General Insurance Article - Car Insurers sharp rise in PPO liabilities after ASHE data

 PPOs are court-mandated settlements that require insurers to make lifelong, inflation-linked payments to claimants who have suffered catastrophic injuries—typically benchmarked to the 80th percentile of carers’ gross hourly earnings.

 The latest ASHE figures show a 7.25% increase in this benchmark, rising from £15.03 to £16.12. This marks the largest annual increase in recent history, surpassing last year’s 4.2% and the 7.0% recorded in 2023.
 
 Cormac Bradley, Senior Actuarial Director at Broadstone, commented: “For motor insurers and reinsurers, this 7.25% uplift directly increases the annual cost of PPOs. It significantly outpaces CPIH inflation at 4.1% and median weekly earnings growth of 5.3%, underscoring the volatility inherent in care sector wages and the ASHE methodology.

 “This will exceed most insurers’ expectations and will have immediate implications for reserving, reinsurance pricing and capital adequacy. While the volume of new PPO settlements has remained relatively low in recent years, the impact across the existing book of live PPOs is substantial. The heightened volatility in this index should be a red flag for actuaries and capital managers who may have anticipated a stabilizing trend.

 “Insurers must now reassess their reserving assumptions and capital models to reflect this renewed volatility and ensure they remain adequately provisioned.”