Catastrophes come in clumps. Part of that is the correlatedness of weather. When disasters are occurring, it may pay to wait until the season is near its end to buy reinsurers. Who can tell what additional losses will arise in a year where losses are shaping up to be bad?
When there have been many tornadoes, and powerful ones, there are often many hurricanes, and powerful ones. Wait to see if the hurricane season has some punch, and if it does, wait until October to buy BRK or other reinsurers.
If the season doesn’t have punch, start buying a little in late August or early September, and complete the job in October.
Don’t get me wrong, I like BRK, and would buy it at book value, or near it. There are many other pure play reinsurers I might buy instead, if they survive the hurricane season. They would have much more upside. But in a really bad scenario, after the damage, BRK would be a low risk bet. In 2005 as the last hurricanes were hitting, I urged my boss to buy BRK — they would be the last man standing in reinsurance. And indeed BRK moved steadily up from there, without us.
BRK is much more than a reinsurer, but reinsurance will be the main focus for the next four months, so be aware…