Run-off cover for Directors & Officers insurance sounds simple in theory, but in practice, insurers take very different approaches. Some are supportive and predictable; others give no guarantees at all.

For businesses in the UK’s creative, digital, tech or entertainment sectors, this can cause real problems during a sale or insolvency. Here’s what you need to know.

Some Insurers Offer Pre-Priced, Guaranteed Run-Off Options

The best D&O policies include run-off prices and time periods upfront, usually offering:

• 1 year
• 3 years
• 6 years

This provides certainty. You know:

•  Run-off is guaranteed to be available
• The price is already agreed
• The insurer cannot withdraw the option
• You can activate it immediately when the sale happens

This is ideal, especially because the legal limitation period for most claims is six years.

Some Insurers Require Referral to Underwriters

With these insurers, nothing is guaranteed. At the time of the sale:

• The insurer reviews the situation
• They decide whether to offer run-off
• They can set whatever price they want
• They can attach restrictions
• They can simply decline to provide terms

This can cause major delays during transactions and leaves former directors exposed.

Some Insurers Only Offer One Year at a Time

This is risky because a one-year period rarely matches the real legal exposure. Claims often arise:

• From financial statements
• From client disputes
• From creditors following insolvency
• From allegations of misrepresentation in the sale

Many of these claims take time to surface. A single year of run-off often isn’t sufficient, and if you need to ask for cover to be quoted again every year then you cannot budget effectively.

Some Insurers Provide No Run-Off Option at All

This is the most dangerous situation. Some policies, especially cheaper ones, include:

• No pre-priced run-off
• No guarantee to offer it
• No option at all in the event of insolvency
• No ability for the policyholder to extend cover

Once a sale or insolvency happens, it may simply be impossible to secure run-off leaving directors completely exposed.

Why Not Get Quotes Elsewhere?

Because you can’t.

There is no real standalone market for D&O run-off. Other insurers will not offer run-off to a business that:

• Is no longer trading
• Has changed ownership
• Is entering insolvency
• Has had its risk profile fundamentally altered

Which means:

• If your current insurer refuses run-off, you almost always have nowhere else to go.
• This is why choosing the right insurer before a sale or insolvency is critical.

In Summary

The stance insurers take on run-off varies hugely.

The better providers give long, guaranteed options, with the rest having the remit to provide onerous terms, expensive premiums, short periods, or even no cover options whatsoever.

Because you cannot shop around for run-off at the point of sale or insolvency, the only safe route is choosing a quality D&O policy that pre-quotes and guarantees run-off from day one.

If you’re unsure whether your D&O policy guarantees run-off cover, or you’d like to understand more, please don’t hesitate to get in touch with the team.

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