Loss development and insurance accounting

Insurance holding company Berkshire Hathaway includes General Re, one of the biggest reinsurers in the US, among its subsidiaries. Like other major reinsurers, the company had significant exposures to the events of 11 September. In the following commentary, extracted from Berkshire Hathaway’s 2001 annual report, the group’s legendary chairman, Warren Buffett , warns of the dangers of underreserving and the use of misleading terminology in the insurance and reinsurance industries.