Chubb’s Greenberg discusses geopolitics, climate in RISKWORLD keynote
Chubb Chairman and CEO Evan Greenberg delivered the Tuesday morning keynote at RIMS RISKWORLD in San Diego.
The economy, litigation costs, global geopolitical issues and climate change were just a few of the topics of conversation during Tuesday morning’s keynote address from Evan Greenberg, chairman and CEO of Chubb Group, at RIMS RISKWORLD in San Diego. The discussion with Greenberg was hosted by Eric Anderson, president of Aon, who began by asking Greenberg about his outlook for the U.S. economy.
“It has a lot of resilience, a lot of strength to it,” Greenberg shared. “We’re not reliant on any one sector, any one area of the economy, and broadly it’s doing well. Manufacturing services; slowing down a bit. I think Fed policy is beginning to take hold. But my own mental model is that this inflation is unlikely to return to the Fed target of 2%. We’re going to live more permanently in a higher inflation world.”
Greenberg attributed this to things like climate change, energy transition and a protectionist mentality in much of the world.
“We’re in a more protectionist world where countries, our own included, are putting up tariffs, blocking other products from entering the country on protectionism is going to grow. That is inflationary, and that is a trend around the world,” he said.
The issue Greenberg believes is most pressing in the medium-term is the national deficit.
“It’s not about the Fed,” Greenberg stated. “It’s about Congress and their ability to rein in spending. It’s about our ability to deal with entitlements. And our debt service costs this year will exceed our military spending, but it is unsustainable.”
He said that China has cut the amount of U.S. Treasuries they buy by more than half, and the Japanese are buying less, as well.
“We are monetizing our own debt, so we rely on ourselves to do that,” he stated. “That crowds out money for innovation. That crowds out an ability to grow.”
On the topic of nuclear verdicts, Greenberg emphasized the scope of the issue and how it affects inflation.
“This is a problem that, you know, to state the obvious, is enduring,” he said. “It’s not episodic. It’s not going away, and it is getting worse. The underlying and inflationary cost that is as a result of what is going on in the legal environment is loss costs are accelerating, and I don’t see any reason to believe we’re bending the curve and that the rate of inflation is going to come down against it.”
He explained that it is not just the severity of these claims that affects the industry, but the frequency of severe, individual verdicts as well as class action suits. These class actions sometimes come from science-based sources and what Greenberg called “new theories of liability.”
“They are tested in courts in various venues. They are improved and polished,” he said of these liabilities. “It’s part of the innovation cycle in legal theory, and when they polish it then you see a frequency of the severity of it.”
Greenberg also believes that anti-corporate feelings are driving the increase in lawsuits, and that individuals are betting on being in front of a jury that will sympathize with them over a corporation. However, he said insurers may not be the ones to lead the charge against these sentiments and verdicts.
“We’re not going to address this simply as an insurance industry. We are the wrong ones to front it,” he stated. “We are not the sympathetic audience… to carry the message, but we do a lot to support it. This is about corporate America. Business America is paying too much, but corporate America, that’s where the real money is… coming from when litigation is being paid to them, and corporate America has to be galvanized in a better way. The insurance industry can support that.”
“It’s going to take money,” he continued. “It’s going to take talent. It’s going to have to be approached like a long-term campaign, political campaign, where organizers come together and organize corporate America… The insurance industry supports it. We have data, we have knowledge, we have money, and we can help.”
When asked about the near-future of casualty, Greenberg noted significant growth in the cost of events like automobile accidents, even though things related to property costs, like repair and labor costs, have flattened and property inflation is stabilizing.
“I think more carriers in their reaction in casualty are starting to shorten lines, the limits they’ll put out. At Chubb, we’re trying to be consistent about it. Our risk appetite has not changed,” he said. “We recognize the reality of the environment. We try to communicate. We get surprised as you get surprised, but we try to manage and be on top. I think we are, but what I see within the industry – I just think there’s more to come. It’s not behind us.”
As the topic of conversation shifted to climate change, Greenberg noted he has faced backlash from some people who have referred to him as a “fossil fool” because of his views on how the industry should respond. Despite this, he shared what he believes should be the priorities of the industry in addressing this issue.
“Insurance is an important function to the wellbeing and operating of society. We take risks so that others can innovate and get on with their lives. Fundamentally, that’s what we do,” he stated. “We have two priorities clearly when it comes to climate change. We have energy security and we have a transition… to a more carbon-neutral and maybe ultimately carbon-free [future].”
Greenberg also shared his commitment to not “green-washing” the work the industry is doing – as it still supports carbon-based energy operations – but that Chubb is actively supporting the development of these new, greener technologies.
“I think one of the more interesting horizons that have sort of shown up for us has been how governments are dealing with the effects of a changing climate, whether it’s rising sea waters, and how the industry has come to play in terms of helping pre-disaster risk financing,” he said. “This industry is actually showing up to help, whether it’s the risk modeling, whether it’s bringing capital to play for those island nations, for example, that need to prove to investors that there is a plan post and event that will then allow them to build a hotel, to build the school, to get the economic development. I think the industry is not highlighted enough in that conversation, because without it, there would be no investment in a number of these places.”