Chubb Urges U.S. and Insurers to Team Up for Future Pandemic Costs

Chubb Ltd. proposed that insurers and the U.S. government work together to cover future business-interruption losses from pandemics, as the industry faces a flurry of lawsuits over costs related to coronavirus-related shutdowns.

Chubb, the large global insurer led by Evan Greenberg, announced Wednesday a plan for a “public-private partnership” that works differently for small businesses than for the larger companies that Chubb argues often have better financial resources. While the federal government would assume “a substantial percentage of the risk,” Chubb’s pitch outlines how insurers would bear some costs as well.

The plan joins a list of other proposals by lawmakers and insurance-industry groups about how to handle losses caused by a pandemic. Policyholders have argued that existing business-interruption coverage should pay for their Covid-19 losses, a claim many insurers are fighting. Economic damage related to the pandemic is too extensive for insurers to shoulder without government assistance, Zurich-based Chubb said.

“It’s a peril that could be covered to a greater degree than we do today,” Greenberg, Chubb’s chief executive officer, said in a phone interview. “It’s our job to figure that out or we belittle ourselves and we’re less relevant than we should be.”

Industry groups including the American Property Casualty Insurance Association have already pushed for a solution backed by the federal government, saying costs from pandemics are not insurable and wouldn’t fit in a program similar to what the government and industry used for terrorism coverage after Sept. 11, 2001. Greenberg said the industry shouldn’t shy away from taking on some of the risk as long as it’s clearly defined and the government helps.

“The industry has a role to play in that, along with the government,” he said. “We’re in the business of taking risk.”

John Doyle, who leads Marsh & McLennan Cos.’ large insurance-brokerage unit, said his company has been talking with Chubb throughout the development of this plan and considers it a “significant step forward” in creating a public-private solution. Farmers Insurance CEO Jeff Dailey said that many insurers could help administer a program such as the one Chubb is proposing, though the government needs to be the primary backer.

Chubb’s plan for businesses with less than 500 employees would provide assistance quickly, to help cover “their immediate cash needs,” Greenberg said. A separate program for larger businesses would rely on a government reinsurance entity, and businesses would pay an “appropriate” price for the risk to both the government and insurers.