Insurers are likely to welcome the news that the Northern Ireland Personal Injury Discount Rate is to be set at +0.5%. The rate that it replaces had been set at -1.5%. In contrast the rate is still lower than the rate in the Irish State which stands at +1.5%.
The Government Actuary Department announced the rate following its report on the 24thSeptember 2024. The rate in Scotland has been raised from -0.75% to +0.5%.
The Discount Rate is used to determine lump sum damages awards in serious and catastrophic injury claims, where awards are made for future losses. The lump sum payments are intended to provide people with full and fair financial compensation for all expected losses and costs caused by their injuries.
Where part of a claim for future losses is settled as a cash amount, the lump sum is calculated allowing for the period over which losses and costs are expected to be met and the assumed investment return that the individual is expected to earn on the award over time. Factors taken into consideration include, the investment period, allowance for tax and investment expenses, damages inflation assumption and a notional investment portfolio.
The raise in the Discount Rate was expected, following a recent sharp rise, after a lengthy period of historically low interest rates.