Good day, and welcome to the Chubb Limited First Quarter 2020 Earnings Conference Call. Today’s call is being recorded. For opening remarks and introductions, I would like to turn the call over to Karen Beyer, Senior Vice President, Investor Relations. Please go ahead.

Thank you. And welcome to our March 31, 2020 first quarter earnings conference call. Our report today will contain forward-looking statements, including statements relating to Company performance and the impact of the COVID-19 pandemic and its economic and other effects, pricing and business mix and economic and market conditions, which are subject to risks and uncertainties, and actual results may differ materially. Please see our recent SEC filings, earnings release and financial supplement, which are available on our website at investors.chubb.com, for more information on factors that could affect these matters. We will also refer today to non-GAAP financial measures, reconciliations of which to the most direct comparable GAAP measures and related details are provided in our earnings press release and financial supplement. Now, I would like to introduce our speakers. First, we have Evan Greenberg, Chairman and Chief Executive Officer; followed by Phil Bancroft, our Chief Financial Officer. Then, we’ll take your questions. Also, with us to assist with your questions are several members of our management team. And now, it’s my pleasure to turn the call over to Evan.

Good morning. We’re in an unprecedented moment of historic proportions. None of us living today has experienced an event of this nature or magnitude. It is at once surreal and catastrophic. As a country, we will manage through and heal both our society and economy, and it will take time. The decisive, heroic actions taken by our health professionals in combination with the support and leadership of our federal and state governments, and our vast private sector and civil society are a powerful force to combat the virus, stabilize our financial markets, support our economy, which remains in a virtual coma, and set the stage for recovery. The most important thing we can do now to achieve stability and health while reopening the economy is to improve our tests, digital trace and isolate capability. The insurance industry plays an important role in our economic foundation. During this health and economic crisis, we are shouldering our responsibilities and carrying our share of the financial load. This event impacts both the liability and asset side of our industry balance sheet. With that, I’m going to divide my remarks into two parts: First, our quarterly results, which were very good; then, I’ll provide some perspective on the current environment and how we are operating. To begin, as you saw from the numbers, we reported core operating income in the first quarter of $2.68 per share. The quarter was marked by very strong premium revenue growth globally and excellent underwriting results on both the published and current accident year basis. The calendar year P&C combined ratio for the quarter was 89.1% versus 89.2% prior year with P&C underwriting income up over 9.5% in constant dollar. On a current accident year basis, excluding cat, the combined ratio was 87.5%, a full point improvement over prior year with current accident year underwriting income up over 18%. The major difference between calendar year and current accident year underwriting income growth was a reduced benefit from the runoff of the 2019 crop insurance year. You’ll recall 2019 was a difficult year for agriculture, while 2018 was an excellent one. Book and tangible book value per share declined 5.5% and 7.5% respectively for the quarter, and Phil will have more to say about investment income, book value, cats and prior period development. Turning to growth and the rate environment. P&C net premiums grew 8.9% on a published basis or 9.3% in constant dollars. The commercial P&C pricing environment continued to firm across the globe. We secured greater market share as we achieved improved rate to exposure and more lines of business, and this rate firming continued into April. Overall rates increased in North America commercial which includes both major accounts and specialty, as well as middle market and small commercial by 10.5%. New business was up 27.5% in the quarter and renewal retention was 95% on a premium basis. Our North America commercial P&C business had a strong quarter with net premiums growth of over 10%. In major accounts and specialty commercial, excluding agriculture, premiums grew about 9.5% with major account retail growth of 7% and E&S wholesale growth of over 19%. In terms of rate increases, rates per major accounts were up 13%, and in Westchester and Bermuda, they were up 16% and 42%, respectively. Turning to our U.S. middle market and small commercial division. Premiums grew 11% overall with middle market up 9% and small commercial up over 40%. Renewal retention in our middle market business was 94.5%. Middle market pricing was up over 6.5% and excluding workers’ comp, it was up over 7%. In our North America personal lines business, net premiums written in the quarter were up 4.8% and retention remained very strong at 98% on a premium basis. In our international general insurance operations, growth remains strong with net premiums written up 10% in constant dollar and foreign exchange had a negative impact of about 1.3 points. Net premiums for London wholesale business grew over 27%, while the retail division was up over 8.5%. Growth in our international retail business was led by Latin America, which was up 