20 March 2017Insurance

Travelers expects $62m hit from UK Ogden rate slash

US property/casualty insurer Travelers has estimated the impact of UK’s personal injury Ogden discount rate at $62 million.

The Ministry of Justice announced on February 27 that the Ogden discount rate used to calculate the compensation in large motor and liability bodily injury claims would be cut to -0.75 percent from 2.5 percent, effective from March 20. The  rate cut was larger than expected in the sector with severe consequences for the re/insurance industry, increasing claims’ costs and requiring reserves.

Travelers said that it expects to record an increase to prior year loss reserves of approximately $62 million pre-tax ($51 million after-tax) in its first quarter 2017 operating results as a result of the change in discount rate, relating primarily to its public liability and commercial auto liability lines of business in the UK.

The company said that approximately two-thirds of the impact relates to certain books of business that the company had previously exited and are currently in run-off. It added that any impact to its future operating results as a result of this change will be insignificant.

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More on this story

Insurance
13 March 2017   US property/casualty insurer Travelers is acquiring UK-based small and medium-sized enterprises (SME) insurance broker Simply Business from previous owner Aquiline Capital Partners for approximately $490 million.
Insurance
6 March 2017   AXIS Capital Holdings has predicted the impact of the recent Ogden rate change, which impacts the way insurers calculate future losses in personal injury cases in the UK, on its business, expecting it to be around $50 million.