Chubb Insurance CEO Evan Greenberg on Global Economic Recovery

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Andrew Schwartz: You're listening to The Reopening. The podcast that asks, "How will America work through the COVID-19 pandemic? How will we innovate, and how will it change our global economy?" Each week we invite top business leaders to share their insights on the road to economic revival here at home, and around the world.

Scott Miller: Today, our guest is Evan Greenberg, chief executive officer of Chubb insurance. Evan is a member of the president's task force on economic recovery. And as the past chairman of the U.S./China business council. We'll talk with Evan about the global economic recovery now under way, the state of U.S./China relations and the role of public private cooperation in matters of health, commerce, and social capital.

Andrew Schwartz: I'm Andrew Schwartz.

Scott Miller: And I'm Scott Miller.

Andrew Schwartz: And this is The Reopening.

Scott Miller: Evan Greenberg, welcome to the reopening. We're delighted to have you. Chubb insurance has operations in 54 countries. You do business around the world. Could you give us your view of the global economy and who's recovering? Who's not? What's your view at this point?

Evan Greenberg: Yeah, you know, the global economy is obviously operating at a slow pace. Trade has been dramatically impacted. People aren't traveling. Shipping has slowed way down, and you know, the world is in various stages of reopening. Asia is probably the furthest ahead and we notice it in our business. Most countries are opening and, in some degree, back to normal, though no one's fully back to normal. China is also, it was the first to close down, the first to reopen, and is coming back relatively strongly, but it's still tepid in historic terms. Europe, most of our offices are all open, but Europe is very slow in the re-emergence and for economic activity to begin back up. Latin America is, for where we do business, is the region most heavily impacted at the moment. The virus is rampant. The health crisis is not under control. In some countries they're in various stages of opening up only because people are suffering economically so much. They can't stay locked down, but they're in chaos. And finally, in the US as we all see, we're opening back up slowly, but the economy has a lot of damage to recover from. When I look forward, what do I imagine? We're not going to eliminate the virus and not until we have a vaccine and it is widely available. And that will be sometime, if we're lucky, it'll be sometime in 2021 and probably towards the latter part of the first half. In the meantime, we can't stay locked down around the world. Economies when they're closed, creates so much suffering and people need to, they need to make a living. And so, therefore, the healthcare system in developed countries has had a chance to catch up and put in place the infrastructure to manage the infection. And we have better testing and tracing in developed countries, in some developing countries. And so we have an ability to control the level of infection while we open up though, naturally infection rises. At the same time part of that control is going to be around social distancing and limiting the number of people who can be together. And that'll continue to weigh heavily on industries, such as travel industry and most consumer services related industries around the world. Countries where governments, where the state of governance in a country at the government level, at the political level is poor, where healthcare infrastructure is poor, they're going to be wrestling with extreme chaos and difficulty between a health crisis and an economic crisis.

Scott Miller: Your point is well taken. The virus is with us. This is just one more risk we've got to manage in our lives. It's one we've learned a lot about, but we still don't, it's still novel. We still don't know everything about it. You're in the risk management business. So natural that you should be thinking about this in a pretty deep manner.

Evan Greenberg: We do and in insurance, we're kind of a reflection of society's activities as a whole, because we insure exposures that people and businesses and other entities are exposed to. And that's through economic activity, social, health, science, the natural environment, and the legal environment. And so we have a chance to see it all. And beyond the economic and the health, there are social consequences that emerge that will also weigh on us as we go forward. Social unrest, because people are suffering, arises. Populism around the world, you can see it growing because people are suffering and they want quick answers and solutions. Nationalism and protectionism, protect your own and beggar thy neighbor. And you begin to see those trends growing and scapegoating to blame others and deflect. The economy will be sometime coming back in spite of all the value and efforts by central banks to provide support and governments to provide support.

Andrew Schwartz: Evan, you've said that insurers can't insure the entire American economy. It's impossible. But how are you re-imagining yourself as an industry going forward, thinking about Coronavirus and other possibly endemic diseases that we're going to be living with.

