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What is run off insurance?

What is run off insurance?

Last updated May 20, 2021 by Kristopher Marsh

Run off insurance is an important consideration for an organisation and its management when considering long-tail exposures. A claims made policy requires that a current policy be in place if any claim is to be accepted by an insurer. Without prudent deliberation following a change in control or policy non-replacement, individuals may be unnecessarily at risk.

In this article, we will explore the concept of run off insurance in the context of the following coverages:

  • Directors and officers liability insurance
  • Employment practices liability insurance
  • Management liability insurance
  • D&O insurance for nonprofits

You may also find that similar concepts apply to a broad range of financial lines insurances, such as professional indemnity insurance, cyber insurance, and even crime insurance to a certain extent. Keep in mind, however, that each policy is strictly interpreted according to its own terms and conditions.

Contents
1 Run off insurance: A definition
2 Relationship to a claims made policy
3 The significance of prior acts coverage
4 The consequences of a change in control
5 Why does a policy convert into run off?
6 How a policy’s conversion affects coverage
7 What is an extended reporting period?
8 Why a discovery period is a solution to non-replacement
9 Run off insurance: An example
10 Conclusion

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Filed Under: New

About Kristopher Marsh

Insurance and risk management professional. Connect with me on LinkedIn.

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