Page 167 - Pharmacy Appeals 1/4/04 to 31/3/05

NHS Resolution Annual report and accounts 2021/22 143

Assumption Approach Degree of Sensitivity Change in assumption between Effect of
uncertainty to changes 31 March 2021 and 31 March 2022 change
(CNST IBNR)

Long term
The inflation assumption for PPO
claims inflation:
damages has decreased by 0.5 -£4.0 billion
derived from past
pa% from the previous year.
settled claims
Short-term
claims inflation: We are assuming that the
Claims inflation
derived from higher short-term inflationary
and risk and High High +£2 . 8 billion
HM Treasury environment will feed through to
uncertainty
prescribed CPI higher short-term claims inflation.
forecasts

The risk and uncertainty margin
Risk and has been removed this year.
-£2.3 billion
uncertainty Previously it was included in the
claims inflation assumption.

Derived from
past settled This has decreased by 2%
Probability of
claims, adjusted Medium Medium for PPO damages. It is -£1 . 8 billion
paying damages
for incomplete unchanged for non-PPOs.
development
Lag range from 2.9 to 7.5 years,
Derived from
Creation to Medium increasing by 0 . 1 years at the lower
past settled Low +£0.7 billion
payment lags (for PPOs) end and decreasing by 0 . 2 years
claims
at the higher end of the range.
Life expectancy Based on analysis Separate assumptions are
for PPO of past settled Medium Low specified for EN claims (42 years) +£1.3 billion
payments PPO claims and non EN claims (37 years).

All discount rates have been
updated. Short- and medium-
term rates have increased by
Nominal HM Treasury
Prescribed High 0.49% and 0.52% respectively. +£24.5 billion
discount rates prescribed
The long term and very long
term rates have decreased by
1.04% and 1.33% respectively.

Based on
earnings
ASHE 6115 The ASHE assumption is
increases relative Medium High -
(80th percentile) unchanged at CPI+1.75%.
to CPI over the
longer term