The amendment saw the discount rate slashed from the original rate of 2.5%, set in June 2001 with reference to yields on index linked gilts, to -0.75%, effectively meaning an increase in the compensation paid out by insurers. In calculating the new discount rate, the Lord Chancellor continued to rely upon the methodology used in 2001, which assumed that recipients of lump-sum personal injury compensation would be very risk averse and invest their compensation in very low risk investments.

Despite this change in England and Wales, no change was made to the discount rate in so far as it applies to Isle of Man cases. By the Damages (Personal Injury) Order 2014 (made under section 24(1) of the Law Reform Act 1997) Tynwald approved the Treasury set rate of 2.5% to be applicable to the Isle of Man. The decision in De Yoxall v Moore1 confirmed that this rate would be upheld by the Courts and only departed from in exceptional cases where the specific facts of the case meant that a different rate would be more appropriate.

Following the change of rate in England and Wales, the Isle of Man Minister for the Treasury announced that the discount rate in the Isle of Man would be kept under review but confirmed  that no change would be made until the results of the UK review were available and had been considered.

In September 2017, the Ministry of Justice in England and Wales published the findings of its consultation which confirmed that old methodology is no longer workable. As a result of this, the Civil Liability Bill has been proposed which passed its third reading in the House of Commons on 23 October 2018 with only minor amendment.

The Bill provides for the discount rate:

to be set by reference to  “low risk” rather than “very low risk” investments as at present;

to be reviewed on a regular basis, at least every three years, the first review to place within 90 days of the legislation coming into force; and

to be set by the Lord Chancellor following consultation with an independent expert panel chaired by the Government Actuary and, as at present, HM Treasury.

The Bill will now return to the House of Lords for consideration of the amendments and Royal Assent may be received in November, meaning that new rate is likely to be in place by July 2019.

In the meantime, the discount rate in the Isle of Man will remain at 2.5% until such time it is amended by the Treasury and approved by Tynwald. Whilst it is anticipated that changes similar to those proposed for the UK will be implemented in the Isle of Man, there remains no indication as to when this may be.

A link to the Civil Liability Bill and its progress through Parliament can be found here.

1De Yoxall v Moore [4 August 2015] ORD 2009/17 (Unreported)




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