Buffett prefers reinsurer shares

Warren Buffett, who cut back sales reinsurance because prices were too low, is betting on a rate increase by investing in the only two firms to write more reinsurance than his Berkshire Hathaway, Bloomberg reports.

Buffett has more than $4.5bn invested in Munich Re and Swiss Reinsurance, choosing to put Berkshire’s cash in two companies that account for more than a third of the global market instead of using the money to compete against them.

Had Buffett, as Berkshire’s chairman and chief executive officer, directed a part of that capital to his own underwriters, he could have pushed down the price of coverage, analysts said.

Few new opportunities

“This is a move to increase that exposure without disrupting the pricing,” said Craig Fehr of Edward Jones & Co., who has a “hold” rating on Berkshire’s stock. “It’s likely a reflection of the fact there aren’t an abundance of opportunities to write new business.”

Berkshire, which sells protection through General Re and Berkshire Hathaway Reinsurance Group, scaled back on the coverage of large risks to conserve capital in the first half of last year. The company said in August it had recovered its appetite for new business, while adding it would wait to increase sales until prices improved.