Reinsurers are to face the biggest impact from the UK government’s sharp reduction in the rate shaved off lump-sum personal injury payments. It is also expected that underwriting profitability will come under presser with the measures. The Ogden tables make it easier to calculate future losses in personal injury and fatal accident cases. The tables take into account life expectancy and provide a range of discount rates from -2.0% to 3.0% in steps of 0.5%. The discount rate is fixed by the Lord Chancellor which was reduced this week to minus 0.75%, down from 2.5% previously. The cut is much larger than the 1 to 1.5% predicted by the market which leaves reinsurers exposed. Willis Towers Watson has anticipated that reinsurers collectively will bear the brunt of a one-off reserve charge of an estimated £5.8bn. PwC have put the total reserve impact on the insurance industry at £7bn. PwC also highlighted that many reinsurers had not adjusted their 1 January renewals to take into account a Ogden rate reduction.