13%, continental Europe and the UK had growth of 9.7% and 9.1% respectively. And overall rates in our international retail business were up 8% and 18% in our London wholesale. Our international life insurance business had a strong quarter with net written premiums up nearly 30% in constant dollar. John Keogh, John Lupica, Paul Krump and Juan Luis Ortega can provide further color on the quarter, including current market conditions and pricing trends. But that’s ancient history and from another time. What’s important is to recognize the underlying strength and momentum of our Company, as we entered this moment. Turning to the current environment. The COVID-19 pandemic and consequent economic crisis will of course impact Chubb. Our growth momentum, particularly in our commercial P&C business globally, continued into April and we continue to experience improved rate to exposure. As we go forward, offsetting that will be a meaningful impact to growth from the health and economic crisis as exposures in important areas shrink for a time with the impact varying by country. This includes consumer-related lines. For example, travel insurance, accident & health discretionary purchases, automobile insurance, commercial lines where exposures are reduced while businesses are closed or as they reopen and are diminished or simply go out of business. Small commercial businesses in aggregate will be more impacted than medium, which will be more impacted than large companies, but it will vary substantially by industry. For credit-related products such as trade, credit, surety, and other lines such as workers’ comp, premium revenue will be impacted by reduced exposures. As you know, we do not give forward guidance and in this case, the degree of revenue impact is simply unknowable. On the other hand, as I said, we are and will continue to benefit in terms of growth from improved technical conditions as many insurance companies take actions to reduce exposures or improve their rate to exposure to correct for inadequate underwriting. This will be an earnings event for Chubb. It will not threaten our balance sheet. Operating earnings will be impacted predominantly on the liability side of the balance sheet from increased insurance claims, though the asset side will likely be impacted as well from increased asset impairments. In addition, as I just mentioned, earnings will be impacted by a reduction in premium revenues for a period of time. In sum, from what we know now, this will be a manageable cat-like event. However, from an exposure, we really don’t discretely price for. So, its impact is additive to our normal projected loss exposure. In a sense, it’s like what terrorism exposure was before 9/11. We have a very strong balance sheet. Our capital and liquidity position are robust and Chubb will continue to operate at a high level and emerge strong or stronger. Again, insurance has an important role to play in society and in the economy, and we’re shouldering our share of responsibility while doing our job to support our employees, our customers, and our business partners. We have been quite clear about our priorities and it shows in our response. First, to the extent possible, we have taken care of our 33,000 people around the world and endeavored to keep them safe through aggressive work from home protocols. We’ve provided them a degree of peace of mind knowing their jobs and benefits are secure during the health crisis with a no layoff pledge. Second, we have remained consistent in how we take care of our customers and distribution partners doing what we can to support their needs. In fact, we are operating around the globe as a normal company during abnormal times. I am so proud and absolutely grateful for how my colleagues are performing every day as a group. From the smallest to the largest unit, from the biggest to the smallest country, how each is focused on delivering on our mission from internal operations to underwriting, sales, claims, marketing and finance, it’s really quite remarkable. We’re extending payment terms to commercial customers, recognizing their cash flow pressures. We’re providing a premium credit for auto policyholders in the U.S., recognizing their reduced exposures. We’re supporting our U.S. small business clients with premium reductions for their reduced exposures, and we’re supporting our small commercial clients by providing health care workers and first responders gift cards redeemable at our customers’ businesses. Lastly, as a corporate citizen, we’re contributing to the immediate emergency response today while supporting the future tomorrow. Our commitment of $10 million to pandemic relief efforts globally is being directed to a range of organizations that provide essential resources immediately in areas that are facing the most acute need. This includes providing emergency medical equipment and supplies to healthcare facilities and helping community food banks support those who are hungry and vulnerable, including so many who’ve become unemployed as a result of the pandemic. This is only the first chapter. As we move into the recovery phase, the Chubb Foundation will commit substantial additional funds. In sum, our Company is very strong. Our balance sheet is in good shape. We are operating well. While I see pressure on revenue and earnings in the short term, I see much opportunity for us in the future. Given all of our capabilities, I am confident Chubb will weather these difficult times and emerge stronger from this challenge. With that, I’ll turn the call over to Phil and then we’ll be back to take your questions.

