Latest advice from GAD informs positive movement in the Isle of Man’s personal injury discount rate (PIDR)

  • Market Insight 02 November 2023 02 November 2023
  • UK & Europe

  • Casualty claims

The Isle of Man (IoM) government is tasked with setting the applicable PIDR under a statute which reflects the original version of UK Damages Act 1996. It last set the rate in the first half of 2020 at minus 0.25%. It has very recently (re)set the rate to +1%.


The IoM’s -0.25% rate was closely based on the activity in England & Wales during mid-2019, when the Government Actuary’s Department (GAD) had advised that a rate of +0.25% would achieve a broad balance between possible over and under compensation. However, in setting the PIDR at minus 0.25%, the Lord Chancellor applied a reduction of 0.5%, which was described as “a reasonable additional margin of prudence which reflects the sensitivities of the [discount] rate to the baseline assumptions.

The IoM legislation does not specify a period for reviewing the rate, unlike the amended parts of the 1996 Act which are now in force in England & Wales, Scotland and Northern Ireland (each of which specify reviews no later than every five years). This means that the IoM government is still able to choose to change the -0.25% at any time, as it has very recently done.

The Order* providing for the new IoM PIDR rate of +1% was passed in mid-October. Obviously, this is a positive movement of 1.25% / 125 basis points in the rate. The decision to do so was informed by advice* provided by GAD in July. Key passages of the advice are set out below.

  • Over the last 18 months actual inflation has been high (ie comparing current prices to those 12 months ago), however over the long term we expect inflation to come back down. Our CPI assumption is now around 0.5% higher than our original 2019 analysis.
  • Gilt yields have increased significantly at all terms and are around 1.5% to 2.0% higher than our 2019 analysis.

As such, we estimate that a revised Isle of Man PI discount rate set now would be between 1.0% and 1.25% pa higher than our 2019 advice, that would equate to a PI discount rate of between CPI+0.25% pa and CPI+1.5% pa.

The unavoidable question posed by the IoM change: what might it mean for PIDRs in the UK?

In answering that, the primary focus is on England & Wales (E&W) given that the rate-setting process in the IoM is more closely matched to the model here than to the more prescriptive approaches in Scotland and Northern Ireland.

The short answer is that the recent IoM change is of no direct effect on the possible outcome of the rate review due in 2024.

The principal reason for this is that GAD’s recent advice can only be regarded as a snapshot of economic conditions and investment performance in July 2023. These matters may well be very different in a year or so from now when the E&W rate will be (re)set.

A more subtle conclusion from the recent GAD advice to the IoM government is - currently, at very least - that the balance of the critical factors driving the discount rate is moderately positive. In effect, the crux of the passages quoted above is that when compared to the 2019 PIDR-setting exercise, the deterioration in inflation is more than outweighed by the improvement in investment performance. This outcome has moved the IoM rate in a positive direction.

At is highest, the recent developments in the IoM might be thought to point towards a positive direction of travel for the PIDR in E&W when it comes to be (re)set next year. However, that assertion would hold only if the balance between inflation and investment performance were to remain positive when reconsidered during the 2024 rate review process. In the current turbulent economic environment, these are hardly factors to be taken as given.

Next steps

We expect that the PIDR review process in England & Wales will develop further over the coming months. Some form of engagement or call for evidence from the Expert Panel tasked with the statutory rate review looks increasingly likely and we continue to monitor the area very closely.

Please do not hesitate to get in touch with your usual Catastrophic Injury & Large Loss contacts at Clyde & Co if you would like to discuss this important topic in more detail.

* The Order and the GAD advice are available by following the links below.
Damages (Personal Injury) (Assumed Rate of Return) Order 2023 (
pidr-iom-gad-review-2023-270923.pdf (


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