Warren Buffett gave a blunt answer to Berkshire Hathaway shareholders on a potential nuclear war.
“There’s going to be more accidents in connection with atomic [weapons] — we’ve come close various times,” Buffett warned at the Berkshire Hathaway annual meeting on Saturday. “We can’t do anything about it.”
A nuclear attack of any kind could hammer Berkshire’s insurance operations. While the company isn’t out there under-writing risk associated with a possible nuclear war, attacks of this kind would likely make it must costlier for Berkshire to underwrite others types of insurance.
“For certain things, we don’t write policies on because we wouldn’t be able to make good on them anyway,” Buffett said. “And everybody would know we wouldn’t be able to make on them. So you have that risk. And there’s nothing Berkshire can protect you against.”
Ajit Jain — who runs Berkshire’s insurance operations — echoed his boss’ dour sentiment.
“When it comes to a nuclear thing you know, I I sort of surrender… it’s very difficult for us to estimate how bad that can be,” Jain said. “Very many different lines of exposures will be affected by it.”
Jain continued: “And even though in almost all our kind of contracts, we try and exclude nuclear as a covered peril. Nevertheless, if something like that were to happen, I’m fairly positive that the regulators and the courts will hold it against the insurance, and we will be… required to pay. For example, one thing which is already being talked about, we issue what are called FICA policies. And these fire policies try and exclude nuclear as a covered peril. But there are several regulators who feel that ‘Gee, if it’s a fire policy and if the nuclear attack causes a fire, then how can you exclude fire?’ … we will have to live with that, and it will be very difficult for the insurance industry to fight back with the regulators and the court systems in terms of what is covered or not covered.”
After Jain’s detailed answer, Buffett quipped: “And there won’t be any regulators or anybody else.”
More Yahoo Finance coverage of Saturday’s meeting: