The invasion of Ukraine by Russia and threats of a potential nuclear war between several countries was turned into a topic of debate at the annual Berkshire Hathaway Inc (NYSE: BRK-A)(NYSE: BRK-B) shareholder meeting. Here’s what Warren Buffett had to say about the risks of nuclear war and what it would mean for insurance companies.
What Happened: Buffett told Berkshire Hathaway shareholders that the risk of nuclear war is real and a major concern. Buffett also said it was fortunate that during World War II, the U.S. invented the atomic bomb before other countries.
“It’s a very, very, very, very dangerous world,” Buffett said, citing the large stockpiles of nuclear weapons that countries have.
A question from the audience prompted a debate on what role a nuclear disaster could have on insurance companies, a sector that Berkshire Hathaway has heavy exposure to.
Buffett said there is little that Berkshire Hathaway can do in terms of risk of nuclear war. Buffett also said that nuclear war would impact other insurance industries and make it more costly for Berkshire to underwrite insurance plans.
“For certain things, we don’t write policies on because we wouldn’t be able to make good on them anyway,” Buffett said.
Berkshire Hathaway Vice Chairman Ajit Jain, who heads the insurance sector, offered his take on the potential on an incident involving nuclear weapons.
“It’s very difficult for us to estimate how bad it can be,” Jain said.
Jain said he was “fairly positive” that insurance companies could be on the line to pay out damages from nuclear war by regulators and the courts.
Unlike earthquakes and hurricanes, which are risks that can be estimated by insurance companies, Jain said the cost of nuclear events is hard to predict and to estimate how bad it could be.
Why It’s Important: Along with discussing the risks of nuclear war, Jain also discussed the fact that Geico has fallen behind rival Progressive Corp (NYSE:PGR) in the car insurance sector.
“Each one have their pluses and minuses, but having said that, there’s no question that recently Progressive has done a much better job than Geico,” Jain said.
Jain credited Progressive with being early on telematics, which involves putting a device in a vehicle that tracks driving patterns and then offering lower rates for safer driving behavior.
“It will take a while, but my hope is that in the next year or two, Geico will be positioned to catch up with Progressive,” he added.
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