Accountants at KPMG have based the estimate on the immediate hit to households, firms and insurers as well as longer term costs, after swathes of Britain were swamped in the wake of Storm Desmond and Storm Eva.
Justin Balcombe, KPMG's head of general insurance management consulting, said: "The scale of the flooding over the last few weeks has seen communities across large sections of Northern England, Wales, Scotland and Ireland severely impacted.
"In 2007 when a similar pattern of flooding hit, total insured claims were £3.2bn. However, we consider that the actual financial impact far exceeded this.
"We are assessing this month's events through a number of economic lenses, resulting in an initial total cost estimate of £5-£5.8bn." The figure covers a wider scope of costs than an earlier estimate by PwC which put the total at more than £1.5bn.
KMPG calculates insurance claims of up to £1.5bn but also expects that in many cases households and businesses will not be adequately insured and be forced to shoulder an additional burden of £1bn.
The analysis also pencils in local authority costs for rebuilding shattered communities of up to £750m, as well as a £100m hit to businesses from factors such as loss of market share.
KPMG also estimates a £2bn bill for flood defence repairs and replacement and higher insurance costs on renewal. Meanwhile a shake-up to the insurance sector could cost £500m. The floods could also hamper wider economic growth, according to Howard Archer, chief UK and European economist at IHS Global Insight.
He said: "The floods could well shave 0.2-0.3% off GDP growth overall in the quarter that it occurs in terms of businesses not being able to open, loss of agricultural output, people not being able to get to the shops, travel, etc.
"There is also the cost to insurance companies. There is also the loss of work from those people not actually able to get to work."
Mr Archer said the impact would be spread between the fourth quarter of 2015 and the start of 2016. However repair work getting underway during the first quarter of the new year could result in a boost to the economy.
Emergency financial assistance is being put in place for areas affected by the floods. Homes and businesses damaged by flooding caused by Eva will have access to the same package of support announced for those affected by Storm Desmond. Teams from insurance companies have been on the ground in the affected areas. Customers have been advised to get their claims started as soon as possible and to take photos of damaged items.
Rob Townend of insurer Aviva said: "Any damage caused to property and belongings will be covered and if customers have to move out of their home, because it is uninhabitable, the cost of alternative accommodation is also paid for - and we can make arrangements for pets, too."
Customers with Aviva are covered for flood and storm damage, Mr Townend said, and the company can also make emergency payments to help people pay for items such as baby food, nappies and clothes.
The Association of British Insurers (ABI) has already said it expects its members to pay out more than £520m to help victims to recover after Storm Desmond saw thousands of homes and businesses in Cumbria and other parts of northern England and the Scottish borders.
Latest floods over the Christmas period sparked by storm Eva will add to the bill. They have affected swathes of Yorkshire and Lancashire while there have also been alerts in parts of Wales and the Midlands. Previous floods in Cumbria cost the insurance industry £272m in 2005 and £276m in 2009.
Flooding in 2007, which affected large parts of Northern Ireland, Yorkshire, The Midlands, Gloucestershire, Herefordshire, Worcestershire, Oxfordshire, Berkshire and South Wales, resulted in 185,000 claims with a total cost of £3bn.
No comments:
Post a Comment