UK Winter Floods to Cost Insurers $2 Billion in Pay-Outs

The Association of British Insurers estimates that flood damage from the winter storms of 2015 to 2016 has resulted in claims for more than 15,000 homes and businesses and is likely to lead to pay-outs of 1.3 billion pounds ($1.9 billion).

The average cost of each domestic claim for the floods caused by Storms Desmond, Eva and Frank is around £50,000 ($74,000) which is higher than usual and reflects the extensive damage caused by the flood waters in some locations, says the ABI.

The 1.3 billion pound payout includes nearly £27.5 million ($40 million) that insurers are spending on alternative accommodation for affected families while their properties are repaired.

Around 85% of claims have been either fully or partly paid out. The ABI explained that where payments haven’t yet been made there are several likely reasons for this: a contractor carrying out work may not yet have yet billed the insurer, or the policy holder may be choosing to plan other improvement works on top of the repairs for example. Insurers will look to make interim payments where necessary and provided £80 million in emergency payments in the immediate aftermath of the floods, to both homes and businesses.

Flood Re

Properties which have flooded or are in high risk flood areas can face higher insurance bills because it is much more likely the insurer will need to pay out to deal with a flood, which can cost tens of thousands of pounds. Insurers were worried about people in flood risk areas starting to find cover unaffordable so, along with Government, they created a new scheme called Flood Re which is now up and running. This is a scheme which helps householders find more affordable cover, funded by a levy on the industry, and companies taking part are listed here.

Businesses should consider using a specialist broker and ensure they fully understand the risk of flooding to their premises so they can make their business as resilient as possible, potentially by installing flood resistance and resilience measures.

The ABI said that it remains vital that Government invests in the long-term flood risk management of these areas in order to better protect them from the chances of future flooding. The ABI will continue to lobby for greater investment from core Government expenditure for the effective management of flood risk throughout the UK.