Insurer and reinsurer AXIS Capital Holdings Limited has revealed an expectation of a $50 million hit under its UK motor reinsurance book due to the recent Ogden Rate change.
AXIS Capital said that the impact of the UK Ministry of Justice’s recent reduction in the discount rate used to calculate lump sum personal injury awards, known as the Ogden Rate, would be around $50 million pre-tax impact to its carried reserves for relevant lines of business.
The impact is primarily to AXIS Capital’s UK motor non-proportional reinsurance business, across motor bodily injury, employers’ liability and public liability lines. AXIS anticipates the $50 million reserve charge being recognised in the first quarter of 2017.
The re/insurer explained that the adjustment to the Ogden rate change was greater than the scenarios AXIS had considered most likely, and none of these scenarios forecast a negative rate scenarios. As a result an increase to its carried motor reserves is necessary in order to adjust for the higher reduction in the Ogden rate.
AXIS Capital said that its UK motor non-proportional reinsurance business represents around 1% of net premiums written and that for the year ended December 31, 2016, its UK motor non-proportional reinsurance premiums were around $40 million.
XL Group recently announced a $75 million hit to its UK motor reinsurance reserves.