This Disclosure is a supplementary note to the audited financial statements which are publicly available both on the website of the Monetary Authority of Singapore and from the Accounting and Corporate Regulatory Authority. This Disclosure, read in conjunction with the audited financial statements, is issued pursuant to MAS Notice 124 – Public Disclosure Requirements.

Company Profile

Berkshire Hathaway Specialty Insurance Company (“BHSIC”) is a Nebraska, United States-domiciled direct property and casualty insurer which maintains offices across the United States and around the world including Canada, Australia, New Zealand, Hong Kong, Singapore, Malaysia, Macau, Dubai, United Kingdom, Ireland, Belgium, Germany, France, Spain and Switzerland. BHSIC is a member of the National Indemnity Company group of insurance companies (the “NICO Group”) and its financial strength ratings are A++ from AM Best and AA+ from Standard & Poor’s. BHSIC is a wholly owned subsidiary of National Indemnity Company headquartered in Omaha, Nebraska, which is in turn wholly owned by Berkshire Hathaway Incorporated (“BHI”), a Delaware, United States-domiciled holding company owning subsidiaries engaged in a number of diverse business activities throughout the globe and listed on the New York Stock Exchange (www.berkshirehathaway.com).

BHSIC-Singapore Branch was registered in September 2014 under Singapore UEN No. T14FC0124H and received its license to conduct general insurance business in Singapore in December 2014. Since then, the Branch has written direct insurance, assumed facultative reinsurance, and treaty reinsurance business.

On the non-treaty side, BHSIC-Singapore Branch writes insurance in the property, casualty, marine cargo, marine hull and liability, fire, motor, group personal accident and health, employers’ liability, public liability, surety, engineering, construction, energy, professional indemnity, and transactional liability lines of business.

Business on the non-treaty side is sourced directly and through brokers and agents. BHSIC-Singapore Branch’s treaty reinsurance business is sourced primarily through brokers throughout Asia and secondarily, directly through cedants.

The underwriting strategy of the Branch is to:

• Maintain a diverse spread of risk in its books of business across product lines and geographic zones;
• Manage its aggregate property catastrophe exposure through the application of sophisticated modeling tools;
• Monitor its exposures on non-property catastrophe coverage; and
• Adhere to underwriting guidelines across its business lines.

The Branch strives to diversify its reinsurance portfolio through the appropriate combination of business lines, ceding source, geography and contract configuration. Its primary customer focus is on highly-rated carriers with proven underwriting skills and dependable operating models.

Corporate Governance and Enterprise Risk Management Framework

As a business unit of the NICO Group, BHSIC adopts the corporate governance framework of the NICO Group.

The ultimate responsibility for risk management in the NICO Group is shared between the President of NICO and the Vice Chairman-Insurance Operations of BHI/President of Berkshire Hathaway Reinsurance Group who also serve as the Executive Committee of the Board of Directors for NICO and who have in turn delegated the management of risk within the business units that they do not manage on a daily basis to the President of each of these business units, including BHSIC. The Presidents are then responsible for implementation of an effective risk management framework within their business unit that is consistent with the NICO Group tone, risk appetite and risk strategy.

BHSIC is a business unit of the NICO Group and its leadership is empowered with the resources needed to appropriately identify and manage risk, foster the health of the NICO Group’s risk culture and ensure the effective operation of the controls that it relies on to mitigate and monitor risk for BHSIC.

BHSIC adopts the risk management framework of the NICO Group and the cornerstone of BHSIC’s risk management framework is the BHI culture established by BHI’s CEO and nurtured within the NICO Group of companies over the last thirty years. Key hallmarks of this culture are:

• The significant delegation of responsibility to trusted, highly experienced and capable business unit presidents;
• Prudent, informed risk taking with a focus on the maximum downside;
• Maintenance of exceptional financial strength and liquidity; and
• Zealously guarding BHI’s reputation.

BHSIC has adopted the NICO Group Risk Appetite Statement (“RAS”). The RAS is reviewed and refreshed annually and presented to BHSIC’s Board of Directors.

