Berkshire Hathaway 2009 Annual Report Download - page 82

Management’s Discussion (Continued)
Property and casualty losses (Continued)
General Re and BHRG (Continued)
The timing of claim reporting to reinsurers is delayed in comparison with primary insurance. In some instances there are
multiple reinsurers assuming and ceding parts of an underlying risk causing multiple contractual intermediaries between us and
the primary insured. In these instances, the delays in reporting can be compounded. The relative impact of reporting delays on
the reinsurer varies depending on the type of coverage, contractual reporting terms and other factors. Contracts covering
casualty losses on a per occurrence excess basis may experience longer delays in reporting due to the length of the claim-tail as
regards to the underlying claim. In addition, ceding companies may not report claims to the reinsurer until they believe it is
reasonably possible that the reinsurer will be affected, usually determined as a function of its estimate of the claim amount as a
percentage of the reinsurance contract retention. However, the timing of reporting large per occurrence excess property losses or
property catastrophe losses may not vary significantly from primary insurance.
Under contracts where periodic premium and claims reports are required from ceding companies, such reports are
generally required at quarterly intervals which in the U.S. range from 30 to 90 days after the end of the accounting period.
Outside the U.S., reinsurance reporting practices vary. In certain countries clients report annually, often 90 to 180 days after the
end of the annual period. The different client reporting practices generally do not result in a significant increase in risk or
uncertainty as the actuarial reserving methodologies are adjusted to compensate for the delays.
Premium and loss data is provided to us through at least one intermediary (the primary insurer), so there is a risk that the
loss data provided is incomplete, inaccurate or outside the coverage terms. Information provided by ceding companies is
reviewed for completeness and compliance with the contract terms. Reinsurance contracts generally allow us to have access to
the cedant’s books and records with respect to the subject business and provide us the ability to conduct audits to determine the
accuracy and completeness of information. Audits are conducted as we deem them appropriate.
In the normal course of business, disputes with clients occasionally arise concerning whether certain claims are covered
under the reinsurance policies. We resolve most coverage disputes through the involvement of our claims department personnel
and the appropriate client personnel or by independent outside counsel. If disputes cannot be resolved, our contracts generally
specify whether arbitration, litigation, or alternative dispute resolution will be invoked. There are no coverage disputes at this
time for which an adverse resolution would likely have a material impact on our consolidated results of operations or financial
condition.
In summary, the scope, number and potential variability of assumptions required in estimating ultimate losses from
reinsurance contracts are more uncertain than primary property and casualty insurance due to the factors previously discussed.
General Re
General Re’s gross and net unpaid losses and loss adjustment expenses and gross reserves by major line of business as of
December 31, 2009 are summarized below. Amounts are in millions.
Type Line of business
Reported case reserves ........................ $ 9,355 Workers’ compensation (1) ................... $ 3,076
IBNR reserves ............................... 8,239 Professional liability (2) ...................... 1,314
Gross reserves ............................... 17,594 Mass tort–asbestos/environmental ............. 1,738
Ceded reserves and deferred charges ............. (1,424) Auto liability .............................. 3,076
Net reserves ................................. $16,170 Other casualty (3) ........................... 2,968
Other general liability ....................... 2,890
Property .................................. 2,532
Total .................................... $17,594
(1) Net of discounts of $2,473 million.
(2) Includes directors and officers and errors and omissions coverage.
(3) Includes medical malpractice and umbrella coverage.
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