Chubb Chairman and CEO Evan Greenberg insists his global P/C insurer has strong fundamentals, but warned at the same time that the ongoing pandemic crisis will spur unpredictable revenue challenges affecting many lines of coverage.
Broadly speaking, the insurer will likely take hits on the liability side and earnings via at least a temporary reduction in premium revenues, Greenberg explained during an April 22 investor call held to discuss Chubb’s Q1 2020 earnings.
“Our growth momentum, particularly in our commercial [property/casualty] business globally, continued into April, and we continue to experience improved rate to exposure,” Greenberg said. “As we go forward, offsetting that, will be a meaningful impact to growth from the health and economic crisis as exposures in important areas shrink for a time, with the impact varying by country.”
Reduced Exposures
Consumer-related lines including travel insurance, A&H “discretionary purchases” and automobile insurance will all take hits, as customers ride out stay-at-home orders or quarantines. Commercial lines are also vulnerable, he said, “where exposures are reduced while businesses are closed, or as they reopen and are diminished, or simply go out of business.”
He expects trade credit, surety and workers compensation to also be affected by reduced exposures.
“It will be pretty broadly based,” Greenberg said, noting the pandemic “has created exposures for clients and industries broadly.”
Beyond that, Greenberg emphasized that the company does not give specific forward guidance, and that it is hard to specify how much of a revenue impact it will face in the months ahead.
“In this case the degree of revenue impact is simply unknowable,” Greenberg said, though he added that Chubb’s fundamental condition is otherwise solid and thriving.
“We are and will continue to benefit in terms of growth from improved technical conditions, as many insurance companies take actions to reduce exposures or improve their rate to exposure to correct for inadequate underwriting,” Greenberg noted.
In trying to draw a parallel to past events, Greenberg said that for now, the COVID-19 crisis seems manageable even with its uncertainties.
“From what we know now, this will be a manageable, cat-like event,” Greenberg said. “However, from an exposure we really don’t discretely price for … its impact is additive to our normal projected loss exposure. In a sense, it is like terrorism exposure was before 9/11.”
Business Interruption
Greenberg emphasized multiple times that the insurer’s capital position is “strong,” and insisted “Chubb will continue to operate at a high level.”
He noted, for example, that the insurer is working to keep its 33,000 employees around the world safe by way of “aggressive work-from-home protocols” and reiterated that they have secure jobs with no-layoffs during the crisis. He also said the company is maintaining standards about how it supports customers and distribution partners, and also extending payment terms and taking other measures to support clients and others facing pandemic stresses.
“We are operating around the globe as a normal company during abnormal times,” Greenberg said.
Greenberg strongly opposed the pressure from states and trial attorneys to force carriers to retroactively cover business interruption claims for COVID-19 losses. He spoke on the topic recently.
“That is retroactively changing contract and increasing our exposures,” Greenberg said. “That is unnecessary harm and would do great damage.”
He had harsh words for trial attorneys seeking to force the change through the court system.
“Lawyers and the trial bar would come to torture the language on our standard industry forms and try to prove something exists that actually doesn’t exist, and try to twist the intent when the intent is very clear,” Greenberg said. “The industry will fight this tooth and nail. We will pay what we owe.”
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