A mega-catastrophe will bring “disastrous consequences beyond anything” the insurance industry has seen, Berkshire Hathaway Chairman Warren Buffett has warned.
Nobody knows when the “Big One” will strike or what form it will take, but it will happen, he says in his annual letter to shareholders.
“A major catastrophe that will dwarf hurricanes Katrina and Michael will occur – perhaps tomorrow, perhaps many decades from now,” he says.
“The Big One may come from a traditional source, such as a hurricane or earthquake, or it may be a total surprise involving, say, a cyber attack, having disastrous consequences beyond anything insurers now contemplate. When such a mega-catastrophe strikes, we will get our share of the losses and they will be big, very big.”
Mr Buffett issued the warning as Berkshire Hathaway’s insurance business reported returning to profit with a $US1.6 billion ($2.2 billion) after-tax profit, following a $US2.2 billion ($3.1 billion) loss in 2017.
Pre-tax significant catastrophe losses fell by almost half to $US1.6 billion.
Berkshire’s motor insurer Geico made a $US2.4 billion ($3.4 billion) pre-tax profit, improving from the previous year’s $US310 million ($434.3 million) loss.
Berkshire Primary Group recorded a decline in profit to $US670 million ($938 million) from $US719 million ($1 billion), and Berkshire Reinsurance Group narrowed its loss to $US1.1 billion ($1.5 billion) from $US3.6 billion ($5 billion).