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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