Liberty Mutual, the auto and home insurer, on Wednesday agreed to buy Safeco for $6.2bn in a deal that creates the fifth largest-US property and casualty insurer and could herald further consolidation in the industry.

Boston-based Liberty Mutual is paying $68.25 per share in cash to acquire Safeco, a 51 per cent premium to the Seattle-based insurer’s closing price on Tuesday of $45.23. It is the largest insurance industry deal since St. Paul merged with Travelers in a $16bn deal in 2003.