It was announced on February 27th 2017 that the discount rate to be applied when calculating multipliers for future loss claims will be reduced from 2.5% to a negative 0.75%.
The rate has been set at 2.5% since 2001 and although the decrease was expected, it was nonetheless more than anticipated. However, it was described by the Lord Chancellor as, ‘‘The only legally acceptable rate I can set.’’
The Lord Chancellor has indicated that the new discount rate will come into effect on 20th march 2017. This means that trials taking place before that date will not be affected.
The reduction to the discount rate will have a significant effect on the insurance industry as well as public bodies that carry large personal injury liabilities. The NHS is a prime example of this and the Lord Chancellor appeared to recognise this as within the announcement she indicated that the government should ensure that appropriate funding is made for the NHS litigation Authority to cover this change.
In order to address this issue, and the consequential impact on the value of claims our team is currently reviewing the reserve on any claim, which will come to trial after 20th March 2017 and involves a claim for future loss as the existing calculations in place are likely to be incorrect. It will also be necessary to review any case where there is a Part 36 offer; either made by us or against our clients. It will be important to act quickly as there may be a number of cases where the claimants offers undervalues the claim.
We anticipate that it is going to be a busy few months with many practitioners reviewing offers as well as updating Schedules of Loss.