Agreement with Warren Buffett’s company is “potential threat”

Lloyd's building

Lloyd’s finance director Luke Savage has spoken out against megabroker Aon’s deal with Berkshire Hathaway.

The arrangement, announced in March, means that Aon allocates $7.50 (£4.9) to Berkshire Hathaway for every $100 of premiums it places at Lloyd’s, and Berkshire Hathaway is liable to pay out 7.5% of any claims.

Savage, quoted in today’s Financial Times, said: “All credit to Berkshire Hathaway – they are going to be getting the return of Lloyd’s without having to make the investment around underwriting expertise that the Lloyd’s market does make.

“It’s effectively a tracker fund on Lloyd’s … It is a potential threat. How sustainable is that in the long term? If it starts to undermine the expertise within the Lloyd’s market, is that actually in the long-term interests of the client?”

Savage was speaking at an insurance conference this week.

When the deal was first announced, it did raise concerns for some in the market. The chief executive of one Lloyd’s insurer told Insurance Times: “You could argue that [the deal] will attract some business into Lloyd’s. More likely is that the Lloyd’s market will be diluted down.

“You could see them using that as an opportunity to perhaps drop some of the smaller markets, so it could be a threat over the longer term to some of the smaller operators within Lloyd’s.”

According to the FT, Aon said Berkshire was providing a “welcome source of additional capital” and this would keep its clients’ premiums low. Berskhire did not comment.

Topics