But expects the flooding to have a limited rating impact on UK insurers
Fitch Ratings said that the total cost to insurers of recent flooding in the UK could exceed £3bn. However, Fitch expects the flooding to have a limited rating impact on UK insurers.
The full extent of the damage is not likely to be known for some time as flood warnings remain in place in some areas. Fitch's estimate of £3bn is based on expected late reporting of claims, higher than average claim amounts due to standing flood water, and claims relating to motor vehicle damage and business interruption.
David Stephenson, associate director in Fitch's Insurance Group, said: "Despite the severity of the recent flooding and the wide area affected, it is not a catastrophe of the magnitude that could impair insurers' capital strength, although it is likely to have a negative impact on earnings.”
Fitch expects reinsurance programmes to be sufficiently strong to absorb flood losses and limit the net exposure for most UK insurance groups. Consequently, Fitch does not expect changes to its UK non-life ratings resulting directly from the flooding.
Fitch notes that, in the absence of sufficient further investment in flood defences, there may be a risk of insurers reconsidering the provision of insurance against flooding in the future, particularly in areas most subject to flood risk.
Fitch believes the flooding may impact the premium rate environment for domestic and commercial property insurance. It said the flooding is likely to result in a significant hardening of rates in the most affected areas and a general increase in premium rates in the property market as a whole.