The recent flooding in parts of the UK could result in home insurance premiums rising overall, insurance analysts have warned.
Insurers profitability targets are unlikely to be met because of the number of claims and in order to get closer to them premiums are likely to be increased.
Further rain is forecast for later this week and it is likely to arrive before water levels have had a chance to recede, which could lead to more flooding and further claims.
Analysts say that Royal Sun Alliance and Aviva are amongst the most exposed insurers, with home and commercial business premises accounting for large parts of each of these companies business.
Bad weather conditions in the past have affected the combined ratio – which measures underwriting profitability – by between three and six per cent.
Analysts have pointed to the heavy flooding of five years ago as a precedent. In 2007, the floods became the most expensive weather-related UK event for insurers and cost the industry around £3 billion. The costs led some insurers to raise home insurance premiums by around 10 per cent.
Analysts say that so far it is too early to work out the cost of this year’s flooding and it will ultimately depend on events over the next few days, whether more rain comes before the previous water levels have had a chance to disperse.
The insurance industry and the government are in ongoing talks on how to provide adequate insurance cover to around 200,000 homes who are unable to get flood cover on their home insurance policies.
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