Run-off cover

Run-off cover, or extended reporting period, prolongs the ability to report claims under a claims-made policy after its expiry. In claims-made policies, only a claim reported during the validity period is covered; yet harmful facts occurring during cover may only give rise to a claim years later. Run-off bridges this gap by maintaining cover for future claims linked to prior facts. It is central in structuring transactions: company sale, merger, cessation of activity, departure of a director, where one wishes to freeze past exposure. For directors and officers liability, a multi-year run-off cover is frequently negotiated on an acquisition to protect former board members. The underwriter must assess the loss tail specific to the line, since some risks emerge very late, lengthening the tail of the claims distribution.