Definition

“Discontinued business” is “Run-off”

Business underwritten in the past (e.g. in a particular class of business) for which underwriting provisions still exist, but no new business is underwritten is termed “Run-off” or “discontinued business”.

Run-off occurs when as a result of business policy decisions insurers no longer write new business – in particular lines of business, sector, regions or entire companies.

When business ceases, so does income from premiums. However, known and as-yet unreported claims still have to be settled. These are recognised in the insurer’s balance sheet in underwriting provisions, which need to be regularly reviewed until the Run-off is complete and no further claims are expected. With the introduction of Solvency II (2012), these underwriting risks will have to be backed by equity.

Run-off is a consequence of ceased underwriting