Chubb CEO Evan Greenberg has said that the coronavirus (COVID-19) pandemic is likely to become the “largest event in insurance history” once all the costs are added up.
Speaking as part of an earnings call alongside the release of Chubb’s Q1 results, Greenberg assured investors that the pandemic would be an earnings event for the company, but would not threaten its balance sheet.
Operating earnings will be impacted predominantly on the liability side of the balance sheet from increased insurance claims, though the asset side will likely be impacted as well from increased asset impairments, he explained.
Greenberg explained that Chubb’s exposure would come from “a variety of areas,” including travel insurance, accident and health, and business interruption where the company “purposely provided coverage.”
Surety, trade credit and political risk are also expected to see COVID-19 related losses, Greenberg added, as well as workers’ compensation lines.
“I think it’ll be pretty broad based,” he said, “because it’s created exposures for clients, for the industries and the economies broadly. And geographically, well over half our business is in the United States. So, I expect all things being equal, since our greatest exposure is in the U.S. by territory, the greatest amount of loss will come out of the U.S.”
Greenberg also highlighted the underwriting challenges that will emerge when it comes to pricing pandemic risk in future, particularly for those companies that had not properly factored the threat into their modelling.
“This is a peril that the industry really didn’t discreetly charge for,” the Chubb CEO noted. “It’s a peril that has no bounds in terms of geography nor time. So, it’s a very different kind of cat, and that has in a practical sense, infinite tail.”
He continued: “I think that the industry has woken up to rate exposure in the last year in particular and understands generally the need to get paid properly for the exposures it takes on. I don’t see that trend changing.”
“This event will be the largest event in insurance history when you add it all up, both asset side and liability side of the balance sheet. And I think that just raises the spectre of risk and the notion of managing exposure. And I think, it will just put a point on getting the right rate to exposure. I think that absolutely continues.”