Thank you, Evan. I want to begin with a few words on our financial position, which remains exceptionally strong. Our balance sheet includes a AA rated investment portfolio with a relatively short duration and conservative approach to our loss reserves. We have over $67 billion in total capital, which as we enter this period, is very strong, stemming from superior operating performance. Our access to liquidity on a global basis is excellent and unimpaired. Our operating cash flow remains quite strong and was $1.7 billion for the quarter. Net realized and unrealized losses for the quarter of $3.7 billion pretax included $2.2 billion from the investment portfolio, which resulted primarily from widening credit spreads in the investment grade and high yield bond portfolio through March 31st. Even after considering the valuation adjustments noted, our portfolio remains in an overall unrealized gain position through the quarter-end. Since that time, credit markets have recovered and liquidity has improved as a result of the extraordinary actions taken by the Fed in response to the COVID-19 pandemic. The portfolio mark has improved by approximately $1.7 billion pretax through this Monday. We also had a mark-to-market loss on a variable annuity reinsurance portfolio of $560 million. This was primarily due to negative equity returns and an increase in implied volatility. Again, this is purely a mark-to-market adjustment required because the transactions are deemed to be derivatives for accounting purposes and it does not indicate a reduction in cash flows from our reinsurance treaties for the quarter. The results are in line with our expectations, given these market conditions. Finally, realized-unrealized losses included $896 million after-tax losses from foreign exchange, related to our net asset exposure to foreign currency. These represent a point in time mark to market valuation adjustment and do not affect the capital position of our international operating units. As we noted in the press release, the marks are market price-driven based on the last day of the quarter and a moment in time. We believe they are largely transient and will accrete back to book value over time. Adjusted net investment income for the quarter was $893 million pretax and was within our guidance range. During March, we engaged on the margin in several tactical adjustments to the portfolio. We purchased a modest amount of high quality equities and modestly increased our exposure to investment grade corporate bonds. While there are number of factors that impact the variability in investment income, we expect our quarterly run-rate to remain in the range of $885 million to $895 million. Net catastrophe losses for the quarter were $237 million pretax or $199 million after-tax, including $224 million from global weather-related events and $13 million so far from COVID-19, which has been classified as an ongoing catastrophe. While there was no significant impact on core operating income in the first quarter related to COVID-19, the Company anticipates that this global catastrophe event will have an impact on revenue as well as net and core operating income in the second quarter and potentially future quarters as a result of an increase in insurance claims, due to both the pandemic and recessionary economic conditions. On a constant dollar basis, net loss reserves increased $363 million in the quarter and include the impact of catastrophe loss payments, favorable prior period development and crop insurance payments in the quarter. On a reported basis, the paid-to-incurred ratio was 95%. After adjusting for the items noted above, the paid-to-incurred ratio was 88%. We had favorable prior period development in the quarter of $118 million pretax or $94 million after-tax. The favorable development is split approximately 28% in long-tail lines, principally from accident years 2016 and prior, and 72% in short-tail lines. Last year’s favorable development of $204 million included $61 million of positive development from our agriculture segment resulting from stronger than expected results from the 2018 crop year. As we said at year-end, based on the difficult 2019 crop year, this level of development would not recur in the first quarter of 2020. Among the capital-related actions in the quarter, we returned $666 million to shareholders, including $340 million in dividends and $326 million in share repurchases at an average price of $143.67 per share. Given the current economic environment and to preserve capital for both risk and opportunity, the Company has suspended further share repurchases indefinitely. Our annualized core operating ROE in the quarter was 9.4% and our core operating return on tangible equity was 15.1%. Our core operating effective tax rate for the quarter was 16.3%. We continue to expect our annual core operating effective tax rate to be in the range of 14% to 16%. I’ll turn the call back to Karen.

Thank you. At this point, we’re happy to take your questions.

And with that we’ll take our first question from Michael Phillips with Morgan Stanley.

Thank you. Good morning, everybody. Thanks, Evan for your comments. I guess, the first question is going to be on the future impact on the wealth side from COVID in the coming quarters. And obviously without giving numbers, but maybe just where you feel Chubb is most exposed to that from, I guess, a geographic and coverage perspective?

