Despite the widespread devastation caused by this summer’s UK floods, the damage is not yet as costly as the March 1947 floods, which would have resulted in insured losses of £4.5 to £6 billion if it reoccurred today, according to Risk Management Solutions.
RMS estimates the floods in late June cost over £750 million in insured losses, and that the current floods will be at least as costly. A combination of factors such as higher average claims and proportion of damage which is insured, together with business interruption caused by loss of power and running water could take the total insured loss for late June and July to over £2 billion., RMS said.
The situation is ongoing and more flooding could occur, but RMS said it is highly unlikely that the total damage so far this summer will be as great as from the 1947 event, which affected nearly all the main rivers in the south, midlands and northeast of England.
But while the current floods are not as extensive, they will pose the biggest test to the private flood insurance market – as flood cover was not widely available until the 1960s – and may lead to a serious reconsideration of the availability of flood insurance.
“Premiums charged by insurers do not fully reflect the flood risk to which properties are exposed,” commented Robert Muir-Wood, chief research officer at RMS. “This summer’s floods have exposed many shortcomings in flood risk management and the location of critical infrastructure like power stations and water treatment plants, which have been shown to be vulnerable. The catastrophe risk models that have been developed for the insurance industry to assess flood risk today should now be employed to help reduce the impacts of floods in a climate change future.”
Assessing flood risk
RMS believes that existing national flood risk maps – as used by councils and property developers – are incomplete, omitting both sheet flooding caused by inadequate drainage as well as flooding from minor streams. Also extreme flood return periods employed for designing flood defences are based on river flows measured over the past half century that may already understate an increase in the hazard of extreme rainfall events associated with climate change.
RMS flood modeling since 2003 shows that close to a third of average annual flood losses come from sources outside the major floodplains.
Source: RMS, www.rms.com.