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The end of the AAA rated reinsurer?

The news that Berkshire Hathaway is to have its financial strength rating downgraded to a mere ‘AA+’ by Standard & Poor’s reminded me of a comment made by a reinsurance executive a few years ago.

“’AAA’ reinsurers are a thing of the past,” he said, in the aftermath of a number of big reinsurers deciding that the capital requirements necessary to maintain the magical triple A standard had just become too onerous.

That was the case for a number of big reinsurers over the years. But you could always rely on Berkshire’s might to fly the ‘AAA’ flag.

But now Business Insurance reports that the acquisition of Burlington Northern Santa Fe Corp has seen it finally drop down a notch and S&P notes that there is little prospect of a return.

So if Warren Buffett can no longer maintain the required capital is the ‘AAA’ rated reinsurer a thing of the past?

1 Comment on The end of the AAA rated reinsurer?

  1. One reading of the Standard and Poors announcement of this downgrade suggests that this is not a matter of capital per se but instead of enterprise risk management. Basically S P are just worried that Berkshire will get distracted with the running of a railroad. No big deal and AA is still very respectable.

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