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The words swift action and Government don’t tend to go together...

…but the insurance world has widely welcomed recent Government announcements on two pressing concerns. Whether ‘swift’ is an appropriate description will depend on your definition but let’s say that they haven’t been ‘snail like’.

Firstly, the Government have agreed to pass legislation to enable Pool Re (who run the Government supported Terrorism Scheme for property and business interruption insurance) to close a gap in cover highlighted by the 2017 Borough Market and London Bridge attacks where Police cordoned off the areas (Borough Market was closed for 10 days). The 1993 Reinsurance (Acts of Terrorism) Act restricted Pool Re to only provide business interruption cover arising from damage to commercial property, but because many of the local businesses affected did not suffer damage to their properties, they were not covered for the interruption arising from the denial of access to the area. Denial of access cover is readily available for non-terrorist related incidents.

The commitment is to legislate as soon as parliamentary time allows, although in the meantime, terrorism denial of access cover is available from some specialist insurers.

Aside from the need for legislation to close the denial of access gap, Pool Re have recently extended their scheme to cover property damage and direct business interruption arising from Cyber Terrorism (damage caused by terrorists via remote digital interference). At least this change has been made, before, rather than after a claim occurs (as far as we know) without the need for Government legislation.

A change to the Ogden discount rate has also been announced. This is the discount applied to compensation awards for serious personal injury and fatality to reflect future investment returns available to a claimant investing their lump sum. Previously it was based on predicted investment returns from Government Gilts (which are deemed to be completely safe) but had remained at 2.5% despite the fall in interest rates since the financial crash of 2008. Following pressure from the personal injury lawyer lobby, this was reduced to -0.75% in 2017, reflecting that you now pay to invest in such safe guilts, hence the negative rate.

The change caused a real stir as it had an enormous effect on compensation payments made, not just by insurers, but also the NHS and in one example the change nearly tripled a NHS Trust pay-out for a 10 year old left with cerebral palsy from £3.8m to £9.3m.

However, following pressure from insurers (and probably realisation as to the cost to the NHS), the Government is now proposing to link the Ogden discount rate to low risk, rather than very low risk investments and is initially thought to be set somewhere between 0 and 1 per cent.

But the change needs legislation. When? Who knows, 2019 has been mentioned, so perhaps we will end up with snail like progress, although hopefully not ‘starfish like’, which (according to my google research) is an even slower animal, and possibly compare with MPs in other ways (they have no brain). Our local MPs excepted of course!

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