This morning the Lord Chancellor issued a regulatory news story (RNS) to the Stock Exchange which confirms that new draft legislation will be brought forward to re-set the current personal injury discount rate of minus 0.75%.
The RNS indicates that Ministers believe a new discount rate, if it were to be a single rate, would lie in the range from 0% to 1%. Further detail will follow after a Ministerial Statement to be issued later today, but some media commentators are already suggesting that the new statutory approach will be based on a low risk approach to the notional investment of awards, that there will be express provision for regular reviews of the rate and that an independent panel of experts will be involved in that process.
This news - which actually relates to England & Wales only - comes just 48 hours after the Scottish Government announced, in its programme for 2017/18, that it would introduce a bill that “amends the law on the Personal Injury Discount Rate”. Hence the reference above to two bills, although it is not yet clear whether these new provisions north and south of the border will be identical. [Rate-setting powers in Northern Ireland are, as in Scotland, devolved.]
On the practical side, the announcement of a new increased rate - which could be up to 175 basis points higher than the current discount rate - might be thought likely to have some effects on the speed at which cases are resolved. On the other hand, however, in giving a range of possible new rates which appear close to those achievable in current settlements, the MoJ may well have had an eye on the reality that claimants and defendants have been settling cases on a pragmatic basis, fully aware of the prospect of rate change, ever since this rate-setting consultation process began on 30 March.
The MoJ’s press release states that any rate change in England & Wales will be prospective only and, further, that it will take effect 90 days after the new law coming into force. Given the major insurance and reinsurance renewals on 1 January 2018, these indications about how and when the new rate (assuming the relevant bill is passed) is to be implemented might be interpreted as the MoJ signposting the likely effects to the market before this key date.