COVER STORY PETER EASTWOOD EXPANDING HORIZONS Peter Eastwood, global president and chief executive officer of Berkshire Hathaway Specialty Insurance, talks to Tim Garratt about the company’s long-anticipated arrival in Australia – the next step in what he describes as a ‘decades-long journey’ for the business THE BERKSHIRE Hathaway name has long been A rapidly growing business of the Berkshire Hathaway synonymous with success in global business. family is Berkshire Hathaway Specialty Insurance (BHSI), It’s a name inextricably linked with investor and business a company launched on 29 April 2013. With its global magnate Warren Buffett, who, at 84, continues to serve as headquarters in Boston, Massachusetts, BHSI is principally chairman, CEO and president of holding company Berkshire focused on commercial lines and has grown exponentially Hathaway Incorporated. within a very short time. According to its 2014 annual report, total revenue for “We’ve gone from four people on the team to 569 people Berkshire Hathaway Inc and its subsidiaries last year came today,” says BHSI’s global president and CEO, Peter in at approximately US$194.7bn (A$248.8bn). Forbes Eastwood. “From a geographic standpoint, we initially magazine, in its most recent ranking of the world’s biggest launched the business in the United States, and we have public companies, had the Nebraska-based group placed since entered five other countries.” Those five other at number five. countries are Canada, Singapore, Hong Kong, New Zealand and Australia. The Australian insurance industry has anticipated the “We’re here to build a primary property arrival of BHSI for some time. It’s entry into the local market was finally confirmed on 26 April, when it and casualty business, and one of the announced it had received its insurance licence from APRA to begin providing all lines of general business in things that we’re focused on doing is Australia. Immediately, BHSI began offering property, casualty, financial lines and marine cargo insurance to putting a meaningful amount of product Australian clients. into the marketplace as quickly as we can” BHSI’s emergence in Australia is a substantial event in itself for the general insurance industry. It goes without saying that this is an entry into the market that stands And while 60 subsidiaries involved in a variety of out from most. Far from an unknown entity, BHSI begins industries have contributed to these staggering results, 27% business locally bringing with it the Berkshire Hathaway of Berkshire Hathaway Inc’s net earnings are the legacy, built up over 75 years in North America’s underwriting and investment profits of its insurance insurance space. Additionally, interest in and respect for operations. The group has played in the insurance space the brand is heightened by the reverence in which a since 1940. sizeable portion of the community holds Buffett, described 12 www.insurancebusinessonline.com.au www.insurancebusinessonline.com.au 13 COVER STORY PETER EASTWOOD (both by product line and geography)… principally BERKSHIRE HATHAWAY commercial property and casualty insurance business.” SPECIALTY INSURANCE Eastwood was one of the four founding members of On 26 April 2015, BHSI announced its approval to BHSI who launched the company in 2013. “I’ve been in the provide all lines of general business in Australia property and casualty insurance business for 24 years,” he says. “I started my career at AIG in New York City in BHSI currently offers property, casualty, financial lines September 1991 after graduating from college. I worked for and marine cargo insurance in Australia AIG for just shy of 22 years.” Immediately prior to joining BHSI, Eastwood had Its Australian office is located in Sydney oversight of AIG’s property and casualty insurance businesses across the Americas and was then presented with the The company is a subsidiary of Berkshire Hathaway opportunity to join Berkshire Hathaway and build BHSI. Incorporated, founded on 29 April 2013 Speaking about the business’ objectives, he says: “We’re It already operates in the US, Canada, Singapore and Hong here to build a primary property and casualty business, and Kong, with underwriting and service teams in each market. one of the things that we’re focused on doing is putting a meaningful amount of product into the marketplace as It is currently seeking its insurance licence in quickly as we can, in satisfaction of our customers’ needs. New Zealand My belief is that when customers and brokers think about strategic insurance company partners, they are turning to The local leadership team includes: those [insurance companies] who can satisfy most, if not • Frank Costigan: CFO and COO, Australasia (former all, of what the need of that customer is. Our objective is to CFO of direct insurance at IAG) be able to satisfy that need. • Susan Donaldson, head