In addition, BHSIC has adopted the following policies as part of its risk management framework:

• BHI’s written Code of Business Conduct and Ethics. This Code is provided to all new employees during onboarding and all current employees at least annually, and employees must acknowledge receipt of the Code. The Code is also posted on the bulletin boards at various offices and is available via the company intranet site.
• BHI’s Prohibited Business Practices Policy. This Policy is provided to new employees during onboarding and all current employees at least annually, and employees must acknowledge receipt of the Policy. This Policy is also posted on the bulletin boards at various offices and is available via the company intranet site.
• Employee Handbook which sets forth the principles and rules each employee is expected to follow. The Handbooks have been distributed to employees and acknowledgement of receipt is confirmed. They are periodically distributed as updates are made.
• Information Security Policy instructs staff not to disclose sensitive proprietary, commercial, contractual, investor or staff related information to third parties, including friends and relatives, who do not have a need to know the information in order to meet their professional responsibilities.
• BHI established a process (for all BHI subsidiaries) that enables employees to report concerns anonymously through an independent third-party organization. All employees are provided information at least annually about how to access the third party 24 hours a day, seven days a week. Each report is taken seriously and treated confidentially.

Finally, BHSIC has established a Risk Committee, consisting of members of senior management and the Board of Directors, which meets at least twice a year.

BHSIC-Singapore Branch participates in the NICO Group risk management framework through the BHSIC business unit president’s implementation of the risk management framework for BHSIC. BHSIC-Singapore Branch’s strategy with respect to risk management has been to adopt a risk management framework that is consistent with the broader BHSIC objectives but is appropriately scaled for the risks faced by the Branch. The Branch adopts the risk management framework of BHSIC and then modifies and enhances the framework where necessary to meet local requirements. Consistent with BHSIC and the NICO Group, BHSIC-Singapore Branch adopts an approach whereby risk identification and the management of risk is incorporated as part of the business planning process which is incorporated into the day-to-day business processes and systems.

As part of BHSIC-Singapore’s risk management framework, BHSIC-Singapore Branch engages in the Group’s Own Risk Solvency Assessment (“ORSA”) process along with BHSIC and the entire NICO Group. The NICO Group ORSA annually links the NICO Group’s risk identification, assessment, monitoring, prioritization and reporting process with its capital management and strategic planning. The process is conducted at the Group level with input from each of the member companies and their respective branches on an annual basis.

The NICO Group ORSA identifies the key risks faced by the NICO Group, including BHSIC and its branch operations, listed below. The Group ORSA further defines both risk tolerance levels and documented key mitigating controls implemented by BHSIC for each key risk. In the most recent ORSA, each key risk was assessed to determine whether the risk was within BHSIC’s risk tolerance and it was concluded that with the risk mitigation measures in place at the enterprise and Branch-level, all of the identified risks were within the risk tolerance of BHSIC. All key risks pertinent to BHSIC are listed below as well as the risk profile status for BHSIC:

The 2022 NICO Group ORSA included stress scenarios and BHSIC-Singapore Branch further conducted Branch-level stress testing which tested how certain key risks may threaten the financial strength of the Branch. Based on the Group and Branch-level stress testing and risk assessments, BHSIC-Singapore Branch concluded that:

1. BHSIC-Singapore Branch’s capital resources are sufficient to meet its business needs;
2. The adequacy of the Branch’s capital has been demonstrated by the stress scenario tests and BHSIC’s capital has also been tested under stressed scenarios relating to NICO and BHI group risks and found to be adequate;
3. BHSIC-Singapore Branch’s business and risk management strategies are appropriate given its risk profile;
4. The ORSA process identified control enhancements that will further strengthen BHSIC-Singapore Branch’s ERM Framework; and
5. The absence of any risk tolerance breaches evidences the integration of BHSIC-Singapore Branch’s risk management practices into its day-to-day operations.

ENVIRONMENTAL RISK MANAGEMENT DISCLOSURE

BHSIC’s responses to the National Association of Insurance Commissioners (NAIC) Climate Risk Disclosure Survey are available here.