Insurers are counting the cost of the recent flooding
Further details emerged this week on the cost to insurers of the catastrophic UK floods of recent months.
Norwich Union said the total cost of the floods in June and July would be £340m and gave warning that the “exceptional nature” of the flooding meant that it may not hit its combined ratio 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 remains unchanged.
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.
Meanwhile, Lloyds TSB reported that its profits from general insurance operations were nearly halved in the first six months as a result of the weather-related claims.
The June floods contributed £45m to the £57m of weather related claims in the half. As a result pre-tax profit fell £55m to £59m in the first six months.
The bank said it expected “similar” losses from the flooding in July.
Last week, Legal & General reported a loss of £38m for its general insurance business in the first half of 2007. Claims from the June floods topped £40m. The July flooding is predicted to cost the company £30m, Legal & General said.
But despite the potential for huge losses, analysts have said insurers will 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.
“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”.
Aviva publishes its half year figures next week, as do AXA and Royal & SunAlliance.
