Definition
A claims-made policy provides cover when two conditions are simultaneously met: (1) the act, omission or event giving rise to the claim occurred on or after the policy's retroactive date; and (2) the claim is first made and reported to the insurer during the policy period (or within any agreed extended reporting period).
Vs occurrence-based policies
| Feature | Claims-Made | Occurrence |
|---|---|---|
| Trigger | Date the claim is first made | Date the injury/loss occurred |
| Post-expiry claims | Not covered (without run-off) | Covered if loss occurred during policy period |
| Retroactive date | Critical — earlier date = broader cover | Not applicable |
| Long-tail risk management | Managed by requiring timely notice | Risk stays with insurer of the year of loss |
| Common lines | D&O, professional liability, cyber, E&O | General liability, property, engineering |
Retroactive date
The retroactive date is the cut-off point before which no covered event can have occurred. Acts or omissions before this date are excluded from coverage, even if the claim is made during the policy period.
The further back the retroactive date, the broader the cover. On a first-year policy the retroactive date typically equals the inception date. When renewing, keeping the retroactive date the same — rather than rolling it forward to the renewal date — preserves cover for all events throughout the company's history under that programme.
Key risk: When switching insurers, the new insurer may refuse to accept the previous retroactive date. Events that occurred between the old retroactive date and the new one will then fall into a gap — covered by neither policy.
Run-off (extended reporting period)
Run-off cover (also called an extended reporting period or ERP) is an endorsement or separate policy that, after a claims-made policy expires, extends the period during which claims arising from events in the prior policy period may still be reported and covered.
Run-off periods typically range from 12 months to 5+ years depending on the line. In D&O, a full run-off of 6 years is common after a company sale.
When run-off is essential
- Company acquisition or merger — directors and officers need protection for acts before the deal
- Ceasing operations — no future policy to renew into
- Switching insurer without retroactive date continuity
- Professionals winding down a practice (professional liability / E&O)
Worked example
A company holds a D&O policy from January 2023 to December 2023. Retroactive date: January 2023.
- March 2023: a board decision is taken.
- June 2024 (policy expired): a shareholder files a lawsuit and the company notifies the insurer.
- Result: No cover — the claim was made after the policy expired and no run-off was purchased.
Had the company purchased a 2-year run-off at expiry, the June 2024 claim would fall within the extended reporting period and be covered.
Lines that use claims-made form
- D&O (Directors' & Officers' Liability): the most common claims-made line globally
- Professional Indemnity (E&O / PI): law, accountancy, engineering, consulting
- Cyber Insurance: breach discovery often lags the incident; claims-made aligns trigger with notification
- Environmental Liability: contamination can take years to surface
Common pitfalls
Rolling the retroactive date forward at renewal
If the renewal endorsement updates the retroactive date to the renewal inception date, all prior-year events lose coverage. Always verify the retroactive date on each renewal document.
No run-off when cancelling or switching insurer
Events from prior years remain unresolved. A claim filed even years later will find no policy in force.
Assuming occurrence and claims-made work the same
A manager used to an occurrence-based general liability policy can be seriously underprotected if they do not understand why the claims-made D&O policy requires prompt notification and why letting it lapse is a major risk.
Sources
- SEDDK — D&O and Professional Liability Insurance General Conditions (Turkey)
- Lloyd's of London — D&O Technical Manual
- AIRMIC — Run-Off Guidance for Risk Managers