Evan Greenberg: You know, the insurance industry will pay out between the liability side and the asset side of our balance sheets. This will cost the industry, circa 100 billion plus anyway, not insignificant. Imagine where the loss has come from - individual people and related to their health, accident and health, life insurance, travel, because travel has been curtailed. Workers' compensation for those who were first responders, who were healthcare workers. And so in the course of employment, they became ill or emotionally damaged with what they've experienced. Imagine all the credit related exposures, purity, and insuring trade and receivables and where governments abrogate their responsibilities and they've borrowed money or invested in projects. And then you get to business interruption, businesses that bought insurance for this and are shut down. The entertainment industry, the show industry, or certain corporations that could buy that kind of coverage. So the industry for many different angles is incurring substantial loss. And then think the liability side. Let a thousand flowers bloom. All the lawsuits that will take place because directors and officers should have known and predicted and protected the company better. Or employment practices liability and discriminated against older people coming back onto the job. And so lawsuits that will be in the thousands across the globe. And so therefore will incur loss to insurers. What cannot be insured easily, and can't be done by the private sector alone, we don't have the balance sheet, is business interruption insurance broadly offered to all businesses that if you're shut down as a result of a pandemic, that the loss of income or the extra expense you would have would be paid because that's fundamentally insuring the whole economy. The industry has hundreds of billions of capital and surplus to support the risks it's taken on. And this by itself, the US economy shut down for a quarter is $4 trillion. Well, how could the industry insure for that? But there are future constructs of public – private partnership that could protect the economy financially and do a better job of ensuring it than was done. However, the most important is not a financial construct. It is that we have the medical infrastructure and we have the wherewithal to keep pandemics from spreading again and to control them quickly when they break out, so we don't have to shut the economy down. That's the answer. The answer is not trying to provide financial support when you do. That's a poor second cousin.

Andrew Schwartz: But if I'm a business going forward now, you've got to think that this has got to be, one of your top priorities is figuring out, what do I do when and if there's a second wave, when and if we have a future disease that we can't control, that we don't know anything about, and we face the same situation over and over again.

Evan Greenberg: You're correct. And we have proposals we have put together that we are working quietly with the government on, we're not grand standing about it. Where we could offer in a public – private partnership, where the government takes the tail risk, because the government has the balance sheet for the trillions or the many hundreds of billions that the industry doesn't have. The industry could take risk and we could take risks and we could offer insurance more broadly to small and mid and large companies and provide a partial solution. We could do administer the program as well. And then when it exceeds a certain dollar threshold that we can handle with our capital base, then the government takes the rest of the exposure. And how you charge for it and what kind of rate of return should the government get, et cetera is all for the future, but we have proposals like that and we're quietly talking to the administration and to Congress about those.

Scott Miller: Well Evan, throughout your comments, you're observing new ways of cooperation. I want to pull out a couple of things that you mentioned. First, you mentioned there was good cooperation among central banks in their response. You mentioned poor cooperation among trade ministries, where we got immediately into new barriers and bigger than [ph] policies. I think you're indicating that health cooperation is a high priority to deal with the next pandemic. And then you have the insurance consortium with government cooperation as a new model. Can you tie those together? As I think you're onto something here.

Evan Greenberg: You know, look, we're in a world today where globalization is not popular and where the notion of multilateral institutions in cooperation are not in favor. And yet ironically, when I look at the health crisis and I look at the economic crisis, both of those would be solved or mitigated to a great degree with better cooperation across the globe. I start with the health. I don't know how we arm ourselves to avoid more outbreak of COVID-19 globally and to bring it down, and at the same time, open up travel and trade, if we don't have cross border cooperation. To share information, to put in place global surveillance, to put in place minimum standards we can all accept of each other so that we could create certainty. And that requires both multilateral and bilateral cooperation that is just not existing to the degree it should. The same with not only discovery of vaccine, but production of vaccine. And we're becoming too nationalistic as we approach that. When I think about recovery of the economy, the two largest economies in the world, China and the United States, there is an area where we could cooperate. Just like I believe in the health care areas I mentioned to manage pandemic exposure, particularly COVID-19 now. China and the U.S. should be cooperating, not throwing stones at each other and blaming each other. Sure, we have differences. We should be putting those aside in both of those areas, we could lead a multilateral effort and I believe the world would be better served.

Andrew Schwartz: Do you worry that in creating public – private partnerships that the government will be too involved in business?

Evan Greenberg: I always want government involvement in business with a light hand. I don't think you mindlessly wander into an increased role for government. The government has a role to play when the private sector mechanism can't work by itself to solve a problem. And in this case, the private sector can't by itself solve the pandemic related business interruption insurance problem. For the reason I said. Don't have the balance sheet wherewithal. We have other examples of that, where the public private partnership and insurance has worked reasonably well. And we do do it with a light hand. Terrorism insurance after nine 11, the government's backstop helped to give the confidence and the certainty to begin to create a terrorism insurance marketplace. And it has grown since then. Private sectors wherewithal has increased. An area like crop insurance, to be able to manage the affordability questions so that all farmers would buy crop insurance and it has worked well to protect the financial wherewithal of the farmers and the food source system has worked well. Flood insurance is an example where it has not worked well and needs to be fixed. Unintended consequences. In this case, if we're going to provide better financial protection, the only ones who have the balance sheet to support that in its totality is the government.

