20140303_SB

Source: CNBC

URL: http://www.cnbc.com/id/101460458

Date: 03/03/2015

Event: Warren Buffett: "effects of climate change, if any... have not affected the insurance market"

Credit: CNBC Squawk Box

People:

• Warren Buffett: Business magnate, investor and philanthropist
• Joe Kernen: Co-anchor of CNBC programme Squawk Box
• Becky Quick: Co-anchor of CNBC programme Squawk Box

Becky Quick: A part of what you talk about every year, in the annual report, the annual letter, is you lay out how each of the insurance companies have done, you lay out how each of the businesses have done. Someone named "@latticeworkwith" MNG [?] writes in with this: "How is the latest rise of extreme weather events changed the calculus faced by Ajit Jain in reinsurance?" And I know you talk to Ajit just about every day.

Warren Buffett: Yeah, it's interesting - I think the public has the impression that because there's been so much talk about climate that events of the last ten years - from an insurance standpoint and climate - have been unusual. The answer is they haven't - I mean, we, you read about these events but you were reading about events 30 or 40 or 50 years ago and we've been remarkably free of hurricanes, in the United States, in the last five years. So if you were writing hurricane insurance, it's been all profit. There have been more - some more tornados than normal but it's not had any effect in terms, so far - the effects of climate change, if any, have not affected our - they have not affected the insurance market.

Becky Quick: They haven't, so that's not something at all that you guys have changed your calculus.

Warren Buffett: I - made no difference. I calculate the probabilities, in terms of catastrophes, no differently than a few years ago. That may change in ten years.

Joe Kernen: Ten thous- I think it's been 3,000 days since something like a Category 2 hit landfall, and that's the longest in history for a hurricane. And you mentioned tornados, last year was actually well below - I don't know about if you add up all the recent years, that's - I watched you after, you know, after Al Gore's big year, it was a horrible year but the one that he said we were going to have, it was going to be repeated year after year, the one where he had, we went through the whole Greek alphabet and started again, with hurricanes. I watched you - you knew -, you knew, you knew, you knew, you knew. And you knew that that was going to be an opportunity to raise premiums and then not really have any events, and it's played out exactly like you thought. I don't know how you do it.

Warren Buffett: I - I love apocalyptic predictions on it, because you're right, it probably does affect rates. And the truth is that writing US hurricane insurance has been very profitable over the last 5 or 6 years. And now the rates have come down very significantly, so we aren't writing much, if anything, in the US. Our biggest single cat risk would be earthquakes in New Zealand.

Joe Kernen: No, but what do you think of the perception right now - I mean, it's, I think it's from the mainstream media, but we are under the impression that adverse weather events are happening every couple of days and that there's never been like this before in history. For some reason, that's what people tell me, and it's, you know, it's nice to be able to include them all in the one thing, you know, when you can include droughts, floods, too much snow, too little snow - when you can include it all under one big thing, it makes it look, you know, like you're pretty smart.

Warren Buffett: It hasn't been true, so far, Joe.

Joe Kernen: All right, well thank you -

Warren Buffett: I mean, that - you know.

Joe Kernen: I know. I know.

Warren Buffett: We keep saying it's cold, but we were saying it's cold 50 years ago. [Laughs.]

Joe Kernen: The only thing that's weird - the Great Lakes have, I think they're almost totally frozen over. I don't know if we've ever seen that, I think we've got one more to go, or something, so that's a little weird.

Warren Buffett: Yeah.

Joe Kernen: Yeah. All right.

Warren Buffett: Well, we don't insure against that.