Climate change, political uncertainty and the global economy all impact the insurance market, making some insurance covers harder to obtain.
Let’s look at the flood risk cover. As the flood models change, so do the costs of flood risk insurance. JBA Risk Management, a global leader in flood risk management, believes that flooding continues to pose a significant risk for UK insurers. Their evidence suggests:
- We could see a 120% increase in the cost of surface water flash floods, particularly in the south and east of the UK under a no-action warming scenario (RCP8.5 ).
- The greatest change in flood losses is expected to come from coastal flooding, with 120% increase in coastal flood loss under an intermediate warming scenario and 150% increase under a no-action warming scenario by 2050.
Added to this, recent Met Office data has consistently indicated the increasing frequency of extreme weather – which is factored into premiums.
FloodFlash, an event-based flood insurance provider, has produced its 2022 Commercial Risk Report which has found that:
- In Britain, over 436,000 commercial properties have at least a low flood risk.
- Commercial properties are twice more likely to be at risk from flooding compared to the average property.
- Over half of British businesses surveyed agreed that flood insurance is hard to come by.
Even if a property’s flood risk has not changed, premiums can still increase. The main reason for the current increase in flood insurance premiums is the increased rebuild costs. The Royal Institute of Chartered Surveyors suggest that material costs may increase as much as 17.6% this year, resulting in far higher claim values.
One solution to reduce costs can be to consider separating your flood risk cover and removing this from your current insurance. Some insurers may refuse unless there is a guarantee of flood cover in place – and this can be achieved by a standalone parametric insurance.
Due to the simplicity of parametric insurance, cover is often cheaper than a loaded premium from the primary insurer. FloodFlash is available to businesses and landlords providing cover in locations that otherwise struggle to secure affordable policies due to their risk of flooding. Using FloodFlash to fill the exposure can save thousands of pounds.
Understanding the options available is vital in these challenging times and having regular discussions with your insurance adviser can help you build and maintain resilience.