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Postretirement benefits
12 Months Ended
Dec. 31, 2020
Retirement Benefits [Abstract]  
Postretirement benefits Postretirement benefits
Chubb provides postretirement benefits to eligible employees and their dependents through various defined contribution plans sponsored by Chubb. In addition, for certain employees, Chubb sponsors other postretirement benefit plans, and prior to 2020, Chubb sponsored defined benefit pension plans.
Defined contribution plans (including 401(k))
Under these plans, employees' contributions may be supplemented by Chubb matching contributions based on the level of employee contribution. These contributions are invested at the election of each employee in one or more of several investment portfolios offered by a third-party investment advisor. Expenses for these plans totaled $211 million, $171 million, and $171 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Defined benefit pension plans
We maintain non-contributory defined benefit pension plans that cover certain employees located in the U.S., U.K., Canada, and various other statutorily required countries. We account for pension benefits using the accrual method. Benefits under these plans are based on employees' years of service and compensation during final years of service. All underlying plans are subject to periodic actuarial valuations by qualified actuarial firms using actuarial models to calculate the expense and liability for each plan. We use December 31 as the measurement date for our defined benefit pension plans.

Under the Chubb Corp plans, prior to 2001, benefits were generally based on an employee’s years of service and average compensation during the last five years of employment. Effective January 1, 2001, the formula for providing pension benefits was changed from the final average pay formula to a cash balance formula. Under the cash balance formula, a notional account is established for each employee, which is credited semi-annually with an amount equal to a percentage of eligible compensation based on age and years of service plus interest based on the account balance. Chubb Corp employees hired prior to 2001 will generally be eligible to receive vested benefits based on the higher of the final average pay or cash balance formulas.

Other postretirement benefit plans
Our assumption of Chubb Corp's other postretirement benefit plans, principally healthcare and life insurance, covers retired employees, their beneficiaries, and covered dependents. Healthcare coverage is contributory. Retiree contributions vary based upon the retiree’s age, type of coverage, and years of service requirements. Life insurance coverage is non-contributory. Chubb funds a portion of the healthcare benefits obligation where such funding can be accomplished on a tax-effective basis. Benefits are paid as covered expenses are incurred.

Amendments to U.S. qualified and excess pension plans and U.S. retiree healthcare plan
On October 31, 2016, we harmonized and amended several of our U.S. retirement programs to create a unified retirement savings program. In 2020, we transitioned from a traditional defined benefit pension program that had been in effect for certain employees to a defined contribution program. Additionally, after 2025, we plan to eliminate a subsidized U.S. retiree healthcare and life insurance plan that had been in place for certain employees. Both amendments required a remeasurement of the plan assets and benefit obligations with updated assumptions, including discount rates and the expected return on assets. The amendment of the retiree healthcare plan resulted in a reduction in the obligation of $383 million, of which $410 million will be amortized as a reduction to expense through 2021 as it relates to benefits already accrued. For the years ended December 31, 2020, 2019, and 2018, $79 million, $79 million, and $80 million, respectively, were amortized as a reduction to expense. At December 31, 2020, the remaining curtailment benefit balance was $26 million which will be amortized as a reduction to expense through June 2021.
Obligations and funded status
The funded status of the pension and other postretirement benefit plans as well as the amounts recognized in Accumulated other comprehensive income at December 31, 2020 and 2019 was as follows:
Pension Benefit PlansOther Postretirement
Benefit Plans
2020201920202019
U.S. PlansNon-U.S. PlansU.S. PlansNon-U.S. Plans
(in millions of U.S. dollars)
Benefit obligation, beginning of year$3,569 $1,042 $3,092 $942 $103 $113 
   Service cost 4 49 11 1 — 
   Interest cost99 22 118 27 2 
   Actuarial loss (gain)441 135 443 124 1 
   Benefits paid(127)(31)(121)(39)(20)(17)
   Curtailments (2)— (4) — 
   Settlements(15) (12)(61) — 
   Foreign currency revaluation and other 29 — 42 (1)— 
Benefit obligation, end of year$3,967 $1,199 $3,569 $1,042 $86 $103 
Plan assets at fair value, beginning of year$3,301 $1,141 $2,784 $1,008 $152 $143 
   Actual return on plan assets563 126 636 169 6 
   Employer contributions17 19 14 16 1 — 
   Benefits paid(127)(31)(121)(39)(39)— 
   Settlements(15) (12)(61) — 
   Foreign currency revaluation and other 29 — 48  — 
Plan assets at fair value, end of year$3,739 $1,284 $3,301 $1,141 $120 $152 
Funded status at end of year$(228)$85 $(268)$99 $34 $49 
Amounts recognized in Accumulated other comprehensive
income, not yet recognized in net periodic cost (benefit):
Net actuarial loss (gain)$78 $163 $(21)$110 $(5)$(3)
Prior service cost (benefit) 9 — 10 (31)(114)
Total$78 $172 $(21)$120 $(36)$(117)

