Liberty Mutual Drops Small Business Insurance in California

Published Date: 01/17/2024

California’s insurance crisis is no longer limited to homeowners. In another major sign of mounting market strain, Liberty Mutual has announced it will stop offering its Business Owner’s Policy (BOP) across California beginning this fall. The decision affects thousands of small businesses and signals deeper instability in the state’s commercial insurance market.

ABC 10 Sacramento first reported the change on To The Point with Alex Bell, confirming that Liberty Mutual will stop writing new BOP policies on October 1, 2024, and begin non-renewing its entire existing BOP book by December.

This move marks one of the most significant commercial insurance pullbacks in California to date—and small business owners are being forced to react quickly.

What Liberty Mutual Is Eliminating

Liberty Mutual’s Business Owner’s Policy is a bundled insurance product designed for small and mid-sized businesses. It typically combines:

• Commercial property coverage
• General liability coverage
• Business interruption insurance

The BOP is commonly used by small retail stores, professional offices, restaurants, cafés, salons, and service-based businesses.

After October 1, Liberty Mutual will stop issuing new BOPs. By December, all existing BOP policies will begin non-renewing, regardless of claims history.

This means thousands of California businesses will need to secure replacement coverage before year’s end.

Why Liberty Mutual Is Exiting the BOP Market

In its letter to agents and brokers, Liberty Mutual cited California’s “adverse market conditions” as the reason for withdrawing the product line.

Those conditions include:

• Inflation-driven construction and repair costs
• Rising reinsurance expenses
• More frequent and severe weather-related losses
• Regulatory restrictions that limit pricing flexibility
• An outdated system that relies on historical loss data instead of predictive modeling

ABC 10 reported that while Liberty Mutual remains active in other commercial lines, the company determined that the BOP product was no longer financially sustainable under current conditions.

The California Department of Insurance confirmed the exit and noted that BOPs represent roughly 1% of Liberty Mutual’s overall commercial business in the state—small in percentage, but large in real-world impact.

The Growing Non-Renewal Problem

Liberty Mutual’s decision is part of a broader pattern of non-renewals and underwriting pullbacks throughout California’s insurance market.

Over the past year, major carriers including State Farm, Allstate, and Farmers have significantly reduced new business in both residential and commercial lines. Now, those same pressures are firmly hitting small business insurance.

For Liberty Mutual BOP holders, the change is not a partial pullback—it is a full exit. Every policy in this class will be non-renewed, even for long-term, low-claim customers.

For many businesses, this will mean higher premiums, stricter underwriting, and fewer carrier options.

The Bigger Market Breakdown Behind the Decision

Liberty Mutual’s move reflects a systemic breakdown across California’s insurance landscape.

Climate volatility, inflation, and regulatory lag have upended traditional pricing models. Insurers are required under Proposition 103 to base rates on historical loss data—even as wildfire behavior, atmospheric rivers, and climate-driven disasters grow faster and more severe than past experience can predict.

As ABC 10 reported, many of the actuarial models insurers relied on for decades “have pretty much gone out the window.”

The result is a widening gap between what carriers are allowed to charge and what they are actually paying in claims. As that gap expands, insurers are forced to either raise rates, restrict underwriting, or exit product lines entirely.

What This Means for Small Businesses

The immediate consequences of Liberty Mutual’s exit will fall squarely on California’s small business community—many of which already face rising rent, labor costs, and economic uncertainty.

For many businesses, insurance is not optional. Landlords, lenders, and contracts often require proof of coverage. Losing a BOP without securing replacement insurance can jeopardize:

• Lease agreements
• Commercial loans
• Vendor contracts
• Operating permits

As carriers withdraw, remaining insurers are overwhelmed with new applications, creating longer processing times, higher premiums, and stricter underwriting standards.

For some businesses, excess and surplus (E&S) lines may become the only option—often at significantly higher cost and with fewer consumer protections.

The Economic Ripple Effect

Insurance pullbacks create cascading effects far beyond individual policyholders.

As commercial coverage shrinks:

• Business owners delay expansions and renovations
• Property owners struggle to insure leased buildings
• Lenders tighten credit due to uninsured collateral
• Local economic development slows

Pressure also increases on the commercial side of the California FAIR Plan, even though that system is not designed for large-scale business participation and offers limited, costly coverage.

What begins as an insurance problem quickly becomes a financing, employment, and community stability problem.

The State’s Official Response

The California Department of Insurance acknowledged Liberty Mutual’s exit from the BOP market while emphasizing that the company remains one of the state’s largest commercial carriers in other lines.

The Department encouraged affected businesses to contact their agents and brokers immediately and also directed consumers to seek assistance through:

• California Department of Insurance Consumer Hotline: 1-800-927-4357
• Website: insurance.ca.gov

At the same time, regulators continue to face mounting criticism for the slow pace of regulatory modernization. While Commissioner Ricardo Lara’s Sustainable Insurance Strategy promises reforms—including catastrophe modeling and faster rate approvals—those changes will not be fully implemented until late 2024.

For businesses facing non-renewals this fall, that timeline offers little immediate relief.

What Small Businesses Should Do Now

If your business currently carries or recently carried a Liberty Mutual BOP, immediate action is critical.

• Contact your agent or broker right away to confirm your non-renewal date and begin the replacement process.
• Start shopping early. The commercial market is tight, and approvals can take weeks or months.
• Explore specialty and regional carriers that may still be writing specific business classes.
• Review your coverage carefully to ensure limits, deductibles, and endorsements match your real exposure.
• Document risk mitigation efforts such as fire suppression, security upgrades, and building improvements, which may help underwriting approval.

Waiting until the last minute significantly increases the risk of coverage gaps or forced placement in high-cost markets.

What Liberty Mutual’s Exit Signals About the Market

Liberty Mutual’s decision to abandon the BOP market in California is not an isolated business move—it is a warning signal about the depth of the state’s insurance crisis.

Commercial coverage is now following the same path as homeowners insurance:

• Reduced availability
• Higher premiums
• Narrower underwriting appetite
• Increased reliance on residual market options

While regulatory reform is finally underway, the market is still in a fragile transition period where exits may continue before stability returns.

Final Thoughts

Liberty Mutual’s withdrawal of its Business Owner’s Policy in California underscores how far the insurance crisis has spread—now reaching directly into the small business sector.

For business owners, the message is clear: proactive planning, early shopping, and expert guidance are no longer optional. Insurance must now be treated as a core operational risk, not an administrative afterthought.

For regulators and policymakers, this move is yet another urgent reminder that reform cannot wait.

As one agent put it, when insurers stop writing homes the consequences are serious—but when they begin walking away from small businesses, the economic ripple truly begins.

In today’s California insurance environment, preparedness is no longer just a best practice—it is a survival strategy.