Lord Chancellor announces discount rate changes
19 July 2019
Author: Shauna McAuley
The Lord Chancellor recently announced a new discount rate of – 0.25% effective from 5 August 2019 for personal injury claims in England and Wales. For most defendant practitioners and insurers this is not the news we were hoping for when it was announced that the rate of – 0.75% would be revisited. Although the 0.5% increase is some consolation, it is far cry from the 2.5% pre 2017 and not within the scope of the 0 – 1% which had previously been suggested by the Ministry of Justice in September 2017 when it was noted the discount rate would be reviewed again.
So what does that mean for insurers and defence practitioners in Northern Ireland?
It is widely anticipated that the Lord Chancellor’s decision on the discount rate will be ratified in Northern Ireland however this is likely to be delayed until sometime after the reinstatement of the Northern Ireland Assembly and appointment of a new Justice Minister. Currently the legal discount rate in Northern Ireland is 2.5% but many cases have been settled since 2017 on the basis of a negotiated discount rate of 1%. The new discount rate of -0.25% is likely to increase the quantum for all personal injury cases which include a future pecuniary loss claim going forward and will not only impact on the damages but potentially on cases already reserved if reserves have been based on a 1% discount rate for a negotiated settlement.