Posted tagged ‘disaster insurance’

Warren Buffet on Nuclear Bombs

January 21, 2008

[Go to a 5/8/08 UPDATE on this post]

“It’s inevitable.” A quote by Warren Buffet.

This is old news but worth reviewing to get it in the record of this blog. It’s important because if I needed just one person to make the case that a nuclear attack on U.S. soil was a slam-dunk, it would be Warren Buffet. He thinks it’s inevitable.

Warren Buffet is the second richest person in the world and the most respected investor on Wall Street. He’s cautious and self-effacing; he’s the opposite of flamboyant and not prone to hyperbole. His company, Berkshire Hathaway, owns not just insurance companies (like GEICO), but it owns at least one reinsurance company, which means Warren Buffet insures other insurance companies. His business is to predict, plan and pay for the cleanup of disasters (in fact, he lost $2.4 billion from 9/11; see the last quote below for his take on covering nuclear disasters). He also serves as Advisor to the Board of Directors of The Nuclear Threat Initiative, a group working to reduce the risk of nuclear terrorism.

From the lips of Warren Buffet regarding a nuclear bomb in the U.S.:

In a CNN interview with Lou Dobbs on 6/19/05, Warren Buffet said, “It’s the number one problem of our time.”

Both CNN and the BBC News on 5/6/02 quote Warren Buffet with this: “We’re going to have something in the way of a major nuclear event in this country… It will happen. Whether it will happen in 10 years or 10 minutes, or 50 years … it’s virtually a certainty.”

A Slate piece on 6/18/02 quotes Warren Buffet with this: “I don’t know anything [about potential threats to U.S. security] but I know basic probabilities. … I understand how things that seem very unlikely happen when time passes. … There’s just plenty of people out there who hate us … more psychotics, more megalomaniacs, more religious fanatics today than 50 years ago.”

A Fortune piece on 11/11/02 quotes Warren Buffet with this: “…the ultimate depressing thing. It will happen. It’s inevitable. I don’t see any way that it won’t happen. But we can reduce the probabilities. If there’s a 10% probability of something happening in a given year–and I don’t know if that’s the right probability; nobody knows–then the chances that it will happen in 50 years are 99.5%. If you get it down to 3%, there is about a 78% chance. If you get it down to 1% per year, there’s like a 40% chance, so reducing the probabilities per annum of anything happening obviously increases the chance significantly that your kids will get through their lifetimes without this happening. You can’t get rid of the knowledge [how to make a bomb]. You can try to control the materials [enriched uranium and loose nukes]. You’ll never get rid of the intent. It is the ultimate problem of mankind.”

Finally, the UK’s Guardian on 5/6/02 quotes the “Oracle of Omaha” on whether he’ll offer nuclear terrorism insurance. I’m confused by the last sentence in the quote below. Perhaps he believes financial institutions are willing to insure themselves for small disasters but not large disasters, even if the probability of a large disaster were the same or greater. Or perhaps he believes these companies are worried about terrorism but they’re not willing to pay the high premiums, especially for nuclear events. I give up, you decide:

“…It could make the World Trade Centre loss look like nothing. We are excluding nuclear, chemical and biological events in terrorism insurance. The twin towers came close to the limit of what we can do. We cannot do nuclear, chemical and biological. We will take an occasional nuclear risk if they’ll pay us enough. It’s strange that financial institutions want terrorism insurance but they’re not willing to buy what I’m worried about.”

Mr. Buffet, I’d like a clarification on that last sentence. Please call me.