[RationalDino]

Don't forget, reinsurance is a GIANT part of Berkshire Hathaway's business. If the right major disaster hits, they need a lot of liquid assets to pay it out.

As https://www.reuters.com/article/us-berkshire-buffett-insuran... says, Buffett gives a 2%/year probability to a $400 billion mega-catastrophe that is likely to wipe out a good chunk of the insurance industry. If that happens, Berkshire Hathaway will be able to pay its share of the claims.

Add that to your thinking. Does maintaining a $150 billion reserve sound so crazy now?

[raesene9]

I'd be extremely surprised if the parent company (berkshire hathaway) had structured their companies in a way that left them liable to re-insurance risk :) They may own re-insurance companies, but that doesn't make them liable for losses in those companies.

My understanding of berkshire's business model was that they're heavily diversified, so that they're not as vulnerable to catastrophic loss from a single company/industry.

[RationalDino]

Yes, but the float in those insurance companies is invested by Berkshire Hathaway. So when people report on BH, they often quote the float as a pile of cash that Buffett is sitting on.

I tried to verify this by looking at the financial report that it is based on. Which may be found at https://www.berkshirehathaway.com/qtrly/3rdqtr23.pdf. Unfortunately the $157 billion figure quoted in the title does not appear anywhere in the report. But page 37 quotes the float as being approximately $167 billion at September 30, 2023. So I suspect that they are quoting the float, and have a typo. Though they might be doing a calculation off of some other numbers.

My claim about how they think about it can be verified on page 32.

"Our management views our insurance business as possessing two distinct activities – underwriting and investing. Underwriting decisions are the responsibility of the unit managers, while investing decisions are the responsibility of Berkshire’s Chairman and CEO, Warren E. Buffett, and Berkshire’s corporate investment managers. Accordingly, we evaluate the economic performance of underwriting operations without any allocation of investment income or investment gains and losses. We consider investment income as an integral component of our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized, as non-operating. We believe that such gains and losses are not meaningful in understanding the quarterly or annual operating results of our insurance businesses."

[danielmarkbruce]

The cash they show on balance sheet is rolled up from all their subsidiaries. It's not just the holdco cash. Of course they are liable. Who would buy reinsurance from them if they didn't have the cash required to cover a giant claim?