Whear, David; Haken, Bob --- "Closing Books of Business: The Challenge of Fairness and Finality" [2012] ELECD 162; in Burling, Julian; Lazarus, Kevin (eds), "Research Handbook on International Insurance Law and Regulation" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on International Insurance Law and Regulation

Editor(s): Burling, Julian; Lazarus, Kevin

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849807883

Section: Chapter 8

Section Title: Closing Books of Business: The Challenge of Fairness and Finality

Author(s): Whear, David; Haken, Bob

Number of pages: 28

Extract:

8 Closing books of business: the challenge of fairness
and finality
David Whear and Bob Haken



1. BACKGROUND AND INTRODUCTION

An insurance or reinsurance policy can give rise to liabilities which extend many years
beyond the year in which the policy was written, so-called `long-tail' liabilities. Insurers
are required to make technical provisions against such liabilities and to hold regulatory
capital to support them. This applies equally to insurers who continue to accept insurance
business and those who have ceased to accept business and may be said to be in `run-off',
although the practical sanctions available to regulators for insurers in run-off who fail to
meet prudential regulatory requirements tend to be somewhat weaker than those available
against active insurers.
Long-tail liabilities have, in particular, arisen out of occurrence-based liability policies,
where the policy responds to claims relating to risks covered by the policy as long as the
insured peril or event occurred during the policy period; such claims (for example in
relation to asbestos, pollution, health hazard and product liability)1 frequently arise and
are asserted years or decades after the claimant's latent exposure to the product, substance
or other peril.2
Long-tail liabilities are not, however, confined to occurrence-based policies. For exam-
ple, a decade on, laddering claims asserted under Directors' and Officers' policies in the
wake of the dot-com boom are not all settled and insurers still hold reserves against those
claims.3 Product and other liability ...