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Chubb reports Q2 cat losses of $1.8bn; COVID-19 hit of $1.37bn

7th July 2020 - Author: Luke Gallin

Global insurer and reinsurer Chubb has announced that the impacts of the COVID-19 pandemic, combined with severe weather-related events and civil unrest in the U.S., has resulted in global net catastrophe losses of $1.807 billion (pre-tax) for the second-quarter of 2020.

ChubbChubb reveals that its Q2 catastrophe loss estimates include COVID-19 losses of $1.365 billion (pre-tax), other natural catastrophe losses of $312 million (pre-tax), primarily from severe weather-related events in the U.S., and also civil unrest related losses in the U.S. of $130 million (pre-tax).

According to Chubb, the $1.365 billion COVID-19 estimate is the firm’s best estimate of ultimate insurance losses resulting directly from the pandemic and consequent economic crises.

Looking at the COVID-19 hit specifically, and Chubb states that the pre-tax loss estimate is comprised of short-tail losses of $605 million generated mostly from entertainment and commercial property-related business interruption, and A&H solutions including travel insurance products; $553 million related to liability insurance products; and $107 million related to insurance credit exposures.

“Substantially all of the losses for liability and credit-related insurance products are classified as incurred but not reported (IBNR) reserves. The loss estimate also includes a $100 million IBNR provision to account for the additional uncertainty in the estimates around the company’s property, casualty and credit-related exposures, given this unprecedented event,” explains Chubb.

The re/insurer adds that the COVID-19 loss estimate does not include a credit for potentially lower current accident year losses from a decrease in exposures, except for a modest benefit from certain casualty claims-made classes. Chubb states that 71% of its COVID-19 estimate relates to its North America Commercial P&C Insurance segment, and 28% to the Overseas General Insurance unit.

Chubb’s Q2 catastrophe loss estimates are net of reinsurance, include reinstatement premiums and comprise losses generated from its commercial and personal property and casualty, A&H and life insurance businesses, as well its global reinsurance operations.

As well as the catastrophe hit, Chubb has also revealed that it will reduce its net written premiums in Q2 2020 by roughly $184 million to reflect its estimate of the exposure adjustments on its in-force policies that have and will result from the impact of economic contraction.

Additionally, Chubb says that as part of its Q2 review of legacy exposures for molestation, it expects to recognise unfavourable prior year period development for U.S. child molestation including reviver statute-related claims of $259 million (pre-tax).

In the first-quarter of 2020, the financial impact of the COVID-19 pandemic on Chubb was limited. However, the re/insurer stressed at the time that it expects the event to have a meaningful impact on its revenue and operating income in Q2 and potentially beyond.

More recently, Chubb’s CEO has said that he expects the coronavirus to inflict upwards of $100 billion in losses for the global insurance and reinsurance industry.

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