Study shows business interruption estimates relating to a London flood are dangerously low

Business interruption estimates relating to a London flood are dangerously low, a study by Middlesex University’s Flood Hazard Research Centre has found.

The research, presented at the Lighthill Risk Network by Professor Edmund Penning-Rowsell, said that business interruption should not be calculated as a percentage of physical damage, as there was no constant relationship between them.

In the case of severe flooding, the business interruption element would be even greater as a result of resources for repair and rehabilitation being stretched.

Other factors are likely to mitigate the longer term impact of flooding, including an increase in business continuity planning and improvements in forecasting and communications, Penning-Rowsell explained.

However, insurers said that efforts were being made to reflect any increased risk.

Martin Singleton, technical manager, property underwriting at Norwich Union, said: “Following Buncefield, insurers have been revisiting their modelling. It is obvious that business losses associated with flooding are growing.

“Indemnity periods are not long enough, the supply chain is longer and more complex, and there are issues over planning permission that impact on business interruption.”