Costly Consequences from UK Floods

Although no official estimates have yet been made, the recent floods in the UK will be costly. Four persons perished as heavy rains caused rivers to overflow and stranded travelers across Northwestern England, Wales and Northern Ireland.

Maurice Fitzpatrick, business analyst, at UK consultants Grant Thornton indicated in an e-mail that “the economic cost to UK businesses as a result from the flood disruption for the 24-hour period to Tuesday 26 June is estimated at £50 million [$100 million]. This does not take into account yesterday’s damage, nor future damage and it excludes the physical cost of damage (much of which will be the subject of insurance claims).”

Those insurance claims, which analysts estimate will average between £15,000 and £20,000 ($30,000 to $40,000), could therefore run into $200 to $300 million.

Angus Tucker, Director of Insurance Claims Solutions within Grant Thornton’s Forensic and Investigation Services, noted that “while many businesses in the area will be covered by ‘physical damage’ and ‘business interruption’ policies for damage from today’s flooding, further problems will arrive if business owners are denied access to their premises by local authorities (i.e. Police/Fire) and therefore cannot trade. To be covered by such an eventuality, business owners are required to have purchased a far more complex and lesser known cover which is ‘denial of access’.”

The Association of British Insurers issued a bulletin advising property and business owners of the steps they should take in order to begin the process of cleaning up and repairing their property, and how to go about filing the necessary claims. Jane Milne, the ABI’s Head of Property, stated: “These events highlight just how important insurance protection is. If you have been affected by flooding, contact your insurance company. Their priority is to deal with all claims as quickly as possible.”

Grant Thornton noted that with the increasing frequency and severity of storms and the resulting floods across the British Isles, businesses should “look beyond the basic insurance offerings and consider the effect of supplementary risks which they may face.”