Flood damage could breach £1.5bn
FINANCIAL LOSSES from this month’s flooding could breach £1.5bn, experts have warned.
Accountancy firm PwC said the economic damage to the UK could be significant after Saturday’s torrential rain.
Mohammad Khan, general insurance leader at PwC, said: “It is still early to estimate losses but, based on the areas where significant rain has fallen, the great number of roads submerged and including the losses arising from Storm Desmond earlier this month, we would give a very initial estimate of economic losses of between £900m and £1.3bn, with the insurance industry bearing between £700m to £1bn of this.
“Unfortunately many areas that were affected during Storm Desmond have been flooded again.
“If rain continues to fall in large quantities, and the areas with warnings in place do indeed flood significantly, it could well be that the total economic losses could breach £1.5bn with an additional significant increase in insurer losses from our initial estimate.”
Mr Khan said insurance losses that arose from the flooding and storm damage during Storm Desmond were severe but were within nearly all affected insurers’ large loss expectations for 2015. Prior to the December weather, 2015 was seen as a benign year for insurers.
Mr Khan added: “The additional damage from Storm Eva and any further damage caused by additional rain will impact relevant insurers’ year-end profitability. It is too early to say whether it causes the 2015 profitability of the household and commercial property business they write to be loss-making.”
Insurers and the Government have been working together to develop a flood reinsurance scheme - known as Flood Re - to help support households at the highest risk of flooding. It does not launch until April 2016.
Domenico Del Re, head of catastrophe management at PwC, said: “Recent additional flooding once again highlights a need to recognise that the introduction of Flood Re and the rebuilding of flood defences will not automatically solve the affordability of flood insurance, nor will it stop flooding when severe rain falls.
“Following the 2007 floods, a lot of work was undertaken on flood defences but clearly more can be done. Flood defences cannot stop everything, as they are based on historical information, but a lot more information exists today than there was even five years ago.
“Businesses which are not covered by Flood Re need to make use of all the flood data that is out there to make themselves more resilient when a flood occurs.”