Quiet And About to Boom

A Cautious Insurance Company Gains Momentum

Covering Everything From Malpractice to Terrorist Attacks

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It took the mercury about 10 years to turn Hermann Biow’s liver into Swiss cheese.

Before that, though, Germany’s top daguerreotype artist did pretty well for himself.

Celebrated across Berlin, Hamburg, and Dresden for his pleasing portraits of politicians, scientists, and society ladies, Biow spent the 1840s perfecting the new medium of daguerreotype. He carefully dipped silver-coated copper plates in a mercury bath to reveal images that – shortly after the invention of photography – seemed miraculous to many viewers. 

It was in 1842 – before the toxic fumes from the mercury-heavy daguerreotype process eroded his health – that Biow left his mark on history, with three haunting, silver-toned images that would change the world of journalism forever by making photography part of the equation.

No one realized it at the time, but the prints also captured a moment in time that marked the birth of a brand-new global industry. 

More about that in a moment….

Biow’s three iconic daguerreotypes are eerie, almost post-apocalyptic. Seen through a thin patina of age and smoke, they depict leafless trees, ancient-Rome-like ruins, and the spire of a burnt-out cathedral. They’re on display today in the Hamburg Historical Museum.

The three photos record the immediate aftermath of the devastating “Great Fire of Hamburg” – a conflagration that started on May 5, 1842, in a cigar factory. Over the next three days, the fire burned down about 1,700 wood-timbered, thatch-roofed buildings, killing 51 people and leaving 20,000 (a third of Hamburg’s population) homeless.

Still perfecting his photography techniques early in his career, Biow set up his equipment outside the smoldering ruins of Hamburg largely as an experiment. At the time, daguerreotypes needed extended exposure times of up to 30 minutes – which made it challenging (and sometimes blurry) to film humans, but easy to document the stillness of a deserted, burned-down city.

He didn’t know just how groundbreaking those shots would prove to be… or what he’d truly captured on copperplate…

Biow’s pictures of the burnt-out shell of Hamburg are the first known instance of photojournalism – a real-time news event recorded on film, on location. Today, of course, every news article comes with a picture… but Biow’s Hamburg images are the first on record. They were soon shared far and wide, published and re-published in local papers… and changed how we report and consume the news.

Biow’s fashionable daguerreotype career took off thanks to the Hamburg photos. But success came at a price. Over the next few years, toxic mercury fumes leached into his bloodstream and slowly perforated his organs. In 1850, shortly after opening a ritzy new studio in Dresden, Hermann Biow succumbed to “mad hatter disease,” named for the mercury poisoning then common among hatters who worked with mercury-dipped felt.

Biow died at just 46 – without knowing that his famous images also documented the moment the $642 billion global reinsurance industry came into being.

Burned Hamburgers

Reinsurance is insurance for insurance companies. Just like your therapist likely has a therapist, and your doctor also sees someone for an annual checkup, insurance companies – which cover everything from fender benders to terrorist attacks – have insurance companies to help share some of that risk. 

It’s an eminently sensible idea… but one that didn’t catch on until after Hamburg got grilled.  

Hamburg had insurance, of a sort. Acknowledging the dangers of living in a wooden city, businesses around town contributed to a fire insurance pot whose name translated to the “Hamburger-Fire-Fund.” There were also various specialized insurance companies, notably ones that insured furniture, like Biebersche Compagnie and the Hamburgische Assekuranz Compagnie. Some of these even dabbled in a limited form of reinsurance, outsourcing a few policies to French or English insurance firms. But fears of competition and trade-secret theft kept those relationships to a minimum.

Now though, with buildings across town burned to the ground, all insurance proved equally useless. The Hamburger-Fire-Fund was maxed out, many of the smaller insurance companies went bankrupt, and the rest, as insurance historian Edwin Kopf writes, were “seriously embarrassed.” (The town was eventually rebuilt, in brick this time, but it took 40 years and $42 million, in today’s dollars, in debt).

The Hamburg ruins – frozen in time by Hermann Biow’s camera – also captured the attention of an entrepreneur and politician named Gustav von Mevissen, from the nearby town of Dulken. Watching the smoke rise, he realized that Hamburg’s “embarrassed” insurance companies would have fared far better if they’d been, well, insured.

So, after some false starts and bureaucratic setbacks, von Mevissen in 1846 launched the first designated reinsurance company in history, Kölnische Rückversicherungs-Gesellschaft (known in English-speaking countries as Cologne Re). It’s still around nearly 200 years later as part of Berkshire Hathaway’s (BRK) insurance holding General Re (which should tell you something about the longevity and value of this particular type of insurance). 

Today, reinsurance companies can be found wherever there is insurance – including, as you may have guessed, in this issue.

This company started out as a tiny insurer focused on providing coverage against accidents on drilling rigs and oil refineries in the Middle East, and has since expanded its footprint into more than 200 countries and 25 separate business lines, with reinsurance now making up less than 10% of its business. It’s run by a pair of founders who together own more than 30% of the company. As a result, they run the business conservatively, which has translated into some of the best underwriting results in the industry. And we believe this stock could easily become the best performer in the Property & Casualty Insurance section of The Big Secret portfolio. 

Why? Because unlike the well-known, widely followed insurance stocks currently in the portfolio, this is an undiscovered opportunity. It’s valued at less than $1 billion, and it has almost no coverage among Wall Street analysts, despite being one of the most profitable underwriters in the industry. As a result, this hidden gem trades for just over 7x earnings, compared with 20x to 30x or more for the more well-followed insurance companies with similar levels of profitability.  

The business is priced like a no-growth value stock, even though it has consistently grown its policy premiums, book value, and earnings per share (“EPS”) at double-digit rates for the last decade. The market is starting to take note, sending the shares up 60% year-to-date. We don’t expect this one to remain under the radar for long. 

The Best Insurance Company You’ve Never Heard Of