By Luke Eastwood '24
On Monday, December 11, Mr. Peter Eastwood P'24,'28 and Mr. David Bresnahan P'21,'25 presented to the Finance Academy on the insurance industry. Peter began his career in insurance in 1990 with AIG, while Dave commenced his career with Chubb in 1991 and later joined AIG. Following their tenure at AIG, they were given the opportunity to establish an insurance business for Berkshire Hathaway.
Peter and Dave initiated the presentation by outlining four main talking points: Risk and Insurance 101, Insurance: The Foundation of Berkshire Hathaway, Building Berkshire Hathaway Specialty Insurance, and Lessons Learned and Keys to Success. Dave first defined risk as the possibility of financial loss. He then presented a relatable example to illustrate risk and insurance on a smaller, more personal scale. The students were prompted to imagine pooling money with friends to buy a mini-van for transportation, highlighting the risks involved, such as the possibility of an accident. Dave proposed three ways to deal with this risk: do nothing, buy a policy at $600 to cover damages, or have the person responsible for the crash pay all the costs. The second option, purchasing a policy, exemplifies the concept of insurance. The price of insurance is determined by the level of risk, and whether an insurance company will offer a policy depends on this assessment. Dave further defined insurance as a legal contract transferring risk from a policyholder to an insurance company.
They then discussed the two pillars of the insurance industry: commercial and consumer insurance. BHSI operates as a commercial insurance company, catering to large corporations. Using the example of St. Sebastian's, Peter explained how BHSI provides insurance coverage for buildings, buses, medical needs, and even environmental risks. In the event of an issue, all parties would be held liable, and BHSI would provide financial support to protect St. Sebastian's.
Peter emphasized how insurance plays a crucial role in protecting various aspects of life, including driving to work or school, having a job, and owning a house. Without insurance, large companies would face bankruptcy. Peter then listed some of BHSI's well-known customers, including Nike, Google, Apple, Boston College, Microsoft, and FedEx. The presentation highlighted the concept of "float," the money an insurance company retains while customers pay premiums and claims are made. This money in float is invested to generate profits, illustrating how Warren Buffet has propelled the growth of Berkshire Hathaway.
To conclude the presentation, Peter discussed BHSI's global success, with 39 offices across 16 countries and over 1634 employees, a significant growth from its original staff of four. Peter shared valuable life lessons, emphasizing the importance of a company's culture and offering four keys to success: work hard, be curious, be long-term focused, and be a good person.
The Finance Academy thanks Peter Eastwood and Dave Bresnahan for sharing their time and expert insights into the world of insurance.