The household insurance market is set to make a nearly unprecedented net loss of at least £110m after investment returns are taken into account as a result of the flooding, according to Deloitte.
Catherine Barton, a partner at the professional services firm, said 2007 would be the worst year for home insurers for over a decade.
It would be the first year for some time in which insurers net results showed a loss when investment returns were included.
The floods in June and July are likely to cost insurers over £3bn, with some placing the insured losses as high as £5bn,
But despite the huge losses, analysts said insurers would not face ratings downgrades.
Ratings agency Mooody’s said the flooding in June and July would have “no impact” on UK non-life insurers’ credit ratings.
It said: “Although the two events look set to have a significant impact on 2007 earnings, strong financial performance and strengthened balanced sheets ensure that the losses are manageable for the industry overall and for key players”.
Meanwhile Norwich Union parent Aviva said this week that the total cost of the floods in June and July would be £340m.
It gave a warning that the “exceptional nature” of the flooding meant that it may not hit its combined ratio (COR) target for 2007.
“Aviva remains fully committed to a group COR target of 98% [but]…there is a degree of uncertainty concerning Aviva’s ability to meet [that] target,” it said in a statement this week.
The July floods in Gloucestershire will cost the insurer £165m, including the cost of exercising a reinsurance option to limit the cost of future flooding in 2007, it said this week. Its initial cost estimate of £175m for the June floods remained unchanged.
Aviva will report its interim results on Thursday.
Zurich Financial Services said it expected aggregate claims payments relating to the June floods would not exceed $400m (£197m), net of reinsurance. But it cautioned that there was still uncertainty as to final cost.
The insurer added that it was too early to estimate the cost of the July flooding.