General insurers face credit downgrade over personal injury claims

Ratings agency Moody’s has warned the increase in periodical payment orders (PPO) will be credit negative for general insurers with exposures to personal injury claims.

The warning comes as PPO settlements, where claimants receive an initial lump sum award together with regular payments to cover on-going medical care costs, are becoming an increasingly common way for the courts to settle high value personal injury claims.

"The uncertain and long-tailed nature of PPO liabilities exposes general insurers to the same longevity and inflation risks that annuity writers face and could ultimately result in suppressed earnings and higher capital requirements," said