Warren Buffett Loves This Business—Maybe a Little Too Much

Warren Buffett watchers know that the reinsurance business has been an important ingredient in his winning formula. Companies like his Berkshire Hathaway sell coverage to other insurance companies for natural disasters and other big events. In return, the reinsurance sellers collect lots of premiums, which they can invest while waiting to pay claims. Buffett has credited this “float” with helping to build one of the world’s great fortunes.

But the business isn’t what it used be. Buffett sold stakes in the world’s two largest reinsurers—Swiss Re and Munich Re—last year, saying their prospects look worse in the next decade than they did in the last. And he put a new leadership team in at Berkshire’s own Gen Re unit to try to reverse more than a decade of shrinking float.