The global insurance market & Covid19 – an event of historic proportions

Juan Luis OrtegaExecutive Vice President, Chubb Group President, Chubb Overseas General

RIMS Australasia -

September 17th, 2020

Agenda

• Macro-economic and Insurance market

• Covid Claims and Business Interruption

• P&C industry trends US & Europe

• Chubb Financial Overview andKey Initiatives

• Q&A

2

The dark cloud

3

Selected Themes in P&C (Re)insurance

4Global Corporate Development

COVID Impact

6

0

20

40

60

80

100

120

D&P (Dowling)Apr 16

AutonomousApr 26

BarclaysApr 27

WTWMay 1

BofAMLMay 5

Lloyd'sMay 14

BerenbergJun 22

Source: Company disclosures, Dowling & Partners, Barclays Research, Autonoous Research, BofA Global Research, Berenberg Willis Towers Watson

40-80B

31-86B

30-80B 32-80B

30-97B

107B50-70B

Average 70B

COVID Market Loss Estimates

Company Total(in millions)

Company Total (in millions)

£2,500 – 3,500 $262

$2,o00 €248

€1,600 $247

€1,500 $200

$1,378 $195

€800 – 1,000 $185

$750 $170

$530 $152

$310 $49

COVID 1H 2020 Loss Estimates – (as of July, 28 2020)

7Total $17 - $18.3BSources – Company Reports, Dowling & Partners Analysis

Cat and COVID-19 Loss Impacts | Reinsurance Companies

Estimated loss impact on Equity and Net Premiums Earned

Source: SNL, Earnings Releases

7%

12%

6%

8%

4%

6%

8%

4%

2% 2%

3%

2%3%

2% 1% 1%2%

0.5%1%

1% 1% 1%0.4%

0%

2%

4%

6%

8%

10%

12%

14%

0%

2%

4%

6%

8%

10%

12%

2020 R

eport

ed E

vent

Losses /

YE

2019 N

PE

2020 R

eport

ed E

vent

Losses /

YE

2019 E

quity

2020 Reported Event Losses / YE2019 Equity 2020 Reported Event Losses / YE2019 NPE

2020 Total Reported Loss from Catastrophe and COVID-19

2020 Market Outlook

99.3

101.1

106.5

102.5

96.4 97.097.8

100.7

103.7

99.2 98.9

90

100

110

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

P/C Insurance Industry Combined Ratio*

*Excludes Mortgage & Financial Guaranty insurers before 2014.Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.1; 2012:=103.2; 2013: = 96.1; 2014: = 97.0.Sources: A.M. Best; ISO, a Verisk Analytics® business; I.I.I.

Joplin, Tuscaloosa Tornadoes

Sandy

3 Consecutive Years of U/W

Profits; 1st time since 1971-73

Hurricanes Harvey,

Irma, Maria

11

Key Sources of P/C Insurer Profits

Through third quarter.Data are before taxes and exclude extraordinary items.Source: NAIC data, sourced from S&P Global Market Intelligence.

$27.0$41.7 $42.5 $41.4

$48.7 $44.7 $45.0 $40.5$50.2 $51.5 $50.7

-$2.4 -$5.2-$33.7

-$6.1

$11.5$5.3 $8.4

-$0.4

-$19.8

$5.6 $6.4

-$50

-$30

-$10

$10

$30

$50

$70

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Net investment gains Underwriting gains/losses$ Billions

Strong capital gains, underwriting results lifted profits

12

10 Year Treasury Rates – July 2010 – July 2020

13

Combined Ratio Improvement Needed to Offset Decline in New Money Rates

14

Accident Year Combined Ratio

New Money

90% 92% 94% 96% 98% 100% 102% 104% 106%

1.0% 13.6% 11.8% 9.9% 8.1% 6.2% 4.4% 2.5% 0.7% -1.2%

1.5% 14.7% 12.9% 11.1% 9.2% 7.4% 5.6% 3.8% 1.9% 0.1%

2.0% 15.8% 14.0% 12.2% 10.4% 8.6% 6.8% 5.0% 3.2% 1.3%

2.5% 16.8% 15.1% 13.3% 11.5% 9.7% 7.9% 6.1% 4.4% 2.6%

3.0% 17.9% 16.1% 14.4% 12.6% 10.8% 9.1% 7.3% 5.6% 3.8%

3.5% 18.9% 17.2% 15.4% 13.7% 11.9% 10.2% 8.5% 6.7% 5.0%

4.0% 19.9% 18.2% 16.5% 14.8% 13.1% 11.3% 9.6% 7.9% 6.2%

4.5% 20.9% 19.2% 17.5% 15.8% 14.1% 12.4% 10.7% 9.0% 7.3%

5.0% 21.9% 20.3% 18.6% 16.9% 15.2% 13.5% 11.9% 10.2% 8.5%

Assumptions: Exp. 30%; Reserve duration 2.5yrs; P:S 120%; Surplus yield = new money +250bps.Source: D&P Analysis

