Insurances acquired in the run-off period

Insurances acquired in the run-off period

An otherwise solvent insurer determines that it wishes to exit from a particular class of insurance contracts, but wishes to continueInsurances acquired in the run-off period underwriting in other classes. This could be the result of strategic considerations, lack of profitability in the to be discontinued class, or a desire to restructure and to focus on the remaining classes. Insurances acquired in the run-off period

Other meanings of run-off in the insurance industry context could be: Insurances acquired in the run-off period

  1. An insurance company will be considered to be in run-off when it ceases to take on-board any new business but will continue to honor existing claims. Usually, when the net balance of the company’s assets and liabilities is such that the insurer does not have the ability to honor all existing policies based on their predicted loss, the company will cease to write new policies and attempt to use their existing assets to pay off any claims arising from existing clients. In such instances, those with existing claims need not worry about their insurer being in a runoff, as their claim will be considered superior to that of any creditor. Insurances acquired in the run-off period
  2. Run-off insurance, on the other hand, is a type of insurance policy that provides liability coverage against claims made against companies that have been acquired, merged, or have ceased operations. Run-off insurance is generally purchased by the company being acquired and protects it and its officers and directors, among other things, from claims and lawsuits, filed relating to the company’s activity subsequent to the date of acquisition.

    This type of policy is also usually a claims-made policy, meaning that coverage is based on the fact the claim may be made several years after the incident that caused damage or loss, and the policy period is based upon the date the claim is presented and not the date of the occurrence subject of the claim. The length of the run-off policy or the “runoff” as it is usually referred to, is typically set for several years after the policy becomes active. The provision is typically purchased by the company being acquired. Insurances acquired in the run-off period

Insurances acquired in the run-off periodAn insurance company will considered to be in run-off when it ceases to take onboard any new business but will continue to honor existing claims. Usually when the net balance of the company’s assets and liabilities is such that the insurer does not have the ability to honor all existing policies based on their predicted loss, the company will cease to write new policies and attempt to use their existing assets to pay off any claims arising from existing clients. In such instances, those with existing claims need not worry about their insurer being in run off, as their claim will be considered superior to that of any creditor. Insurances acquired in the run-off period

Another variant on this scenario is when an otherwise solvent insurer determines that it wishes to exit from a particular class of business, but wishes to continue underwriting in other classes. This could be the result of strategic considerations, lack of profitability in the to be discontinued class, or a desire to restructure and to focus on the remaining classes.

Something else -   Combination of Insurance Contracts

Runoff Provision — a provision in a claims-made policy stating that the insurer remains liable for claims caused by wrongful acts that took place under an expired or canceled policy, for a certain time period. Insurances acquired in the run-off period

For example, consider a policy written with a January 1, 2015-2016, term and a 5-year runoff provision. In this situation, coverage will apply under the runoff provision to all claims caused by wrongful acts committed during the January 1, 2015-2016, policy period that are made against the insured and reported to the insurer from January 1, 2016-2021 (i.e., the 5-year period immediately following the expiration of the January 1, 2015-2016, policy). Insurances acquired in the run-off period

Although runoff provisions function in a manner that is identical to extended reporting period (ERP) provisions, there are several differences. First, ERPs are generally written for only 1-year terms, whereas runoff provisions normally encompass multi-year time spans, often as long as 5 years.

Second, while ERPs are most frequently purchased when an insured changes from one claims-made insurer to another, runoff provisions are generally used when one insured is acquired by or merges with another. In such instances, the acquired company buys a runoff provision that covers claims associated with wrongful acts that took place prior to the acquisition but are made against the acquired company after it has been acquired.

Insurances acquired in the run-off period

Insurances acquired in the run-off period

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Something else -   Insurances risk adjustment for non-financial risks

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