[[Actuarial Notes Wiki|Wiki]] / [[Exam 5 (CAS)]] / **Claims-Made Coverage** ## Definition ==Claims Made Coverage== Claims-made coverage is an insurance policy form that covers claims that are reported during the policy period, regardless of when the loss occurred (subject to retroactive date). ## Key Features ### Coverage Trigger Claim must be **reported** during policy period: - Report date within policy term - May require occurrence after retroactive date - Immediate coverage cutoff at expiration - Extended reporting period (ERP) available ### Example ``` Policy Period: 1/1/2024 - 12/31/2024 Retroactive Date: 1/1/2020 Loss occurs: 6/15/2023 Claim reported: 9/1/2024 Result: COVERED (occurred after retro date, reported during policy) ``` ## Retroactive Date Earliest date of loss that can be covered: - Establishes coverage boundary - Typically policy inception date for first year - Carried forward in renewal - Creates "gap" coverage without proper transition ## Extended Reporting Period (ERP) Coverage for claims reported after expiration: - Also called "tail coverage" - Covers occurrences during policy period - Reported after expiration - Purchased at additional premium ## Advantages - Lower initial premium - Limits insurer's tail exposure - Faster claim closure - Better matched premium/losses ## Disadvantages - Need continuous coverage - Gap risk if lapse - ERP cost at cancellation - More complex to understand ## Ratemaking Implications ### Data Organization **Report year** is natural: - Matches coverage trigger - Shorter development - Faster emergence ### Reserve Development - Shorter tail - Lower IBNR percentage - Quicker settlement ## Common Lines - Professional liability (D&O, E&O) - Medical malpractice - Environmental liability - Products liability (some) ## Related Concepts - [[Occurrence Coverage]] - [[Report Year]] - [[IBNR Reserves]] ## References - Werner & Modlin, Chapter 3