Question 1

What does a sunset clause primarily measure to decide whether a claim is covered?

Accepted Answer

The date the claim is reported or notified, relative to a fixed deadline after expiry — A sunset clause cuts off liability based on when a claim is reported, not when the underlying exposure originally occurred — even a genuinely covered loss can be time-barred if reported too late.

Question 2

Why do sunset clauses matter most for long-tail casualty business?

Accepted Answer

Because casualty claims can take many years to emerge, so an open-ended tail creates lasting uncertainty for the reinsurer — Long-tail classes are exactly where claims can otherwise keep emerging for decades, so a sunset clause gives the reinsurer a defined point at which its exposure is finally closed.

Sunset Clause

The full write-up is free for members

Related terms