Hefty storm bill to lash insurers

DIRECT Line, Aviva and RSA alone are facing a bill of hundreds of millions of pounds from the winter floods, according to analysts.

Storms Desmond, Eva and Frank battered the UK in December causing an estimated £1.5bn of damage to homes and businesses in the North of England and Scotland. KPMG predicts this could run up to £6bn when longer term costs, such as rebuilding flood defences, are considered.

Floods hitting the city centres were particularly damaging to businesses, with 400 lost in Leeds and many others ruined in York.

Insurers paying out to householders and business owners will face hefty costs in covering the damage, with Direct Line, Aviva and RSA expected to pay out £525m between them.

Insurers have their own cover to help them meet the costs of claims, with an excess – known as a retention limit – just like a consumer policy. Analysts at Shore Capital estimate that Direct Line, which has a 17pc market share of home insurance and a 14pc share of motor insurance, will pay out £150m to flood victims.

Analysts say RSA’s retention limit is lower, leaving it responsible for paying £75m to its policyholders that were affected. It has been suggested the firm is facing a £50m loss from the flooding of McVitie’s Carlisle biscuit factory during Storm Desmond.

Aviva has a higher retention level, set at around £300m, with UK household business accounting for around 6pc of the group’s premiums, based on Shore Capital estimates.

Mohammad Khan, a general insurance expert at PwC, said many small businesses hit by the storms ‘will not have commercial insurance in place due to the impact of the recession’.