I’m not going to give any specifics on that. There’ll be claims from a variety of areas, as we imagine right now. And the reason we didn’t put up numbers in the first quarter is because we’re going to do it in a thoughtful way, based on claims that come in, that are analyzed and reported, and then we’re able to have a framework to project the IBNR with that in a thoughtful way as well. Claims will come from travel insurance and accident & health. We’ll have business interruption losses where we purposely provided coverage as opposed to the vast majority where we did not provide coverage. We’ll have it through credit-related that is surety and trade credit and maybe political risk, who knows. Workers’ comp will produce losses, I’m sure. And so, it kind of gives you a sense. And it’ll be pretty broad based because it creates exposures for clients, for the industries and the economies broadly. Geography-wise, over half our business is in the United States. So, I expect all things being equal, since our greatest exposure is in the U.S. by territory, the greatest amount of loss will come out of the U.S. I hope that helps you.

Yes, it does. Thank you very much. I know, Evan, you’ve been very actively involved in task forces and things that are happening here in the U.S. And I guess, clearly all the pressure from states on business interruption and states on workers’ comp and big restaurants that are in bed with landlords and things like that, all these different pressures in the U.S. And I’m not really looking for one expectation, but just your thoughts on how this all kind of shakes out, given all the different scenarios on how the pressure on insurance kind of unfolds and what to expect maybe as this thing kind of shakes out?

The insurance industry is an important part of the financial plumbing of our economy in the U.S. And frankly, it’s part of the financial plumbing globally. The insurance industry I think is performing quite well and I think will perform very well in meeting their obligations and our obligations. When it comes to business interruption, there is activity that I put into two categories. One is on the political side where there’s talk about retroactively imposing cover on insurers for something that they didn’t cover and didn’t charge a premium. That is retroactively changing contract terms and increasing our exposure. I think that that’s unnecessary harm and would do great damage. It would damage or destroy the insurance industry in a terrible way. It would simply take money from one to give to another. Who does that serve? And frankly, it’s unconstitutional. We are a constitutional democracy and preservation of that and the certainty of that in such uncertain times is paramount. So, I’d start with that. Secondly, the insurance industry, for the most part, except for those customers who discretely purchased it, business interruption insurance doesn’t cover COVID-19. It covers and requires direct physical loss to a property. The regulators who’ve approved these forms, because we’re highly regulated, confirm that themselves that it’s not contemplated. Now, lawyers and the trial bar will attempt to torture the language on standard industry forms and try to prove something exists that actually doesn’t exist and try to twist the intent when the intent is very clear, and the industry will fight this tooth and nail. We will pay what we owe. Finally, what I’d say is business interruption insurance, actually we should remember, is very good value for money because what it does cover, we pay out as an industry roughly from what we can estimate about $0.70 on the dollar for every business interruption claim relative to the premium we collect. And that’s pretty good value for money. So, thank you for the question.

And we will take our next question from Elyse Greenspan with Wells Fargo.

Hi. Good morning, Evan. My first question I guess picks up on the business interruption conversation a little bit. So, internationally, does this policy language typically follow the standard language within the U.S.? I guess, you did mention that you could see some business interruption losses from COVID. But, should we think conceptually that the same excludes – virus exclusions would imply internationally as well as you attributed to within the U.S.?

Yes. Elyse, two comments. First, internationally, it follows the same pattern generally, which is, it requires direct physical loss to property as a trigger for business interruption. Number one. And then, number two, the exceptions to that for Chubb are where we purposely extended cover for different clients and different industries and purposely took on the exposure. In those cases, it’s clearly defined.

Okay, thanks. And then, my second question, you guys suspended your buybacks indefinitely. And the language in the prepared remarks as well as your press release kind of attributed it to economic uncertainty as well as just having capital flexibility. We’ve obviously seen suppressed prices throughout the insurance space coming off of this COVID uncertainty. So, can you just kind of provide a little update in terms of suspending the buybacks and how you think about just having more capital as well as the potential for some M&A here, given that valuations are much more attractive right now?

