Warren E. Buffett, the chairman of Berkshire Hathaway,Inc., had a lot of interesting news to share in his annual letterto shareholders, released on Saturday.

Related: Buffett elevates Abel or Jain as likely successorwith new roles

For one thing, he reported that the tax code changes enacted inDecember benefited the company by $29 billion. Compare that to the$36 billion gain in the company's net worth during 2017 fromoperations.

Insurance section of letter

The insurance section of Buffett's letter also was noteworthy.He highlighted the benefit of “float,” which he described asfollows:

(1) Premiums generally are paid upfront whereas losses occurover the life of the policy, usually a six-month or one-yearperiod;

(2) Though some losses, such as car repairs, are quickly paid,others — such as the harm caused by exposure toasbestos — may take many years to surface and even longer toevaluate and settle; and

(3) Loss payments sometimes are spread over decades in cases,say, of a person employed by a workers' compensation policyholderbeing permanently injured and thereafter requiring expensivelifetime care.

Related: Buffett's insurers slump, dragging down Berkshire'searnings

Long-tail claims

Moreover, Buffett explained, “long-tail” claims generate a lotof float, and “Berkshire has been a leader in long-tail businessfor many years. In particular, we have specialized injumbo reinsurance policies that leave usassuming long-tail losses already incurred by other p/cinsurers.”

The float — again, the money belonging to others but heldby Berkshire's insurers — is invested by Berkshire, whichretains the gain.

How significant is that? Buffett wrote that, “[a]s a result ofour emphasizing that sort of business, Berkshire's growth in floathas been extraordinary. We are now the country's second largest p/ccompany measured by premium volume and its leader, by far, infloat.”

2017 hurricanes

On a different insurance topic, Buffett suggested that the threeSeptember hurricanes that hit Texas, Florida, and Puerto Ricogenerated insured losses of $100 billion or so, but he concededthat that figure “could be far off themark.”

His current estimate for Berkshire's losses from the threehurricanes was $3 billion (or about $2 billion after tax, reducingBerkshire's net worth by less than 1%).

Related: Natural disasters hit Buffett's insurance-focusedconglomerate hard in Q3

He added that he believed that Berkshire likely could expect 3%of insured losses for future American mega-catastrophes.

Significantly, Buffett pointed out that if Hurricane Irma hadfollowed a path through Florida only a bit to the east, “insuredlosses might well have been an additional $100 billion.”

Learn more: Warren Buffett Letter to Shareholders.

Victoria Prussen Spears, Esq., ([email protected]) is associate directorof FC&S Legal, editor of the Insurance Coverage LawReport, and senior vice president at Meyerowitz CommunicationsInc.