7 July 2020News

Chubb makes an estimated $1.8bn pre tax global cat loss

Chubb has estimated its global net catastrophe loss for Q2 2020 as $1.8 billion million before tax.

The estimate includes COVID-19 global pandemic losses of $1.36 billion, and other natural catastrophe losses of $312 million, both before tax.

Chubb said its losses were primarily attributable to severe weather-related events in the US and to civil unrest-related losses in the US of $130 million before tax.

The COVID-19 pre-tax loss estimate comprises short-tail losses of $605 million generated primarily from entertainment and commercial property-related business interruption and accident and health (A&H) products, including travel insurance products. A further $553 million loss related to liability insurance products, including professional liability such as directors and officers, employment practices and professional liability, as well as workers' compensation and other liability-related products.

An estimated $107 million of the COVID-19 loss related to insurance credit exposures including surety, political risk and trade credit. 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.

The COVID-19 estimate does not include a credit for potentially lower current accident year losses from a decrease in exposures, Chubb said, except for a modest benefit for certain casualty claims-made classes. It estimated that 71 percent of the COVID-19 estimate relates to its North America commercial P&C insurance segment, while 28 percent relates to the overseas general insurance segment.

These catastrophe loss estimates are net of reinsurance, and include reinstatement premiums. They comprise losses generated from the company's commercial and personal property and casualty, A&H and life insurance businesses, as well as its reinsurance operations globally.

In addition to the COVID-19 loss estimate, the company will reduce its net written premiums in Q2 by approximately $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.

Separately, as part of its Q2 review of legacy exposures for molestation, Chubb expects to recognise unfavorable prior period development for US child molestation, including reviver statute-related claims of $259 million pre-tax.

The reserve development represents the best estimate of ultimate loss based on current information, Chubb said.