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📋 '''Occurrence basis''' is a [[Definition:Policy trigger | policy trigger]] mechanism under which a [[Definition:Liability insurance | liability insurance]] policy responds to losses arising from events that take place during the policy period, regardless of when the resulting [[Definition:Claim | claim]] is actually reported to the [[Definition:Insurance carrier | insurer]]. This stands in contrast to a [[Definition:Claims-made basis | claims-made]] trigger, where coverage depends on when the claim is first made or reported rather than when the underlying event occurred. Occurrence-based policies are widely used in [[Definition:General liability insurance | general liability]], [[Definition:Property insurance | property]], and [[Definition:Auto insurance | motor insurance]] across virtually all major markets, though the relative prevalence of occurrence versus claims-made structures varies by line of business and jurisdiction.

⚙️ Under an occurrence-based policy, if a covered incident — such as a slip-and-fall injury on commercial premises — happens on March 15 of a given policy year, the policy in force on that date responds even if the injured party does not file a lawsuit until two or three years later. This creates what insurers call a "long tail" of potential [[Definition:Loss reserves | reserve]] liability, because the carrier must estimate and set aside funds for claims that may not surface for years after the policy expires. [[Definition:Actuarial science | Actuaries]] play a critical role in projecting these [[Definition:Incurred but not reported (IBNR) | incurred but not reported]] liabilities, and the accounting treatment differs across regimes: [[Definition:US GAAP | US GAAP]], [[Definition:IFRS 17 | IFRS 17]], and local statutory frameworks each impose distinct [[Definition:Reserving | reserving]] and discounting requirements on these long-tail obligations. For [[Definition:Reinsurance | reinsurers]], the occurrence trigger also defines how losses attach to [[Definition:Treaty reinsurance | treaty]] or [[Definition:Facultative reinsurance | facultative]] contracts, making the precise dating of occurrences a frequent source of contractual dispute.

💡 The choice between occurrence and claims-made coverage has far-reaching implications for both policyholders and carriers. Policyholders benefit from occurrence-based coverage because it eliminates gaps that can arise when switching insurers or when a policy lapses — the original policy remains responsible for events during its term indefinitely, subject to statutes of limitation. However, this open-ended exposure makes occurrence policies more expensive to price and more capital-intensive for insurers to support, which is why certain long-tail lines such as [[Definition:Professional liability insurance | professional liability]] and [[Definition:Directors and officers liability insurance (D&O) | directors and officers liability]] have largely migrated to claims-made forms. Understanding which trigger applies is essential during [[Definition:Policy placement | placement]] and [[Definition:Claims management | claims handling]], since misidentifying the trigger can lead to coverage denials, litigation, and significant financial consequences for all parties involved.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Claims-made basis]]
* [[Definition:Policy trigger]]
* [[Definition:Incurred but not reported (IBNR)]]
* [[Definition:Long-tail liability]]
* [[Definition:General liability insurance]]
* [[Definition:Loss reserves]]
{{Div col end}}

Definition:Occurrence basis - Revision history

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