of claims, Australia “We’ve actually launched six different commercial (former national financial lines claims manager businesses, and there’s meaningful amounts of product that at Zurich) sit underneath each of the six broad categories. We’ve put • Andrew Spurr, head of casualty, Australia (former a lot of product into the marketplace quickly.” liabilities manager at AIG) • Craig Taylor, head of property, Australia (former Expansion property manager for Australasia at HDI-Gerling) As to the countries in which BHSI decides to establish operations, Eastwood says the criteria are two-fold. Firstly, as the most successful investor of the 20th century and he says it looks for countries where it sees opportunities to named in 2012 as one of the world’s most influential write business that adds value to a country’s indigenous people by Time magazine. risks and exposures. Secondly, he cites the importance of Industry pundits will watch BHSI’s moves over the catering to the needs of multinational customers. “I would coming months, trying to get a sense of how great an impact describe us as building an international company that has the behemoth can and will have in Australia. What do its global capabilities… There are customers that have exposures new local operations mean for the general insurance that cross borders. So where there’s a need for us to satisfy landscape? And how much competition do they represent that multinational customer’s needs, and particularly where for the bigger end of town? there’s a need for a locally admitted policy, we want to be in a place to have a network to do that.” Beginnings Eastwood says BHSI had an interest in the Asia-Pacific Speaking to Insurance Business, Eastwood emphasised that region early on, given its growth potential. He sees the BHSI’s strategy is very much long term. “In the world of Australia industry as having no shortage of high-calibre Berkshire Hathaway, long term I would describe as ‘forever’. performers. “I’ve experienced it as being a marketplace that We effectively don’t have a finish line,” he says. “Everything has an exceptional level of insurance industry talent,” he says. that gets done in this organisation has a long-term perspective Eastwood has high praise for Chris Colahan, BHSI’s around it. We’re here to build a long-term, focused, diverse recently appointed president, Australasia, who will lead the 14 www.insurancebusinessonline.com.au Australian and New Zealand businesses from Sydney. “Chris with property, casualty, financial lines and marine cargo is an exceptionally talented individual, having joined us just capabilities, and Eastwood says that, over the short term, a handful of months ago from RSA (Royal & Sun Alliance), it will continue to expand on those capabilities. “I’ll put where he was the chief executive of RSA’s business in Asia. the expansion of capabilities into a ‘stay tuned’ category as In a very short period of time, he’s been able to put together we think about acquiring more people onto the platform terrific teams in both Australia and New Zealand, validating and creating more connectivity and developing distribution my belief that it’s a marketplace with great industry talent. relationships that get us into other areas, but the We’ve been able to [build those teams] by pulling from the marketplace should absolutely expect to see us in other local marketplace, as opposed to bringing people in from product lines beyond the ones that we’re in today.” other geographies. He also indicates an intention to ultimately serve a “To be honest, that’s a very important criteria for me in highly diverse range of Australian customers. “Our initial terms of where it is we think about launching our business launch in Australia… is principally in the larger account and the order of priorities for us in terms of the way we segment,” Eastwood says. “Over time… what the market launch. Amongst other things, it’s making sure that we’ve will see is us moving into other market segments as well, got the right person to lead it and the right people on the perhaps as far down as the SME space and positioning the “We haven’t thought about essentially timing the insurance cycle and launching the business in a highly opportunistic way, but we’re building the business and positioning it for success over the long term” team who know the local marketplace and can generate a business to offer products and services to the full spectrum positive underwriting return for the organisation.” of the customer base in the Australian market.” Eastwood says market conditions haven’t been factored Describing what we can expect from BHSI in Australia, into the timing of BHSI’s launches into new international Eastwood says, like its other businesses around the globe, markets. “We think about this as a long-term play,” he it will be a “solution-oriented organisation”.