Travelers CEO Says ‘Frivolous’ Lawsuits Undermine U.S. Recovery

(Bloomberg) -- Travelers Cos. Chief Executive Officer Alan Schnitzer said he’s encouraged by efforts states and the U.S. government are making to create liability protections for businesses dealing with the Covid-19 pandemic.

“We shouldn’t let frivolous lawsuits undermine the nation’s recovery,” Schnitzer said Thursday on a conference call discussing second-quarter results.

Travelers offers liability coverage for businesses, a part of the market that’s taken a hit from lawsuits tied to the pandemic. Chubb Ltd. CEO Evan Greenberg has urged Congress to consider granting limited immunity from Covid-19 suits, except in cases of gross negligence. Senate Majority Leader Mitch McConnell has included temporary limits for businesses as one priority for a potential stimulus plan.

Schnitzer still expects the plaintiffs’ bar to be active. Companies including Norwegian Cruise Line Holdings Ltd. have already started to face lawsuits against directors over their response to the pandemic.

Travelers shares slumped 3.4% to $118.14 at 11:09 a.m. in New York, extending this year’s loss to 14%. Meyer Shields, an analyst at Keefe, Bruyette & Woods, attributed some of the weakness to the reserve charges in the company’s general liability and commercial multi-peril lines of business.

The insurer, which gave a preliminary look at its results last week, swung to a net loss of $40 million in the second quarter from profit of $557 million a year earlier. The driver was catastrophe losses, which more than doubled because of civil unrest and storms across the U.S.

Still, the New York-based insurer eked out an improvement in an underlying measure of underwriting profitability and said that the impacts of Covid-19 and economic conditions were “modest.” Pricing improved in Travelers’ operation selling insurance to businesses, with the average premium for policies that renewed up 7.4%.

“Commercial pricing was impressive, and that’s maybe the strongest take from the report -- that even a deep recession wouldn’t blunt pricing power,” Mark Dwelle, an analyst at RBC Capital Markets, said in a note.

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