One of the conference co-chairs was David Gold, Senior Vice President, Direct Claims, at Resolute Management Inc., the claims administration subsidiary of National Insurance Company (NICO) and an indirect subsidiary of Berkshire Hathaway. It was at this same conference two years ago that my own presentation “All Roads Lead to Berkshire” caused such a sensation, and I was heckled from the audience by Mr. Gold’s boss, Tom Ryan. I therefore listened to Mr. Gold’s opening remarks with great interest. He was at pains to present a warm and fuzzy picture of Resolute’s claims handling practices, as well as to respond to certain reputational issues that Resolute has in the marketplace.
Highlights of his remarks included:
All of the books of business for which NICO has acquired claims handling responsibility through its retroactive reinsurance deals flow up Resolute New England (Boston) and to him.
The exception is the Liberty Mutual Book, for which Brooke Green has overall responsibility.
Countering perhaps Resolute’s reputation for tight-fistedness, Mr. Gold shared that Resolute had in 2014 paid out $725 million for asbestos-related indemnity and defense (excluding money spent on coverage disputes). He also made the point that this dwarfed the expenditures made by Travelers, Hartford, Allianz, and others on their non-Resolute-managed books of asbestos claims. It is an interesting headline but — without relating the expenditure to market share — rather meaningless.
How Resolute views its job: to protect the policyholder asset (whatever that means) and to pay claims quickly.
Mr. Gold went on to observe that there are excessive profits in the plaintiffs bar, as evidenced by the money spent on advertising. Also, that the asbestos litigation business is fraught with fraud (nice turn of phrase), as evidenced by the suppression of set-off data.
Mr. Gold then rattled off a series of astonishing statistics, obviously designed to counter Resolute’s entrenched reputation for pushing defendant companies to try cases. According to Mr. Gold, Resolute:
Settles more than 99% of claims.
Wins 80% of the cases it does try.
Took 58 cases to trial in 2014:
53% had a directed verdict or were ruled a mistrial.
28% of the time, the verdict was less than the last demand.
19% of the time, the verdict exceeded the last demand.
Mr. Gold said these statistics prove that Resolute tries cases in a measured and calculated way.
What do you make of these remarks? Do you find Resolute’s claims handling practices troubling? Are you concerned about Berkshire’s unprecedented concentration of long-tail risk? You may find of interest this earlier post of mine about this year’s Berkshire Hathaway shareholder letter.
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Jonathan Terrell is the Founder and President of KCIC. He has more than 30 years of international financial services experience with a multi-disciplinary background in accounting, finance and insurance. Prior to founding KCIC in 2002, he worked at Zurich Financial Services, JP Morgan, and PriceWaterhouseCoopers.