Warren Buffett has said that Berkshire Hathaway would have been willing to write pandemic insurance at the right price if people had asked for the coverage.
Speaking during the conglomerate’s first-quarter 2020 earnings call, after the firm announced losses within its re/insurance businesses and a huge unrealised investment loss, Chief Executive Officer (CEO) Buffett discussed the impacts of the ongoing COVID-19 pandemic.
Within the Q&A, Buffett was questioned on whether Berkshire would offer pandemic insurance protection in the future.
“Well the answer is, we insure a lot of things,” said Buffett. “But we would have written pandemic insurance if people had come to us and offered us what we thought was the right price. We would have been wrong, probably in doing it. But, we have no reluctance to quote on very unusual things and very big limits. We’re famous for it. We haven’t done that much of it in certain period because the prices aren’t right.
“But if you want to come and insure almost anything, and we don’t want you to insure against fire if you happen to be a known arsonist of something. But, if you come to us with any unusual coverages, either in size or in the nature of what’s covered, Berkshire is a very good place to stop. And so, somebody wants to dream up the coverage and they can tell us the price they’ll pay, and we’ll consider writing it.”
Post-9/11, Berkshire was one of the company’s that wrote a lot of terror business. Buffett noted that although the re/insurer thought it knew what is what doing, the occurrence of some follow on attacks from 9/11 could have surprised the firm.
“You don’t know for sure the answer. That’s why people are buying insurance. But, we would be willing to write a pandemic coverage at the right price,” he said.
Of course, it’s tough to say exactly what that right price might be, with the systemic nature of pandemic risk, similar to terrorism, making it extremely difficult, if not impossible to insure.
In light of the significant economic challenges and uncertainty, underpinned by extremely volatile financial markets and stressed equity markets, governments around the world are looking at ways to address pandemic risks both now and in the future.
Public-private partnerships are seen as vital to tackling the issue, drawing on the risk expertise and knowledge of the risk transfer space, alongside the mobilisation and influence of governments to enable pandemic risks to be covered in an adequate, effective, and sustainable manner.