James, Rakow, insurance partner at Deloitte, comments on UK floods:
“If the accumulation of extreme weather claims extends into February the insurance industry could be facing a bill of at least £500m for the exceptional autumn and winter weather claims, matching the cost of the big freeze in 2010.
“Flood claims cost on average £30,000 to £40,000. In the run up to New Year, 1300 properties were flooded. Since the New Year, week by week flood claims have continued to mount and last weekend alone a further 270 additional flooded properties were reported by the Environment Agency.
“The flood and storms that we have witnessed since the St Jude storm in October last year threaten to seriously dent the profits made by insurers for the year as a whole, potentially forcing many to recoup costs by raising property insurance premiums.”
About Flood Re (the Government/industry proposals for flood insurance for high-risk areas)
“If Flood Re is launched in 2015 it should help keep premiums affordable for high-risk flood areas. Deloitte estimates that the premiums and levies going into Flood Re will be £300m to £400m for each of the next five years. If the frequency of flood claims increases, or more areas get classified as high risk, this could increase significantly in five to 10 years.”
Under the current proposals for Flood Re:
- Flood Re will be funded by premiums for properties at high flood risk. The premium for the flood risk going into Flood Re will be capped at between £210 and £540 depending on Council Tax Band.
- There also will be a levy paid by insurers of £180m pa which is equivalent to £10.50 for each UK Household with both buildings and contents insurance in place. The Levy is intended to be fixed at £180m for five years but a top up levy might be needed if there is a shortfall in Flood Re.
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