Berkshire Hathaway’s GEICO Was Hit Hard by Hurricanes Harvey and Irma

Berkshire Hathaway’s GEICO Was Hit Hard by Hurricanes Harvey and Irma

When Warren Buffett warned that Berkshire Hathaway's (NYSE: BRK-A)(NYSE: BRK-B) GEICO unit could have a rough quarter because of its exposure to Hurricanes Harvey and Irma, he wasn't kidding. His estimate that Harvey could lead to 50,000 total losses from flooding may have been right on the money.

Berkshire Hathaway estimated that Harvey and Irma cost GEICO as much as $500 million, due to damaged cars owned by its insureds. GEICO's standing as the best car-insurance company, however, remains intact. 

Car insurance is a particularly competitive industry. Drivers shop for car insurance based on the price, believing (correctly) that car insurance is nothing more than a commodity. As a result, car insurers operate on razor-thin margins, earning very little, even in periods where there are no large natural disasters.

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Source: Fool.com