PERILS drops Storm Desmond UK flood loss estimate 10% to £597m

PERILS AG, provider of industry-wide European catastrophe exposure, industry loss data and indices, has reduced its estimate insurance or reinsurance market losses from UK floods due to storm Desmond in December 2015 by another 10% down to £597m ($860m).

Today PERILS has released its third estimate of insured property losses caused by a flooding event that followed European windstorm Desmond, which hit the UK on the 4th December, with flooding impacts that peaked around the 5th and 6th of December in the northwest of England.

PERILS has steadily reduced its estimate of insured property losses due to the storm Desmond floods, as increasing certainty of the true insurance or reinsurance market impact from the UK flood event has emerged.

The first loss estimate was announced as £717m ($1 billion) published on 15th January. PERILS subsequently lowered the estimate by 8% on 4th March to £662m and now by another 10% today. In total the insured loss estimate has now declined by almost 17%.

Losses suffered from storm Desmond remain largely expected to fall to primary insurance companies, with a small amount hitting reinsurance firms. Some ILS fund managers reported minimal exposure to the floods, but ILS fund losses are expected to be merely attritional at worst. However some ILS funds have small exposures to the accumulation of severe winter storms, flooding and inclement weather suffered by the UK in 2015/16.

This third loss estimate for the flooding from storm Desmond contains loss data by CRESTA zone (area code), broken down by residential and commercial property lines. PERILS said that this is “the first time that a detailed market loss footprint for a UK flood event has been made available.”

Such granular information on a flooding event can be used as a loss footprint enabling insurers and reinsurers to test modelled loss footprints and to help with improving flood risk assessment for the UK, PERILS explained.

In March, PERILS raised its loss estimate for storms Eva – Frank and other flooding rains, which struck the northern UK from 25th December 2015 to 14th January 2016, by 10% to £662m.

Added to the latest Desmond update, the total insurance and reinsurance industry loss estimate from UK winter flooding in 2015 and very early 2016 now drops slightly to £1.175 billion ($1.695 billion).

While a number of ILS fund managers reserved small amounts for potential claims due to the UK flooding from Desmond and Eva-Frank, with exposure expected to some collateralised reinsurance contracts, some of those side-pockets have already been reduced as clarity over the final loss emerged.

PERILS will release a third and updated insurance industry loss estimate for the UK flooding due to storms Eva-Frank in three weeks, after which we’ll have a much better picture of where the final toll for insurance and reinsurance to pay will settle.