KEY RATING CONSIDERATIONS
The rating and Stable trend reflect the consolidated financial strength of
RATING DRIVERS
DBRS Morningstar would upgrade the ratings of the Chubb Subsidiaries if the Company's combined operations showed a material and sustained improvement in its risk profile and overall profitability, while maintaining strong capitalization. Conversely, DBRS Morningstar would downgrade the ratings if there is a sustained deterioration in the Company's overall profitability, capitalization, and market positioning .
RATING RATIONALE
DBRS Morningstar views Chubb's internationally recognized brand and its leading P&C market position with a diversified mix of products as key contributors to the franchise strength of the Chubb Subsidiaries. Recent expansion in several markets in
Chubb has a very large fixed income portfolio consisting of 83% investment-grade securities, and this composition has been relatively stable over time. Equities currently represent a very small proportion of the overall investment portfolio. As a result of higher market yields, overall investment income has contributed substantially more to net income. However, higher interest rates have also resulted in large marked-to-market unrealized losses thereby decreasing the value of the invested assets, including cash, to
In terms of product risk, the Chubb Subsidiaries are exposed to catastrophic risk through their underwriting of traditional and specialty commercial insurance products. They manage exposures related to different types of catastrophic losses, including those arising from cyber risk, through an integrated enterprise-wide risk management framework employing the three lines of defence model. Cyber risk is mitigated with policy limits, terms, and conditions as well as through reinsurance protection placed with highly rated counterparties.
Overall, Chubb's combined operating subsidiaries have a very strong record of underwriting profitability and better combined ratios relative to peers over the past 10 years. Inflationary pressures, higher reinsurance prices, climate change trends, and commercial insurance hard market conditions will continue to underpin premium increases.
As part of the largest publicly traded P&C insurer in the world, the Chubb Subsidiaries have good access to capital markets and capital flexibility. The very large and liquid investment portfolio and access to other forms of on-demand credit facilities at the holding company level provide ample liquidity. The Company's consolidated financial leverage is stable and consistent with the assigned ratings to its subsidiaries.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) CONSIDERATIONS
DBRS Morningstar views the Climate and Weather Risk sub-factor as relevant to the rating of Chubb but it did not affect the rating or trend assigned to Chubb. Chubb is exposed to weather-related losses from natural catastrophic events such as storms, wildfire, flooding and other extreme weather through its property and casualty insurance business. These events can lead to earnings volatility and increased reinsurance cost. DBRS Morningstar considers this ESG factor as part of product risk when assessing the risk profile. The Company has adopted the processes of the
There were no social or governance factors that had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929> (
The Grid Summary Grades for Chubb are as follows: Franchise Strength - Very Strong; Risk Profile - Strong/Good; Earnings Ability - Strong; Liquidity - Strong/Good; Capitalization - Strong.
Notes:
All figures are in
The principal methodology is the Global Methodology for Rating Insurance Companies and Insurance Organizations (
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at www.dbrsmorningstar.com.
This rating was not initiated at the request of the rated entity.
The rated entity or its related entities did not participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
This is a solicited credit rating.
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are under regular surveillance.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com.
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