In August 2019 the Ogden rate was increased from -0.75% to -0.25%. The rate is used to calculate the present-day value of damages for claimants in personal injury cases. This rate accounts for the expectation that claimants will invest their damages and is therefore a form of backwards interest.
The rate has been -0.75% since 2017, however insurers argued that this left claimants over-compensated. They successfully lobbied government who agreed and stated that awards were 125% of the true value of a claim. It was reviewed this year and changed to -0.25%. This was much lower than expected, as many believed it would be between 0-1%.
This change was intended to benefit insurers by avoiding overcompensation. However, insurers had prepared their reserves for the expected change to be 0-1%. The rate being lower than expected means insurers had to further bolster their reserves. Hastings, for example, had to take a £8.4m hit to profits due to the change. Despite this controversy, the change was welcomed by many on the claimant side, as they said it ensures accurate compensation for claimants.
Part 2 of the Civil Liability Act requires the Lord Chancellor, currently Robert Buckland, to review the discount rate every 5 years. However, with possible economic shifts on the horizon, such as the commencement of Brexit, it will be interesting to see whether the rate will be reviewed earlier to account for this.