Storm Babet, flooding and the insurance implications

Subtropical cyclone Storm Babet is currently responsible for over 350 flood warnings in the UK, with more flood warnings expected later this week.

What has been the impact of Storm Babet so far?

The storm has wreaked destruction across northern and western Europe, disrupting flights in Denmark, killing a 33-year old woman in Germany, collapsing the ceiling of Faro airport in Portugal and leaving 22,700 people without electricity in Norway.  Here in the UK, at least 4 people have died so far and 1,250 properties have already flooded according to the Environment Agency.  More flood warnings are expected to be issued in the coming days as rivers have risen to the highest level on record in Derbyshire and Nottinghamshire; exceeding the previous records set in 2007. 

What role does property insurance play?

Property insurance is a crucial part of effective flood management and a laudable example of the insurance industry taking a pro-active and collaborative approach.  Not-for-profit reinsurance scheme FloodRe was developed by the insurance industry in 2016 and aims to cap consumer flood insurance prices to try to keep premiums affordable for people who live in areas where the risk of flooding is high.  Insurance premiums under the scheme are linked to council tax bandings to ensure that they remain proportionate and that those on the lowest incomes are protected.  FloodRe only covers properties constructed before 2009 to avoid incentivising developers from constructing residential properties on flood plains. The scheme, operated and financed by the insurance industry, is set to run until 2039, after which insurers anticipate that there will be a free market for flood risk insurance.  Peter Mansfield interviewed the CEO of FloodRe, Andy Bord, on his podcast Insurance Covered in December 2021: listen here.  Peter also discussed the future of flooding with Ivan Haigh, Aon, in September 2023: listen here.

How will Storm Babet impact the insurance industry?

Storm Babet is another facet of the continuing trend towards increased natural catastrophe losses discussed in our previous analysis of the El Niño climate phenomenon currently in progress in the tropical pacific.  The prospect of further natural catastrophe losses will be most unwelcome to insurers and policyholders alike, particularly with the current economic pressures.  The prospect of further significant flood losses will make it more important than ever for insurers to pursue any and all viable subrogated recoveries.

The human cost of flooding also cannot be overstated; the loss of irreplaceable cherished belongings or keepsakes can leave a lasting impact, as well as making the process of pursuing an insurance claim more emotionally loaded.

What should the prudent policyholder do now?

As such, in order to minimise risk arising from the extreme weather associated with Storm Babet, policyholders would be prudent to:

1. Follow Government advice to plan ahead by making a flood plan; researching in advance where to get practical help locally; checking that you know how to turn off the gas, electricity and water.
2. Follow FloodRe's advice on flood protection measures;
3. Sign up for flooding alerts.
4. Check their property insurance terms to ensure that valid flood risk cover is in place; ideally including flood damage/direct loss cover and cover for consequential losses;
5. Ensure that any damage is notified to insurers as soon as possible in accordance with the notification requirements in the policy.

Early notification will not only speed up the processing of the claim, but may mean that less damage is caused as insurers may be able to offer mitigation advice or resources.

What about subrogated recoveries?

Usually flood damage cannot be the subject of a subrogated recovery, since no one is to blame for entirely natural disasters or "acts of God".  However, insurers and loss adjusters should always consider the possibility of pursuing a subrogated recovery when dealing with a flood damage claim where there is a possibility that someone has caused or contributed to the damage.  Typical defendants include landowners, local authorities, public bodies, national governments or, possibly the emergency services.  One interesting question is the possibility of claims against public bodies, such as the UK Government, for e.g. failing to act earlier on the climate emergency.  Lucy Dyson discusses the English courts' emergence as a "hotspot" for environmental and ESG-related claims in her article here.

Catherine Percy's and Richard Breavington's analysis following the 2015/16 floods remains an excellent guide to the legal principles engaged in a subrogated recovery for flood damage. They also highlight the following:

1. Insurers should not be deterred by the fact that one subrogated recovery on its own may be a small claim as claims can be combined, even where different insurers are involved.RPC has a stellar history of uniting the insurance industry to react to developments and evolving risks.

    

2. Pursuit of a subrogated claim also has the benefit of highlighting the damage-causing behaviour to the defendant, so that they can take measures to avoid a repeat incident in future.

    

3. Gathering evidence at the point of handling the initial damage claim is crucial, since the subrogated claim may be pursued years after the original event, by which time certain evidence may not be available or witnesses' recollections may have faded.

RPC frequently provide coverage advice to property insurers and pursue subrogated recoveries. Victoria Sherratt or Andrew Roper would be delighted to discuss any new matter arising from Storm Babet or any comments or queries arising from this article.