Storm Frank brings fear to Insurance giants
Storm Frank has wreaked havoc for many parts of the UK and it is said to continue further with the Environment Agency for England and Wales issuing nine “severe” flood warnings (potential loss of life) that started on Boxing day.
KPMG, professional services firm have estimated that the clean-up cost could peak to £5.8 billion which includes insurance losses. KPMG have advised that it is working with companies and organisations across the North as they respond to current flooding.
Insurance giants could face up to £1.5 billion in losses due to the damage caused by the recent floods which has affected their shares in the London Stock Market. So far More Than owner RSA insurance fell by 2% in the market followed closely by Aviva who was down 0.5% and things are not looking good as Storm Frank continues to bring bad news.
UK head of general insurance management consulting at KPMG, Justin Balcombe has said: “The scale of the flooding over the last few weeks has seen communities across large sections of Northern England, Wales, Scotland and Ireland severely impacted.
“In 2007 when a similar pattern of flooding hit, total insured claims were £3.2 billion; however, we consider that the actual financial impact far exceeded this.”
“We are assessing this month’s events through a number of economic lenses, resulting in an initial total cost estimate of £5 billion to £5.8 billion.”
Insurance firms large loss expectations for 2015 would have been closely met due to the last two storms Desmond and Eva according to general insurance leader Mohammad Khan at PricewaterhouseCoopers (PwC).
Mr Khan also added “any further damage caused by additional rain will impact relevant insurers’ year-end profitability”.
“It is too early to say whether it causes the 2015 profitability of the household and commercial property business they write to be loss-making,”
It has been claimed, by economist Howard Archer at IHS Global Insight, that with businesses not being able to open, loss of agricultural output and public accessibility to shops, the economy growth could be affected by between 0.2% and 0.25%.
He went on to state that “As the flooding is occurring late on in the fourth quarter, some of this negative impact is likely to occur in the first quarter of 2016.”
With that being said he advised that the economy should receive a boost in growth next year, mainly focusing on the first three months, when the clear up begins and from replacement purchase spending. This should hopefully partly offset the loss seen prior.
It has also come to light by KPMG that around £1 billion from their figures accounts for policyholders under insuring their goods and property as people still feel the effects of the recession wanting to reduce insurance premium payments. Another big issue surrounding the under insurance is the Christmas timing, as people may not have increased their content values for presents and food over the festive period.
