Since the terror attacks, Berkshire shares have risen 2.35 percent, versus 2.47 percent for the insurance index and 2.78 percent for the S&P 500.
Insurers will think twice about buying reinsurance from companies that had to seek help from the capital markets after the recent terrorist attacks, Russ said. They'll be concerned that those companies aren't as strong as they thought they were before Sept. 11.
"Times could not be better for Berkshire," said James Armstrong, portfolio manager at Henry H. Armstrong Associates, which owns 642 Berkshire shares.
While new entrants are coming into the market, such as insurers started by American International Group, Chubb Corp, White Mountains Insurance Group, Marsh & McLennan Cos and Aon Corp. they won't be as attractive to reinsurance buyers as companies such as General Re, with longer track records and triple "A" credit ratings.
"The visibility and desirability they offer -- an ironclad ability to pay claims -- is critical today," Armstrong said.
FIFA, world soccer's ruling body, recently turned to Berkshire's National Indemnity Co to insure next year's World Cup soccer tournament against cancellation after Paris-based Axa SA demanded more money to insure the event. Terms of National Indemnity's policy weren't available though insurers have said they may triple the price of insuring sports events. Axa charged FIFA 27.4 million Swiss francs (US$16.7 million) to provide SF1.4 billion of coverage.
Reinsurance also is not as much of a commodity as people thought it was a few years ago when Berkshire bought General Re, and Buffett understood that, he said. "It has value in conditions of disaster," Armstrong said. That said, Buffett in his letter Friday said "the only viable reinsurer for truly large-scale terrorism is the US government."
Even with insurance and reinsurance prices rising by double-digit amounts, analysts and investors say it will be years before Berkshire is able to recoup all of its losses from General Re and the trade center.
If General Re wrote US$20 billion of premiums next year, Russ said, and was able to keep US$0.04 cents of every dollar after paying off claims -- what the investor considers an "optimal" outcome -- the most the company could generate in underwriting profits is about US$800 million.
To be sure, some analysts and investors are concerned that too much capital is moving into the insurance business to fill the void left by the recent terrorist attacks. That could bring a halt to the price increases by creating too much competition.
More than US$20 billion of new capital has flowed into insurance since Sept. 11, according to an estimate from analyst Alice Schroeder of Morgan Stanley Dean Witter & Co.
Buffett, in his letter to shareholders, said that because of the flood of capital, "any period of strong pricing will certainly end within a year. After that, Berkshire will do well only if we are more disciplined than others, and that we certainly intend to be." As Berkshire's earned premiums grow, so too does its cash flow for making acquisitions, such as its recent purchase of underwear maker Fruit of the Loom for US$835 million.
Berkshire's cash flow from premiums taken in and held for future losses, known as float, stood at US$27.87 billion at year-end last year.
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