In recent years extreme weather patterns have led to an increase of flooding incidents in the UK, and the number of businesses affected by flooding has also risen. While you can’t always fight the elements, having robust risk management can help protect your business and get you back up and running more quickly if your property floods.
According to the Met Office, May 2021 was one of the UK's wettest May’s on record1. Flooding is a regular occurrence in the UK, especially during our autumn and winter months, with the Environment Agency estimating that one in six properties in England alone is at risk of flooding2. This includes an estimated 236,000 commercial properties that they have identified as having a low flood risk3.
With this in mind, it’s worth reviewing the cover you have in place to assess how your business would cope in the event of a flood that causes damage to your property and/or contents. To what extent would you be able to carry out business as usual if your physical premises were unusable due to flooding, or key equipment was damaged? Do you know what your current flood risk level is, and if so, does your insurance cover match it?
Check your flood risk
You can find out the level of flood risk for your business on the UK Government’s flood risk map at flood-map-for-planning.service.gov.uk.
Once you’ve confirmed your location you will be able to see the likelihood of flooding, and download the map and guidance information.
Sign up for flood alerts
To give your business the best chance to prepare for a flood, you can also register to receive flood alerts for your area at https://www.gov.uk/sign-up-for-flood-warnings.
The rising challenge of flood risk in the UK
Flooding can come in many forms, ranging from surface and ground water to river flooding and tidal surges. Even if your business is in a lower-risk area, it could still be affected by incidents such as sewage floods or burst water mains. When reviewing cover, UK business owners should consider the following challenges:
Prolonged Business Interruption
While property insurance usually includes flooding, it does not always provide cover for the level of business interruption that a business could experience in the weeks and months following serious flood damage.
Water damage can be extremely difficult and time consuming to repair, whether it’s making good your physical building or replacing contents, stock or equipment. While a minor flooding event may take hours or days to clean up and dry out, a serious incident can have disastrous consequences for a business’s ability to operate and potentially cause weeks or even months of severe disruption. From access issues to restricted turnover, equipment damage to loss of stock, the effects can be far-reaching, so it’s important to consider how far your cover would go.
Higher premiums for high-risk businesses
The combination of higher flood risk and an increasingly competitive household insurance market may not bode well for businesses in flood-prone areas. Insurers are no longer able to absorb the costs of high flood risk properties by using profits from premiums of low risk properties. If you have been impacted by flooding before, your business may be labelled as high-risk for future flood events and could face higher premiums and excesses.
The Flood Re business barrier
For owners of domestic properties that are prone to flooding, Flood Re was put in place as a joint initiative by the Government and insurers. It means that homes that meet the required criteria can receive help in reducing the cost of the flood part of their premium. Flood Re does not currently apply to commercial properties, business properties, or properties that are rented out to non-immediate family members, meaning that businesses have yet to see a market based solution that reflects their flood risk.
The burden of proof
Writing standalone flood business is not something insurers typically do due to the likelihood of experiencing major losses. In order to agree to place flood cover for a commercial property, insurers will often request proof likely in the form of a detailed flood risk report which can be a time consuming process for businesses and may not always result in them receiving the cover they were hoping for.
How Gallagher can help
We support businesses throughout the UK by arranging flood cover, even for those who present complex cases or have had difficulties securing this kind of cover in the past.
Estimated maximum loss approach
Our approach is to offer a solution that assesses your actual exposure to flood and calculates an estimated maximum loss. This means designing cover around the many specific needs of your business to help protect you from a worst-case scenario, rather than a ‘one-size-fits-all’ approach based on just a handful of considerations such as your geographical area and physical premises.
Flood Risk Management
We offer a risk management service which includes flood inspection, reporting and surveys. Not only can we can help you reduce your flood risk but we can help you negotiate terms to find a suitable solution to meet the needs of your business.
The team can assess your flood risk through leading mapping technologies and tools including geocoding, national catastrophe analysis, Gallagher flood modelling capability, flood analysis, subsidence hazards, and storm surge recognition. We can also perform an in-depth analysis on your postcode to highlight your proximity to flood zones, riverbanks or storm surge points.
This active approach to risk management helps you build a flood contingency plan to reduce your exposure to flood and speed up your recovery should your premises suffer flood damage.
Reinsurance and Risk Transfer
If an insurer still deems the risk too great once we have estimated the maximum loss, and they do not agree to cover your business, this is where we can step in. Gallagher can use their connections, including Gallagher Re, our reinsurance and risk transfer company, to help secure a suitable level of cover for your requirements even if this means a higher excess and other conditions need to be put in place.
Flood Excess insurance
Businesses that have previously suffered a flooding incident, or are located in an area deemed to be high risk, often experience a high flood excess on their property insurance policy. Flood Excess insurance was launched with the help of UK flood prevention and restoration experts to address this growing issue in both the private and commercial UK property insurance markets.
Flood Excess insurance is designed to cover the flood excess amount, with flood excesses of up to £50,000 issued. It’s available for residential and commercial properties, including landlord and holiday let properties. A further benefit of this insurance is that if the value of the damage was to fall below the flood excess amount, Flood Excess insurance will still respond and cover the cost.
For some SMEs having to pay out for a large flood excess payment could lead to serious financial difficulties for the business so Flood Excess insurance is an important consideration. As brokers, Gallagher can instantly quote and bind cover for many individual properties with flood excess up to £50,000 on the Flood Excess online system (quotes above this amount are referred to the insurer for consideration).
Gallagher works with FloodFlash to provide a welcomed solution for businesses struggling to insure flood risk. FloodFlash is an innovative, technology-led flood insurance product, designed to pay businesses an immediate settlement in the event of a flood if a pre-agreed water level is reached within the property.
You can select a specific depth and settlement amount for your policy, taking into account your level of flood risk and potential cost of business disruption. This can easily be adjusted to suit your requirements, and you can also add multiple triggers to cover you for different levels of flooding. An internet-connected sensor will detect when the agreed flood level is reached and sends an alert to report the flood to FloodFlash.
FloodFlash cover can be used to fill high flood risk deductibles required by property insurers or simply boost the limits already offered. It can also isolate flood risk from the property programme.
As many flood claims are based on the damages caused to property and can take many months to settle, FloodFlash offers a viable solution to help get your business back up and running as soon as possible. This cover is available to businesses regardless of flood history.
If you would like to know more about FloodFlash and how we can incorporate it into your flood risk management programme, please speak to us.
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This information is not intended to constitute any form of opinion nor specific guidance nor legal or financial advice, and recipients should not infer such from it or its content. Recipients should not rely exclusively on the information contained in the bulletin and should make decisions based on a full consideration of all available information. We make no warranties, express or implied, as to the accuracy, reliability or correctness of the information provided. Our advice to our clients is provided subject to specific terms and conditions, the terms of which take precedence over any representations in this document. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide and exclude liability for the statistical content to fullest extent permitted by law.
Gallagher Re is a trading name of Arthur J. Gallagher (UK) Limited which is authorised and regulated by the Financial Conduct Authority. Registered Office: The Walbrook Building, 25 Walbrook, London EC4N 8AW. Registered in England and Wales. Company Number: 1193013.
Arthur J. Gallagher Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building, 7th Floor, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909. FP1253-2021
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