A Singapore professional services firm renews its professional indemnity insurance every year. One year, they decide to switch to a different insurer at renewal. The new policy is cheaper, the limit is the same, and the coverage description looks identical. Six months later, a client brings a claim relating to work the firm did two years ago.
The claim is declined.
The reason is not the coverage description. It is the retroactive date. The new insurer's policy started covering the firm's work from the inception date of the new policy. The work that gave rise to the claim was done before that date. On a claims-made policy, the work done before the retroactive date is simply not covered, regardless of whether the claim itself is made during the policy period.
This is the claims-made and occurrence distinction, and it is the single most consequential structural difference in commercial insurance that most Singapore business owners do not understand until a claim reveals it.
What claims-made means
A claims-made policy responds to claims that are first made against the insured during the policy period, provided the act or event that gave rise to the claim occurred after the retroactive date.
The key word is made. It is not when the professional act occurred, not when the client suffered the loss, and not when the insured became aware of a problem. It is when the claim is formally made: when the client's lawyer sends a letter, when legal proceedings are commenced, or when a formal regulatory notice is received.
Two dates matter on every claims-made policy. The retroactive date, which is the earliest point in time from which the policy will cover acts or omissions that give rise to a claim. And the policy period, which is the window during which the claim must be made for the policy to respond.
A claim that is made during the policy period but arises from work done before the retroactive date is not covered. A claim arising from work done after the retroactive date but made after the policy has expired is also not covered, unless the policy includes an extended reporting period provision.
Professional indemnity, Directors and Officers, and cyber insurance in Singapore are almost always written on a claims-made basis. This is not unusual or problematic if the policyholder understands it. It becomes problematic when they do not.
What occurrence means
An occurrence policy responds to events that occur during the policy period, regardless of when the claim is made.
A public liability policy written on an occurrence basis covers a third-party injury that occurs on your premises during the policy year, even if the injured person does not bring a claim until two years later. The policy that was in force when the event occurred is the policy that responds, not the policy in force when the claim is made.
Work Injury Compensation insurance in Singapore is written on an occurrence basis. An employee injured at work during the policy period is covered by that year's policy, even if the claim and the legal process extend into subsequent years.
The difference matters most when something changes: a policy is cancelled, an insurer is switched, the business ceases to trade, or a claim arrives years after the event.
The three scenarios where the distinction matters most
Scenario 1: Switching insurers at renewal
This is the most common scenario where the claims-made structure catches Singapore businesses by surprise.
When a professional services firm switches its PI policy to a new insurer at renewal, the new insurer will offer a retroactive date. In competitive renewals, the new insurer may offer to match the retroactive date of the previous policy, meaning the new policy covers work going back as far as the original policy did. But this is not automatic, and it is not always what happens.
If the new insurer's retroactive date is set at the inception date of the new policy, the switch has created an uninsured gap for all work performed before that date. The old policy has expired and will not respond to new claims. The new policy will not respond to claims arising from work done before its retroactive date. Work performed during the previous policy period is, in practical terms, uninsured for any claim made after the switch.
Before switching insurers at renewal, the key question to ask is: what retroactive date will the new insurer offer, and does it match or pre-date the retroactive date on the current policy?
Scenario 2: Letting a policy lapse
A business that allows its PI or D&O policy to lapse, even briefly, creates a gap in its claims-made coverage.
If a policy expires on 31 December and the renewal is not completed until 15 January, there are 15 days during which no claims-made policy is in force. A claim made during those 15 days has no policy to respond to, even if the work that gave rise to the claim was performed years earlier when a policy was in force.
For businesses in professional services or with a board that carries ongoing governance obligations, a lapse in claims-made coverage is not a minor administrative issue. It is a coverage gap that cannot be retrospectively filled.
Scenario 3: Ceasing to trade or winding down
When a business closes, its claims-made policies expire. Claims arising from work performed before closure can still be made against the former directors and the entity for years after it ceased operating. The Companies Act limitation period for claims is generally six years.
A business that winds down without arranging runoff cover leaves its former directors and the entity exposed to claims arising from prior professional acts, governance decisions, or data protection failures, with no policy in place to respond.
Runoff cover, sometimes called tail cover, is a claims-made policy extension that provides coverage for claims made after the policy period ends, for acts that occurred before the policy expired. It is arranged at the point of winding down, typically for a period of three to six years. For professional services firms, technology companies, and companies with a board of directors who have carried governance responsibility, runoff cover is a practical step that is worth including in any wind-down or exit planning process.
Why the retroactive date matters so much
The retroactive date is the anchor of a claims-made policy. The further back it reaches, the more of the business's professional history is covered.
A firm that arranges PI insurance at incorporation and maintains it continuously captures a retroactive date close to the founding of the business. Every professional act from that point forward is covered by the current policy, as long as the policy remains in force and the retroactive date is carried forward at each renewal.
A firm that first arranges PI five years into its operations has a retroactive date that leaves five years of prior professional work uninsured. Any claim arising from work done in those five years, even if made today, falls outside the coverage window.
This is one of the most practical arguments for arranging PI and D&O insurance at an early stage rather than waiting until a contract requires it or a fundraise demands it. The earlier the policy is in place, the further back the retroactive date reaches, and the more complete the coverage window becomes. We discussed this in the context of Singapore startups in our post on Insurance for Singapore Startups.
What to check at every renewal
For every claims-made policy at renewal, three questions are worth asking.
First, is the retroactive date being maintained at the same point as the expiring policy? A retroactive date that moves forward at each renewal progressively reduces the coverage window for prior work.
Second, if switching insurers, what retroactive date is the new insurer offering, and does it match or pre-date the retroactive date on the current policy?
Third, if the business is considering allowing a policy to lapse, winding down, or significantly changing its activities, is runoff cover or an extended reporting period appropriate?
For occurrence-based policies, the renewal conversation is structurally simpler: the policy in force when the event occurs is the policy that responds, and there is no retroactive date to manage. But confirming that the sum insured and coverage scope remain adequate for the current activities of the business is the equivalent review for occurrence policies.
You can read more about our professional indemnity cover, D&O cover, cyber insurance, public liability cover, and WIC cover on the products page.
If you would like to understand how the claims-made structure applies to your current insurance programme, or what the retroactive date position looks like across your policies, we would be glad to work through it with you.
This article provides general information only. It is not insurance advice. Policy structures, retroactive dates, and coverage conditions vary by insurer and product, and cover is subject to the full policy wording. Please contact TZY CO for advice on your specific situation.