Liberty Mutual believes the hit from Covid-19 will be limited in scope, but says the evolving political situation could lead to a bigger impact

Liberty Mutual chairman and CEO David Long believes his firm is financially strong, but has concerns about the evolving litigative and political situation (Credit: Liberty Mutual)

Liberty Mutual says the impact of Covid-19 on its 2020 financial results will be like “a moderately-sized catastrophe loss”, but that uncertainty around court action and political decisions could result in a bigger hit.

Liberty Mutual Holding Company, the parent of insurance firms operating under the Liberty Mutual umbrella, said it’s likely to see larger losses through its portfolio of investments due to the current market downturn.

Business interruption insurance, the product that’s seen the most attention in discussions around Covid-19, is one area of exposure the company is concerned about, but it also said increased claims in other areas could lead to a bigger hit to its balance sheet.

Liberty Mutual chairman and CEO David Long said: “While the pandemic is still evolving, from a financial perspective we expect the impact of Covid-19 on our insurance operations to be similar to those we have experienced for a moderately sized catastrophe loss.

“The areas of our business most exposed to insurance losses related to the pandemic and resulting economic downturn include trade credit, general liability, workers compensation, and event cancellation coverage, among others.”


Liberty Mutual confident in financial strength despite Covid-19

Experts in the US believe the rejection of claims on business interruption insurance, a current trend seen in the country as well as elsewhere in the world, will lead to a raft of lawsuits, as well as the possibility of government intervention — both of which could force insurers to pay out and drive some to insolvency.

But despite this, Liberty Mutual believes it has enough in reserves to weather the storm.

“Our liquidity position remains excellent, with access to over $6bn in total, not including current cash on hand of $1.4bn,” said Long. 

“We are confident in the strength and resiliency of our operations to allow us to endure these uncertain times and continue to serve our customers.”

According to the American Property Casualty Insurance Association, estimated closure losses for small businesses with 100 or fewer employees are between $255bn and $431bn per month, while the total monthly premium for all commercial property risk written by the industry is $6bn.