Category: Terms

A long-tail liability is a type of liability that carries a long settlement period. Long-tail liabilities are likely to result in high incurred but not reported (IBNR) claims, because it may take a long period of time for the claims to be settled.

• A long-tail liability is a type of liability that carries a long settlement period.
• Liability insurance claims often involve large sums of money and can result in a settlement as well as a lengthy court case.
• Examples of long-tail liabilities include medical malpractice, employment discrimination, and cases of child abuse.

When a claim event occurs there will be some time before it is reported or notified to the insurer – this is known as a claim reporting delay. The insurer will incur numerous claims in a calendar year, and each of those claims will have a claim delay.

The reporting delay is the time from the event occurrence through to the time that the insurance company is notified of the event. There may be delays due to:

• the time between an event occurring and the condition emerging
  
  e.g. for industrial diseases such as asbestos or from environmental pollution.
  
  
• the time taken for the policyholder to advise the insurer – possibly because
  • the amount involved is quite small.
  • they do not realise that there is cause for claiming