Elyse, when you look at the historic—let’s just look at this from a big picture perspective. We are in the worst economic event that we have faced as a nation and globally since The Great Depression. The economy is shut down. The opening of the economy is going to take time and it’s not going to happen in a smooth way, and no one knows for sure the shape or size or duration. To be buying back stock at that time, to me is clearly unwise. The fiduciary responsibility is to our customers, our shareholders, our employees. Capital, strength of balance sheet, capital and liquidity are king in this environment. Those are attributes and strengths you can’t have too much of and they are very fundamental. When there is visibility and there is certainty and we all have a better sense, then we will reassess.

And we will take our next question from Paul Newsome with Piper Sandler. Please go ahead.

Good morning. Thanks for the call. So, first question, I was wondering if you could talk about how you might see a really fundamental change in the perception of risk. I think, it’s hard and soft, it’s happening because of underwriting, seeing risk change…

I can’t really hear what you’re saying. Can you speak up, Paul and say clearly? Because we’re on a funny line right now.

My apologies. Hopefully that’s better. I was hoping you could talk about where you see the perception of risk changing in the insurance industry, given the current environment. Where do we see underwriters likely changing how they do underwriting and rethinking risk concentrations and such?

First of all, we’re asking a question right now that is asking about what do you think of the results of the wildfire when we’re in the middle of the fire. This event is unfolding. It’s too early to tell in many respects. But, the one thing I will say, perception of risk, as always, when a new parallel rears its head from the more academic to the actual, it has a powerful impact, and impacts perception of risk. In this case, the last time we had that was really terrorism. In this case, we will go through a similar exercise in some ways. Underwriters will examine concentrations and how it impacts both sides of the balance sheet. And by the way how we modeled and what the actual looks like are always different. There is always basis risk. Reality is always different than the laboratory. This is no different. This is a peril that the industry really didn’t discretely charge for. It’s a peril that has no bounds in terms of geography nor time. So, it’s a very different kind of catastrophe, and that has in a practical sense, an infinite tail. So, it will impact. No doubt, better underwriters had better control over the exposures. Underwriters who were maybe not as disciplined will have many surprises that will emerge. Time will tell and we’ll see that as this event unfolds. I hope that helps.

That’s great. My second question, we’ve been focused very much on the business interruption issues, the political risks in the U.S. Could you speak to how that may differ outside the U.S.? I think just some of the basics. I think, sometimes you just don’t know how extensively it was included overseas and how the political situation may differ?

Overseas, we’re not in any one country. Chubb is not a large middle market or small commercial writer; it’s a business we’re growing. In most jurisdictions, no different than the United States, small commercial and middle market customers have standard industry forms providing coverage in their country. They require direct physical loss. Most countries that I know of adhere to the rule of law and their forms are pretty clear. Large commercial customers’ business interruption insurance is typically on a more manuscript basis. So, each customer’s forms speak to a large degree for themselves, and in each jurisdiction they’ll be adjudicated based on the wordings as they were drafted. Frankly, to-date, I feel more stability outside the United States on the regulatory and legal front than I do in the United States. The irony.

And our next question will come from Mike Zaremski with Credit Suisse. Go ahead.

First question, do you feel the COVID losses will impact your reinsurance covering, you’ll get some help from your reinsurance partners?

That’s specific to each reinsurance cover. Each treaty is different, and it’s very fact-specific.

Okay. My next question, if I look at the North America commercial segments, and I heard your commentary about exposure on pricing being a 10% I think plus. And I’m looking at gross written premiums and the segment growing up a lesser, 6%. Is exposure shrinking in the North America commercial segment, trying to understand the dynamics there?

North America commercial grew about 9%. Mid and small group saw double-digit growth; large account grew a little slower. Last year, we wrote a one-off transaction or two related to wildfire that didn’t repeat this year, so there’s some noise in there. But underlying it is really strong growth.

Okay, got it. So, maybe some noise in there. I’ll just ask one quick one. And given you announced the no layoff policy for your valued employees and there will be top line pressure, should we expect a material spike in the expense ratio in 2Q?

No.

And we will take our next question from Greg Peters with Raymond James.

