Home / Corporate / QBE claim liabilities rise after rate ruling
22 July 2019
QBE has increased its claims liabilities estimate after a change in the interest rate used in UK personal injury calculations fell short of company expectations.
The UK Ministry of Justice has changed the key figure, known as the Ogden rate, from minus 0.75% to minus 0.25%, but QBE said it had been factoring in a rate of 0.25%.
The decision will result in a $US60 million ($85 million) one-off increase in QBE’s estimate of claims liabilities, the insurer said in a statement to the Australian Securities Exchange last week.
The discount rate reflects the return that personal injury claimants can expect to receive when they invest compensation funds. A lower rate means a higher payout by insurers.
Ratings agency AM Best says some insurers in the UK have been reserving conservatively, while others have been taking a more speculative approach and assuming a rate of 0-1%.
“The alteration is likely to have a minor one-off earnings impact on some companies through strengthening or release of reserves,” Director of Analytics Timothy Prince said.
QBE says the new rate was not allowed for in its targeted combined operating ratio range of 94.5-96.5% for this year, outlined in the February results presentation.
The impact will be reported as an adjustment in its first-half and full-year results.
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