For the U.S. pension plans, the $441 million and $443 million actuarial loss experienced in 2020 and 2019, respectively, was principally driven by the decrease in the discount rate from the respective prior year.
The accumulated benefit obligation for the pension benefit plans was $5.1 billion and $4.6 billion at December 31, 2020 and 2019, respectively. The accumulated benefit obligation is the present value of pension benefits earned as of the measurement date based on employee service and compensation prior to that date. It differs from the pension (projected) benefit obligation in the table above in that the accumulated benefit obligation includes no assumptions regarding future compensation levels.

The net components of the funded status of the pension and other postretirement benefit plans are included in Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets.

Chubb’s funding policy is to contribute amounts that meet regulatory requirements plus additional amounts determined based on actuarial valuations, market conditions and other factors. All benefit plans satisfy minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA). 
The following table provides information on pension plans where the benefit obligation is in excess of plan assets at December 31, 2020 and 2019:
20202019
U.S. PlansNon-U.S. PlansU.S. PlansNon-U.S. Plans
(in millions of U.S. dollars)
Plans with projected benefit obligation in excess of plan assets:
Projected benefit obligation$3,967 $629 $3,569 $236 
Fair value of plan assets3,739 568 3,301 175 
Net funded status$(228)$(61)$(268)$(61)
Plans with accumulated benefit obligation in excess of plan assets:
Accumulated benefit obligation$3,967 $593 $3,569 $173 
Fair value of plan assets$3,739 $565 $3,301 $140 

For other postretirement benefit plans with an accumulated benefit obligation in excess of plan assets, the accumulated benefit obligation was $23 million and $25 million at December 31, 2020 and 2019, respectively. These plans have no plan assets.

At December 31, 2020, we estimate that we will contribute $20 million to the pension plans and $1 million to the other postretirement benefits plan in 2021. The estimate is subject to change due to contribution decisions that are affected by various factors including our liquidity, market performance and management discretion.

At December 31, 2020, our estimated expected future benefit payments are as follows:
Pension Benefit PlansOther Postretirement Benefit Plans
For the years ending December 31U.S.
Plans
Non-U.S. Plans
(in millions of U.S. dollars)
2021$159 $30 $19 
2022166 28 20 
2023171 30 16 
2024175 32 12 
2025180 32 
2026-2030947 185 

The weighted-average assumptions used to determine the projected benefit obligation were as follows:
Pension Benefit Plans
U.S.
Plans
Non-U.S.
Plans
Other Postretirement Benefit Plans
December 31, 2020
Discount rate2.32 %1.80 %1.36 %
Rate of compensation increase (1)
N/A3.24 %N/A
Interest crediting rate4.10 %
December 31, 2019
Discount rate3.20 %2.39 %2.70 %
Rate of compensation increase (1)
N/A3.26 %N/A
Interest crediting rate4.10 %
(1) For the U.S. Pension Plans, benefit accruals were frozen as of December 31, 2019.
The projected benefit cash flows were discounted using the corresponding spot rates derived from a yield curve, which resulted in a single discount rate that would produce the same liability at the respective measurement dates. The same process was applied to service cost cash flows to determine the discount rate associated with the service cost. In general, the discount rates for the non-U.S. plans were developed using a similar methodology by using country-specific yield curves.

