UK Floods Could Cost Insurers Over £2 billion

The UK floods could cost insurers over 2 billion pounds and might lead to the industry reconsidering the availability of flood cover, according to leading risk-modelling firm Risk Management Solutions (RMS).

Although the number of properties affected by the current floods is lower than June's, higher average claims, a greater proportion of insured damage, together with higher business insurance claims due to loss of electricity and running water is likely to push the cost well above the 750 million pound bill that RMS estimates insurers will be left with after the June floods.

The extent of insured damage from the combined flooding in June and July is much less than if there had been a repeat of the devastating 1947 floods, which would cost insurers between £4.5 billion and £6 billion pounds, RMS said, but may make insurers look again at offering flood insurance on a widespread scale.

Existing national flood risk maps, used by local councils and property developers are incomplete and do not contain the potential for flooding from poor drains and streams, it said.

This latest estimate is in line with Association of British Insurers' prediction that the disaster will cost the industry £2billion. Preliminary estimates from the Chartered Institute of Loss Adjusters concluded that the Yorkshire floods would set the industry back £1.5bn.

However, Fitch Ratings, the credit ratings agency, said today that its new estimate of £3bn is based on expected late reporting of claims, higher than average claim amounts due to standing flood water, and claims relating to motor vehicle damage and business interruption.