Source: Insurance Age | 04 Jan 2016
Tags: SME | Storm | Flooding
PwC estimates that costs of storms Eva, Desmond and Frank could top £3bn as flooding impacts SME businesses.
Storms Desmond, Eva and Frank hit the UK in quick succession over the holidays causing floods and damage to homes and businesses.
Mohammad Khan, general insurance leader at PwC, said the full impact of the three storms combined had not yet been fully assessed but noted: “The effects of continuing torrential weather are set to hit parts of the UK even harder.
“Our latest estimates now suggest that economic losses due to Storms Eva and Desmond will be £1.6 billion – £2.3 billion, with insured losses of between £900m – £1.2bn.”
He added: “However, these projections do not include any government spend on flood defences which we understand may be between £2.3bn and £2.8bn. Also, these estimates do not currently include the impact of Storm Frank.”
Khan also noted that the storms were unusual “in that there have been a significantly greater proportion of commercial insurance claims compared to personal lines insurance claims”.
Traditionally, commercial lines insurance claims have made up approximately 10% – 30% of the total insured loss claim, but based on what PwC has observed in the market, commercial lines insurance claims will make up about 50% of the total insurance claims.
PwC said that far more businesses have been affected this time because the floods have hit far more towns and cities and therefore impacted more SME businesses that have commercial property insurance.
PwC said that it expects to see business interruption insurance pay out more than in previous years.
However, Khan pointed out: “Unfortunately, many of the smaller and family-run businesses that have been impacted by Eva and Desmond will not have commercial insurance in place due to the impact of the recession and lower business volumes in recent years.
“Many of these businesses will have made the economic decision not to purchase insurance. For many of these businesses the impact of the recent storms and floods will mean they will have to protect themselves against the prospect of insolvency.”
This series of storms is also likely to impact more people without insurance. Khan advised that more SME businesses without insurance have been affected by the three storms and predicted that businesses and councils will have to pay between 35% and 50% of the total economic losses suffered due to Storms Eva and Desmond – about £700m – £1.1bn. This does not include the additional cost of repairs and any further building on Flood Defences which may be in the order of £2bn.