Warren Buffet’s views on the insurance industry

I have to ask for your view on the below comment in today’s report by Paul Rickard.  How does this square with a certain Warren Buffet’s well publicised affection for this industry?

“Answer (By Paul Rickard): I don’t like insurance as an industry”.

A: Thanks for the comment.


I don’t in any way dare to put myself up against Warren Buffet. Let me point out a couple of differences:


1. He is an investor that either takes a material position in the company, or gets involved in managing the company – I am a tiny, insignificant investor with no influence on the management; and

2. I am not sure the US insurance industry is like the Australian industry.


My experience of the Australian general insurance industry is broadly the following cycle:


Catastrophe

Premiums rise

New players enter

Competition drives premiums down below economic value

Catastrophe


Even with re-insurance (all sourced internationally) , not a particularly attractive business cycle.


Where are the local success stories?



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