Total insured loss for summer U.K. floods estimates at up to £3.25 billion
Massive June and July floods in the U.K. may coast insurers between £2.25 billion and £3.25 billion in total
The June and July floods in the United Kingdom could cost insurers between £2.25 billion and £3.25 billion in total, according to latest estimatesby Newark, California-based Risk Management Solutions (RMS). Insured losses from the July flood are likely to be between £1 billion and £1.5 billion, with the estimated cost of the 25 June flood ranging from £1.25 billion to £1.75 billion. These figures could be higher than many insurers expected, based on their initial estimates of the risk.
RMS analysis of the more than 1,000 affected postcodes shows that almost 70 percent of the areas affected by the July floods were in areas considered to be off the major river floodplains. “Many insurers assess their flood risk exposure based on maps that only take account of river and coastal flooding,” commented Dr. Claire Souch, senior director of model management at RMS. “The recent events highlight that these incomplete maps only provide part of the picture, and that flooding due to heavy rainfall in areas with inadequate drainage or from minor streams can have dire consequences. Those insurers that have only taken account of their risk exposure from direct river flooding could face an unexpected deluge of claims.”
The number of residential properties affected by the July floods — currently thought to be up to 15,000 — is lower than the 27,500 flooded in late June, but average claims are expected to be higher, as the affected properties tend to be of higher value and a greater proportion of the damage will be insured. The total insured cost for commercial properties in the July floods is likely to be lower than for the June flood, as the businesses impacted were generally smaller. Also, the Government has set up a scheme in some areas to help small and medium-sized companies develop recovery plans so they can return to business as soon as possible.
A big factor pushing up residential and commercial property repair costs will be the inflated prices for goods and services in short supply, known as demand surge. In addition, during disasters we typically see coverage expansion, whereby insurers may need to pay out more than is covered in the issued policies.
