XL Group estimates it will face a $75 million impact on its carried reserves as a result of a decrease in the discount rate used to calculate lump sum awards in British bodily injury cases.

The Bermudian-based company said impacts on its insurance segment are expected to be modest due to the low level of British bodily injury claims it has in its portfolio, as well as reinsurance protections.

XL made the announcement in the wake of the UK Ministry of Justice’s decision to decrease of the discount rate, known as the Ogden Rate, from 2.5 per cent to -0.75 per cent, a decrease of 325 basis points and the first rate change since 2001.

The new rate will be effective on March 20.

XL estimated the pre-tax impact of the rate change on the company’s carried reserves for relevant lines of business as approximately $75 million, and this will be recognised in the first quarter of 2017. It is primarily related to XL’s British motor business in the reinsurance segment.

Classes of business impacted by this rate change are UK motor bodily injury, UK employer’s liability, and UK public liability.

In a statement, XL said it had not been a large writer of British motor business, but has some exposure from business written on a non-proportional reinsurance basis.

“This portfolio was scaled back beginning in 2009 as periodical payment orders became more prevalent and more costly,” the company stated.

Last year, XL’s gross British motor premiums were less than $10 million.