Experts at leading consultancy PwC are predicting that losses arising from the December floods could reach £1.5 billion and result in significant economic damage for the UK.

Mohammad Khan, general insurance leader at PwC, put a very initial estimate of between £900 million to £1.3 billion on the losses, commenting:

“After Saturday’s torrential rain, and with rare “danger to life” warnings issued, the economic damage to the UK could be significant. It is still early to estimate losses but, based on the areas where significant rain has fallen, the great number of roads submerged and including the losses arising from Storm Desmond earlier this month, we would give a very initial estimate of economic losses of between £900m and £1.3bn, with the insurance industry bearing between £700m to £1bn of this.”

“Unfortunately many areas that were affected during Storm Desmond have been flooded again. If rain continues to fall in large quantities, and the areas with warnings in place do indeed flood significantly, it could well be that the total economic losses could breach £1.5bn with an additional significant increase in insurer losses from our initial estimate, he added.

“The insurance losses that arose from the flooding and storm damage during Storm Desmond were severe but were within nearly all affected insurers’ large loss expectations for 2015, as 2015 was such a benign year prior to the December weather. The additional damage from Storm Eva and 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.”

Domenico Del Re, head of catastrophe management at PwC, said the recent additional flooding had once again highlighted a need to recognise that the introduction of Flood Re and the rebuilding of flood defences will not automatically solve the affordability of flood insurance, nor will it stop flooding when severe rain falls.

Earlier this month Flood Re, the scheme to ensure affordable flood insurance cover will be available to UK households in areas of high flood risk, announced that it is set to go live in 2016 after securing a deal which puts on course to provide protection up to the planned £2.1 billion annual liability limit.

Some of the industry’s leading reinsurers have collectively offered £1.29 billion of cover a year in one of the five largest ‘natural peril’ reinsurance deals struck globally and the second biggest in Europe. Flood Re is now seeking a further £720 million worth of reinsurance protection through a second procurement process which is expected to conclude in January 2016, which will ensure that Flood Re is on track to accept its first policy in April 2016.

Domenico Del Re added:

"Following the 2007 floods, a lot of work was undertaken on flood defences but clearly more can be done. Flood defences cannot stop everything, as they are based on historical information, but a lot more information exists today than there was even five years ago. Businesses (which are not covered by Flood Re) need to make use of all the flood data that is out there to make themselves more resilient when a flood occurs.”

Highways England experts, backed by £40 million of emergency government funding, will help communities recovering from floods by assisting with repairs to damaged transport links, Transport Secretary Patrick McLoughlin announced today (27 December 2015).

On Sunday the Government announced that the Department for Transport (DfT) will provide £40 million of emergency funding to help fund repairs to key local transport infrastructure n Cumbria and Lancashire. 

This will focus on 3 major engineering projects across Cumbria:

• rebuild the crucial A591, the road which runs north to south through the heart of the Lake District, to allow it to be reopened as soon as possible
• investigate what can be done to replace Pooley Bridge, situated at the northern end of Ullswater, after it was completely swept away by flood water
• examine how the Eamont Bridge, near Penrith, can be rebuilt to be more resilient against future flooding.

Highways England will start design and construction work to repair the A591, and investigate what is required to restore Pooley Bridge and Eamont Bridge, in Cumbria, in the new year. This follows assessment work that has already been undertaken.

In addition, the meeting agreed that the Bellwin Scheme should be triggered for affected areas and that homes and businesses damaged by flooding should have access to the same package of support as already announced for homes and businesses affected by Storm Desmond.

Yesterdays COBR meeting chaired by the Prime Minister on the ongoing flooding in Yorkshire and Lancashire agreed that the Bellwin Scheme should be triggered for affected areas and that homes and businesses damaged by flooding should have access to the same package of support as already announced for homes and businesses affected by Storm Desmond.