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Hedge Fund Inroads Weaken Reinsurers’ Catastrophe Defenses

  • Industry has experienced the opposite of a ‘perfect storm’
  • Rising combined ratios could make businesses loss-making
Updated on

It won’t take another Hurricane Katrina for reinsurers to face losses from covering the cost of storms and earthquakes. Competitors such as hedge funds have eroded prices so much that a typical year of claims could move the industry into losses.

Property & casualty reinsurance is “getting very close to combined ratios of 100 percent,” Manfred Seitz, managing director of international reinsurance at Warren Buffett’s Berkshire Hathaway Inc., said at a roundtable of industry executives on Monday. “Even if we see normal catastrophe claims in 2016, you could see a number of companies” reach the threshold. A ratio above 100 percent means claims and expenses exceed premium income.