Research carried out by enterprise risk management consultants EMB, has shown that Flooding is the biggest ‘act of nature’ risk, to the UK insurance industry.
Increased rainfall and poor drainage are seen as the main problems causing an upturn in insurance claims, in recent times. It wasn’t so long ago that the risk of flooding was restricted to people living close to rivers and coasts, but that has now changed.
“Most insurance companies had previously based their calculations on river flood models. However 2007’s floods hit people previously unaffected by such conditions and companies are now having to modify their pricing strategies.” said EMB partner Karl Murphy.
The floods of 2007 are said to have cost UK insurance companies an estimated £2.5billion and revealed how business could be better prepared for future risks. Murphy says:
“Insurance companies need to factor in issues surrounding climate change and must look to incorporate long-term weather trends into their pricing.”
Ironically the research shows that as recently as 2005 the major ‘act of nature’ risk was heat, followed by wind, with rain in third place.
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