Home flood repairs could cost £150m

This week’s floods could cost the insurance industry £100m in repair bills for domestic properties, according to estimates by actuaries at Deloitte.

Deloitte said that storm related damage could take this figure above £150m. And that was only half the story - the cost for commercial property insurers could match those of the domestic market.

Deloitte’s analysis showed that even before these floods, the first quarter of 2007 recorded the highest quarterly level of storm-related household insurance claims (£300m) in the last decade.

Commenting, Lis Gibson, insurance partner at Deloitte said: “The floods over the past two weeks have been severe and insurers face very high claim costs.

"With further bad weather forecast for this weekend the Yorkshire flooding may get worse before it gets better. Normally the UK only sees flooding of this type in the winter months.

"Scientists have predicted that climate change will lead to more flash flooding events so we may see this sort of weather, more often, and all year round.”

However, as a single event, Deloitte noted that the number of properties damaged by the current floods is not currently as high as the 2000 floods.

"The last significant flood event for the insurance industry was the extreme wet weather of October and November 2000 when domestic flood losses were £180m and storm claims were £230m. In that wet autumn of 2000 over 10,000 properties were damaged. In the Cumbria floods of January 2005, a smaller event for the industry, 3,000 properties were affected.

According to Deloitte, gross written premiums for household insurance amount to some £6bn annually. Taking June's floods and January's storm together, 2007 may already have cost the household market an additional £450m (7.5% of premiums) compared with 2006 - and it is only half way through the year.

Gibson said: “This is a level of losses that insurers can't ignore when deciding what premiums to charge for the remainder of the year and 2008.

"For those consumers who have not faced large increases in premium rates in recent years, the weather events of 2007 may be gloomy in more ways than one.”

Gibson continued: “The ABI has called for a significant increase in government spending on flood defences - partly to repair and restore - and partly to prepare for the growing risks as a result of climate change.

"It makes rational economic arguments for this investment. Recent events suggest it could be right.”