Speaking at the annual shareholders meeting of his conglomerate Berkshire Hathaway Inc. today, Warren Buffett said that he doesn’t believe anyone understands cyber risk well enough today, so his firm will not seek to be a pioneer in underwriting cyber insurance.
Cyber risks are seen as an enormous opportunity by many in the insurance and reinsurance industry, but not by Warren Buffett.
The so-called Sage of Omaha doesn’t feel that cyber risks are understood well enough by the industry and he insinuated that there could be cyber mega-catastrophes to come.
He said that “cyber is uncharted territory,” explaining that he expects the risk to increase, saying it’s going to get “worse, not better.”
He explained that cyber risk is becoming increasingly material and the threat which didn’t exist just a decade or so ago is only going to increase in the future.
“I don’t think we or anybody else really knows what they’re doing when writing cyber,” he’s quoted by Bloomberg as saying.
While CNBC cited him as saying, “We don’t want to be a pioneer on this,” although Buffett said he understands the need to write some to remain competitive in the area.
But Berkshire Hathaway will not be the number one, two or even three in terms of exposure to the cyber underwriting market, Buffett said, suggesting he is happy to leave others to pioneer in cyber insurance and reinsurance.
“I think anybody that tells you now they know in some actuarial way either what general experience is like in the future, or what the worst case can be, is kidding themselves,” he explained.
Buffett cited challenges in policy wordings and the risk of clash between cyber events or contracts as two concerns, explaining that while Berkshire Hathaway has a good understanding of risks like hurricanes and earthquakes, cyber is a different challenge altogether.