Warren Buffett said he doesn’t want Berkshire Hathaway Inc. being a leader on cyber insurance because neither he nor others in the industry really know the risk.
“I don’t think we or anybody else really knows what they’re doing when writing cyber” insurance, Buffett said Saturday at his firm’s annual meeting in Omaha, Nebraska. “We don’t want to be a pioneer on this.”
Buffett said that cyber risk is part of his estimate that every year carries about a 2 percent chance of a super catastrophe that would cause $400 billion or more of insured losses. While that kind of disaster will wipe out many companies, Berkshire will aim to keep its exposure low enough to remain profitable in such a year, the 87-year-old chairman said.
Buffett said he’s fine with writing some cyber policies to remain competitive, but doesn’t want to be among the top three in the industry. Anyone who claims to know the base case or worst case for losses is “kidding themselves,” he said.
[Property/casualty insurers wrote $1.35 billion in direct written premium for cyber insurance in 2016, a 35 percent jump from 2015, according to reports by Fitch Ratings and A.M. Best.
According to the reports, the largest cyber insurance writers are American International Group, XL Group and Chubb. These companies had a combined market share of approximately 40 percent at year-end 2016. The top 15 writers of cyber held approximately 83 percent of the market in 2016.
Completing the top 10 writers of cyber ranked by direct premium written are: Travelers, Beazley, CNA, Liberty Mutual, BCS Insurance (owned by Blue Cross licensees), AXIS Insurance Group and Allied World.]