Personal and commercial property insurers should still make a profit despite claims
The coastal flooding that hit parts of the UK on Friday could cost insurers up to £100m, according to PwC.
However, the accounting firm still expects companies writing commercial and personal property to make a profit this year, despite this most recent event and October’s floods.
PwC insurance partner Mohammad Khan said: “The impact on some communities has clearly been severe.
“For the UK insurance industry, although it is too soon to accurately estimate the full costs of the floods, early indications are that it will be in the tens of millions of pounds rather than the high hundreds of millions, potentially reaching £100m.”
He added, however, that the estimate would develop in the coming days.
Khan said most of the claims appear to be coming from businesses because of business interruption losses as well as property damage.
He added: “Although an unexpected event, due to the unusually benign weather insurers writing personal and commercial property lines should still be making a profit this year, even allowing for this coastal flood and the storms that affected the UK in October.”
Even so, PwC expects businesses in flood-affected areas to suffer rises in premium or policy excesses on renewal, especially as they are not part of the Flood Re agreement.
Personal and commercial properties not affected by the floods will continue to enjoy rate reductions because of rising competition, the accounting firm added.
More to come
While insurers may have got off lightly in 2013, they can expect more coastal flooding, according to PwC catastrophe insurance specialist Dom del Re.
He said: “Unfortunately, due to climate change, we are more likely to see coastal floods like this and therefore the impact on the insurance industry will be ongoing.
“The only 100% certain impact of climate change on extreme events is that sea levels will rise and make storm surges like this more severe. The average sea level rise by 2100 is expected to be around 50cm, which does not seem much, but may be critical to overtopping the flood defences already in place.
“Insurers will need to factor this in as they plan their response to changing risks and opportunities.”