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The UK Government has startled the re/insurance industry by decreasing the personal injury (Ogden) rate by far more than had been expected, causing companies to revise their profit results mid-reporting season.
The UK’s Lord Chancellor and Justice Secretary Elizabeth Truss surprised markets on February 27 by reducing the Ogden discount rate to -0.75 percent from 2.5 percent.The so-called Ogden tables are used to calculate compensation awards for serious personal injuries.
Motor insurers and reinsurers will bear the brunt of the impact, but writers of other liability lines will also be affected, AM Best explained in a statement.
According to analysis by broker Willis Towers Watson the Ogden rate change will cost the insurance industry, in particular reinsurers, a material one-off reserve charge of approximately £5.8 billion. In addition, there would be a roughly £850 million per annum increase in the cost of providing motor insurance in the future.
Motor Reinsurance, Motor Insurance, Elizabeth Truss, Richard Pryce, Elizabeth Truss, Huw Evans, Philip Hammond, Aviva, QBE, ABI, BIBA