29 March 2017Insurance

Ogden rate cut to hit WR Berkley's reinsurance in first quarter results

US insurer WR Berkley Corporation has estimated the impact of Ogden rate change on the company’s first quarter operating results at $30 million before tax, and $22 million after tax, the company said in a statement.

The impact will be recorded as an increase to prior year loss reserves, primarily in the reinsurance segment.

The Ogden rate is the discount rate used to calculate lump-sum bodily injury payouts in the UK and was recently reduced by the UK Ministry of Justice from 2.5 percent to -0.75 percent.

Several insurers have predicted the impact on their businesses that will be recognised in their first quarter 2017 results. Bermuda-based Axis Capital expects the pre-tax impact could be approximately $50 million; US property/casualty insurer Travelers estimates it to be nearly $62 million pre-tax; and XL Group said that the decision might cost the re/insurer around $75 million.

Aviva said that the decision of the Lord Chancellor to cut the personal injury discount rate triggered a charge to its 2016 profit after tax of approximately £385 million.

Admiral had earlier said that its 2016 profit would have been £389.7 million (instead of £284.3 million) without the costs of the latest Ogden rate change.

Specialist listed Lloyd’s insurer Novae said that before making the adjustment for the Ogden rate change it would have reported a pre-tax profit of £59.1 million.

The UK’s Chancellor Philip Hammond has agreed to a consultation on the framework for setting future Ogden personal injury rates.

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More on this story

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30 March 2017   Bermuda-based Aspen Insurance Holdings expects to increase carried reserves for impacted lines of business by approximately $30 million on a pre-tax basis in the first quarter of 2017 as a result of the change in the Ogden rate in the UK.
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20 April 2017   US insurer WR Berkley Corporation has appointed the lead equity analyst covering insurance at Goldman Sachs to join its corporate investment arm as a director.
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25 April 2017   Commercial lines insurer WR Berkley Corporation has reported an underwriting loss for the first quarter of 2017 in its reinsurance operations.