The components of net pension and other postretirement benefit costs reflected in Net income and other changes in plan assets and benefit obligations recognized in other comprehensive income were as follows:
Pension Benefit PlansOther Postretirement
Benefit Plans
U.S. PlansNon-U.S. Plans
Year Ended December 31202020192018202020192018202020192018
(in millions of U.S. dollars)
Costs reflected in Net income:
Service cost$ $49 $57 $4 $11 $12 $1 $— $
Non-service cost:
Interest cost99 118 105 22 27 27 2 
Expected return on plan assets(224)(189)(212)(41)(45)(50)(5)(4)(5)
Amortization of net actuarial loss — — 2  — — 
Amortization of prior service cost — —  — — (83)(84)(85)
Curtailments — — (1)(1)—  — (2)
Settlements3   — — 
Total non-service benefit(122)(69)(105)(18)(15)(19)(86)(84)(89)
Net periodic benefit$(122)$(20)$(48)$(14)$(4)$(7)$(85)$(84)$(88)
Changes in plan assets and benefit obligations recognized in other comprehensive income
Net actuarial loss (gain)$102 $(4)$214 $56 $$34 $(2)$(2)$(11)
Prior service cost (benefit) — —   — — 
Amortization of net actuarial loss — — (2)(3)(1) — (1)
Amortization of prior service cost — — (1)— — 83 84 85 
Curtailments — — (1)(3)—  — 
Settlements(3)(2)(2) (1)(3) — — 
Total decrease (increase) in other comprehensive income$99 $(6)$212 $52 $— $33 $81 $82 $76 

The line items in which the service and non-service cost components of net periodic (benefit) cost are included in the Consolidated statements of operations were as follows:
Pension Benefit PlansOther Postretirement Benefit Plans
Year Ended December 31202020192018202020192018
(in millions of U.S. dollars)
Service cost:
Losses and loss expenses$ $$$ $— $— 
Administrative expenses4 54 62 1 — 
Total service cost4 60 69 1 — 
Non-service cost:
Losses and loss expenses(12)(7)(10)(9)(8)(9)
Administrative expenses(128)(77)(114)(77)(76)(80)
Total non-service benefit(140)(84)(124)(86)(84)(89)
Net periodic benefit$(136)$(24)$(55)$(85)$(84)$(88)
The weighted-average assumptions used to determine the net periodic pension and other postretirement benefit costs were as follows:
Pension Benefit Plans
U.S. PlansNon-U.S. PlansOther Postretirement Benefit Plans
Year Ended December 31
2020
Discount rate in effect for determining service costN/A6.04 %3.00 %
Discount rate in effect for determining interest cost2.85 %2.24 %2.64 %
Rate of compensation increaseN/A3.26 %N/A
Expected long-term rate of return on plan assets7.00 %3.83 %3.00 %
Interest crediting rate4.10 %N/AN/A
2019
Discount rate in effect for determining service cost4.23 %4.48 %4.04 %
Discount rate in effect for determining interest cost3.94 %2.88 %3.69 %
Rate of compensation increase4.00 %3.37 %N/A
Expected long-term rate of return on plan assets7.00 %4.40 %3.00 %
Interest crediting rate4.10 %N/AN/A
2018
Discount rate in effect for determining service cost3.62 %3.97 %2.84 %
Discount rate in effect for determining interest cost3.27 %2.55 %2.62 %
Rate of compensation increase4.00 %3.46 %N/A
Expected long-term rate of return on plan assets7.00 %4.32 %2.59 %
Interest crediting rate4.10 %N/AN/A
The weighted-average healthcare cost trend rate assumptions used to measure the expected cost of healthcare benefits were as follows:
U.S. PlansNon-U.S. Plans
202020192018202020192018
Healthcare cost trend rate5.96 %6.32 %6.68 %5.04 %5.24 %6.29 %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)4.50 %4.50 %4.50 %4.00 %4.00 %4.50 %
Year that the rate reaches the ultimate trend rate203820382038204020402029

