Insurance firms in deep water as flood damage payouts take massive toll
Published 08/01/2014 | 02:30
THE INSURANCE industry is unprepared for the financial toll of this winter's stormy weather, analysts told the Irish Independent.
Claims caused by the latest period of bad weather, which has resulted in heavy flooding in coastal areas around the country, looks likely to run into the hundreds of millions for the country's biggest property insurers, who include RSA, Aviva and FBD.
The last major flood to hit the country, in November 2009, cost the industry €244m, according to representative body Insurance Ireland.
Sources said this month's floods, a result of what meteorologists are describing as "the worst storm in 15 years", could result in an even higher bill.
"Given the scale of what's happening, the end figure may well be at the upper end of historical highs," said Emmet Gaffney, an insurance analyst with Investec.
FBD, Ireland's only listed general insurer, has already been forced to issue a profit warning on the back of the storms at the tail end of 2013.
It announced last week that storm damage in the last two weeks of December cost it between €4m and €5m, reducing operating earnings per share by between 10 and 13 cents.
Its earlier financial forecasts had assumed that there would be no exceptional weather events during the remainder of the year.
FBD's earnings warning only applied to the period between December 19 and 31. "Given that this weather has continued and in some areas intensified, you can expect at least the same amount again for damage caused in January," said Fiona Hayes, an insurance analyst with Cantor Fitzgerald.
Ms Hayes said insurers would find it very difficult to recoup costs by raising premiums.
"It's a very competitive environment and the sector is highly susceptible to consumer sentiment. Rates have been falling for two years and I don't see any stabilisation in the short term," she said.
Most insurers have been lowering the cost of their non-life insurance policies in Ireland for the past two years.
FBD, the only Irish-only insurer on the market, has openly said in recent months that the market rate for property insurance has fallen below realistic levels. It has stopped offering the same kind of rock-bottom premiums being sold by competitors and has been losing market share as a result.
Home insurance premiums fell by 3pc in 2013 alone, while motor insurance premiums fell by 9pc. Prior to 2011 they were rising sharply, up 21pc in 2009.
Insurance Ireland, which calculates the official cost of events like severe weather to insurers, won't release an official estimate for another three to four weeks.