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The development of an actuarial approach to the calculation of future loss in the UK

In: Personal Injury and Wrongful Death Damages Calculations: Transatlantic Dialogue

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  • Matthias Kelly

Abstract

In the common law of the United1Kingdom the objective of any award of damages in personal injuries litigation is to achieve as nearly as possible full compensation for the claimant in respect of the injury sustained.2To achieve that objective the court seeks to award such sum as is notionally required to be laid out in the purchase of an annuity which will provide an annual amount equivalent to the loss for the whole period of the loss.3The basis of the calculation is an assumed annuity. The court makes an assumption about how the award will be invested.4Lord Fraser of Tullybelton inCookson v. Knowles5put it thus:The assumed annuity will be made up partly of income on the principal sum awarded, and partly of capital obtained by gradual encroachment of the principal. The income element will be at its largest at the beginning of the period and will tend to decline, while the capital element will tend to increase until the principal is exhausted.The court is not, in fact, concerned with how the award will be spent:How the Plaintiffs will in fact invest their damages is, of course, irrelevant. That is a question for them. It cannot affect the calculation.6

Suggested Citation

  • Matthias Kelly, 2009. "The development of an actuarial approach to the calculation of future loss in the UK," Contemporary Studies in Economic and Financial Analysis, in: Personal Injury and Wrongful Death Damages Calculations: Transatlantic Dialogue, pages 11-34, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:csefzz:s1569-3759(2009)0000091004
    DOI: 10.1108/S1569-3759(2009)0000091004
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    Cited by:

    1. Jędrzychowska Anna & Kwiecień Ilona, 2019. "Economic Factors in the Process of Calculation of Annuities in Bodily Injury Compensation Claims Under Liability Insurance," Financial Sciences. Nauki o Finansach, Sciendo, vol. 24(1), pages 25-38, March.

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