Liberty Mutual, the insurance and reinsurance group, has disclosed its property catastrophe reinsurance arrangements earlier than usual, saying that it has $2.8 billion of per-occurrence limit available and a further $500 million of annual aggregate protection.Typically, Liberty Mutual has disclosed a few details of its reinsurance arrangements with its first-quarter earnings, but this year the re/insurer has opted to make a disclosure earlier.“Given recent and ongoing events, the Company can disclose that it has the following reinsurance in place for its domestic business as of January 1st, 2025,” Liberty Mutual explained, suggesting the announcement is in response to an event, which can only be the California wildfires we suspect.Liberty Mutual said that its property catastrophe reinsurance program consists of protection for large single loss events, as well as an aggregation of smaller and mid-sized catastrophe losses.

The company has a main per-occurrence property catastrophe reinsurance tower than extends to $2.8 billion of protection, in excess of a $1 billion retention, Liberty Mutual said.The occurrence tower has one reinstatement available, the re/insurer noted, while also highlighting that the initial $1.5 billion of per-occurrence reinsurance limit is available on an all-perils basis to the company.Which suggests the occurrence protection would cover a major loss from the Los Angeles, California wildfires, where Liberty Mutual’s ultimate net losses to reach above the $1 billion retention level.

Liberty Mutual also said that it purchased annual aggregate catastrophe reinsurance protection this year, to protect against the frequency and severity of loss.The aggregate reinsurance arrangements provides for $500 million of protection, excess of a $2.4 billion aggregate retention and with a $100 million per-event deductible in place.It’s worth noting that Liberty Mutual Insurance had a more than 4% market share in California in 2023, being exposed on both the homeowners and commercial property side, so the insurer has always been one of those assumed to hold meaningful exposure to the recent wildfires in the Los Angeles region of the state.

It’s worth noting that Liberty Mutual has $775 million of reinsurance limit protection in-force that comes from the capital markets via its Mystic Re catastrophe bond series at this time., remain in-force to protect Liberty Mutual, but $675 million of this limit is within the per-occurrence reinsurance tower, only $100 million in the annual aggregate tower., we explained that Liberty Mutual’s Mystic Re IV Ltd.

(Series 2025-1) Class C notes, a $100 million annual aggregate tranche of cat bond coverage, saw their price move down around 15% in the secondary market.Those cat bond notes share one-fifth of the $500 million aggregate layer Liberty Mutual referred to, attaching at $2.4 billion and exhausting at $2.9 billion, with an event deductible of $100 million.The notes also have a wildfire cap of $500 million for events outside California, but no cap for events that occur within the state.

It’s safe to assume the LA wildfires will breach that aggregate deductible and accelerate the erosion of the retention beneath the aggregate coverage.But analysts do not believe Liberty’s losses from the wildfire would come close to attaching the aggregate reinsurance, it appears.On the occurrence side, could Liberty’s wildfire losses reach the $1 billion retention level to activate its reinsurance coverage? At this stage it remains unknown.

But, by opting to highlight its reinsurance arrangements publicly in a press release, it perhaps suggests the insurer is keen to ensure its stakeholders know it is well-protected.Finally, it’s perhaps worth pointing out that Liberty Mutual used to have collateralized quota share reinsurance protection through its Limestone Re sidecars.It’s not known whether the company continues to have sidecar support (), but these arrangements would certainly have responded to an event like the wildfires..

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