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Chubb CEO: Stop buying muni bonds until lawmakers, regulators block M&A suits

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Chubb CEO: Stop buying muni bonds until lawmakers, regulators block M&A suits

Companies should halt their purchases of U.S. municipal bonds until lawmakers and regulators do something to prevent law firms from filing an excessive number of securities-related lawsuits, according to Chubb Ltd. Chairman, President and CEO Evan Greenberg.

Speaking at an S&P Global Ratings insurance conference, Greenberg reiterated remarks made on an April earnings conference call that costs stemming from merger-related class-action lawsuits are on the rise and have caused a spike in directors and officers insurance claims payouts. The business line, known as D&O, broadly covers defense costs and damages as the result of wrongful act allegations and lawsuits against companies' boards or executives.

Greenberg said it is up to Congress and state insurance regulators to regulate the practice of law firms suing, purportedly on behalf of shareholders, to block mergers and acquisitions and then receiving settlements to drop the litigation. Greenberg said companies should "avoid" buying bonds in protest until regulators step in.

"From an insurance perspective, the answer is not simply to raise D&O prices to reflect current risk, but to lead business[es] that advocate for reforms," Greenberg said. "This includes Congress, at the federal level, but also states with a history of this abuse."

Businesses should pressure states and demand reform in the space, going so far as to halt buying those bonds, until they "act appropriately to reform," Greenberg said.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.