bank of England wrote to Washington asking it to explain why Berkshire Hathaway’s reinsurance operation was left off a provisional lift of institutions in the sector that are "too big to fail."

Several hedge f......................

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