Tags: Berkshire | Buffett | SIFI | reinsurance

FT: UK Regulators Want Berkshire Hathaway Listed as 'Systemically Important'

By    |   Tuesday, 21 April 2015 12:57 PM

You might not think of Warren Buffett's Berkshire Hathaway as primarily a financial company, but its reinsurance operation provides much of the cash for its investments and acquisitions.

Berkshire's reinsurance division ranked sixth in the world in terms of gross premiums as of 2013, according to AM Best.

So British regulators "have challenged" the Financial Stability Board (FSB) to include Berkshire on its list of systemically important financial institutions (SIFIs), which can lead to higher capital requirements for a company, the Financial Times reports.

The FSB is an international regulatory body based in Switzerland. Both the U.S. Treasury Department and Federal Reserve are members.

The Bank of England has written the U.S. Treasury Department asking why Berkshire's reinsurance division was left off a preliminary SIFI list, which includes nine primary insurance companies, such as AIG, Allianz and UK-based Prudential, according to the Times.

No reinsurers have been put on the list yet, angering the primary insurance companies. The FSB was due to decide which reinsurers would be included last year, but the decision has been postponed "pending further development of the methodology."

According to thresholds set about by the Dodd-Frank Act, Berkshire could be designated as a SIFI, with more than $50 billion in assets and more than $3.5 billion of derivatives liabilities, The Times notes. However, the council of U.S. regulators that make that decision has not yet opted to subject Berkshire to increased oversight.

Meanwhile, though Buffett, occupies a place front and center in the public's consciousness now, that will eventually change, says Motley Fool writer John Maxfield.

"How will historians write about Warren Buffett 100 years from now? Will they treat him like the magnificent Commodore Cornelius Vanderbilt? Or will the 84-year-old multibillionaire play a more muted role in history books, akin to the venerated Gilded Age stock operator Henry Clews?" Maxfield asks on his firm's website.

"I believe it will be the latter."

Maxfield doesn't deny Buffett his due. "It would be silly to argue that Buffett isn't one of the most accomplished Americans alive today," he acknowledges.

"But unlike the great business moguls of America's past, Buffett didn't invent a product or process that will live on in perpetuity," Maxfield explains. Vanderbilt produced steamship lines.

And what of Buffett?

"His innovation consisted of using insurance float to fund a corporate conglomerate," Maxfield says. "Buffett's innovative use of float is difficult for the average person to grasp."

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You might not think of Warren Buffett's Berkshire Hathaway as primarily a financial company, but its reinsurance operation provides much of the cash for its investments and acquisitions.
Berkshire, Buffett, SIFI, reinsurance
402
2015-57-21
Tuesday, 21 April 2015 12:57 PM
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