Last year, Berkshire Hathaway (NYSE:BRK-B) made a huge push into the booming Excess/Surplus insurance market. Not only did Warren Buffett's company steal away some key players from its competitors, but it gained some serious market share at the same time.

This year is looking like it may have started strong for the firm's newest division with a big contest drawing in millions of Americans to participate in its latest specialty policy.

Source: Quicken Loans.

Nobody's perfect
In January, Quicken Loans, the nation's second biggest mortgage lender, announced a $1 billion bracket challenge for the upcoming NCAA March Madness tournament, which Berkshire Hathaway would be backing. Essentially, Berkshire was insuring Quicken against the event that it would have to pay out the billion to a winner.

Alas, no perfect brackets remained after Day 2 of the tournament (thanks, Duke!), but 20 winners took home $100,000 for their nearly perfect brackets.

While the challenge was essentially a marketing ploy for Quicken Loans, the insurer was able get some positive coverage for its new excess/surplus division. Though most people think about Buffett and his investment team when Berkshire Hathaway comes up, the contest was a big reminder that the Omaha-based firm is a major competitor in the insurance industry.

What is excess/surplus?
The new division, Berkshire Hathaway Specialty Insurance, was developed in 2013 by Buffett and Ajit Jain to take advantage of a booming market that has only a handful of major players. Excess/surplus is a specialized segment of the insurance market that deals with incredibly niche customer needs to combat risk, some examples include:

  • High-hazard: earthquake insurance in California
  • Emerging markets: cyber-security insurance
  • Niche market: body part insurance (like a quarterback's arm)
  • Other ones out there: insurance for contests

While that is not a complete list, you can see how varied and specialized the risks are for excess/surplus customers. Because of the varied nature of the coverage, there tend to be fewer regulations and limitations for this type of insurance product versus the traditional offerings allowing insurers to set higher -- though risk-appropriate -- prices.

Excess/surplus insurance is fertile ground for potential profits, making it clear why Buffett wanted to be a bigger presence in the market so badly.

Going gangbusters
Though BHSI didn't start underwriting new policies until the year was half over, Berkshire Hathaway gained some serious ground in those last few months of 2013.

With a 38% increase in new business, BHSI helped Berkshire jump five spots on the list of top 30 excess/surplus insurers -- this was the biggest gain the survey from SNL Financial saw for the year. The jump in new business helped boost Buffett's brainchild to the 2.05% mark for total market share.

The two dark blue slices in the pie above are important: the smaller slice wedged in the group of little players is Berkshire Hathaway's 2.05% share. The huge blue slice, which represents 17.6% of the total market, belongs to American International Group (NYSE: AIG).

Monster in the market
The colossal hold on excess/surplus market share allows AIG to completely dominate the space. And when you're on top, you often become the target for various strategic tactics from the little guys.

Last year's push from Berkshire Hathaway to get BSHI rolling included the not-so-subtle poaching of four top executives from AIG. One of the defecting executives, Peter Eastwood, is now leading the new Berkshire division and was personally praised by Buffett in the company's most recent shareholder letter -- something he doesn't often do.

It makes sense that Buffett wanted the top talent he could get to run BHSI, so it should be no surprise that he turned his eyes toward AIG's top producers. And so far, it looks like Buffett's strategy has really paid off.

Besides the inclusion of some very experienced executive players, the fragmentation of the excess/surplus market is another big reasons BHSI why was able to gain so much ground in so little time. Only a handful of insurers hold 3% or more of the market, with Berkshire Hathaway right on their tail.

As you saw in the chart above, BHSI is in good company with the smaller E/S providers, but Buffett's prediction that the division will be bringing in billions in the coming year would certainly push it into the elite group of market dominators.

Definitely not understated
Though insurance may not be the most exciting thing in the world of finance, the creative way Berkshire Hathaway introduced its newest division to the nation made a big impression -- almost as big as the impression made by the segment's gains in the market in just six months.

With BHSI, Buffett and Berkshire Hathaway have given the insurance operations another big boost toward higher profitability. Though the business is still relatively young, investors should expect to hear more good things about BHSI in the years to come.

Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends American International Group and Berkshire Hathaway. The Motley Fool owns shares of American International Group and Berkshire Hathaway and has the following options: long January 2016 $30 calls on American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.