Tuesday, December 20th, 2016

Discount Rate Review

On 9th December 2016 we commented on the announcement by the Ministry of Justice on 7th December 2016 that the Lord Chancellor had undertaken a review of the discount rate and intended to report by 31st January 2017.   

On 19th December 2016 the Association of British Insurers (ABI) launched a legal challenge of the Lord Chancellor’s decision to review, calling on the Government to complete its consultation and change the methodology before proceeding.  The announcement of the launch of judicial review proceedings can be found here.

The ABI’s Director General said: “It is vital that claimants get the compensation they are entitled to, based on a formula that reflects how they are likely to invest it.  The discount rate has a significant impact on the amounts paid out by both insurers and public sector bodies like the NHS. This calculation must therefore reflect the type of long-term investment behaviour we know claimants actually use. Despite two public consultations over three years ago and convening an expert panel, the Ministry of Justice has not yet shared any findings. Instead they are now trying to rush out a new rate for the first time in 15 years at a time of great uncertainty in the investment markets. To proceed in these circumstances is reckless and wrong. Insurers are open to a proper dialogue on how to reform the system but this is not the way to do it.”

As far as we are aware there has, as yet, been no equivalent legal challenge taken in Scotland.  The Lord Advocate may, as previously, simply follow the position taken by the Lord Chancellor’s department and, that being so, it might transpire that in Scotland we will require to litigate under a new rate.

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