New categorisation should help improve understanding and better equip (re)insurers when estimating future liabilities
New categories for periodic payment order (PPO) injuries have been defined by the Institute and Faculty of Actuaries (IFoA) in an attempt to improve understanding.
The categorisation has been designed to better predict how the severity of brain and spinal injuries impacts mortality, and help (re)insurers better estimate future PPO liabilities.
The news comes as a result of on-going research from the IFoA that has revealed the propensity for issuing PPOs is increasing and as a result are making up a greater proportion of insurers’ reserves.
While past liabilities were more likely to be paid in the form of lump sums, and were typically off balance sheets within six years, today claims of £1 million or more are more likely to be paid as PPOs, and these liabilities can remain for several decades.
Sarah MacDonnell, one of the authors of the IFoA research report said: “PPO liabilities in the UK remain on balance sheets for decades and the impact of mortality on these liabilities is significant. We know that the severity of injury has a large impact on mortality outcomes, but to date there’s been no standard way of capturing this, particularly for brain injuries. Whilst this may not be a problem today, it is one that stretches ahead of us and will have an impact in twenty, thirty or even forty years’ time.”