Allianz UK chief executive Jon Dye says new Ogden legislation could be delayed by Brexit
Allianz UK chief executive Jon Dye has said he “wouldn’t be betting my house” on the new Ogden discount rate legislation coming into force in 2018 because of the other pressing matters on Parliament’s to-do list.
New draft legislation was proposed in September that would restore the Ogden rate to between 0% and 1% from its current level of minus 0.75%, where it was set in March.
Speaking to journalists about Allianz UK’s nine-month 2017 results this morning, Dye said: “Will [the new legislation] actually be enacted in 2018?
“The best case scenario would say that it will have an effect in 2018 but I wouldn’t be betting my house on it. There is so much uncertainty in terms of the whole programme for parliament between now and then.”
Dye’s Ogden comments closely follow law firm Weightmans partner David Johnson’s warning last week that an early 2018 timeframe for the Ogden change was “optimistic”.
Dye said it is important for the insurance industry to remember that at this stage, the proposed new legislation is just “a stated intention”.
He said: “We know that it will be a long process to get it through parliament and to get the legislation passed.
“That is a tough thing for the government to achieve in a world which is dominated by Brexit and its attendant legislative challenges.”
He added: “In the meantime we have still got a rate which is -0.75. We have to remember that because that is the actual discount rate that applies to the serious personal injury claims world right now and will do until the law gets changed.”
The continuing effects of the cut in the Ogden rate to minus 0.75% was one of the contributors to Allianz UK reporting a 30% drop in operating profit for the first nine months of 2017.
Allianz UK took a £17m hit over the nine months for the current year impact of Ogden – the cost of business written in 2017 at prices set before the rate was cut.
Dye said that there would be a small continuing current year effect in the fourth quarter that would be “rather less than we have seen in the first three quarters”, and that this impact should all but disappear in 2018.
He said: “If we have got our prices into the right place, and I would say we have done a pretty good job in that regard, then in 2018 we shouldn’t really expect to see much of a current year impact at all.”
A bigger contributor to the profit drop was £46m of large claims, mainly from the commercial book, but also some stemming from private car.
Dye said he was comfortable that the big claims are one-offs.
He said: “There is nothing in those risks that gives us any particular concern. As you can imagine when these sorts of things happen we go back and look at the underwriting. We’re quite comfortable that they were all risks we would write again tomorrow.”