Andrew Schwartz:

Now you're part of the president's task force on looking at COVID related issues and reopening in business. What are you learning that you can share with us from that experience?

Evan Greenberg: Frankly speaking, the task force has not been very active, you know, beyond the first flurry, it has been pretty dormant. I wish government had engaged business to a greater degree in the management and the solutions to how to handle this nationally. I think businesses experience and capabilities with logistics management, manufacturing, I believe we would have been more efficient, had we engaged business. And by the way, in my own mind, in the military, because the military has capabilities in moving, building systems and moving major supplies. Because this is all supply chain set up, whether it is testing, whether it is tracing, whether it is PPE related, could have all moved much more efficiently and quickly in my mind, if we'd engage business and the military in their roles for managing this.

Andrew Schwartz: I mean that's how we get things done in America, we put our best foot forward. And that's the resources that we have.

Evan Greenberg: We could have done this with a wartime footing. I don't think it would have been that complicated.

Andrew Schwartz: Along those line though, going forward, as you're thinking about disruptions to the United States and to the world, what do business leaders need to do to think about how we can be better prepared for things like this?

Evan Greenberg:

There are a few things. And you have to stick with what you believe, whether it is popular at the moment, or it is not, and you have to continue advocating. So on one hand, I think what business can do, coming out of this there is a question and we've seen it, and it's a vulnerability within globalization and where you distribute processing and manufacturing and that is supply chain resilience, not in a political sense. You need to de-politicize it, but supply chain resilience. The word resilience speaks to availability and flexibility, particularly in times of stress or under stressed conditions, stress points. I think there are lessons that come out of this about not just critical supplies, but what we will define as critical supplies, particularly in the medical area. But beyond that when basic economic goods need to be provided, and there were availability we've learned about vulnerabilities. And so supply chain resilience, and that means, where you have choke points, where you have over concentration. And I think we will balance absolute cost efficiency against resilience as we go forward. We've learned from that. And that's a natural maturing process. And I think it's a good one.

Scott Miller: Yeah, I agree. This will be a healthy learning experience. Obviously this was an unusual stress on many supply chains, because it was global. It's not like an earthquake, or a flood, or something that tends to be regional.

Evan Greenberg: If we don't obscure it and the clarity with over-politicization, we can't over-politicize it.

Scott Miller: Yes.

Evan Greenberg: That's the danger in it.

Scott Miller: As long as firms can look at it at the firm level, because that's where this happens, where you need to make sure your suppliers are not too concentrated. I mean, that's the real core of this, but it has to be done at the firm level and you're right, it can't be done on political grounds.

Evan Greenberg: And it's not just concentration of suppliers. You're thinking about availability and a constant availability because we're also in much more of a just-in-time economy when it comes to manufacturing. And so that creates a certain brittleness and risk within the system. So, that's what you're going to manage around as well. You know, secondly, what can business do? I think it's to recognize the world that was unlocked with globalization and the capability and the economic growth, broad based growth that it unleashed. And we remember that. I think that going backwards that way is a mistake. There are many issues and many problems with the global trading system and the problems we can wax on endlessly. At the same time, there are many strengths and benefits that we shouldn't forget and that we should be advocating for while we address the problems and the weak points that have arisen. Multilateral, more liberal world order, rules based trading system, working with those who have common purpose, a set of rules that allow all to thrive and where a few can't game it against others, because then it's like a poker game. If the rules and the administration of those rules aren't equal, well, who's putting their money in the pot. And so, you know, I think business, even though it's not popular, particularly in the United States now and in some other countries, business shouldn't cower, shouldn't quiet our voice. You got to advocate and in a rational way, and someone has to bear witness to it because I can guarantee you, we will wander off the track. It will be to our detriment. And then we'll say, woe is us. What did we do? And we'll be a lot of years repairing.

Andrew Schwartz: Evan Greenberg, you've been incredibly generous with your time today. Thank you very much for this talk and this conversation. We're thrilled to have you with us, and we hope to be able to talk to you again really soon. Thanks again.

Evan Greenberg: Thanks a lot you guys.

Scott Miller: Thank you.

Evan Greenberg: Have fun. Stay healthy.

Andrew Schwartz: Thanks for listening to the Reopening. If you liked this episode, please write us a review and subscribe wherever you find your podcasts. You can also find other podcasts from the center for strategic and international studies at