ABI sticks to final UK floods insurance bill of £1.3 billion

The Association of British Insurers (ABI) is sticking with its estimate that the final insurance bill for last winter’s UK flooding will cost around £1.3 billion (approximately $1.9 billion), so impact to reinsurance and ILS markets should not creep too much higher.

The ABI said today that over 15,000 insurance claims for flooded homes and businesses were made due to the flooding from December’s storms that struck the UK, with 85% of the claims either fully or partly paid already.

The estimated final bill for insurance and reinsurance to pay from the ABI, is very closely aligned with an industry loss estimate from PERILS AG, which put the cost to the industry from flooding that struck the UK in December 2015 and early January 2016 at an estimated £1.24 billion.

A number of ILS fund managers had reserved small amounts for potential claims due to the impact of the UK floods, as a number of collateralised reinsurance contracts were deemed exposed. However the expectation remains that primary insurers will bear the brunt of the costs, with reinsurance and ILS markets only taking attritional exposure from this event.

The average cost of each domestic property insurance claim for the flooding, which was caused by European windstorms Desmond, Eva and Frank, is approximately £50,000 which the ABI notes is higher than usual, reflecting the extensive level of damage caused by the flood waters in some affected locations.

The final bill for all repairs due to the flooding is expected to reach £1.3 billion, according to the ABI, which includes costs of £27.5 million spent by insurers on alternative accommodation for residents awaiting property repairs.

So the final loss due to property damage is becoming clearer and has certainly come in lower than some of the initial estimates of insurance and reinsurance losses from the event. However the issue of business interruption could mean some additional exposure for the industry, but again this is assumed to be largely retained by the primary market.

Some ILS fund managers have already been able to reduce the size of any side pockets and reserves they had set aside for the UK floods and as the loss becomes clearer we may see these reduced further.

Also read:

– UK floods insured loss now £1.24bn, as Eva-Frank estimate rises: PERILS.

– Markel CATCo ILS fund reduces side pockets for UK floods, US storms.