Moody's changes Chubb outlook on reported losses and COVID-19 uncertainty

Moody's Investors Service has changed the rating outlook for property/casualty insurer Chubb to stable from positive based on its reported losses and uncertainty around the COVID-19 pandemic and the associated economic impact.

Chubb, a top five global property/casualty insurers with deep penetration in the US as well as a global presence across Europe, Asia-Pacific and Latin America, saw a net loss of $79 million in the first half of 2020. This, compared with a net profit of $2.2 billion in the prior-year period.

The carrier reported a $1.4 billion charge in the second quarter for COVID-19-related claims.

"The coronavirus pandemic continues to constrain economic growth and could lead to additional property-casualty claims and investment volatility for Chubb and the industry," said the ratings agency.

Moody's stated that the affirmation of 'Aa3' insurance financial strength ratings of Chubb's principal US and Bermuda-based operating subsidiaries reflects the group's global leadership, its diversified international spread of risk, steady core profitability, and good internal liquidity and financial flexibility.

However, noted that these strengths are "tempered by the group's lower profitability and earnings coverage in recent years, its somewhat elevated financial leverage relative to tangible capital, and its exposure to catastrophe losses in property lines and rising litigation costs in casualty lines".

Moody's believes that due to Chubb's emphasis on commercial casualty lines for which ultimate losses are difficult to predict, its reserves are subject to volatility from rising litigation and related claim costs. While it also faces underwriting volatility from natural and man-made catastrophes through its personal and commercial property lines.