25 Insurance Legends

Last week’s issue of National Underwriter profiled the industry’s “Living Legends: 10 Visionaries Who Fundamentally Changed Insurance Forever — For Better or Worse.” Their online supplement took it even furthering, offering a list of “The Top 25 Living Legends of Insurance.”

From household names like investment oracle Warren Buffett and financial sector watchdog Barney Frank to industry leaders like Travelers CEO Jay Fishman and Willis CEO/Chairman Joe Plumeri, the list summarizes the contributions of so many insurance titans.

However, by far my favorite description has to go to Insurance Information Institute (III) head honcho Robert Hartwig, who National Underwriter calls an “Omnipresent Guru.”

You might think Robert Hartwig is omnipresent. When he’s not on TV giving the insurance perspective on a wide range of issues or being quoted in various national publications, Hartwig is traveling across the globe giving presentations on the industry.

“I make about 100 presentations a year,” says the president of the Insurance Information Institute. “It’s very common for me to be in two or three different cities every week—and they’re not near each other.”

But despite always being in such high demand, Hartwig has developed a reputation for himself and the I.I.I. for being a credible source of information in the insurance world.

“If you were to ask me which of the countless websites available to keep in touch with our industry today, I’d say the best is I.I.I.,” says Hank Watkins, president of Lloyd’s America. “Bob is very good at what he does. He’s a true spokesperson for the industry.”

Hartwig really is the best in the biz.

Warren Buffett Urges More Insurance Underwriting Discipline, Fewer “Testosterone-Driven” Decisions

When it comes to making good financial decisions, few people are more respected than Warren Buffett. So when the chairman of Berkshire Hathaway, a holding company that counts GEICO, General Re and BH Reinsurance among its revenue generators, gives the insurance industry some advice, many will take note.

Buffett made the following pointed statements in a shareholder letter, warning the industry against “testosterone-driven CEO[s]” that chase policy volume even if it means writing business at  “inadequate prices.”

“At bottom, a sound insurance operation requires four disciplines: (1) An understanding of all exposures that might cause a policy to incur losses; (2) A conservative evaluation of the likelihood of any exposure actually causing a loss and the probable cost if it does; (3) The setting of a premium that will deliver a profit, on average, after both prospective loss costs and operating expenses are covered; and (4) The willingness to walk away if the appropriate premium can’t be obtained,” the letter states.  “Many insurers pass the first three tests and flunk the fourth. The urgings of Wall Street, pressures from the agency force and brokers, or simply a refusal by a testosterone-driven CEO to accept shrinking volumes has led too many insurers to write business at inadequate prices. ‘The other guy is doing it so we must as well’ spells trouble in any business, but none more so than insurance.”

Such comments are not surprising from someone with a conservative risk appetite like the one that has famously made billions of dollars for the Omaha Oracle. The only question, then, is whether the industry will follow his advice and re-prioritize underwriting discipline.

The history of the insurance market cycle tells us that this will occur.

We just don’t know when.

Buffett Invests in Munich Re, Boosting Share Price

Munich Re was very happy to recently announce that billionaire Warren Buffett has invested even more money in the company. He now holds a 3.045% stake in the company and news of the investment boosted share price by 2%.

A 30-day view of Munich Re's share price, compared to the 200-day simple moving average.

A 30-day view of Munich Re's share price, compared to the 200-day simple moving average.

In early 2008, Buffett’s investment company, Berkshire Hathaway, bought a 3% stake in Swiss Re. During the U.S. subprime crisis, the company helped rescue Swiss Re from financial trouble with a major loan, helping to strengthen the reinsurance company’s balance sheet.

Berkshire Hathaway itself has reinsurance operations, Berkshire Hathaway Re, which is among the largest three reinsurers worldwide by gross premium income. Buffett has repeatedly said in the past that he isn’t eyeing a takeover of the Swiss company. However, during the past two years, Swiss Re and Berkshire have entered several reinsurance deals, raising speculation that the two firms could merge at some point.

Buffett is no stranger to the reinsurance market. Berkshire Hathaway owns Berkshire Hathaway Re, one of the largest three reinsurers worldwide in terms of gross premium income. Berkshire also owns various other insurance companies, including GEICO, which it acquired in 1996, General Re, which it acquired in 1998, NRG (Nederlandse Reassurantie Groep), which it bought in 2007 and Berkshire Hathaway Assurance, a government bond issuance company.