Liberty Mutual Insurance has signed a definitive agreement with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway, on a combined aggregate adverse development cover for substantially all of its US workers compensation, asbestos and environmental liabilities.

Liberty Mutual HQ

Under the terms of the deal, NICO will offer a combined aggregate adverse development coverage for substantially all of Liberty Mutual Insurance’s US workers compensation, asbestos and environmental liabilities, attaching at nearly $12.5bn of combined aggregate reserves with an aggregate limit of $6.5bn.

In connection with the agreement, Liberty Mutual Insurance has ceded about $3.3bn of existing liabilities under a retroactive reinsurance agreement, effective as of 1 January 2014.

NICO will provide approximately $3.2bn of additional aggregate adverse development cover.

The reinsurance deal encompasses Liberty Mutual Insurance’s potentially volatile US asbestos and environmental liabilities arising under policies of insurance and reinsurance with effective dates before 1 January 2005.

It also covers commercial Insurance’s workers compensation liabilities as respects injuries or accidents occurring before 1 January 2014.

As per the terms of the agreement, NICO will assume responsibility for claims handling related to Liberty Mutual Insurance’s asbestos and environmental claims.

Liberty Mutual Insurance chairman and CEO David Long said: "We believe that this agreement further strengthens our financial position as it eliminates a substantial source of uncertainty in these liabilities and allows us to focus on execution in our core businesses."

TigerRisk Partners and Skadden, Arps, Slate, Meagher & Flom served as advisors to Liberty Mutual Insurance.

Image: Liberty Mutual Insurance corporate headquarters at 175 Berkeley Street, Boston. Photo: courtesy of User54871.