Plan Assets
The long term objective of the pension plan is to provide sufficient funding to cover expected benefit obligations, while assuming a prudent level of portfolio risk. The assets of the pension plan are invested, either directly or through pooled funds, in a diversified portfolio of predominately equity securities and fixed maturities. We seek to obtain a rate of return that over time equals or exceeds the returns of the broad markets in which the plan assets are invested. The target allocation of U.S. plan assets is 55 percent to 65 percent invested in equity securities (including certain other investments measured using NAV), with the remainder primarily invested in fixed maturities. The target allocation of non-U.S. plans varies by country, but the plan assets are principally invested in fixed maturities. We rebalance our pension assets to the target allocation as market conditions permit. We determined the expected long term rate of return assumption for each asset class based on an analysis of the historical returns and the expectations for future returns. The expected long term rate of return for the portfolio is a weighted aggregation of the expected returns for each asset class.

In order to minimize risk, the Plan maintains a listing of permissible and prohibited investments. In addition, the Plan has certain concentration limits and investment quality requirements imposed on permissible investments options. Investment risk is measured and monitored on an ongoing basis.
The following tables present the fair values of the pension plan assets, by valuation hierarchy. For additional information on how we classify these assets within the valuation hierarchy, refer to Note 4 to the Consolidated Financial Statements.
December 31, 2020Pension Benefit Plans
(in millions of U.S. dollars)Level 1Level 2Level 3Total
U.S. Plans:
Short-term investments$59 $ $ $59 
U.S. Treasury / Agency250 186  436 
Non-U.S. and corporate bonds 793  793 
Municipal 2  2 
Equity securities1,818   1,818 
Total U.S. Plan assets (1)
$2,127 $981 $ $3,108 
Non-U.S. Plans:
Short-term investments$5 $ $ $5 
Non-U.S. and corporate bonds 609  609 
Equity securities127 388  515 
Total Non-U.S. Plan assets (1)
$132 $997 $ $1,129 
(1)Excluded from the table above are $543 million and $147 million of other investments related to the U.S. Plans and Non-U.S. Plans, respectively, limited partnerships of $74 million and $8 million in U.S. Plans and Non-U.S. Plans, respectively, measured using NAV as a practical expedient, and $14 million in cash related to the U.S. Plans.
December 31, 2019Pension Benefit Plans
(in millions of U.S. dollars)Level 1Level 2Level 3Total
U.S. Plans:
Short-term investments$18 $37 $— $55 
U.S. Treasury / Agency466 134 — 600 
Non-U.S. and corporate bonds— 749 — 749 
Municipal— — 
Equity securities1,467 — — 1,467 
Total U.S. Plan assets (1)
$1,951 $922 $— $2,873 
Non-U.S. Plans:
Short-term investments$$— $— $
Non-U.S. and corporate bonds— 598 — 598 
Equity securities112 318 — 430 
Total Non-U.S. Plan assets (1)
$114 $916 $— $1,030 
(1)Excluded from the table above are $428 million and $107 million of other investments related to the U.S. Plans and Non-U.S. Plans, respectively, and limited partnerships of $4 million in Non-U.S. Plans, measured using NAV as a practical expedient.
The other postretirement benefit plan had $120 million and $152 million of other investments measured using NAV as a practical expedient at December 31, 2020 and 2019, respectively.