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Run-Off

A termination provision of a reinsurance contract that stipulates that the reinsurer remains liable for loss as a result of occurrences taking place after the date of termination for reinsured policies in force at the date of termination until their expiration or for a specified time period.
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UK: the continuing liability of an insurers in respect of a block of past business, for example where a reinsurance contract has been terminated but a liability remains in respect of risks or cessions accepted during the period of the agreement, or where an insurer has ceased to accept new business but has not settled all outstanding claims arising on old business.

Run-off account

A year of account of a Lloyd’s syndicate which has been left open after the date at which that account would normally have been closed by reinsurance. See OPEN YEAR.
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A year of account which has not been closed as at the date at which it would normally have been closed and which remains open.

Run-Off Basis

A valuation basis that assumes an insurer will cease to write new business, and continue in operation purely to pay claims for previously written policies. Typically expenses and reinsurance arrangements change after an insurer ceases to write new business.

Run-off broker

A broker that provides the broking support for business in run off. At Lloyd’s, Lloyd’s brokers that undertake to limit their business to acting as a run off broker are given a dispensation from a number of requirements that otherwise apply to Lloyd’s brokers.

Run-off liability

The potential liability of a losses-occurring liability insurer in respect of occurrences that occurred while they were on risk being reported as claims after the expiry of their policy. Contrast with claims-made policy where the run-off risk attaches to the insured who may be faced with a claim after the policy has terminated. See LONG-TAIL.

Run-Off policy

A claims-made insurance policy that affords coverage for claims made during the policy period only if the claims are for wrongful acts committed prior to the policy period. A run-off policy is most frequently purchased following the acquisition of the insured company. Because the directors and officers of the acquired company may be replaced or removed following the acquisition, those directors and officers typically purchase prior to the acquisition a prepaid, noncancellable multiyear run-off insurance policy that cannot be amended or affected in any way by the acquiring company or subsequent management. That policy covers future claims arising out of conduct by the directors and officers prior to the acquisition.