Chubb moves to put Boy Scouts claims in rearview with $800M settlement

The agreement-in-principle that Chubb Ltd. has reached with the Boy Scouts of America offers a degree of confidence for investors that the insurer will be able to remove clouds of uncertainty that had been plaguing it.

As part of the agreement, Chubb is set to pay $800 million to cover its share of financial responsibility for sexual abuse claims facing the Boy Scouts of America and also obtained a broad release for all of its companies from such claims. Although many of the events referenced in the litigation took place decades ago, they triggered insurance policies that were in place at the time. These policies were often written with no aggregate limits or, in some cases, had high per-occurrence payouts available. Experts have previously warned that there could be massive payouts for insurers as a result. That reality is now unfolding.

CFRA analyst Cathy Seifert in an interview said the agreement was an "expensive resolution" for Chubb, but it ultimately puts parameters around the liability, giving investors a greater degree of information and confidence that the insurer is able to move forward.

"Markets like resolution," Seifert said. "This is just one more positive resolution and enables the company to move on in an environment where pricing is likely to remain strong for a while."

Seifert also noted that the bottom line impact to Chubb should be mitigated by reinsurance and the fact that the insurer has been reserving for this event.

Wells Fargo analyst Elyse Greenspan likewise said in a research note that the settlement should be viewed positively for Chubb, adding that expectations had been that they would take a larger charge than The Hartford Financial Services Group Inc., which settled its Boy Scouts-related claims for $787 million.

"The ultimate charge to the company seems as if it will be modest after accounting for what they have already reserved for and reinsurance," Greenspan said.

Chubb declined to comment for this story.

Other abuse claims adding up for insurers

USA Gymnastics, the U.S. Olympic & Paralympic Committee and their insurance companies announced Dec. 13 that they too had reached a settlement over sexual abuse claims with the victims of former team physician Larry Nassar, and will pay $380 million into a fund for the athletes who were assaulted.

Insurers will front the majority of the settlement. TIG Insurance Co. will pay a substantial share of the sum, according to reports from The Wall Street Journal.

Due to the size and complexity of the risk associated with the U.S. Olympic teams, it is likely that risk will be spread out across the U.S. and European insurance and reinsurance market, Seifert said.