-2.9

%

-0.1

%

0.9

%

2.7

%

4.4

%

4.3

%

3.9

% 5.0

%

5.2

%

4.3

%

3.4

%

2.1

%

1.5

%

-0.5

%

0.1

%

-0.7

%

-2.3

%

-3.3

%

-3.1

%

-2.8

%

-3.7

%

-3.9

%

-3.2

%

-3.3

%

-2.5

%

-2.8

% -1.3

%

0.3

% 1.7

%

1.5

%

1.6

% 2.4

% 3.5

%

5.2

% 6.2

% 7.5

% 9.3

%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1Q11

2Q

11

3Q

11

4Q

11

1Q12

2Q

12

3Q

12

4Q

12

1Q13

2Q

13

3Q

13

4Q

13

1Q14

2Q

14

3Q

14

4Q

14

1Q15

2Q

15

3Q

15

4Q

15

1Q16

2Q

16

3Q

16

4Q

16

1Q17

2Q

17

3Q

17

4Q

17

1Q18

2Q

18

3Q

18

4Q

18

1Q19

2Q

19

3Q

19

4Q

19

1Q2

0

Average Commercial Rate Change by Quarter All Lines Q1 2011 – 1Q2020

Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.Source: Council of Insurance Agents & Brokers; Center for Risk and Uncertainty Management, Univ. of South Carolina.

3 Years 2 Years

Loss cost trend = 4.5%

3 Years

15

Historical Results & Rate ChangeGeneral Liability

Combined Ratio Rate Change

16

90%

95%

100%

105%

110%

115%

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

F

20

21F

20

22

F-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Prepared by Conning, Inc. Historical data source: ©2018 A.M. Best Company – used by permission. Forecast ©2019 Conning, Inc.

15% additional rate increase neededin 2020 to achieve a 95% C/R

Loss cost trend = 4.5%

Historical Results & Rate ChangeCommercial Property

Combined Ratio Rate Change

80.00%

90.00%

100.00%

110.00%

120.00%

130.00%

140.00%

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

F

20

21F

20

22

F-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Prepared by Conning, Inc. Historical data source: ©2018 A.M. Best Company – used by permission. Forecast ©2019 Conning, Inc.

Loss cost trend = 4.5%

17

174

242209 216

180224

192228

182

120 138 123 107 113 110 129 147 152 172 186214 218

246

112

4043

30

85

198 185158

62

0

50

100

150

200

250

300

350

400

450

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

All Other Filings Credit Crisis Filings M&A Filings Chinese Reverse Merger Filings

U.S. Securities Class Action Filings Since 1997

Source: Cornerstone Research, D&O Diary, D&P Analysis

Proliferation of SCAs at a time of strong performing equity markets andwhen there are fewer public companies (over 5600 in 2004 vs. 4400 today)

Likelihood of being sued= 9.1% vs. historical average of 2.9%

1997-2016 Average

403412

271

207

168165151

187175165

223

177

120

182

228

192

224

180

216209

242

174

404

174

18

D&O Pricing For US Public CompaniesContinues To Increase

19

23.3%18.8% 19.7% 19.7%

46.4%

30.4%

37.9%

31.9%

42.3%

73.0%

55.0%57.4%

14.6%11.9% 12.2%

9.1%

23.2%

13.8%

25.3%

17.5%20.6%

48.9%

30.9%

36.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20

Primary Layers Total Programs

Source: Marsh

20

EUROPEAN MARKET

• Pricing increases with growing momentum since the beginning of the year.

• The impact of COVID-19 is not an underlying cause. The market was already shifting before the pandemic, although it is likely to

contribute to further rate hardening and a lengthier cycle as capacity reduces even further.

• The rate acceleration is happening in both UK and across the Continent but to a lesser extend. Overall insurance pricing in the

second quarter of 2020 in the UK increased 31% (21% in Q1) compared to 15% (8% in Q1) on the Continent.

UK

• Market is hardening in major account property (+16% Q2) and energy. The sectors of waste, food, and mining are particularly

distressed. Clients in any sector with poor claims and/or risk management issues are also subject to important rate increases .

Access to capacity in the market is a challenge, resulting also in more split placements and more restrictive terms.

• Casualty pricing is increasing but to a lesser extend (+5% in Q2).

• We are seeing important rate increases for Commercial D&O (+64% in FL) where the combination of US security class action

lawsuits, group litigation orders, regulatory investigations and litigation funding have driven up loss severity and where results

have deteriorated significantly in the industry. COVID-19 and increased insolvency exposures drives expectations of increased

claims.

