Chubb’s Greenberg: Market to stay 'reasonably disciplined' amid elevated loss-cost inflation

By Michael Loney

March 13 - (The Insurer) - Evan Greenberg believes the insurance market will stay disciplined despite increasing competition, while the Chubb chairman and CEO has also suggested changing accounting rules to encourage the building of long-term reserves for more severe catastrophe events.

In his annual letter to shareholders, Greenberg said that underwriting conditions are growing more competitive in a number of product areas and geographies, “though pricing remains adequate”.

Greenberg highlighted that competition in the U.S. and other major markets is increasing for property insurance for large companies, including in the excess and surplus lines market.

He said commercial casualty pricing is stable or firming depending on the class, “and overall pricing is keeping pace with loss costs”.

In contrast, Greenberg said competition in financial lines is reaching for market share at the expense of current accident year underwriting margin.

“Looking forward, I expect the market to remain reasonably disciplined as it grows more competitive, given unrelenting reminders brought by elevated loss-cost inflation in both property and casualty.

“Broadly speaking, we are in a prolonged period of loss-cost volatility and inflation. Frequency of catastrophe events and increased concentration of values impact the severity of events. Inflated litigation costs, particularly in the U.S., aren’t going away,” he said.

MAKING ‘REAL DIFFERENCE’ ON TORT REFORM TO TAKE YEARS

American businesses are beginning to react collectively to the problem of excessive litigation, Greenberg suggested. He said the problem has been exacerbated by social attitudes, the trial bar and funding by third parties.

“Excessive litigation is an unproductive tax on business and on society – it’s a threat to our economic well-being,” he said.

Greenberg said the cost of liability insurance is rising at an elevated rate at least as high as legal costs annually.

“Insurers, major corporations and businesses are beginning to pool their resources to fight for tort reform at both the state and federal level. It will take years to make a real difference. In the meantime, there are battles we can win. My company is putting dollars and talent to work on this important endeavor,” he said.

Discussing the catastrophe market, Greenberg said the insurance industry incurred $140 billion in losses last year in a “normal” year. He added that in just over 90 days in late 2024 and early 2025, the industry incurred about $90 billion to $100 billion in insured losses from two hurricanes and California wildfires.

“And as the cost of catastrophes increases for the industry and society, it is naturally impacting the price and availability of insurance,” he said.

Greenberg said the public needs greater certainty of insurance availability and stressed the private sector can not attract the capital necessary to cover growing exposures without an adequate return.

“The industry doesn’t run a printing press; we intermediate money,” he said. “When state regulators deny insurers the ability to charge an adequate price and restrict our flexibility to tailor coverage, they drive away insurance availability and foolishly suppress economic price signals, which incentivizes the wrong decisions about where and how people choose to live and work. This ultimately creates a crisis,” he said.

One outcome is that state-funded insurers have been distorted into “the general insurer of first resort for too many”, Greenberg argued.

He said that citizens will pay the bill when that insurer inevitably fails.

“This political and regulatory approach is not an economically viable model. Going a step further, attempts to suppress price signals disincentivizes most governments and communities from investing in infrastructure, resiliency and loss mitigation efforts. So many promote unwise zoning and land management practices,” he said.

Greenberg pointed to January’s wildfires as an example of this problem, arguing that California suppressed the industry’s ability to charge a fair price for wildfire-exposed coverage.

“As insurers reduced their exposures and withdrew private insurance capacity, citizens were offered cheap coverage through the state’s insurer-of-last-resort FAIR plan. Add the enormous time and costs associated with reconstruction post-event due to highly inflated state and local requirements as well as approval and permitting processes,” he said.

Greenberg continued: “It also doesn’t help that insurers are vilified by government and consumer advocacy groups who, for their own populist and political reasons, tell claimants not to trust their insurers and to lawyer up, which only adds more time and cost to claims settlement. Most insurers are striving to do the right thing and take care of their customers. Counterproductive,” he said.

INSURERS SHOULD BE ENCOURAGED TO BUILD CAT RESERVES

The executive said that allowing insurers to adequately charge the right price is “the starting point” for increasing availability and building a sustainable model. He suggested that accounting and tax rules can also be improved to increase the industry’s capacity over time to cover disasters.

Greenberg said that accounting rules allow for insurers to post reserves for natural disasters only after a disaster has occurred.

“In years when cat activity is lighter, revenue from insurance premiums collected to fund for larger, more infrequent catastrophes is released to income, and, in turn, the capital account on an after-tax basis. The revenue is treated as profit when, in fact, it’s meant to provision for larger, less frequent events,” he said.

This is a contrast to accounting practices for banks, he said, which account for the risk of future loan losses when building reserves.

“The insurance industry should be encouraged to build long-term reserves for more severe cat events. In simple terms, this change would grow the industry balance sheet – our wherewithal to take risk – and lower our cost of capital, which means damping price increases over time and increasing private sector capital available to cover events,” he said.

“While it isn’t a silver bullet, nor an instant answer, this is a long-term problem requiring longer-term solutions as well.”

Greenberg also suggested that local, state and federal governments have a very important role to play through better wildlands management programs and zoning policies, and infrastructure investments that help to mitigate exposures and increase resiliency in communities.

The executive said that state insurers of last resort can serve a need but “should be designed to subsidize insurance, if necessary, only for those most in need – people who live in high-risk areas, can’t afford private sector coverage and can’t afford to move.”

The letter noted that Chubb’s gross premiums in 2024 were $62.0 billion while its combined ratio was 86.6%, and has averaged 86.9% over the past three years, “a gold standard among insurers globally”.

“The combined company performed very well, though we purposely constrained growth due to overly competitive commercial insurance market conditions. Risk pricing wasn’t sufficient to justify more rapid growth,” Greenberg said.