So, on the call and in your press release, you reported $13 million of catastrophe losses related to COVID-19. Then, you made the statement saying this will be tracked as a separate ongoing catastrophic event. So, it is clear that there’s going to be losses and revenue impacts. And I’m — revenue hit and losses related to this. Is the tracking that you’re going to provide going to give us color on both? And then, maybe you can dovetail that into the accounting geography of your announced premium reduction programs in the interim U.S. small business to personal lines, et cetera.

I’m not going to give you much satisfaction on that question, but the loss part will be tracked as part of catastrophe and that’s what we report as cat. The revenue reduction from exposures will come out in our published numbers and we’ll give you as much color as we can as we understand it. We don’t see it yet, but we know it’s coming. You can’t have an economy shutdown and not see exposures shrink. Premium is a function of rate to exposure. That’ll be on a published basis. What we call cat and assign to the cat number is to corral the losses and distinguish them from underlying run rate at the time. I gave you a framework and I think that will help you.

And our next question will come from Meyer Shields with KBW.

We’re hearing a lot of, I think, very legitimate opposition to changing definition of business interruption exposure. And it seems like a lot less concern over expanding presumptions of feasibility within workers’ compensation. Is that a fair read? And should we expect that difference in attitude to persist?

A very right-line decision that should not confuse anyone: business interruption insurance and the political activity of retroactively changing contracts to add coverage that was never contemplated nor charged for is very different than workers’ compensation presumptions concerning healthcare workers and first responders. Changing presumptions in workers’ comp is not changing contract language retroactively; it is within the purview of regulators and legislatures. That’s legally different. It also varies by jurisdiction; some jurisdictions have long presumed that certain medical workers contracting an illness did so on the job, others have not. So, workers’ comp is different in that regard.

And next, we’ll hear from Brian Meredith with UBS.

Yes. Thanks. Evan, so, just curious, understand the implications for exposures here going forward. Do you think any impact on pricing going forward, be it will companies relax a little bit on pricing given the economic strain or is it going to go the other way given potential increase in exposure?

I think the industry has woken up to rate to exposure in the last year and a half and understands the need to get paid properly for the exposures taken on. I don’t see that trend changing. I think this event will likely be the largest event in insurance history when you add it all up, both asset and liability sides, and that will raise the specter of risk and the notion of managing exposure. It will put a stronger focus on getting the right rate to exposure. That will continue.

Great. Thanks. And then, second question, just on the business interruption. Is it possible to give us a percentage or number of your policies that actually carry a virus endorsement and maybe some perspective on what a typical sublimit on that is? I know it’s typically pretty heavily sublimited.

No, I’m not going into that level of detail. The vast majority of our policies require direct physical loss. The sublimits vary by whether it’s a major account or middle market or small commercial and what the customer bought, because we offer different options.

And next, we will hear from David Motemaden with Evercore ISI.

Evan, just hoping to get your outlook on D&O and other management liability lines amid COVID, and likely lawsuits alleging misleading disclosures and other things related to COVID. How big of an issue do you think this is for the industry and then for Chubb in particular?

Who knows for sure. Out of every major event, there will be opportunistic litigation and that is a tax on business and society. I have no doubt there will be COVID-related D&O suits related to stock price drops and disclosure. Many will be frivolous. It’s an unnecessary tax on businesses trying to recover. Congress could consider granting some immunity to business in some form against frivolous suits that are counterproductive. Stocks broadly dropped; COVID-19 was no one’s fault and foreseeability was limited. Buyer beware and sensible protections matter.

And then, just also, you guys are obviously I think top five in the workers’ comp market. Just wondering, if you could give us a sense for the percentage of your book that is healthcare and other frontline responders, what sort of exposure you have there?

I won’t give specifics, but healthcare is not a meaningful part of our book of business.

The next question will come from Yaron Kinar with Goldman Sachs.

Just a couple of questions. Heard a lot about cyber risk being greater in this environment with a lot of workers working from home. My first question is around cyber. I know you guys have a large cyber practice. There has been speculation or talk about an increased cyber risk considering that a lot of employees are working from home. Do you see that as a large issue? And if so, how can the industry address that?

No, to-date, we’re not seeing a meaningful change in patterns with cyber losses.

Okay. And then, the second question is more philosophical. Several insurers as renewals come up have articulated some exclusions around pandemic and around COVID specifically in their policies. Do you think that could create an opening for the plaintiff’s bar to challenge prior language that was maybe less explicit in the exclusions?