• MARKET SIZE

104.5

299.1

P&C GWP 2018 €Billion

UK CE

70.6

62.1

30.325.9

15.2

95

P&C GWP 2018 €Billion

Germany

France

Italy

Spain

Switzerland

Others

21

EUROPE – MARKET CONDITIONS

• CONTINENT

• Property market is also hardening. driven by complex property placements and CAT-exposed programs. Pressure

on rate, retentions, and capacity drove an increase in the use of traditional wholesale markets in London as well as

demand for alternative structures.

• We also experienced increase rates in financial lines (+22% in Q2) albeit less profound than in the UK (+64%).

Pricing increases accelerated particularly for major D&O programs in distressed sectors or with US exposure.

• LONDON WHOLESALE MARKET

• Following years of underperformance by market participants, Lloyd’s has had to make some difficult adjustments to

address the deterioration in underlying performance exposed by the major losses in 2017 and 2018. Lloyd’s it

continues to execute its decile 10 approach (remediation plan to bring back profitability). As a result we see

continued dislocation in the market with a number of withdrawals of capacity from lines such as property , cargo ,

marine hull and aviation.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

CommercialProperty…

European Cat** Global Reinsurance** US Cat XL** RetroOccurrence***

RetroAggregate***

Cum

ula

tive R

ate

Chang r

ela

tive t

o 2

017

Pricin

g

(2018 -

Q2-2

020)

U-shaped recovery – how will the landscape look in 2021? Rate change by product line relative to 2017 pricing (2018 – 2020)

“We see ROE as a key driver of pricing over the long term and that a "capital event" isn't required to boost pricing” – Morgan Stanley, July 20

Property Rate Change SummaryCumulative rate since 2018 has varied through the insurance chain

*Marsh Insurance Global ROL Index: Global Property Insurance Renewal Rate

** Guy Carpenter 2020 Regional Reinsurance Property Cat ROL index

*** Guy Carpenter Retro Cat ROL index

2020 Chubb Overview

Chubb Limited 2Q

2020 Results

2Q 2020 Change vs 2019

$10.0BGROSS WRITTEN

PREMIUM- 3.0%

$8.4BNET WRITTEN

PREMIUM0.1%

($331M) NET INCOME NM

85.2%LOSS & LOSS

EXPENSE RATIO23.5 pts

27.1% EXPENSE RATIO (1.3 pts)

112.3% COMBINED RATIO 22.2 pts

24

Exceptional Balance

Sheet Strength2Q 2020

Chubb’s total capital position is $70 billion

Net loss reserves, which back our policyholdercommitments, of $65.7 billion6/30/20

Balance Sheet Highlights

Total Assets $181.5 B

Total Investments 110.9 B

Net Loss Reserves 65.7 B

Total Debt 15.3 B

Shareholders’ Equity 54.8 B

Total Capital 70.0 B

Ratings: AA from Standard & Poor’s and A++ from A.M. Best

25

CHUBB Key Initiatives and 2H Priorities

COVID Response Highlights

― Operating seamlessly from home

― $10M Pandemic Relief Fund

― Supporting Client Exposure Adjustments

― Supporting Client Pandemic Response

― No Layoff Pledge during health crisis

― Diversity & inclusion effort revamped

― Leadership for private/public partnership

2H Priorities & Investments

― Get back to office, back to meetings

― Digital Investments - Marketplace, @chubb, chubb.com, Worldview, Chubb Studio

―Maintain and Strengthen the Chubb Culture

― Chubb Associate Program

― Diversity and Inclusion Commitment execution

26

Small Businesses (<500 employees) Medium and Large Businesses (> 500 employees)

Purchase Strong opt out; ~90% take up expected Open market (~30% take up expected)

PremiumRisk appropriate premium for insurers’ share; no governmentpremium

Risk appropriate premium for insurers’ and government’s share

Claim AdjustmentSimple parametric structure provides for an accelerated claims payment process

Indemnity–based program with traditional claims handling

Policy LimitThree months payroll (plus operating costs for certainclasses)

Up to three months of expense, with a maximum of $50 million

Program Limit $750 billion limit $400 billion limit

Government Share $735 billion limit $385 billion limit

Industry Share Year 1 $15 billion limit $15 billion limit

Carrier Share

Carrier pays 6% of first–dollar claims up to carrier’s market share of industry limit, growing to 12% by year 20. Government pays remaining share of first–dollar claims

Carrier pays 5% of first–dollar claims until industry limit is reached, growing to 10% by year 10. Government pays remaining share of first–dollar claims

Chubb Pandemic Business Interruption Framework

• Affordable for small businesses with strong incentives to purchase while maintaining choice

• Provides effective incentives for broad participation by the insurance industry

• Fiscally responsible

• Addresses different needs of small, medium–sized and large businesses

• Envisions a meaningful role for the industry to share pandemic risk with the government

27

Chubb. Insured.