Berkshire Hathaway Inc. (BRK/A)’s Peter Eastwood, hired last year to expand into more insurance niches, is pushing into travel coverage in the latest challenge to American International Group Inc. (AIG), his former employer.
Eastwood’s specialty insurance unit will sell protection to travelers, tour providers and middlemen that arrange trips, the company said today in a statement. The policies will guard against risks such as lost luggage, missed connecting flights and delays. Berkshire’s travel protection unit is led by John Noel, who sold a previous venture to New York-based AIG in 2006.
“The timing couldn’t be better, with the record number of flight delays and cancellations this past winter combined with the rising cost of air travel,” Noel said in the statement.
Berkshire Chief Executive Officer Warren Buffett has said the hiring last year of Eastwood, previously AIG’s CEO of property-casualty coverage in the Americas, was part of a “big time” push into commercial coverage. Omaha, Nebraska-based Berkshire is already one of the largest reinsurers and U.S. auto insurers. Expansion adds premium dollars that give Buffett more funds to invest.
Americans spent almost $1.9 billion on travel coverage in 2012, the U.S. Travel Insurance Association said in October. The most popular policies cover trip cancellation or interruption, and sales in that segment increased 15 percent from 2010, according to the group.
AIG sells policies through the Travel Guard brand. Matt Gallagher, a spokesman for New York-based AIG, didn’t return messages seeking comment.
This year is shaping up as one of the airline industry’s worst for delays and cancellations after snow, rain and fog snarled traffic in the first quarter.
About 72.2 percent of flights by major U.S. carriers were on time in the three months ended March 31, the lowest level since 2008, data from the Bureau of Transportation Statistics show. First-quarter cancellations surged to a record 4.6 percent of flights, eclipsing the 4 percent mark from 1996, according to BTS data compiled since 1995.
Among potential buyers of travel insurance, “there’s usually a little more interest when you have weather issues,” said Linda Kundell, a spokeswoman for the industry association.
Airlines are eager to offer third-party insurance because it can generate commissions and deflect attention from them when something goes wrong, said Jay Sorensen, president of airline consultant IdeaWorksCompany. He said insurers believe there is room for growth in the U.S.
“It typically has been a popular choice for Europeans and Australians,” he said.
Berkshire announced in January that it agreed to buy the assets of MyAssist Inc., a concierge and personal-assistant service, from a company founded by Noel. The service helps clients including Ford Motor Co. and Daimler AG’s Mercedes-Benz provide live, in-car support to drivers.