Building a forever business

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How Berkshire Hathaway Specialty Insurance went from newcomer in the property market to a significant player in a short space of time

IF ANYTHING distinguishes Berkshire Hathaway Specialty Insurance’s approach in the market today, it's a commitment to the long term. This has proved particularly valuable over the last two years and looks set to continue underpinning a strong performance as market uncertainties and new risks surprise businesses with more frequency in the post-pandemic world. “The thing that differentiates us is when we're looking to deploy our capacity, we're not afraid of volatility; however, we do not like uncertainty,” says BHSI head of property Craig Taylor. The business in Australia had come a long way since setting up in 2015.

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Berkshire Hathaway Specialty Insurance (BHSI) Australia provides commercial property, mining and energy, construction, casualty, executive and professional lines, marine, transport and logistics liability, accident and health, healthcare liability, surety, and multinational solutions and risk engineering. BHSI has offices in Sydney, Adelaide, Brisbane, Perth and Brisbane, and its wide range of insurance products is expanding. This is combined with financial strength, a yes-oriented culture and great flexibility in customising solutions for clients’ needs. BHSI is customer-first, through and through. It views every claim as an opportunity to strengthen its customer relationships and industry reputation because, as BHSI says, ‘Claims is our product’.

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Australia’s renewable energy capacity is growing

Moderate negative impact

38%

Significant negative impact

28%

Little negative impact

12%

Moderate positive impact

0.5%

“We’re constantly reviewing how we approach a customer from a risk-based perspective”

Craig Taylor, BHSI

“If somebody asked me seven years ago, ‘where do you think your business position would be in seven years?’, I would not have expected to say, 'in five offices with 41 teammates and a portfolio of over $200m written premium'," he says. The role of insurance Taylor is responsible for a range of property segments that consist of mid-market, corporate, power, mining and energy, and construction. He is also responsible for BHSI’s risk engineering practice in Australia. “We have nine risk engineers helping underwriters make decisions about deploying capacity in all those segments of business within a property area,” he says.

Within his ambit, one area that highlights the benefits of a long-term approach is renewable energy. BHSI started out in wind and solar in Australia, but now the market for battery technology and hydrogen-based energy options is evolving. “There's constantly new technology and new opportunities being driven through that renewable energy space,” he says, adding that the political environment that sits around renewable energy generates a lot of investment and momentum.

The move away from business reliance on thermal coal and initiatives such as the Australian Sustainable Finance Roadmap are making high-emission areas of the market more constrained, Taylor says. “I think the role of insurance companies is an interesting balance [in this area]. We're constantly reviewing how we approach a customer from a risk-based perspective.” Taylor says the pandemic and the flooding damage in Queensland and NSW illustrate the role that insurance companies should play. “Our role is about risk transfer, so what is the opportunity that has been driven by those events?” This links into providing customers with certainty about what is covered. One of BHSI’s key advantages is that it has “unconstrained capacity”, says Taylor.

Work-related accidents or mishaps

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Directors & officers

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Legal fees

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Auto liability

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Property damages and bodily injury

“All the decisions that we're making, we're making locally and we are writing to our own balance sheet without treaty reinsurance or facultative reinsurance, and this enables us to think about solutions and think outside the box.” The long game In a market as large and diverse as Australia, it is common to have multipronged risk events happening simultaneously that demand different assessments, Taylor says. While floods might be occurring in one area, bushfires are a risk in another. “You can't operate in an environment where you're impacted by so many things on such a large scale without having that long-term focus,” he says. Many companies would put a specific time frame on the idea of ‘long-term’, but Taylor says this is not the case at BHSI.

“You can’t operate in an environment where you’re impacted by so many [risk events] on such a large scale without having that long-term focus”

Craig Taylor, BHSI

“We say we're building a forever business. We don't put an end date on it.” In an area like renewable energy, where it is still not clear which type of technology will prove the most effective and most useful within the regulatory frameworks that are being implemented, this kind of approach is appealing. One industry still in its infancy in terms of being a scaled business that BHSI is watching closely is creating energy from waste (EfW).

Taylor says there is a large pipeline of planned infrastructure spend on EfW projects in Australia. “These projects, investment and infrastructure around waste to energy are going to be a game changer when you think about the benefits from a society perspective as well as in terms of managing waste,” he says. BHSI risk engineers have spent a lot of time coming to grips with these new fields to understand the risk perspective properly, something that is quite difficult with an unproven technology. “Some of these risks to us may be currently unknown, and we work to understand them and reduce the uncertainty. This is one of the things we do,” Taylor says. But even risks that are known are constantly moving, he adds. An example might be the current difficulty of securing parts for specialist equipment when supply chains are strained both from a production and transport point of view, and when costs are constantly changing due to rising fuel prices. Another nut getting tougher to crack in terms of risk assessment is climate change-related catastrophe, but this is also a problem that BHSI’s acceptance of volatility can handle, Taylor says. Staying resilient in the face of natural calamity requires balancing the need for BHSI to remain profitable in terms of underwriting to sustain a robust market presence with the need to provide the best solutions possible to customers. He emphasises that BHSI would not be where it is today without the support of the brokers it relies on, acknowledging that many have made a leap of faith by joining up with BHSI despite it being a new player. “It's a big ask to leave a relationship that you have and join a new one with a new insurer that's just turned up with a couple of people from other insurance companies and thrown open the doors.” Taylor says the power of incumbency in the insurance market is real, and while BHSI has the advantage of strong brand recognition, the trust that has been placed in the company is not something he undervalues. “It’s something that I never take for granted.”

Value of insurance losses from major weather events in Australia

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Source: The Clean Energy Regulator’s Quarterly Carbon Market Report, December 2021

31.4%

Around 5.5 gigawatts of renewable energy capacity across large- and small-scale schemes was added in 2021, raising the share of renewable electricity in the national electricity market to an average of 31.4%

NSW storms and floods, 2015

Cyclone Debbie, 2017

Sydney hailstorm, 2018

Townsville floods, 2019

Bushfires, 2019-2020

$1.1bn

$1.6bn

$1.3bn

$1.2bn

$740m

Source: Insurance Council of Australia

Australia’s renewable energy capacity is growing

Value of insurance losses from major weather events in Australia