You are here:HomeNews CenterInsurance News2009Buffett Wins His $224 Million Hurricane Bet With Florida

Buffett Wins His $224 Million Hurricane Bet With Florida

On December 31 an option that would have forced Warren Buffett's Berkshire Hathaway to buy $4 billion of bonds to finance Florida's recovery from major...
January 8, 2009

On December 31 an option that would have forced Warren Buffett's Berkshire Hathaway to buy $4 billion of bonds to finance Florida's recovery from major hurricanes expired. The state paid $224 million for the company's commitment to purchase debt to finance storm recovery, but no major storms hit Florida in 2008.  The state estimated that once every 32 years a single storm would result in losses of at least $25 billion. Under terms of a deal disclosed in July, Berkshire had agreed to buy debt if the state fund incurred losses of $25 billion by December 31. The state fund would have paid 6.5 percent annual interest on the bond for 30 years, which still would have been a good return. But since Florida did not experience more than $25 billion in storm losses, Buffett didn't have to issue bonds and he gets to keep the $224 million. There is a reason that Warren Buffett is the richest investor in the world.

Buffett Makes $224 Million From Weather Wager (The Guardian UK 12/30/08)

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