Warren Buffett, the venerable billionaire investor and CEO of conglomerate Berkshire Hathaway, believes cybersecurity risk for insurance underwriters can only get worse.
The problem is no one knows how much worse. It’s apparently not-knowing the unknowable that spooks Buffet, and with good reason. While he’s got a “pretty good idea” about the risk of earthquakes in California and hurricanes in Florida, cyber hacking is another matter, Buffett said at Berkshire Hathaway’s annual meeting last Saturday, May 5th. (via Fortune).
“We have a pretty good idea of the probabilities of a quake in California or the probability of a 3 or 4 hurricane hitting Florida or wherever it may be,” he said. “But we don’t know what we’re doing in cyber. I think anybody who tells you now that they think they know in some actuarial way what the general experience is likely to be in the future or what the worst case would be, is getting ahead of themselves, and that’s one of the reasons I say a $400 billion event has a roughly 2% probability per year of happening. Cyber is unchartered territory and it’s going to get worse not better.”
Cyber Insurance Risks
Cyber’s unpredictable risk means Berkshire Hathaway will be competitive but still limit its underwriting exposure, Buffett said. "There's a very material risk which did not exist 10 or 15 years ago and will be much more intense as the years go along.” Still, there are those taking a shot at framing the market’s size. For example, Allied Market Research pegs the cyber insurance market will hit $14 billion by 2022. Another report projected total annual cyber premiums will reach $10 billion by 2020.
Buffett might be right that no one knows where the basement lies for cyber risk, but plenty are trying to figure it out. Here’s a sampling of what MSSP Alert has reported others are saying:
Additional Oracle of Omaha Perspectives
Buffett also opined on some of his tech investments (via Fortune):
On Apple. “I didn’t go into Apple because it was a tech stock in the least. I went into Apple because I came to certain conclusions about both the intelligence with the capital they deploy but more important the value of an ecosystem and how permanent that ecosystem could be.”
On cryptocurrency. “When you buy something because you’re hoping tomorrow morning you’re going to wake up and the price will be higher, you need more people coming into it than are leaving. And you can get that and it will feed on itself for a while, and sometimes for a long while, and sometimes to extraordinary numbers, but they come to bad endings, and cryptocurrencies will come to bad endings.”