“Word on the street” is that Berkshire’s specialty lines unit, headed up by four executives who recently left American International Group, is gearing up to write a $5 billion book of business, a research analyst reported recently.

Sharing remarks from an excess-and-surplus lines conference call organized earlier this week for industry participants, William Wilt, president of Assured Research, a research and advisory firm focused exclusively on the property/casualty insurance industry, outlined the difficulties Berkshire will face moving to a premium volume figure that is heavy on marketplace conjecture at this point.

“Berkshire would have to target smaller accounts (which generate substantial premiums, in the aggregate) if it is to surpass the pace of growth set by its forerunner—Ironshore, which is nearing $2 billion of total premiums (including about $700 million of E&S premiums) after six years of hard work,” Wilt wrote in a research note on Monday. Wilt notes that while the $5 billion figure is speculated to be a near-term target, there is no actual specified timeframe for ramping up to this level.

In fact, Ironshore’s direct E&S premiums totaled $673.7 million for 2012, giving it a 9th place ranking on U.S. E&S leaders compiled by SNL Financial earlier this month.

In addition, Ironshore notes on its website that its gross premium growth overall “since inception…has quintupled to $1.7 billion.”

Ironshore was actually launched in 2007 with a focus on writing commercial property insurance in underserved markets, writing $330 million in premiums in 2007—$315 million of property business from Bermuda and $15 million of liability from New York. In late 2008, the company profile changed dramatically—taking on specialty casualty bent that now dominates the business mix—when Kevin Kelley, who was CEO of AIG’s Lexington Insurance, left AIG for Ironshore together with Lexington’s former President and Chief Operating Officer Shaun Kelly.

Kelley’s departure left Peter Eastwood to step into Lexington’s CEO spot.

Five years later, Eastwood is one of four AIG business leaders exiting the AIG stage to start up an E&S/ specialty insurance operation at Berkshire.

In addition to Eastwood, who was CEO of AIG Property Casualty in the Americas right before his move to Berkshire, the other three executives are: David Bresnahan, president of Lexington Insurance; David Fields, head of global casualty for AIG; and Sanjay Godhwani, president for Latin America and the Caribbean for AIG Property Casualty.

Whether history will repeat itself—or whether Berkshire can surpass Ironshore or AIG in the E&S specialty space is an open question.

Facts to consider:

• AIG sits high atop the E&S ranking in the top spot of SNL’s list with over $5.0 billion in just U.S E&S direct premiums, with Lexington contributing $4.2 billion

• Historical E&S rankings from SNL (compiled by Carrier Management’s editor in prior years) show that Ironshore, with only $43.7 million in direct E&S premiums in 2008, vaulted from a 55th place ranking to 20th place in 2009 (the first full year after Kelley joined) with $312.1 million in direct U.S. E&S premiums.

• Wilt reports that 25-30 senior executives are believed to have already joined the new Berkshire venture and that they do not have any non-compete or non-solicitation agreements in place from prior positions, citing the remarks of industry participants on the call.

In spite of the latter point, suggesting the potential ability to attract teams of underwriters and to generate premium volume quickly, Wilt notes two opposing forces. “Premium aspirations, such as those being floated will be difficult if Berkshire takes the market price, and [if] Berkshire stays in the large account E&S space,” he writes.

On the former point, he notes that “executives respect the discipline of the newly-hired executives, but all seem fearful of Berkshire’s lower cost of capital (real or perceived).”

Wilt also speculated in his report about the timing and rationale of Berkshire’s foray into E&S.

“We have come to believe that the declining secular demand for reinsurance likely played a role,” he writes.

“Casualty reinsurance demand has been under pressure for years, and with collateralized capacity flooding into the P/C reinsurance markets, the very nature of traditional reinsurance is being transformed,” he notes.