Profit-focused executives from strong firms who understand the business of underwriting are welcome to enter the excess and surplus lines segment—and that includes Berkshire Hathaway’s Ajit Jain, says E&S veteran William R. Berkley.
Berkley, whose specialty insurance organization now finds itself in competition with Berkshire and an E&S team led by four former executives of American International Group who have joined the Berkshire team, referred to the upstart while fielding a question about underwriting at the Standard & Poor’s Annual Insurance conference in New York on Wednesday.
Jain is reported to have decided, along with Berkshire Hathaway Chairman Warren Buffett, that the time was right for Berkshire to enter the commercial specialty insurance space in a bigger way,
“Ajit wants to make money,” Berkley said. “He might even be called greedy,” W.R. Berkley Corp.’s chairman and chief executive officer quipped, adding that the new competitor does not concern him.
“I’m not worried about people who want to get into the underwriting business and make profits,” he said of Jain, who is well known for his record of profitability in leading Berkshire Hathaway Reinsurance Group.
Berkley made his remarks while responding to a question from Moderator Kevin Ahearn, S&P managing director and analytical manager, about whether being known as an “underwriting company” provides an advantage to some firms and not others.
“Underwriting strength is the key. It’s why I’m not concerned about Berkshire and Ajit getting into the E&S.”
There is no one who is as eager to make profits as is Ajit Jain, he said.
What does concern Berkley?
“There are marginal firms that either don’t understand their numbers or don’t pay attention. With investment income declining, the period of time [in which] these companies have a window to exist is declining,” he said.
Addressing Ahearn’s question directly, Berkley said, “It’s a huge competitive advantage to have skilled underwriters focused on underwriting right now because poor underwriting results mean it’s over very quickly when you don’t have investment income.”
In short, “people who don’t care or understand what it is to make money” are a concern, not the members of Berkshire’s group who do focus on profit, he said.
Another panelist, Robert Benmosche, president CEO of AIG, did not participate in the conversation about underwriting, but he did suggest later that AIG, having recently been designated as a systematically important financial institution by the Financial Stability Oversight Council, is at a competitive disadvantage to companies like Berkshire, which are also large companies, but are not under the increased scrutiny of federal regulators.