Berkshire’s specialist insurance arm lands foothold in Singapore

Warren Buffett
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Warren Buffett

Berkshire Hathaway's specialist commercial insurance arm has secured its first permit to operate outside the U.S. in the latest sign the recently-formed division of Warren Buffett's conglomerate is aiming to reshape the industry.

Berkshire Hathaway Specialty Insurance, the division which the renowned billionaire investor established last year to sell property, liability and other types of cover to companies, has been granted permission to do business in Singapore.

The licence is the first of several that BHSI is expecting to obtain in Asia, where it is hoping to capitalize on relatively buoyant economies.

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While insurance has been the basis of Berkshire's extraordinary growth from a modest investment company into the world's largest conglomerate, until recently it had largely avoided making an aggressive push into large scale specialist cover.

The Omaha-based group has focused on selling cover to consumers — such as through the motor underwriter Geico — and reinsurance, or insurance for insurers.

Investment returns generated from insurance premiums provide Berkshire — which has interests spanning railways, utilities, manufacturing, retail and newspapers — with a "float" to spend on other ventures.

Berkshire's reinsurance operation, among the world's largest, has a reputation for opportunism and taking on risks that other underwriters eschew. After floods devastated Thailand in 2011, Berkshire took advantage of the retreat of rivals that had suffered heavy losses by moving into the market.

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Mr Buffett has cut back on reinsurance underwriting in recent years as intensifying competition dents pricing across the industry, although he has continued to expand in other areas of insurance.

In the first nine months of this year, Berkshire made $1.5 billion in underwriting profit and $2.7 billion in investment gains in the division.

Now Mr Buffett is putting Berkshire's balance sheet to work with a push into commercial insurance. He has poached several executives from rivals, notably AIG, to run BHSI.

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On Monday, BHSI said it would sell a "full range" of commercial insurance in Singapore, from energy and construction projects to financial institutions.

BHSI is being led by Peter Eastwood, who defected from AIG, although it is being overseen by Mr Buffett's longstanding reinsurance chief, Ajit Jain, who is occasionally mooted as the octogenarian's successor.

Berkshire has appointed another ex-AIG executive, Marc Breuil, to run its Asia business. In addition it has hired Marcus Portbury, also formerly of AIG, and Peter McKenna, previously of Lloyd's of London underwriter Catlin.

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"With Marc, Marcus and Peter spearheading our entry into the local insurance market, we are pairing substantial expertise and local knowledge with our strong balance sheet from day one," said Mr Eastwood in a statement.

Mr Buffett has expressed an ambition that Berkshire should expand beyond its traditional base in the US.

The group has been looking for large overseas acquisitions and some of its subsidiaries have been extending their operations internationally, most recently the real estate agency business.

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