What does 'short-tail insurance' refer to?

'Short-tail insurance' refers to insurance claims that are typically settled quickly, usually within a year. This characteristic is seen in lines of insurance where the time between the occurrence of the event and the reporting of the claim is relatively brief, allowing insurers to process and pay claims promptly. Such lines of insurance often include products like property, motor, and certain types of liability coverage, where the loss events can be identified and quantified in a short timeframe.

The nature of short-tail insurance contrasts with long-tail insurance, where claims may be settled many years after the event due to prolonged investigations, legal proceedings, or ongoing medical treatments. These distinctions highlight the importance of understanding the claims settlement process and the associated cash flow implications for insurers, which is critical for effective risk management and financial planning in the insurance industry.