Long-tailed Business

Definition

Types of insurance in which claims may be made long after the end of the insured period. A long-tail liability is type of liability that carries a long settlement period, over 2-5 years. 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.

This comes from the distribution of cash flows over time showing a long tail.

The opposite of long-tailed business is short-tailed business.

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