I can’t speak to every company’s manuscript forms. Generally, pandemic-related exclusions are an extra precaution on top of the basic policies that require direct physical loss. Whether changing language now creates exposure depends on the prior wording. But generally, these exclusions are belt and suspenders on the underlying forms.

If I could sneak one other quick one, and I think in response to Brian’s question, the vast majority of your business interruption policies have physical damage triggers. Can you say anything about how many of your policies have viral exclusions?

No, I won’t get into that detail. Where it’s appropriate, a viral exclusion exists, but it varies by policy and client.

And we will take our next question from Ryan Tunis with Autonomous Research.

I’ll try one more time on business interruption. Is the real question in terms of the business interruption exposure how many policies actively cover the virus, or is it how long business lockdowns happen? Which is more relevant in terms of sizing that loss?

There are caps and limits in all policies. Duration of shutdown is central to business interruption severity; the length of shutdown directly impacts severity of loss. Caps and limits will matter and the duration is axiomatic in BI that the longer the shutdown, the greater the potential severity.

And then a step back. You mentioned in the Journal this morning that you think ultimately the industry will pay out tens of billions of dollars of claims. Is there any reason Chubb’s market share of those claims should be more or less than its global market share as the global leader in P&C?

Chubb is a disciplined, buttoned-up underwriter with strong controls. I have no reason to believe Chubb’s share of claims should be outsized. This will be a significant event for the industry and for Chubb as well. It’s an earnings event, not a balance sheet event, and I do think it will be one of the largest losses in industry history when you add both sides of the balance sheet.

And our final question will come from Larry Greenberg with Janney. Go ahead.

Thank you very much. I just want to be certain that I understand the accounting and the intent of how you’re going to recognize losses in the second quarter. Should we assume that you will put up a catastrophe loss for what you expect will be your ultimate exposure from COVID, recognizing that so much is changing and there’s a lot of unknowns down the road, but is that your plan?

We will let the facts speak to us. We will put up our loss based on the facts as we know them at the time when we close the books on the second quarter. I’m not going to speculate ahead. We will provide our perspective and color around that to help define it. It will depend on what we know. Expect that we will estimate ultimate loss to an event in our consistent manner; we always do our best estimate of ultimate loss to an event and no different here.

Okay. And then, curious on your thoughts on legislative proposals that might be productive prospectively. Is there any conceivable model where government involvement could be helpful on a retrospective basis?

I absolutely see a public-private partnership prospectively. I don’t see much sense in a retrospective approach where governments would retroactively impose losses on insurers. Right now the government’s program to provide loans that can become grants if you retain employees is a very efficient way to provide cash flow to small businesses. Business interruption adjudication is messy, time-consuming and one-at-a-time. What problem would retroactive BI solve that the government program doesn’t solve? On a prospective basis, why doesn’t the industry underwrite pandemic? Because of the size of the tail, a pandemic’s tail is so great that the industry cannot take infinite risk. If the government would take the tail risk in a pandemic event and the industry retained a reasonable portion, the industry could underwrite pandemic—think of it like TRIA for pandemics. I’m in favor of a public-private partnership for future events. Chubb has put together its own proposal and we will be sharing that shortly with the appropriate parties both inside and outside the industry.

And this concludes today’s question-and-answer session. I would now like to turn the call back to Karen Beyer for any additional or closing remarks.

Thank you all for joining us this morning. We look forward to speaking with you again. Have a nice day and stay well.

And this concludes today’s conference. Thank you for your participation. You may now disconnect.

Maybe put a little context around this. As you watch the Fed, their response to the markets has been, I think, very impressive. It’s been large and historic and it included the purchase of corporate bonds, both in the investment grade and high yield sectors. One way you might think about our portfolio is that the Fed is buying or supporting the financing of over 80% of what we own. So, I think in that regard, we are in good shape. As Phil mentioned in his commentary, we have made a few tactical adjustments to our portfolio. I think this is taking advantage of the dislocations that occurred in March with liquidity, and that included corporate bonds and equities. Overall, I think there remains too much uncertainty on how the virus will progress and how quickly the economy will recover to make any significant moves off our current allocation.