A.M. BestTV: Ogden Rate Changes Will Hurt Results But Boost Premiums, Says A.M. Best Analyst

Insurance Business Weekly

By a News Reporter-Staff News Editor at Insurance Business Weekly -- In this A.M.BestTV episode, Myles Gould, senior financial analyst, A.M. Best, said recent statistical changes that raise payouts for injury claims in the United Kingdom will affect non-life insurers, but are not expected to trigger rating changes. Click on http://www.ambest.com/v.asp?v=ogden417 to view the entire program.

The U.K. non-life insurance industry Ogden rate, which calculates the lump sum payments for personal injury claims, was recently cut to-0.75% from 2.5%.

"For U.K. insurers, A.M. Best expects to see an impact on earnings and capitalization in the immediate future," said Gould. "In addition, over the medium term it is likely that there will be deterioration in the performance of those lines that are affected as a result of higher claims settlements from increased levels of compensation payout for bodily injury."

Gould also said he expects to see an increase in premium rates, as insurers try to offset the deterioration in their company's performance.

The industry Gould believes will be the most severely impacted is the U.K. motor book. However, he sees other liability classes that encounter bodily injury claims also affected.

To read the Best's Briefing, titled, "Reserve Strengthening to Follow U.K. Personal Injury Discount Rate Change," go to http://www3.ambest.com/bestweek/purchase.asp?record_code=259155.

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