Skip to main content

Insurance 101 with Berkshire Hathaway's Peter Eastwood

Insurance 101 Hero Image

PURE Staff

August 18, 2022


An inside look at Berkshire Hathaway Specialty Insurance with President & CEO Peter Eastwood

Insurance experts Aaron Abrahms, of Jasper Ridge Partners and the Columbia University School of Wealth Management, and Ross Buchmueller, CEO of PURE Insurance, host Insurance 101 on SiriusXM’s Business Radio.

In each episode of the special limited-engagement series that aired in the spring of 2022, Abrahms and Buchmueller led discussions with some of the most accomplished names and CEOs in the industry. Here we summarize their episode with Peter Eastwood, President & CEO of Berkshire Hathaway Specialty Insurance.

About Berkshire Hathaway Specialty Insurance

Berkshire Hathaway Specialty Insurance is part of Berkshire Hathaway’s National Indemnity Group. The company is designed to support businesses and business professionals through commercial property & casualty and specialty lines insurance.

Launched in April 2013, Berkshire Hathaway Specialty Insurance now has a global platform with about 1,400 employees and 34 offices across 16 countries. In 2021, the business grew at approximately 41% and the company wrote over $5 billion of business.

The Q&A

RB: You picked a great partner in Berkshire Hathaway. The ability and willingness of Berkshire to actually participate in risk taking is unique.

PE: It really is Ross, and over the years, the ability to do it has just gotten greater and greater because the capital that the broader Berkshire Hathaway organization, including my business, has access to has grown substantially.

AA: Just to give us a sense of the magnitude of what you’re talking about, when you have the balance sheet of Berkshire Hathaway behind you, how large can a concentrated risk be?

PE: It can be significant. Being willing to put out a billion dollars in capacity, that’s not uncommon within parts of Berkshire Hathaway. But what I would say at the same time is that the organization takes a very unique and conservative approach to risk management. Warren Buffet and Ajit Jain really have a very good sense of how much risk they’re taking and will know at all points in time what the worst case scenario is.

RB: Starting from scratch on April 29, 2013, you might not have had the whole business plan, but I suspect you had a sense of culture. Can you talk about how much of that culture is what you and your team brought and then how does that fit into the broader Berkshire culture?

PE: I would describe the operating philosophy within Berkshire Hathaway as one of operating company empowerment and accountability. It is very much up to the operating companies to define what the culture looks like and to determine how much time is spent on it. But, one characteristic that runs through the entire operation is integritydoing the right thing.

RB: Climate change continues to be, if not the existential threat to society and the industry, certainly right up at the top. Talk a little about your current views of climate and the risks it presents to your clients.

PE: We took the opportunity very early on to build a group called Catastrophe Engineering and Analytics. The role of that group for us is, at a high level, to do two things: evaluate the perils that we’re insuring against and give us a sense of the loss expectancy, both frequency and severity. What I hear from our team is that there are things that are occurring that suggest climate change is real. What they will also tell me at the same time is that it’s very difficult over a short period of time to make the correlation between climate change and what impact it's having on the actual events that are occurring. And so, it’s going to take some time and how do you deal with that? You have to make some assumptions. And then, you’ve got to put some level of uncertainty load into your pricing to make sure that you’re not caught, as an insurance company, on the wrong side of it.

RB: Years ago, the risks associated with online fraud or hacking were just being understood. Am I right to say that cyber insurance has gone from a pretty small part of an insurance portfolio to a much more costly but important cover? And how do you approach that line of business?

PE: If you go back 10 years ago, most of us were contending with a low level of frequency and almost exclusively focused on data privacy. We’re far from that today, we still have those types of risks that exist, but the attacks that are occurring now are much more nefarious. It is, in my opinion, one of, if not the most, difficult risks that the insurance industry is contending with.