Run-off
Run-off has two common insurance meanings: an insurer that has stopped writing new policies while handling claims on existing ones, and run-off cover, often called tail, that protects directors and officers against claims about past acts after a sale, merger, or wind-down.
Last updated October 13, 2026
How run-off works
Insurer run-off. The Bank of England describes an insurer as in run-off when it has stopped issuing new insurance contracts. Existing policies stay in force and claims continue to be handled and paid. This can happen when an insurer is closing down or when a solvent insurer chooses to exit a line of business.
Run-off cover for a company. A claims-made policy, such as directors and officers liability, often limits coverage after a change in control, which includes a sale or merger. Run-off cover keeps protecting former directors and officers for claims made after the transaction that allege wrongful acts before it. Commonly quoted terms are up to six years, and the cover is usually bought for a one-time premium, though practice varies.
Terminology overlaps. Some advisers treat run-off, tail coverage, and an extended reporting period as the same idea, while others treat run-off as a separate policy that can last longer than an extended reporting period in the existing policy. See our guide to wind-down insurance coverage.
Example
A hypothetical startup is acquired. The buyer's insurance covers the combined business going forward, but the startup's own D&O policy ends at closing. To protect its former board, the sellers arrange a six-year run-off policy. Two years later, a former shareholder alleges the directors mishandled the sale price. The run-off policy may respond to the former directors' defense costs, subject to its terms and limits.
What to watch for
- Run-off is not automatic. It is usually arranged before or at closing, and the purchase agreement may require it.
- The limit is fixed and shared by every claim during the run-off period. Defense costs typically reduce it.
- Check for exclusions and limits on claims that span both before and after closing, and whether lines such as employment practices are included.
- The mix of meanings causes confusion. Confirm which one is meant when a contract or policy uses the word.
Run-off vs. related terms
- Change in control provisions. Many D&O policies convert to run-off when the company is acquired. Coverage continues for wrongful acts before the transaction but generally ends for acts after it. The policy wording sets the details, including how long the run-off lasts.
- Wind-down. A wind-down is the business process of closing a company. Run-off is the insurance that can respond to claims that arrive afterward. See the guides to wind-down insurance coverage and run-off and tail insurance.
- Insolvency. An insurer in run-off is not necessarily insolvent. Many are solvent and have simply stopped writing new business. Still, a policyholder with open claims should ask who is handling them.
- Extended reporting period and tail. These are commonly used for the same purpose, giving extra time to report claims after a policy ends. They are often an option inside the expiring policy, while a run-off policy may be a separate contract with a longer term. Terminology overlaps, so ask for the exact terms.
Second example: a shutdown
A hypothetical start-up fails to raise a new round and its board decides to dissolve the company. The D&O policy is about to expire and will not be renewed. The board arranges run-off cover before the policy ends. Once the company is gone, there may be no entity left to indemnify the directors, so Side A protection becomes the main protection. A year later, a former vendor and a former employee each bring claims against the directors. The run-off policy may respond to the defense costs for claims about pre-shutdown acts, subject to its limit, exclusions and conditions. Whether employment claims are included depends on the coverage parts that were purchased.
Questions to ask your broker or underwriter
- Does the D&O policy convert to run-off automatically on a change in control, and for how long?
- Is there a stated option to buy an extended period, what does it cost, and by when must it be elected?
- Which coverage parts are included, such as employment practices and fiduciary liability?
- What is the limit, and is it the same as the expiring limit or reduced by past payments?
- Does the purchase agreement require someone to arrange and pay for run-off, and who owns the right to buy it?
- How does the policy treat claims arising from the transaction itself, and are defense costs inside the limit?
- If our own insurer is in run-off, who now handles claims, and how can we confirm their authority and financial standing?
Why it matters for technology, AI, fintech and digital-asset companies
Acquisitions, acqui-hires, and wind-downs after a failed fundraise are common outcomes for venture-backed companies. Founders and board members can face claims long after a deal closes. Plan the run-off cover as part of the transaction. See D&O coverage.
Venture-backed companies can end up in a sale, an acqui-hire, a merger or a closure within a few years, and claims can follow from investors, customers, employees, creditors or regulators. Fintech and digital-asset companies in particular may face regulatory questions long after they stop operating. The retroactive date and the definition of a wrongful act in the expiring policy affect what run-off cover can reach, so it is worth checking them before a transaction closes. See startup insurance by stage and AI and emerging tech for context. Plan run-off alongside the deal timeline, because the right to buy it can expire soon after closing.
Related terms
Frequently asked questions
What does run-off mean in insurance?
Run-off has two common insurance meanings: an insurer that has stopped writing new policies while handling claims on existing ones, and run-off cover, often called tail, that protects directors and officers against claims about past acts after a sale, merger, or wind-down.
What is D&O run-off coverage?
D&O run-off coverage is a policy or extension that continues to protect former directors and officers after a change in control. It responds to claims made after the transaction that allege wrongful acts before it. Terms of up to six years are commonly quoted, but it depends on the deal and the insurer.
Is run-off the same as tail coverage?
Often the terms are used interchangeably, especially for D&O. Some advisers distinguish them, treating run-off as a separate policy and an extended reporting period as an option inside the existing one. Check the policy or quote to see exactly what is being offered.
What happens to policies when an insurer goes into run-off?
Existing policies generally remain in force and the insurer keeps handling and paying claims under them, but it stops selling new policies. Renewal may not be offered, so policyholders usually need a new carrier at expiry. Details depend on the insurer and the regulator.
Is run-off insurance required when a company is acquired?
It is generally a matter of contract and not a legal requirement, but purchase agreements often call for it and it is commonly negotiated. Whether run-off is required in a specific deal depends on the agreement, so ask your deal counsel and broker early.
Who pays for D&O run-off coverage?
It is commonly bought for a one-time premium, and the deal terms decide who pays. The company, the buyer or the sellers may bear the cost, depending on what the purchase agreement says. Practice varies, so confirm it in the transaction documents.
Does run-off cover claims about acts after the sale?
No. Run-off cover protects former directors and officers against claims alleging wrongful acts before the transaction. Acts after closing belong to the buyer's insurance program for the combined business.
Is an insurer in run-off the same as an insolvent insurer?
No. Run-off means the insurer has stopped writing new policies. Many are solvent and keep paying claims on existing policies. Some in run-off do later become insolvent, so ask who handles claims and what financial protection exists.
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