UK insurer losses from winter floods and storms rise to £1.1 billion

The UK insurance industry is facing losses of £1.1 billion from this winters severe weather which saw strong European windstorms and heavy rainfall cause widespread damage and trigger devastating floods across the UK according to the ABI.

The Association of British Insurers (ABI) said that the UK has suffered its wettest winter on record and the losses that insurers are responsible for paying are rising.

Flooding alone is estimated to have cost insurers £446m (which is approximately USD$750m)  in payouts to homeowners, businesses and vehicle owners, according to the ABI.

Interestingly, this figure of £446m is very low. The range of estimates for losses from the UK floods stood at £500m to £1.2 billion, so the ABI’s figure is actually below the lowest recent estimates seen. For example, Credit Suisse Asset Management estimated that the losses from UK floods could reach around £1.2 billion, while analysts from Bank of America Merrill Lynch said even higher at around £1.5 billion.

The ABI’s figures cover the period of 23rd December 2013 to 28th February, so do not include some European windstorm losses that insurers will have suffered during October and November.

The insured losses from flooding and storm damage suffered during this period are expected to total £1.1 billion (which is approximately USD1.85 billion), said the ABI.

Otto Thoresen, ABI’s Director General, commented; “The flood waters may have mostly receded, but for many the distress of being flooded remains raw. Insurers and loss adjusters are playing a crucial role in the recovery process. A badly flooded property can take months to become habitable again, so insurers continue working around the clock to  ensure that the drying out process is completed as quickly and as safely as possible. While of course this was a serious and significant bad weather event the current flood damage costs remain well below the severe floods of 2007 when insurers paid out £3 billion to customers.”

The ABI’s insured loss estimate shows that no matter how severe a flood event looks from the pictures in the media, the amount of losses suffered varies wildly depending on the region hit, the density and the type of residential and commercial buildings affected.

Of course the insured loss tally will likely be higher, as the ABI is only reporting on UK insurers which are exposed and there may be other European insurers facing losses. However at this level of insurance loss it is unlikely to result in a significant impact on reinsurers.

The UK flood events are currently being investigated by PERILS AG, the provider of industry-wide European catastrophe insurance exposure, industry loss data and indices widely used by insurance-linked securities issuers. It is the first UK flooding event that PERILS AG has investigated since it began covering flood risk, plus they include insurance losses to companies from outside the UK as well.

However as PERILS AG reports losses to the re/insurance sector its work is bound to the hours clause, so would require losses from flooding over EUR200m to have occurred within the hours clause window for the flood event to qualify for further reporting.

Read other articles on the estimates from this winters severe European windstorms and floods:

– PERILS increases loss estimate for European windstorm Xaver.

– PERILS investigates four more European storms and UK floods.

– UK flood losses unlikely to hit insurer ratings: S&P.

– Credit Suisse estimates UK flood insured loss at $2 billion, or higher.

– Euro windstorms, UK floods add up to meaningful insurance losses.