Court goes easy on motor insurers

By THIS IS MONEY
Updated: 18:00 EST, 27 March 2000

Motor insurers may be able to write back reserves after a Court of Appeal ruling on personal injury claims proved less onerous than the industry expected.

Nigel Munns, of actuaries Bacon & Woodrow, said: 'It is going to cost the insurers more but the judgement was much lower than the worst-case scenario. At this stage it is very difficult to work out how much it is going to cost the insurers.

'But it has come out better than insurers expected and it might well be the case that they had reserved more, thinking that it might have been worse.'

Five appeal judges decided last week there should be increased awards on a sliding scale for the most serious cases, in which damages for pain, suffering and loss of amenity currently run between £10,000 and several million pounds. Those below £10,000 will not be raised and the overall increases were lower than those recommended by the Law Commission.

But a lack of transparency in the sector means investors looking for net gainers from the ruling will have to guess the companies which have made the most conservative provisions.

Lloyd's group Amlin, which runs a £75 million fleet motor book, had made a 3.5% provision for its open 1997 accounts, and said it would probably be a small net beneficiary of the ruling. Amlin's Brian Carpenter said in terms of provisioning, the effect is 'quite patchy'.