S&P Global has published a report that looks at the long term flood risk in the UK. Taking into account Met Office predictions on rainfall, the age of UK housing stock, automated claims systems, local flood defences, especially in the West of the UK where rainfall is heaviest, plus a range of other factors.
The report makes interesting reading for anyone in the home insurance, or Commercial sector. Here are some of the key points;
Precipitations could become heavier and more widespread by 2040. On the upside, more modern housing stock will be able to withstand a greater flood risk (complying with flood resilient building regulations) unlike the old stock of housing which may suffer chronic damages without adequate enhancements and, as a consequence, devalue.
Some of the local authorities with the most exposure to flooding, and therefore associated costs, include Doncaster, North Lincs, Hull, East Lindsay, South Holland and Boston.
Payment holidays by mortgage lenders following the flood events of 2019/20, plus the Corona crisis, could lead to a situation where insurers might have to re-assess the risk on property where no mortgage is actually being paid at the time of inception.
The market value of homes may well fall in flood prone areas, as insurance becomes more difficult to obtain or expensive to buy. Insurers may have to re-think their valuations on insured properties depending on the frequency of flooding, Flood Re or other schemes, plus population migration away from those areas hardest hit.
Insurtech FloodFlash used parametric insurance to automate claims during the Storm Ciara event. The average payout in Lancashire and Yorkshire was £65,000. The report notes that CAT (Catastrophe) bonds may provide a pool of capital to help trigger such automated payouts in future, via the Reinsurance market and that there is growth potential in the UK for such bonds.
Find out by downloading the report here.
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