Page 161 - Pharmacy Appeals 1/4/04 to 31/3/05

NHS Resolution Annual report and accounts 2021/22 137

General Practice Indemnity Process and methodology for
From 1 April 2021 liabilities relating to incidents prior setting the provision

to 1 April 2019 against members of the Medical
NHS Resolution has entered into a Memorandum of
Protection Society (MPS) transferred to be administered
Understanding with Government Actuary's Department,
by NHS Resolution. These are covered within the
to assist with the preparation of financial statements
Existing Liabilities Scheme for General Practice (ELSGP),
through actuarial analysis and modelling of claims
which already covered liabilities relating to incidents
data. This is combined with information provided
prior to 1 April 2019 against members of the Medical

by management on the current economic and
and Dental Defence Union of Scotland (MDDUS).
claims environment in order to provide estimates for
Short-term inflation management to consider in relation to determining
the valuation of the liabilities for the accounts.
Short-term inflation expectations have increased
significantly relative to last year owing to the post­ NHS Resolution's Reserving and Pricing Committee is
pandemic economic recovery, higher energy prices responsible for making decisions on the key judgements
and supply and labour constraints. The provisions and estimates. This is supported by the advice of
are determined assuming that claims inflation will the actuaries alongside the Preparatory Reserving
also be higher in the short term - reflecting the Group, which reports into the Reserving and Pricing
assumption that a higher cost of living in the general Committee and brings together colleagues from
economic environment will lead through to higher across the organisation to scrutinise the analysis.
claim settlement costs. The impact on the CNST
In addition to the discount rate, there are other factors
provision is shown at Table 28 on page 142.
that influence the provision that are also outside NHS
Claims inflation trends Resolution's control; for example, patients (and their
legal representatives) have an element of control over
Notwithstanding the higher short-term inflation
the timing of the reporting of claims. The Reserving
expectations in the general economic environment,
and Pricing Committee keeps all the factors affecting
average settlement costs have not increased at
the calculation of provisions under review to ensure
the rate previously assumed. This is a continuing
that the final provisions reflect the experience of the
trend over the last few years and as such we have
organisation and are adjusted in a timely manner.
made reductions to our long term claims inflation
assumptions. See page 142 for details of the impact The methodologies for the three key elements
of the changes to the claims inflation assumption in NHS Resolution's provisions are as follows:
Risk and uncertainty • Known claims - The provision is based on the case
estimates of individual reported claims received by
In prior years, we have included a risk and uncertainty
NHS Resolution. The case estimates are adjusted for:
margin in our IBNR provisions to reflect the unquantifiable
risks that might affect our liabilities. This year, we - the case handlers' estimated probability
have decided to remove the risk and uncertainty of each claim being successful,
margin to ensure that the provisions reflect our best - expected future claims inflation to settlement,
estimate as a result of our ongoing refinements
- the likelihood that they will go on to settle
to our reserving processes. Instead, the risk and
under a periodical payment regime - with part
uncertainty inherent in the provision is demonstrated
of the claim paid over the life of the claimant
via presentation of sensitivity analysis and the
as a regular stream of compensation income
reasonable range covered in the following material.
rather than purely as a lump sum, and
Assumption of liabilities
- the assumed additional cost if the case were
upon cessation to settle as a periodic payment order (PPO).
The NHS Act 2006 s.28A requires the Secretary of State
A further adjustment has been applied to the
for Health and Social Care to exercise his statutory
2021/22 known claims provision as a whole, and to
powers to deal with the liabilities of a Special Health
the CNST provision only for 2020/21 (on grounds
Authority, if it ceases to exist. This includes the liabilities
of materiality) to align the profile of case estimates
assumed by NHS Resolution in respect of all schemes.
settlement dates with an actuarial view of the
expected timing of settlement of the provision.