Berkshire Hathaway’s recent arrangement with Aon, whereby it takes a 7.5 percent quota share on all retail subscription business with some Lloyd’s participation, has caused controversy in the industry. Intelligent Insurer asked a range of industry figures: “Do you believe it represents an innovative blueprint of things to come in the industry, or a potential threat to underwriting expertise?”
“For better or for worse or, more precisely, to a lesser or greater degree, free riding is inherent to the structure of markets. Therefore, the real question here is not whether free riding is occurring, but how the structure of free riding within the insurance market itself is likely to change in the future.
“If we use capital markets for guidance, the biggest balance sheets should prevail in following markets. Furthermore, leading markets should not expect all newcomers to be light on expertise for long, as change will dislocate both capital and talent.”
John Seo, co-founder & managing principal, Fermat Capital Management
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Berkshire Hathaway, Aon, Lloyd's, Soapbox, underwriting